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October 22, 2008 | Crisis Will Reassert Russia as a Global Player

The financial crash will have serious geopolitical consequences. ++ Russia will reassert itself as a global player. ++ As its stock market does not play as crucial a role as in Western markets, and as Russia has a lot of money due to the boom in oil and natural gas markets, it will be the greatest winner in the aftermath of the crisis. ++ The US will also, in the long run, gain as the crisis will

September 22, 2008 | Hard Landing for Eurozone

The demise of the shadow banking system began last week. ++ This is the financial crisis of the century. ++ Shadow banks are not protected from bank runs, as commercial banks are. ++ A run on hedge funds is highly probable. ++ If these institutions are to be government-insured, they will need regulation in order to avoid any moral dilemma implications. ++ A “severe” US recession is

August 12, 2008 | Euro's Joyride is Coming to an End

Even though the European Central Bank reassures the investors that the euro has great prospects, business activity on the Old Continent is falling and consumer confidence is plummeting. ++ On Friday, the euro had its worst day against the dollar in 4 years and there are reasons to believe this was not a temporary blip, but the beginning of a trend. ++ Analysts were so focused on American economic

June 2, 2008 | US Deficit and Sinking Dollar: The Agenda of a New G5

The US dollar was for a long time the leading global currency against which all other foreign currencies were measured. The downside of this is that as a result, the USA has accumulated a huge trade deficit. In 2006, foreign goods and services purchased by Americans were worth 600 billion USD more than the goods and services they sold abroad. Every day, the US needs to draw on seven billion

May 27, 2008 | A Love/Hate Relationship: US Dollar and Oil Prices

High oil prices are tied to a weak US dollar. ++ The single-currency pricing of the oil market means that in the long run, a weak dollar reduces production while simultaneously increasing consumption. ++ This increase in demand and decrease in supply correlates with higher prices, and unless US fuel consumption patterns change or the dollar rebounds, the US, rather than the world as a whole, will

May 23, 2008 | US Monetary Policy is Responsible for Price Rises

US Federal Reserve officials continue to insist that recent price increases have almost nothing to do with monetary policy. ++ Yet their claim that only global supply and demand for corn and oil are responsible for the soaring of oil and food prices is simply wrong. ++ Oil on global markets is denominated in dollars. ++ When speculators anticipate that the greenback’s value will fall

April 23, 2008 | A Rising Euro Threatens American Dominance

The Fed is undermining global confidence by flooding the economy with new dollars while it should in fact be pursuing direct and targeted intervention. ++ Since US global purchasing power is used for humanitarian, economic or military purposes, a further fall of the dollar will damage US political influence. ++ The rise of transactions in Euros neuters US ability to control financial flows to

May 31, 2007 | Bruegel Says Worldwide Exchange Rates Adjustment Would Fight Current Account Deficits

The March 2007 Bruegel Policy Brief reveals that imbalances in global current account positions are not sustainable and need adjustment. A 15% depreciation of the dollar and an appreciation of Asian currencies is needed in order to:

• reduce the US current account deficit,
• faciliate China’s focus on domestic demand and reduce its accumulation of foreign exchange reserves, and
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April 12, 2007 | Kenneth Rogoff Asks What Keeps the Dollar so Strong

The dollar should be much weaker relative to America’s competitive position, according to Kenneth Rogoff of Harvard University. In 2006, interest payments for US debt amounted to 6.5% of GNP. US borrowing makes up more than two-thirds of combined excess savings of all surplus countries in the world. The former IMF chief economist reports that domestic consumption, Americans’ confidence in their