Mohamed A. El-Erian
In recent weeks, policymakers on both sides of the Atlantic have affirmed the financial system’s soundness and stability. And yet, it would be premature to declare victory: while some financial risks have been eliminated, others have migrated into less regulated non-bank activities.
LONDON – In recent weeks, policymakers on both sides of the Atlantic have affirmed that the financial system is sound and stable. The US Federal Reserve announced in June that all US banks passed its latest annual stress test. And Fed Chair Janet Yellen has now suggested that we might not experience another financial crisis “in our lifetimes.”
At the same time, the Financial Stability Board (FSB) – which monitors regulatory practices around the world to ensure that they meet globally-agreed standards – has declared, in a letter to G20 leaders, that “toxic forms of shadow banking” are being eliminated.
In short, ongoing measures to buttress the global financial system have undoubtedly paid off, especially when it comes to strengthening capital cushions and cleaning up balance sheets in important parts of the banking system. The latest assurances from policymakers are comforting to those of us who worry that not enough has been done to reduce systemic financial risk and to ensure that banks serve the real economy, rather than threaten its wellbeing.
To continue reading, please log in or enter your email address.
Registration is quick and easy and requires only your email address. If you already have an account with us, please log in. Or subscribe now for unlimited access.
Across the European Union, millions of people who are willing and able to work have been unemployed for a year or longer, at great cost to social cohesion and political stability. If the EU is serious about stopping the rise of populism, it will need to do more to ensure that labor markets are working for everyone.
In a time of global uncertainty, a vision of “made in the Americas” prosperity provides a unifying agenda for the continent. If implemented, the US could reassert its historical leadership among a group of countries that share its fundamental values, as well as an interest in inclusive economic growth and rising living standards.
During a time of American waywardness under Donald Trump, the United Kingdom's national security has increasingly come to depend on the European Union as a buffer against Russian revanchism. Ironically, then, the safest form of Brexit might be the one that hurts the most, so long as it leaves behind a stable EU.
Standard economic theory says that net inward migration, like free trade, benefits the native population after a lag. But recent research has poked large holes in that argument, while the social and political consequences of open national borders similarly suggest the appropriateness of immigration limits.
Clearly, there is something appealing about a start-up-based innovation strategy: it feels democratic, accessible, and so California. But it is definitely not the only way to boost research and development, or even the main way, and it is certainly not the way most major innovations in the US came about during the twentieth century.
With the withdrawal of the Free Democrats from coalition talks, Chancellor Angela Merkel could be forced to form a minority government. That would not necessarily be a bad thing; in fact, a Merkel who can be called to account by the Bundestag may be the best alternative Germany has.
In the first 11 months of his presidency, Donald Trump has failed to back up his words – or tweets – with action on a variety of fronts. But the rest of the world's governments, and particularly those in Asia and Europe, would be mistaken to assume that he won't follow through on his promised "America First" trade agenda.