Skip to main content

How to Emerge from the Crisis in 2009

In the maelstrom of events and news that characterize the current global crisis, it is often difficult to keep a clear head and a sense of what is really going on. But when one takes a step back from the market turmoil, the picture becomes clearer, and so do the required policies.

WASHINGTON, DC – In the maelstrom of events and news that characterize the current global crisis, it is often difficult to keep a clear head and a sense of what is really going on. But when one takes a step back (something easier to do on days when markets are closed), the picture becomes clearer, and so do the required policies.

Let me first set the scene by making three observations on where we are today. First, in the advanced countries, we have probably seen the worst of the financial crisis. There are still land mines, from unknowable credit default swap (CDS) positions to hidden losses on balance sheets, but the worst days of frozen money markets and obscene risk spreads are probably over. 

Second, and unfortunately, the financial crisis has moved to emerging countries. In crossing borders, the sharp portfolio reallocations and the rush to safer assets are creating not only financial but also exchange-rate crises. Add to this the drop in output in advanced countries, and you can see how emerging countries now suffer from both higher credit costs and decreased export demand.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

https://prosyn.org/3HyJ9cl;
  1. haass105_Gustavo BassoNurPhoto via Getty Images_amazon Gustavo Basso/NurPhoto via Getty Images

    The Amazon and You

    Richard N. Haass

    Sovereignty entails obligations as well as rights, and where compliance cannot be induced, pressure must be applied. And though positive incentives to encourage and enable compliance would be preferable, Brazil's government is showing that there must be sticks where carrots are not enough.

    1
  2. GettyImages-1151170958 ADRIAN DENNIS/AFP/Getty Images

    The Meritocracy Muddle

    Although populism in Western democracies is nothing new, resentment toward elites and experts has certainly been on the rise. Does this trend reflect a breakdown in the system, or a system that is actually working too well?

    11

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated Cookie policy, Privacy policy and Terms & Conditions