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Fixing Global Finance [Hardcover]

Martin Wolf
4.0 out of 5 stars  See all reviews (9 customer reviews)

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Book Description

16 Dec 2008
'It is neither desirable nor feasible for the US to be the world's dominant borrower forever. Indeed it is absurd for the world economy's stability to depend on the willingness of the world's richest consumers to borrow ever more.' The globalisation of finance should have brought substantial benefits. In practice it brought a series of devastating currency and banking crises in the 1980s and 1990s, particularly in the developing world. The failure of advanced countries and of the IMF to rescue the damaged economies of Asia, Russia or Brazil taught those countries, and the emerging Chinese giant, an overwhelming lesson: never again. Emerging economies ceased importing capital, but by keeping their exchange rates down, running huge current account surpluses, recycling capital inflows and accumulating enormous foreign currency reserves, they began to export it on a vast scale. Since several advanced countries also ran large current account surpluses, to which the oil exporters added their own massive contributions in the mid-2000s, the US emerged as the spender and borrower of last resort. The US is the world's most creditworthy borrower. But as its external deficit exploded, so did the domestic borrowing of US households, stimulated by rising house prices. The result was the subprime mortgage crisis of 2007. The challenge ahead is to promote a financial system that makes fast-growing emerging economies comfortable as large-scale net importers of foreign capital. The key is to acknowledge that, in a world of adjustable currencies, international lending must be denominated in the currency of borrowers, not just in that of a few dominant advanced economies. Only by tackling imbalances in the international financial system is there a chance of global financial stability.

Product details

  • Hardcover: 224 pages
  • Publisher: Yale University Press; 1ST Edition edition (16 Dec 2008)
  • Language: English
  • ISBN-10: 0300142773
  • ISBN-13: 978-0300142778
  • Product Dimensions: 23.6 x 16 x 3 cm
  • Average Customer Review: 4.0 out of 5 stars  See all reviews (9 customer reviews)
  • Amazon Bestsellers Rank: 456,432 in Books (See Top 100 in Books)

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"... offers not just a fascinating account ... it also marks the first moments of this `good liberal' questioning his own beliefs." -- Tony Curzon Price, Spectator Business, 1st March 2009

"... this excellent book provides great reason for optimism." -- Locust, Ethical Corporation Magazine, 1st March 2009

"...more analytical and detailed than many other `instant' books about the credit crunch."
-- George Kerevan, The Scotsman, 11th April 2009

"...what Wolf ... say[s] repays attention...his book is identifying one of the main dimensions of the present crisis."
-- Alex Callinicos, International Socialism, Spring 2009

"This book is a great and important contribution to everyone's welfare on the globe. It can be paid no higher accolade." -- Will Hutton, Observer, 1st February 2009


"This book is a great and important contribution to everyone's welfare on the globe. It can be paid no higher accolade."

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Customer Reviews

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3 of 3 people found the following review helpful
5.0 out of 5 stars Fine fixes for global financial markets 5 Jan 2010
By Rolf Dobelli TOP 500 REVIEWER
Questions about current account deficits and international savings rates send many fiscal analysts into jingoistic declamations. But Martin Wolf isn't that kind of economic commentator. He's the sort who realizes that global financial markets are fiendishly complex and, thus, that easy answers are likely to be too easy. In this study, Wolf adds depth and texture to such hot topics as China's massive savings rate and its huge foreign-currency holdings. This is primarily an economist's analysis, so Wolf doesn't address the way financial markets affect everyday consumers and entrepreneurs. getAbstract recommends his book to observers who seek a learned, lucid, forward-looking perspective on global financial markets.
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1 of 1 people found the following review helpful
4.0 out of 5 stars No Easy Fixes, Sadly 9 May 2010
By demola
I agree with one reviewer that the title of this book is misleading. About that later. Moreover FGF is nothing about the credit crunch in case you're beguiled as I was by the clever placing of it amidst all the other credit crunch books at the bookstore. This book was written largely before the onset of the subprime mess. Instead, Wolf tackles what was the pre-eminent macro topic before Bear Stearns and Lehmans and that was the huge current account deficits of the developed Western nations and the equally offsetting surpluses of the developing mostly Eastern countries.

Wolf traces a short history of financial crises to explain why developing nations have grown wary of laissez-faire globalization and are amassing reserves at an alarming rate. One thing I got early from this book is that it's not just that Americans are spending too much but that many developing countries are intentionally debasing their currencies by such a large margin as to make it economic for Americans to maintain trade deficits. There were a number of other such illuminating insights (at least for me) throughout the book.

Back to the title, the book doesn't really offer any practical or pragmatic or even workable solutions. The solutions are correct theoretically. But exactly how are we going to get the Chinese or the Japanese to stop saving and start consuming not just more but much more? Supposing they are happy with what they've already got?
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5.0 out of 5 stars Excellent Analysis 10 Jun 2010
The book centers mainly on international imbalances in debt and trade, so it covers only a part, though very important, of today's troubled financial system. Excellent and very deep analysis, all backed up with detailed figures.
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4.0 out of 5 stars So how do we fix global finance? 17 Jun 2009
I looked forward to this book with anticipation and great expectations. However it disappointed slightly. I probably expected too much.

I hold Martin Wolf in great esteem and believe him to be one of the most insightful and clear thinking economic commentators today. I had hoped some of that would transpire into some real concrete solutions as to what can actually be done to "fix global finance." But it didn't; hence my disappointment.

On the positive side, the book does give an extensive, sober and clear analysis into the imbalances that created the financial and economic crisis of 2008 / 2009. Wolf's thesis is that the crisis has been created and exacerbated by an enormous "savings glut" in regions such as Asia (China, Japan, Korea etc) combined with excess spending (dis-savings) in the Anglo Saxon world (primarily United Kingdom and the United States). The "savings glut" has become the result of deliberate mercantilist economic policies adopted by most large emerging market countries following the Tequila Crisis in 1995 and the Asian / Russian Crises of 1997/8.

The solution? Get them to spend more on goods with high import content, so that the US and UK can export their way back to prosperity and improved solvency. I have no problem with this concept, however I fear successful execution is going to extend well beyond the current crisis if not beyond the next.

If you are not an insider to the world of finance and economics, this book will provide you with the foundations for a balanced and well considered view (though I would recommend a brush-up on your current account and capital account definitions).
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18 of 25 people found the following review helpful
2.0 out of 5 stars Crisis Not Our Fault - Bankers Say 31 Mar 2009
By reader 451 TOP 1000 REVIEWER
Martin Wolf's submission on the global train wreck is short, written in a readable, journalistic style, and duly supplemented with graphs and tables. While one does need to know the basic terms, an economics degree is not a requisite for reading it. This is all the good that can be said of it.

Fixing Global Finance is a misleading title - possibly intentionally. This is an economic tract sketching the macro background to the financial crisis. Only peripherally does it deal with finance meant as banking or the markets, and the book provides no suggested fix to their problems. Indeed, Wolf would have us believe that the financial crisis has nothing to do with bankers, market supervision, or monetary policy mistakes. It is all the fault of a `savings glut' and disembodied trade flows, or of that little Chinese saver and his over-parsimonious government. That America and Europe's banks paid hundreds of billion (yes, hundreds) in bonuses in the half-decade that preceded their collective failure has nothing to do with their current trouble. That the Fed and the ECB allowed investment banks and markets to dictate monetary policy (a practice known euphemistically as `signalling'), thus engendering the greatest credit bubble in generations, was perfectly all right. That the same public institutions refused to regulate the credit derivatives market, praised opaque securitisations, and encouraged no-equity borrowing on mortgages and corporate buy-outs alike was all blameless.

To be fair, much of Wolf's book seems to have been written in 2007 or early 2008, before the full, horrific scale of the bust was apparent.
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