'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.
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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 valuable...in 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 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 valuable...in 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
Review
"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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3 of 3 people found the following review helpful
By Rolf Dobelli
TOP 500 REVIEWER
Format:Hardcover
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.
1 of 1 people found the following review helpful
By demola
Format:Hardcover
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?
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?
By LP Blanca
Format:Paperback
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
Well written
Martin Wolf made a really good book. It is well written and fast to read.
Published on 27 Aug 2009 by B. Davide
5.0 out of 5 stars
A must read
Martin Wolf's latest book is like his columns in the FT: short, punchy and rigorous. His perceptive insight and clear analysis explain why the imbalances in the global economy are... Read more
Published on 18 Jun 2009 by P. Legrain
4.0 out of 5 stars
So how do we fix global finance?
I looked forward to this book with anticipation and great expectations. However it disappointed slightly. I probably expected too much. Read more
Published on 17 Jun 2009 by Ulrik Jungersen Walther
2.0 out of 5 stars
On Economic Rumination
much of the material is out dated - even at time of going to print. An economists book for an economist, lacks deep insight and ruminates through earlier scholarly literature like... Read more
Published on 26 April 2009 by David Francis Mccarthy
2.0 out of 5 stars
Crisis Not Our Fault - Bankers Say
Martin Wolf's submission on the global train wreck is short, written in a readable, journalistic style, and duly supplemented with graphs and tables. Read more
Published on 31 Mar 2009 by reader 451
5.0 out of 5 stars
Superbly informative, but not focussed on current crises.
Only Martin Wolf could have written this book.
Imagine a team of scholars working to ensure all the important areas are covered with rigorous accuracy & precision; a... Read more
Imagine a team of scholars working to ensure all the important areas are covered with rigorous accuracy & precision; a... Read more
Published on 16 Mar 2009 by Feyd
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