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Archive for February, 2010|Monthly archive page

Mother Earth On Crack

In Financial Markets, Health and Environment, International Econnomic Politics, National Economic Politics, Views, commentaries and opinions on 27.02.10 at 21:20

It must be the worst nightmare; the forces of nature spinning totally out of control. Is that what is about to happen? With one major ecological catastrophe after another? If so, it would be the “fattest tail” in the history of science.

“We hear about more earthquakes and it seems like they are more frequent.”

J. Ramón Arrowsmith

8,8 on The Richter Scale is quite a ride. But it’s not abnormal. Nor is the earthquake frequency out of the “normal” range, according to scientists. What’s worries me is that most scientists are using the same mathematical models when reaching their conclusions as the economists that didn’t see the financial crisis coming.

The Chilean earthquake, and the tsunami it spawned, originated on a hot spot known as a subduction zone, where one plate of Earth‘s crust dives under another.

It’s part of the very active “Ring of ire,” a zone of major crustal plate clashes that surround the Pacific Ocean.

“This particular subduction zone has produced very damaging earthquakes throughout its history,” says Randy Baldwin, a geophysicist with the U.S. Geological Survey (USGS), according to Associated Press.

The world’s largest quake ever recorded, magnitude 9.5, occurred along the same fault zone in May 1960.

A Whole Lotta Shaking Going On

Magnitude-8 earthquakes occur globally, on average, just once a year.

“Since magnitudes are given on a logarithmic scale, an 8.8-magnitude is much more intense than a magnitude 8, and so this event would be even rarer,” J. Ramón Arrowsmith, a geologist at Arizona State University, says.

The Ryukyu Islands of Japan were hit with a 7.0-magnitude quake just last night. News of this, the Haiti quake and now Chile make it seem Earth is becoming ever more active. But in the grand scheme of things, geologists say this is just Mother Nature as usual.

“From our human perspective with our relatively short and incomplete memories and better and better communications around the world, we hear about more earthquakes and it seems like they are more frequent,” Arrowsmith said.

“But this is probably not any indication of a global change in earthquake rate of significance.”

“Coupled with better communication, as the human population skyrocket and we move into more hazardous regions, we’re going to hear more about the events that do occur,” Arrowsmith adds.

However, Stephen S. Gao, a geophysicist at Missouri University of Science & Technology, says: “Relative to the 20-year period from the mid 1970’s to the mid 1990’s, the Earth has been more active over the past 15 or so years.”

“We still do not know the reason for this yet. Could simply be the natural temporal variation of the stress field in the earth’s lithosphere.”

(The lithosphere; the outer solid part of the Earth.)

Common Factors

The latest earthquake in Chile have two common factors with the 7,0 magnitude quake in Japan recently.

For one, any seismic waves that did make their way from Japan to the Chilean coast could play a slight role in the ground-shaking.

“It is too far away for any direct triggering, and those distances also make the seismic waves as they would pass by from the Haiti or Japan events pretty small because of attenuation,” J. Ramón Arrowsmith says.

(Attenuation is the decrease in energy with distance.)

“Nevertheless, if the Chilean fault surface were close to failure, those small waves could push it even closer.”

In addition, both regions reside within the Ring of Fire, which is a zone surrounding the Pacific Ocean where the Pacific tectonic plate and other plates dive beneath other slabs of Earth.

About 90 percent of the world’s earthquakes occur along this arc.

The Fat Tail of Mother Nature

What do you think geologists, climate scientists, financial engineers and poker players have in common?

Financial model

They all use – roughly – the same mathematical models, based on available historical data,  to calculate probability.

Events that occur outside the statistical pattern are usually referred to as “fat tails”.

The last couple of years, the term “Black Swan” have been used about similar unexpected incidences.

(After Nassim Taleb’s famous book by the same name).

The “rocket scientists” on Wall Street obviously ran into a “fat tail” and it seems like the climate scientists, (or should I say “the climate industry”?),  are about to do the same.

So, what about the geologists?

What happen if?

That’s the question probability models are used for.

General model

The answer is only as reliable as the date you put into the formula.

And when it comes to the development of the Earth, our historical data is less than insignificant.

Even a million years is next to nothing.

Still, we’re determined to alter the composition of our  delicate earthly mechanisms.

Without knowing the consequences.

What would happen if we replaced all the salt water on the Earth with fresh water?

Or, what would happen if we replaced all the oil in the Earths lithosphere with a mixture of salt water and dirt? (Or pump the empty oil wells in the North Sea full of CO2?)

Well, I’m no geologist.

Related by the Econotwist

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Obama announces “non-binding” climate accord

A non-agreement on nothing

“Mini Ice Age” Underway?

Europe Risks Being Sidelined In Climate Talk

Netherlands Adds New Controversy To UN Climate Report

Top Scientist: “UN Climate Panel Is Losing All Credibility”

World May Not Be Warming, Scientists Says

As Climate War Intensifies, So Does Extreme Weather

Extreme Weather Around The Globe

Top 10 Risks of 2010

Coldest January In Norwegian History

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Ukraine Dropping E.U. Membership?

In Health and Environment, International Econnomic Politics, National Economic Politics, Views, commentaries and opinions on 27.02.10 at 18:44

The new Ukrainian president Viktor Yanukovych used his first inauguration speech to announce that the country want a “non-aligned” relationship with the European Union. Observers belive Ukraine will drop its plans to apply for full E.U. membership.

“In the minds of Ukrainian politicians it’s clear that joining the EU is not an option in the foreseeable future.”

Iana Dreyer

President Viktor Yanukovych of Ukraina

Ukraine needs the EU in a global dimension, as a power to guarantee a peaceful coexistence of different civilizations and safety in the spheres of energy, environment and food,” Yanukovych said in Kiev Saturday.

“We are prepared to take part in such processes as a non-aligned state,” he said, according to Bloomberg News.

Several European observers and commentators see the president’s remarks as another signal that the Eastern European state will not join NATO and E.U. after all.

The former president Viktor Yushchenko, who defeated Yanukovych in 2004, targeted NATO membership and joining the EU to help free Ukraine from Russian influence.

The Kremlin curbed natural-gas deliveries to Ukraine in 2006 and 2009, withheld a new ambassador to Kiev and accused Yushchenko of supplying arms to Georgia during Russia’s war with its southern neighbor in August 2008.

But Yanukovych, on the other hand, signaled in his election campaign that he’s to seek closer ties with Russia.

Yanukovych will also visit Moscow on March 6, deputy head of his office Hanna Herman said today. She added that the president spoke to the U.S. delegation after his inauguration and discussed a visit to Kiev by Secretary of State Hillary Clinton, which may take place in the next three months.

Ukraine’s economic collapse, which has left it relying on a $16.4 billion International Monetary Fund loan that has been frozen since the autumn has been exacerbated by political wrangling and the election campaign.

Yanukovych has pledged to set up a stable government to combat the deepest economic recession since 1994 and restore investor confidence. The hryvnia lost 41 percent against the dollar since September 2008 and was the world’s second worst performer after the Venezuelan Bolivar.

The new president of Ukraina seems already to have painted himself into a corner after he asked for Russian help to ease gas flows into Europe and signaled he may allow Russia’s Black Sea naval fleet to remain based in Ukrainian waters.

“It’s a rebalancing act,” says Iana Dreyer, an analyst at the European Centre for International Political Economy in Brussels.

“The country has been divided into two for a long time between a western-orientated government and a Russian speaking, Russia-oriented east. I’m not surprised Yanukovych is seeking to restore the balance a bit. He doesn’t want to alienate Russia more,” she says.

“In the minds of Ukrainian politicians it’s clear that joining the EU is not an option in the foreseeable future. The EU hasn’t been very keen to offer enlargement. But the Ukrainians do want a free trade agreement.”

Sources:

EUobserver

Bloomberg News

Related by the Econotwist:

East European banks needs $304bn

2010 Analysis: Warns Against Social Unrest

2010 Analysis: ECB Increase Bank Loss estimates

European criminals and politicians taking “libel tourism” trips to UK

Nordic Central Banks Agree On Baltic Bank Bailout

All Eyes On Ukraina

Michael Milken Warns Against Sovereign Debt

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DnB NOR's Latest Fuck-Up

In Financial Markets, Health and Environment, National Economic Politics on 27.02.10 at 12:28

The grand national bank of Norway, DnB NOR, have done it again; five Norwegian fish exporters is filing for bankruptcy after buying structured foreign exchange products from the bank as hedge against losses. Over the last two years four small towns and over 150 000 private investors have lost all their money after buying complicated derivatives from DnB NOR.

“I had a fucking bad Christmas.  There was a lot of aquavit.”

Geir Børre Johansen


Several exporters of dried fish in Norway have bought foreign exchange products from DnB NOR as a hedge against losses. Now, five companies are out of business, the Norwegian news paper Dagens Næringsliv reports.

Many exporters of dried fish in the Lofoten area in northern Norway feared currency losses last year and thought they could secure their income with foreign exchange products from DnB NOR Markets.

Instead they are left with heavy losses, and several are already bankrupt, the Norwegian news paper writes.

DnB NOR Markets have earned more money on foreign exchange market than ever.

Recommended By The Bank

“DnB NOR Markets recommended to ensure the currency,” fish exporter Geir Børre Johansen at Røst Seafood says in a interview with Dagens Næringsliv.

“I had a fucking bad Christmas.  There was a lot of aquavit, he adds.

He thinks back on Christmas for just over a year ago. The euro had gone through the roof as the financial crisis ravaged. For an exporter with hedged against a fall in the euro exchange rate, it would mean big losses.

Many exporters like Røst Seafood was affected by the large exchange rate movements.

Several of these companies had purchased a type of foreign exchange product, sold by DnB NOR Markets, which could provide an additional benefit when/if the euro rose – up to a certain level, that is.

But if the exchange rate exceeded the agreed level, they risked heavy losses.

According to the news paper at least ten out of about 20 dried and salted fish businesses in the Lofoten area have entered into such contracts, in addition to regular currency hedging agreements.

A total of five companies have filed for bankrupt in recent months.

Total debt is around NOK 150 million.

Extreme Speculation

“This is miserable bank craftsmanship,” Professor Thore Johnsen at the Norwegian School of Management (NHH) says.

He thinks DnB NOR have behaved irresponsibly towards the fish exporters.

“The agreement that this is a hedging product is quite incomprehensible. It is an extreme speculation in the euro exchange rate. The bank provides the companies with an opportunity for disaster,” Professor Thore Johnsen says.

But he also points out that the companies that have signed such agreements, must take their share of the responsibility.

Strategy Specialists Ståle Johansen at DnB NOR Markets says he believe the dried fish exporters themselves must take responsibility for the fact that their foreign currency exposure was many times higher than sales revenue.

In 2008 four small town i northern Norway lost billions after buying U.S. mortgage backed securities from other banks in the DnB NOR system.

Over 150 000 private investors are still fighting DnB NOR in court after loosing all their savings when they bought  complicated products with hidden risks.

Related by the Econotwist:


DnB NOR: “Comprehensive System Failure”

DnB NOR Except Penalties of NOK 26 million

How To Make A Rat Look Like A Puppy

Fighting The Reality

The Relative Reality

“Not Grounded In Reality”

“The Baltic Lab Rat”

Mellom banker og berg

Tre bobler og en bank

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Iceland Debt Talks Collapse

In Financial Markets, International Econnomic Politics, National Economic Politics on 26.02.10 at 23:43

The Icelandic finance ministry announced on Thursday evening that the latest round of talks between the parties had “adjourned without a final resolution.”

“Constructive proposals were made by both sides during these talks, but significant differences remains.”

Steingrímur Sigfússon


Talks between Iceland and the UK and the Netherlands over the Icesave banking dispute collapsed late Thursday, making a referendum on a previously agreed deal more likely, a vote the government in Reykjavik is almost certain to lose.

The Icelandic finance ministry announced on Thursday evening that the latest round of talks between the parties had “adjourned without a final resolution,” according to EUobserver.

Representatives of the three parties had been meeting in London for the last two weeks.

“We had hoped to be able to reach a consensual resolution of this issue on improved terms”, said Icelandic finance minister Steingrímur Sigfússon, “but this has not as yet been possible.”

“Constructive proposals were made by both sides during these talks, but significant differences remain,” he added.

Icelandic negotiators are to return to Reykavik to discuss what is to be the government’s next move.

After the Icelandic Icesave internet bank collapsed in 2008, depositers in the UK and the Netherlands were compensated by their governments to the tune of €3.8 billion. The Hague and London now are demanding Reykjavik pay them back.

The government has agreed to do so, but the terms are considered onerous by a majority of the population. Under the terms of the agreement the loan will be paid back over 15 years with interest, with estimates suggesting every household will have to contribute around €45,000.

The UK-Dutch side had reportedly offered reduced interest rates and a suspension of interest for two years, an position described by the Dutch as their “best offer”.

The Icelandic side felt that the interest applied would still be too high to be palatable domestically.

The Icelandic president had refused to sign the government bill that approved a schedule of payments to the two governments, provoking a referendum on the matter due on 6 March, which analysts and pollsters expect the government to lose.

In trying to negotiate better terms for payback of the debt, the government had hoped to avoid the vote, as it is certain to threaten the supply of international financial aid.

The referendum is now likely to proceed and a No vote all but assured.

The development further threatens the likelihood of Iceland acceding to the European Union, as the UK and the Netherlands have hinted that they will block accession talks with the north Atlantic nation if the Icesave issue is not resolved.


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Consumer Confusion Index At Record High

In Financial Markets, Health and Environment, National Economic Politics, Views, commentaries and opinions on 26.02.10 at 21:58

The latest Norwegian CCI numbers was released Friday,  and shows a small increase of 0,5 points. Still, the country’s two main providers of electronic financial news manage to present two totally different views on the consumer confidence. According to DN.no, the Norwegians’ confidence about their own economy is strengthening, but the competitor E24.no says is weakening.

“Uncertainty about the development of both unemployment and interest rates probably contribute to the restrain in consumer confidence.”

Mari Paulsrud

In spite of the recent less-worse-the-expected numbers from the Norwegian labor market, the Norwegians continue to be skeptical about both the national and their personal economic future. They’re even planning on saving more money in the next 12 month. Now, that’s really confusing to the nations establishment of economists.


Norway is a funny little country.

It sees itself as one of the most democratic states in the world, although the country has been ruled by the same socialistic political party for more than 70 years.

(Except for a few short guest appearances by the conservatives).

Almost ethical and morally flawless, an environmental frontier, (and the only people with balls big enough to stand up to Hitler in WWII).

Yeah, well, I won’t go down that road. Not today.

I will only point out another Norwegian characteristic; the ability to justify every opinion with the exact same argument.

Today’s amusing example is illustrated by the headlines of Norway’s two main financial news sites, DN.no and E24.

While one is reporting that the Norwegian consumer confidence is strengthening, the other is reporting that it’s weakening.

They both use the exact same quotes by macro economist Mari Paulsrud at the research institute, Opinion AS, to argue their case.

Pretty Flat

But – first – let’s look at the actual number.

Norway’s CCI came in at 8,7 points in February, up 0,5 percentage points from January, and up from 0,0 points a year ago.

And the economist Mari Paulsrud makes it pretty much clear in her statement.

“Consumer confidence rose slightly this month, but continues to remain relatively flat, as it has done several months in a row. This reflects some uncertainty among consumers and there are still some hesitation when it comes to optimism.”

“Uncertainty about the development of both unemployment and interest rates probably contribute to the restrain in consumer confidence.”

Paulsrud also emphasize the fact that the actual confidence is declining, but an increase in peoples willingness to save money makes the sum of all the sub indexes positive.

Half Empty – Half Full

Yet, it results in these two headlines:

DN.no (Dagens Næringsliv):

E24.no (VG, Aftenposten):

And actually they’re both kinda telling the truth.

If you see the CCI numbers over a years period of time, the confidence is getting better.

But if you look isolated at the last few months, the rise in optimism is curbing.

Consumer Confusion Index

The most confused people here is probably not the Norwegian consumers, but the members of the mainstream media and the national establishment of economists.

The latest development in the labor market has been far less worse than expected a year ago. Low rates, combined with practically no inflation and rising wages has given most Norwegians more spending power. And the housing market is back on a fast track to heaven.

So, why aren’t the “consumers” more optimistic? Taking up more loans and running down the shops? (as they’re supposed to, according to theories).

Well, here’s the real news: THEY ARE NOT THAT STUPID !

(By the way; here’s economist Mari Paulsrud’s Blog Post on the latest CCI numbers).

Related by the Econotwist:

Evaluation Of Norwegian Monetary Policy

Norway’s GDP Fall For First Time In 20 Years

End Of The European Upswing?

Final Words Of A Central Banker

How To Make A Rat Look Like A Puppy

Norway: Key Policy Rate Remains Unchanged

Norway Economic Update – “Partly Grim”

Fear Of Norwegian Housing Market Collapse

Fighting The Reality

Norway’s Prime Minister Fears Social Unrest

Central Bank of Norway raise interest rate again

Roubini: “The Worst Is Yet To Come”

Robert Schiller: – Recovery is just luck

“The Norwegian Syndrome”

Not So Rosy After All

Crisis In A New Light

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Standard and Poor's: The Baltic Are Stabilizing

In Financial Markets, International Econnomic Politics, National Economic Politics, Views, commentaries and opinions on 26.02.10 at 02:46

Swedbank and SEB, the two largest lenders in the Baltic states, have got their credit rating outlooks changed to stable from negative by Standard & Poor’s Ratings Services, which say the Baltic economies are stabilizing.

“The Baltic states are about to emerge from their recent sharp economic correction.”

Standard & Poor’s Ratings Services

The Baltic states are about to emerge from their recent sharp economic correction, which means Swedbank and SEB will make significantly lower loan loss provisions in the region than last year, the rating agency says according to Bloomberg News.

The company affirme its A long-term and A-1 short-term counterparty credit ratings on Stockholm-based Swedbank and SEB.

Swedbank, the largest lender in the Baltic, and SEB, the second-largest, have suffered soaring loan losses in Estonia, Latvia and Lithuania after a debt-fuelled property boom turned to bust.

Swedbank reported a fourth-quarter net loss of 1.8 billion kronor ($249 million) after credit impairments jumped, and carried out two separate rights offers in 2008 and last year to raise capital to help it absorb losses on troubled loans.

“It’s obviously quite pleasing to see the first sign of improvement of our rating,” Jonas Erikson, Swedbank’s head of treasury, says in an e-mailed statement Thursday.

“We are working continuously with taking down the risk profile of the bank and have now issued some 150 billion kronor worth of term-funding since launching the rights issue last autumn, which has already improved our maturity profile significantly.”

Swedbank AB and SEB AB, the two largest lenders in the Baltic, had their credit rating outlooks changed to stable from negative at Standard & Poor’s Ratings Services, which said the Baltic economies are stabilizing.

The euro-pegged economies have just reported a record high unemployment rate, and economists at Danske Bank have just issued a report that says all the three Baltic nations will remain in recession throughout 2010.

The Baltic states “are about to emerge from their recent sharp economic correction,” which means Swedbank and SEB will make “significantly lower” loan loss provisions in the region than last year, S&P’s says in the statement.

The company affirme its A long-term and A-1 short-term counterparty credit ratings on Stockholm-based Swedbank and SEB.

The other two “Big Baltic Boomers”, danish Nordea Bank and Norwegian DnB NOR, is not mentioned.

Wonder why?


Sources:

Bloomberg News

Baltic Business News

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How Sweden sent Estonian economy into free fall

European criminals and politicians taking “libel tourism” trips to UK

Estonia gives six times U.S. earthquake aid to Haiti

Baltic losses of Swedish banks at 3.7 billion dollars

Nordic Central Banks Agree On Baltic Bank Bailout

Bankrupt Baltic Baker Charged With Million-Dollar Fraud in U.S.

“SEB Robbed Customers,” Whistleblower Says

Swedbank Reports Record Loss of SEK 10,5bn

Swedbank In Estonia: “Daylight Robbery”

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Estonian Company Claims $130mill from SEB

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Fitch: Global Sentiment Improving but European Concerns Persist

In Financial Markets, International Econnomic Politics, National Economic Politics on 25.02.10 at 21:30

Fitch Ratings says that its latest European and US fixed income investor surveys both show continued cautious optimism about prospects for international credit markets this year, however, the majority of investors remain concerned about the outlook for European government debt.

“Investors have a negative view on sovereign debt fundamentals and funding needs in 2010.”

Monica Insoll


“The proportion of European investors concerned that sovereign credit fundamentals will deteriorate remained at an elevated 70% – unchanged on the last quarter. In addition, 40% believe that the peak of mark-to-market loss-taking in this sector has yet to occur, and 55% expect sovereign bond spreads to widen. Investors also expect a flood of sovereign issuance to occur in the next 12 months: 24% believe issuance will increase more than a quarter on last year, and 59% anticipate issuance will rise by up to 25%,” Fitch Ratings says in a statement.

Fitch Ratings says that its latest European and US fixed income investor surveys both show continued cautious optimism about prospects for international credit markets this year, however, the majority of investors remain concerned about the outlook for European government debt.

“Responses from senior credit investors across Europe paint a picture of continued improvement in fundamental credit conditions in relation to corporate asset classes, including investment grade, speculative grade and emerging markets. However, in stark contrast, investors have a negative view on sovereign debt fundamentals and funding needs in 2010,” says Monica Insoll, Managing Director in Fitch’s Credit Market Research group.

The proportion of European investors concerned that sovereign credit fundamentals will deteriorate remained at an elevated 70% – unchanged on the last quarter. In addition, 40% believe that the peak of mark-to-market loss-taking in this sector has yet to occur, and 55% expect sovereign bond spreads to widen. Investors also expect a flood of sovereign issuance to occur in the next 12 months: 24% believe issuance will increase more than a quarter on last year, and 59% anticipate issuance will rise by up to 25%.

Regarding expectations of global macroeconomic growth, US investors continued to hold the most negative views on Europe, with 50% believing that growth this year will fall in a range of 1% to 2%. Their views were most optimistic on emerging markets (with two thirds anticipating a 3%+ growth rate), while they also appeared more optimistic than previously on domestic US growth, with half of the respondents placing growth rate expectations in a healthy range of 2% to 3% in 2010.

Overall, investors were more sanguine about corporate debt fundamentals, especially for cyclical sectors. European investors expressed a clear positive step change in sentiment across this asset class, with the proportion expecting improvements in credit quality broadly doubling on the previous quarter for investment grade and speculative grade – continuing the upward trend observed during the latter part of 2009. In the US, opinion has turned modestly bullish, with the majority of investors expecting credit improvement over the coming year and a renewed focus on growth-oriented activities such as capex and M&A.


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Central Bank Of Norway Call For A New "Global Order"

In Financial Markets, Health and Environment, International Econnomic Politics, National Economic Politics, Views, commentaries and opinions on 25.02.10 at 20:32

Governor of Central Bank of Norway, Svein Gjedrem, purpose to merge the activities of G20 and IMF in creating a new financial architecture. In a speech held at the Peterson Institute for International Economics in Washington, Thursday,  Mr Gjedrem said that a “statutory-based and representative global order” should be one of the main objectives of the discussions on changes in the international financial markets.

“The IMF has played a pivotal role in presenting the initial lessons from the crisis, in providing finance to countries with temporary balance of payments needs. When the good times return, we must avoid memory failure and remember these facts of life.”

Svein Gjedrem

Photo: Nancy Bundt/Norges Bank

A Multilateral approach is needed to deal with the global challenges. That was the main message from governor Svein Gjedrem of Central Bank of Norway in his speech at the Peterson Institute for International Economics in Washington, Thursday. He draws a picture of a new global financial world with the International Monetary Fund, IMF, in the center.

“At the end of the Second World War, 45 countries agreed to establish a new international financial and economic order with the Bretton Woods Institutions, the IMF and the World Bank, at its center. In his inaugural speech to the Bretton Woods Conference in 1944, US Treasury Secretary Henry Morgenthau noted the following:”

“We know that economic conflict must develop when nations endeavor separately to deal with economic ills which are international in scope. To deal with the problems of international exchange and of international investment is beyond the capacity of any one country, or of any two or three countries. These are multilateral problems, to be solved only by multilateral cooperation. They are fixed and permanent problems, not merely transitional considerations of the post-war reconstruction. They are problems not limited in importance to foreign exchange traders and bankers but are vital factors in the flow of raw materials and finished goods, in the maintenance of high levels of production and consumption, in the establishment of a satisfactory standard of living for all the people of all the countries on this earth.”

“It is perhaps time to honor some fundamental principles,” Mr Gjedrem said in his speech at the Peterson Institute.

The governor of the Central Bank of Norway did stretch as far as to paint a picture of how he thinks a new global financial world should look like.

Mr. Gjedrem’s new world would revolve around the IMF.

“During the crisis, the IMF proved its ability to respond promptly and effectively to very challenging developments.”

“I therefore submit that a statutory-based and representative global order should be one of the main objectives of the discussions on changes in the international financial architecture.”

“I have presented my view on the prevailing international economic order which I find deficient in important respects. The G20 played a vital role in the response to the global crisis and the rest of the world depends on its successful cooperation. With the world recovering from crisis, the G20 should merge its activities with those of the IMF. That will give them both wider acceptance and legitimacy.”

“I’ve described some characteristics of Norway and emphasised our history of active support of multilateral institutions and collaboration. Currently, we do not participate where decisive discussions take place on international economic and financial issues and cooperation, including changes in the governance of the IMF. Yet we are called upon to make relatively large contributions to efforts agreed by a non-statutory body.”

Svein Gjedrem emphasize certain key principles:

  • First, systemically important countries need to collaborate effectively on consistent economic policies. Their success is vital not only for their own good, but also for that of others, including small open economies.
  • Second, this collaboration should be anchored in a multilateral and statutory-based system of representation, for example through constituencies, where smaller countries would participate, even if indirectly.
  • Third, the constituencies should have rotating representation, where small countries, at least periodically, could participate directly.

“Without such a global order, the interest in contributing to international efforts is certain to diminish. There can be no taxation without representation.”

“The IMF has played a pivotal role in presenting the initial lessons from the crisis, in providing finance to countries with temporary balance of payments needs, and in preparing the overall framework for the international policy response.”

“When the good times return, we must avoid memory failure and remember these facts of life.”

Here’s a full transcript of the speech.

Related by the Econotwist:

Evaluation Of Norwegian Monetary Policy

Final Words Of A Central Banker

Nordic Central Banks Agree On Baltic Bank Bailout

Norway: Key Policy Rate Remains Unchanged

Fear Of Norwegian Housing Market Collapse

Central Bank of Norway raise interest rate again

C.B.of Norway: “All Banks Must Be Allowed To Fail”

Norway: Most Banks Fail In Stresstest

Reason To Worry

Norges Bank urges banks to reduce liquidity risks

Norway’s New Bubble

“The Norwegian Syndrome”

Central Bank of Norway: “Transparency Is Difficult”

Not So Rosy After All

The Art of Interest

Central Bank of Norway Reverse Easing

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