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| Volcker discusses Vision of a two-tiered financial system. |
| New York, 22.02.2009 |
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| Sun Feb 22, 2009 at 02:27:55 PM PST
Paul Volcker, President Obama's Economic Advisory Chair, recently gave a speech to Columbia University's economic department. Among other notables, in attendance was Christine LaGarde, French Financial Minister, and Joseph Stiglitz, Columbia University Economics professor. Volcker mentioned he felt he seemed to be in 80% agreememt with the other speakers.
Volcker starts out with something to the extent of
Even the experts don't know completely whats going on. **
Well it's good someone admits it. I appreciated every word of his talk, and I particularly was riveted by the concept of having a vision as we move forward - not just moving forward arbitrarily, but according to what we want to achieve for the long term - stability, prosperity, etc. [* Ahhhh - sigh of relief * ] He says we need to approach this with "some vision of where we want to go."
He admits that the previous system was unsustainable and that the financial engineers had become experts at obscuring and exploiting the weaknesses of the financial system in such a way that the problems were allowed to persist longer than they needed to, which seems to be why things are as bad as they are.
He talked about having a two-tier financial system with one tier very solid, steady, no-risk, public service kind of banking. And the other tier being the hedge fund wheeler dealers. So investors know where they are when they're doing their various financial dealings. There should be different worlds with different rules. He is not in agreement with those who say the lessons of this problem will be easily forgotten. He believes this crisis will be imprinted in the minds of investors and bankers and that all parties will want to go ensure measures so that we never return to the same conditions that allowed these problems to take hold in the first place.
He says essentially, we have to come to terms with the new paradigm. He says very pointedly that we have to stop quoting from Water Bagehot. The world has changed since his day and so has the economic system. Volcker says an emphasis is now placed on international cooperation, because that is what the circumstances require.
He says that he and others have been shocked by the uniform rapidity with which the whole global financial system has been cut down from it's highs. There was a time when all the experts felt this crisis was an American phenomenon that would sort itself out on its own. It's clear that's no longer the case.
He also mentioned the need to understand the long-term effects of the central banks persisting to intervene in the system beyond the term of the crisis. We need to be certain to craft into the solution a way to restore independence after the fact of the recovery. We cannot assume that what we hope will happen will naturally unfold. We have to craft the desired outcome into the legislation.
I highly recommend everyone to watch the video if you can. Sorry I don't have a transcript. Here are a couple of other reviews of the speech.
odkaz na stránku
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