A turma do “eu estou avisando”!

Observado os observadores, é possível encontrar os catastrofistas, os moderados, os inocentes, e tem também a turma do “eu estou avisando”. Esta última é aquela que nem diz que o mundo vai acabar amanhã, nem acha que a coisa está mais ou menos, nem prega que tudo está uma maravilha.  Simplesmente ela começa a fazer alguns alertas, como se estivesse torcendo para que algo dê errado para confirmar suas previsões, mas nunca assumindo isso diretamente.

O Prof. Kenneth Rogoff, da Harvard University, EUA,  é um dos representantes desta última turma. Aqui vai ele em um artigo de hoje!

============

What is the worth of your money?

Kenneth Rogoff

Will today’s ever widening global financial crisis mark the end of the era of financial triumphalism? Ask a lay person to list the ten great innovations that drive our world today and you probably won’t find too many who mention the Black-Scholes formula for pricing options. But for the financial community, pioneering formulas that paved the way for modern hedging strategies should get just as much credit for the passing period of rapid global growth as cell phones, computers, and the Internet.

Until the last 12 months, finance advocates seemed to have a strong case. By helping to spread risk, high-tech finance could help economies grow faster. Macroeconomists celebrated the Great Moderation of the global business cycle, with recessions seeming to become milder and less frequent. And, of course, the financial community was making money hand over fist, creating scores of millionaires and even billionaires worldwide.?
Governments were cheerleaders, too. In anglophone countries, presidents and prime ministers, not to mention some leading central bankers, boasted of superior financial systems that were the envy of the world. When French and German leaders complained that the sprawling and unregulated tentacles of new finance posed huge risks to the global economy, they were derided as sore losers. Small countries such as Iceland decided to get in on the action by privatizing their banks and setting up their own financial centers. If you cannot be Silicon Valley, then why not create a mini-Wall Street?

Now Iceland’s banks, having borrowed several times the national GDP, are in desperate trouble, with debts far beyond what the small country’s taxpayers can absorb. Even the conservative Swiss gave into the temptations of high-tech finance and the riches it promised. Today, the two largest Swiss banks are sinking in liabilities that exceed seven times the country’s income.

Of course, the mother of all bailouts is the absurd blank check the United States government is granting the giant home mortgage lending agencies Fannie Mae and Freddie Mac, which hold or guarantee $5 trillion in mortgages that are looking increasingly dubious. It is ironic indeed that US Treasury Secretary Hank Paulson, a former head of Goldman Sachs, a firm that exemplifies financial triumphalism, is spearheading the effort to save government-sponsored behemoths that have so conspicuously outlived their usefulness.

Advances in the field of finance have potentially had a beneficial impact in raising and smoothing global growth. But there is also a cyclical element to the flowering of finance. When home prices were soaring, the geniuses behind mortgage finance seemed infallible. Now that prices are falling, the genius strategies don’t seem quite so brilliant.

It is an old story. Back in the early 1980’s, financial engineers invented portfolio insurance, a fancy active hedging strategy for controlling downside risk. They made piles of money. Unfortunately, when global stock markets crashed in October 1987, the insurance turned out to be useless, mainly because markets for hedging collapsed.

In the late 1990’s, the US hedge fund Long-Term Capital Management convinced the world that its partners were masters of the universe. For a while, it consistently made outsized profits, supposedly due to its Nobel-prize backed financial expertise. In 1998, when LTCM went bust, it became all too clear that the firm was basically making massive quantities of simple bond trades, with huge leverage and huge risk.

For governments, the key to success in regulating financial markets lies in maintaining reasonable constraints during boom times that prevent taxpayer funds from being put excessively at risk. Unfortunately, this is difficult to do, because boom times make people who warn of risks seems like doom mongers. That is why it is so important that governments allow financial firms to fail occasionally. That is the only way to impose real discipline on shareholders, bondholders, and corporate leaders.

Is the current gilded era of financial triumphalism over? There is talk in many countries, even the US, that the time has come to ensure that the entire financial system, including hedge funds and investment banks, become subject to much stricter regulation.

Financial firms are screaming murder, but it is not obvious that broader and better financial regulation would be a bad thing. In my research on the history of international financial crisis with Professor Carmen Reinhart, we find that eras of heavy financial regulation tend to have significantly fewer financial crises than lightly regulated free-wheeling eras, such as those associated with the recent period of financial triumphalism.

No one is suggesting that we go back to the financial repression of the 1950’s, but the latest crisis has left little doubt that the entire system for global financial regulation is in serious need of an update. Financial innovation ought to be allowed to flourish, but not without better checks and balances. Otherwise, we will be forever trapped in a framework where taxpayers are forced to bail out banks in bad times, while wealthy shareholders reap huge profits in good times. It is time to leaven financial triumphalism with some humility and common sense.?

Kenneth Rogoff is Professor of Economics and Public Policy at Harvard University, and was formerly chief economist at the IMF.

* Published in Bahrain’s DAILY TRIBUNE on August 2, 2008.

Atirando em nós mesmos no alimento

Artigo muito interessante do ex-Presidente do México na revista Forbes!

====================

Current Events
Shooting Ourselves in the Food
Ernesto Zedillo 07.17.08, 6:00 PM ET
Forbes issue date 08.11.08

Images of people rioting in many countries to protest high prices are vivid reminders of the ongoing food crisis. Rising food prices are eroding the real income of people all over the world, undoing some of the last decade’s progress in combating poverty. More than 100 million people in developing countries are now at risk of once again falling below the poverty line. Global grain prices have more than doubled since early 2006, with over half the jump in prices occurring this year. Record food and oil prices are coupled for the first time in 35 years, threatening to end the golden period of low inflation that has been enjoyed practically worldwide for the past several years. The specter of stagflation haunts us as the cost of food and oil continue to rise, and we have yet to glimpse any light at the end of the tunnel of the current financial mess.

Protectionists haven’t missed the opportunity to blame free markets for the crisis. The absurd goal of “food sovereignty” has made a comeback in a number of countries both poor and rich and is being used as an argument to resist and cancel the liberalization of agricultural markets. This position–most clearly exemplified by France–is ironic because agricultural protectionism, not freer markets, is what has aggravated the problem.

Blame Policies, Not Markets

Increasing demand for grains in emerging countries such as China and India and two successive years of severe drought in Australia, an important contributor to world supply, could never in and of themselves have caused the huge price hikes we’re experiencing. World demand for grain for food use increased only 1.3% annually between 2000 and 2007–only 0.3% annually, in fact, in all of East Asia, including China. Australia’s droughts reduced global grain exports by 4% in 2006 and 2007. Consequently, one must look at other factors to understand the spike in food prices: high energy costs, increased fertilizer prices and the weakening of the U.S. dollar. But to get the complete picture, one cannot ignore the severe protectionist distortions, both new and old, that have crippled the much needed supply response in world food markets.

By reducing the incentive for domestic farmers to increase production, controls over grain exports in some developing countries have worsened shortages instead of alleviating them, thus contributing to higher world prices. This has been the case, for example, with the recent restrictions in rice exports by China, India and Vietnam and wheat exports by Argentina and Kazakhstan.

It is clear, however, that the most damaging distortions in agricultural markets originate in rich countries. There’s little doubt that the present spiral in grain prices is closely linked to U.S. and EU policies enacted to boost production of biofuels. The American and European governments subsidize the production of biofuels, limit their import and mandate their use. The exact extent to which these policies have impacted food prices is still a matter of contention, but not even the most enthusiastic proponents of ethanol can deny that by inducing a greater allocation of agricultural resources toward biofuel production, the amount of grain available for food has been reduced. According to the World Bank, while global production of corn increased by 51 million tons from 2004 to 2007, biofuel use of corn in the U.S. alone increased by 50 million tons, thus leaving no margin to satisfy the increase of 33 million tons in global consumption for other uses during the same period. This explains why some respectable experts, such as the former chief economist for the U.S. Department of Agriculture and a top World Bank agricultural economist, have imputed a large proportion of the rise in food prices to the growing use of food crops for fuel.

Wrongheaded biofuel policies constitute only one aspect of the complex and expensive web of protectionist agricultural policies practiced by most developed countries that the WTO Doha Round was supposed to fix. The leading trading countries have repeatedly failed to commit to real reform, with short-term political convenience overriding their own national long-term interests. The latest example of this anomaly is the new Farm Bill approved by the U.S. Congress in May. Instead of reducing agricultural subsidies, this bill provides for bigger and more distorting ones. Even more than the 2002 Farm Bill, this one has eroded U.S. credibility and leadership at the WTO trade talks and given the other key players yet another excuse to evade their own responsibility to make the Round successful–responsibility that in the EU’s case consists of accepting truly meaningful cuts in all the tariffs it applies to agricultural products.

Given the American and European resistance to serious agricultural reform and the developing countries’ own counterproductive protectionism, it should come as no surprise if the latest attempt to conclude the Round this year delivers–if anything–a deal so full of loopholes that it ends up perpetuating the present inefficient and unfair system. It seems that the world’s vast potential to produce food will continue to be held back by agricultural protectionism. In other words, countries will persist in causing harm to themselves.

Ernesto Zedillo, director, Yale Center for the Study of Globalization, and former president of Mexico; Lee Kuan Yew, minister mentor of Singapore; and Paul Johnson, eminent British historian and author, rotate in writing this column. To see past Current Events columns, visit our Web site at http://www.forbes.com/currentevents.