Davos debate: How to fix finance?

By Reuters Staff
January 26, 2009

The credit crunch has left little of the globe unaffected and few sectors of the world economy untouched. The interlinkages between economics and finance are at the core of discussions at the World Economic Forum in Davos. Reuters News asked delegates for their analysis of the roots of the problem and prescriptions for recovery.

24 comments

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another clue to holistic economic equilibrium and stability … the capitalist system has great dynamic merit relying on fair competition.. privatization of some entities works other don’t … some elements work better with a socialist model … education and health as a birth right not a brutal unfair battle breeding social resentments.

positive working fundamentals are there but for the holistic global model to work properly , needed is a return of some business entities to stable government control … the proven capital free markets that build stable connections create the expansion dynamics … proven beneficial foundations sponsored by tax incentives getting wider use …. once a positive flow through to the whole of humanity is acheived stable equilibrium will be found .

for this to happen all the wasted arguments or blame games must be replaced by clearly presented communication towards co-operation.

the other benefit found world peace … not just a dream .

Posted by Harry | Report as abusive

The answer is both absurdly simple and hard to do.
The U.S. has abused its position as providing the world’s reserve currency. It continues to extract the maximum possible rent from this through cheap debt.
Dethrone the U.S. $ and there will be an end to huge global imbalances, debt binges etc. Of course, hard to do both in terms of what will replace it and the transition. But anything else is just hot air. Tackle the fundamental problem.

We first step towards reducing global financial balances and therefore reducing financial instability is to acknowledge that we cannot all grower faster than trend. We cannot all be better than average. Keynesian policies on steroids known as non-Ricardian fiscal policies are the source of global financial imbalances characterized as persistant current account deficits on one hand with currency manipulation to remain export competitive on the other. It works in the short-term, but longer term it shows up as unsustainable financial imbalances, a misallocation of resources, and exacerbates the boom and the bust of the business cycle as there are fewer natural mechanisms for self-rigthing those imbalances. Reduce your global financial imbalances and markets will be less prone to violent corrections.

Posted by MrBill, Eurasia | Report as abusive

Dear Sir,
I have been putting some thought to the current global financial crisis and would like to put forward to you a hypothesis for consideration, if it is a viable solution to the increasingly catastrophic situation the global financial system is currently experiencing.
It is about time that someone came up with some constructive thoughts and started to look at the ‘credit crunch / recession /depression) as an entirely global problem that is not going to improve in anything like the near future.

Global problems require global solutions and the only REAL solution is to tackle the problem on a global scale.

Consider this hypothesis – the only way to revive the world economy is to instill confidence in the public mind, give investors something to invest in!

Banks and bankers cannot do this anymore nobody trusts them

The answer is to respond to the masses in such a way that they have the power to bring the world economy back on track.

Bring confidence back and it will turn around very quickly, the burning question is HOW?

A simple solution is available, provided that the world financial systems and all governments work as one entity for one goal.

THE SOLUTION IS SIMPLE IN CONCEPT BUT DIFFICULT TO RESOLVE WITHOUT 100% GLOBAL COOPERATION AND METICULOUS PLANNING TO IMPLEMENT THE CHANGEOVER TO REVALUED CURRENCIES AND ALL FINANCIAL TRANSACTIONS ADJUSTED TO THE NEW LEVEL.

Close down all financial dealings for 48 hours

The concept is to take all global assets, everything but hard cash and reduce the value to one tenth

Next take all cash assets and multiply value by ten

(this would require revaluation of every world currency) yes print new money

This would create wealth for every man and women in the world overnight and create a differential of 100 times between asset values and cash values globally and therefore will not have any inflationary impact whatsoever.

after 48 hours all transactions would recommence with all assets a tenth of what they were before, but cash assets having being multiplied by ten they would be worth 100 times more. However the status quo of assets, wages, prices, etc., relatively, will remain the same.

The windfall from the change gives revenue back to the people to spend but have 100 times more spending power. Costs of assets are slashed and the cash assets allow people to buy houses and spend while still maintaining the original differential as the revaluation is totally global therefore there will be no difference in the relative values of assets compared to incomes.

If such a plan was considered and published globally it would almost certainly create confidence, in fact ity may even improve the world economy before it is applied. Just the knowledge of global improvement may give the kick-start the banking bail-out strategy has not.

I am an engineer, not an economist, I look for solutions to problems every day.

Regards,

CG London

Posted by cliff | Report as abusive