macroblog: Moving The Bottom On The Dollar
リンク: macroblog: Moving The Bottom On The Dollar.
Moving The Bottom On The Dollar
My real job has interfered with my blogging activities this past week, but I have been meaning to take note of this Wall Street Journal article (appearing on A1 of Thursday's print edition, and highlighted in real time by Mark Thoma):
In Call to Deregulate
Business, a Global TwistOnerous Rules Hurt
U.S. Stock Markets,
But So Do New Rivals
It begins:
Prominent figures in the U.S. are warning that the nation's financial markets have been handicapped by post-Enron regulatory overreach. Treasury Secretary Henry Paulson has made addressing the problem a signature political issue. A blue-ribbon committee chaired by former Bush economist Glenn Hubbard has echoed this sentiment, as does a report commissioned by Sen. Charles Schumer of New York and New York City Mayor Michael Bloomberg.
Their key evidence is data suggesting that U.S. stock markets are increasingly unattractive places for companies to list shares. Mr. Hubbard, now dean of Columbia University's business school, says this is the "canary in the coal mine," an early warning of the increasing costs to U.S. companies of raising money, which in turn threatens investment and growth. Their solution: a lighter touch in regulating corporate behavior.
I would also draw attention to an issue I pondered just a handful of posts back:
Are the days of the US dollar as the predominant world currency over? Maybe not. As was noted in the research of Menzie Chinn and Jeffrey Frankel cited in my 2005 post, there are many factors that determine which country's monetary assets become the leading international reserve currency. But to the question of what currency will emerge, we are increasingly ticking off items on the list that would make the answer "the euro."
Burdensome regulations that make our financial markets less attractive are at the top of that list, and in the pecking order of things to worry about regarding our global economic position I would advise thinking a lot less about what China is doing to us and a lot more about what we may doing to ourselves.
TrackBack
TrackBack URL for this entry:
http://www.typepad.com/t/trackback/7674729
Listed below are links to weblogs that reference Moving The Bottom On The Dollar:
I absolutely agree with your point, "I would advise thinking a lot less about what China is doing to us and a lot more about what we may doing to ourselves."
But, who's interest deserve our consideration?
My concern is that we made a monumental mistake when we totally repealed Glass-Steagall without completely rewriting regulations over our financial sector. Honestly, what's a larger threat, whether our markets favor our business interests more than those of another markets, or whether our markets are leading us at warp speed toward our economic armageddon. For just one example, how long will we shut a blind eye to the enormity of our eponentially growing derivatives risk? Our system requires effective checks and balances to power to survive.
I fear we cannot endure the fallout from the unfettered deregulation of our financial sector much longer and the costs are growing daily.
What I argue is obvious, the unanswered question is, who's to argue for the longterm viability of our economy when it was the FED itself (AG) who vigorously lobbied to get us here?
Posted by: bailey | January 28, 2007 at 11:00 AM
I wonder whether it is really that negative to observe fewer firms listed in the US? I indeed wonder whether firms currently use regulatory arbitrage to avoid the high standard demanded in the US. However, this strategy might not be sustainable. Investors eventually will figure out that lower standards might worsen corporate governance. From a global perspective the most important aspect is whether it will be possible to convince and maybe teach investors that a race to the bottom [of the regulatory stance] will hurt investors. Very sound theoretical arguments can be made that a race to top is more likely than a race to the bottom. However, many investors are rationally ignorant and hence I am not 100 percent sure that the best regulatory framework will win regulatory competition. America offers a good example of the complexity of the matter. Still it is not clear whether the importance of Delaware for corporate law is the outcome of regulatory competition or of a race to the bottom.
Posted by: Manfred Jäger | January 29, 2007 at 04:19 AM
If Wall Street were really suffering, salaries would be plunging. Wall Street's main competitive disadvantage vs. London and Hong Kong is excessive compensation, not over regulation.
Posted by: rex | January 29, 2007 at 11:21 AM
But many Europeans are not positive about the Euro
http://www.euro2day.gr/articlesfna/27837084/
Your thoughts then on whether the euro is a viable alternative?
Posted by: RB | January 29, 2007 at 07:07 PM
I partly agree with Bailey in that we need to keep a sharp eye on derivatives et al. I was for the elimination of Glass-Stegal, and am unsure of how to rewrite regulations. It is always a huge catfight when you do that. I had some experience with that with the rewrite of the CFMA in 2000.
SOX is for sure written wrong. That is generally what happens when government quickly writes regs to counter or appease a populist movement.
Careful thought needs to go into rewrites. The SEC is perhaps the most antique backward looking regulatory agency in world wide finance.
Cox seems to be making progress there-but it is like eroding a mountain.
My thought is that if we try to level playing fields, we will create unlevel playing fields elsewhere. Better to fix the externalities of regulatory arbitrage, because companies are doing it. They are also engaging in tax arbitrage. No way to stop it.
Posted