Europe's economic crisis continues, and the way it plays out will decide the future course of the world economy. Among those who are trying to steer the continent, and especially the euro zone, away from the edge of the precipice is Christine Lagarde, managing director of the International Monetary Fund. She has recommended policies such as deeper economic integration and higher firewalls to turn Europe around. Ms. Lagarde also has the delicate task of restructuring the IMF so that fast-growing emerging economies have a voice in the institution that is commensurate with their increasing economic clout, without alienating other member countries.
Whether it comes from ethics or from theory, the impression is that the days of the contemporary speculator are numbered. For this moody character is reckless: he is one to confuse the stock market and roulette. Economic theory has a hard time understanding him. Nevertheless, a theory of the speculator is possible.
Till 2007, a large part of the global growth was fueled by leveraging and debt creation. With governments and central banks struggling to save the banks, the private debt crisis has evolved into a public debt crisis. The next ten years could be brutal. Will governments and financial institutions be able to manage the great deleveraging?
"Are we entering a golden age of gas?" The question was posed in the latest IEA report and if the experts are to be believed the response is firmly positive. They have made predictions of a bright future based largely on the emergence of unconventional natural gas. The United States has witnessed a gold rush more commonly associated with the nation's frontier past, one that is raising some serious concerns for the environment.
The regulation that followed in the wake of the financial crisis has only partially addressed the challenges exposed by the collapse. Restrictive measures on equity levels and liquidity requirements have been taken but have been restrained by fears over endangering the very instruments necessary to finance the fragile recovery. The need for a global framework, and a more explicit separation of market and credit risk, would complete the picture as would reinforcement in scope and power for the bodies charged with enforcing the new regime.
As recently as mid-February copper prices hit an all time high of $10,157 a metric ton on the London Metal Exchange. While the market has cooled off in the intervening months the spike set off alarm bells for decision makers in government and business on how to approach overheated commodities and energy markets. Should the current climate be viewed as a passing anomaly or a permanent reality? Just how real is the threat of a shortfall?
The less heralded consequence of globalization is the emergence of crises of expanding magnitude which test our ability to coordinate and swiftly execute a response. Truly global institutions such as the World Health Organization govern only specific domains and in most areas of human activity such bodies exist little, if at all. We are stuck with the question of how to respond to the new reality and it was with these stakes in mind that HEC Paris convened a workshop last November to discuss the way forward following the paralysis of European airspace in April 2010 as a result of volcanic activity in Iceland.
The combined challenges of energy and environmental security pose important national security questions and risks that, with few exceptions, remain poorly formulated and understood today. This article, adapted from a keynote address given by Carol Dumaine at the 8th International Security Forum in Geneva, Switzerland, shines light on these issues and calls for a common security framework to strengthen our ability to cope with global change.
The last few decades have witnessed an extraordinary development in the sciences and techniques of risk control and crisis management. However, there is a gnawing doubt: what if our points of reference, our capabilities, are no longer good enough?
Crises are times when statistics are used to portray the seriousness of the situation. They are also moments of heated debate where the state's role in regulating and steering the economy is questioned. Each major crisis is witness to the emergence of new ways of quantifying the social order, implying new models of action, variables, and systems of observation.
High-speed, computer-driven trading is increasingly controlling the investment markets. Most analysts agree that it is adding liquidity and reducing trading costs for everyone. Some critics argue, however, that leaving people out of the loop, except for a few mathematicians who tinker with algorithms after the fact, has created new and still dimly understood systemic risks that pose ever greater dangers to market stability.
Many have tried to predict the future, but only a few ever succeed. One is Paul the Octopus, who correctly called all seven of the German team's matches in the World Cup as well as Spain's victory over the Netherlands in the final. Three others include the provocative French thinkers interviewed for this article, each of whom called the American economic crisis years ahead of the fact. What's next now for the United States? The three all hope that the country can reform its financial and political system and cooperate more with Europe and the rest of the world but they fear that special interests will get in the way. One prediction: the international floating currency system will soon end, maybe as early as autumn.
The crisis erupted with the bankruptcy of Lehman Brothers. An unprecedented mobilization of heads of state did not prevent the worldwide credit crunch. Today, Europe is taking exceptional measures to prevent some countries of the Union from default and debt restructuring : is it simply a classical cyclical crisis or a structural one signaling the failure of a model? For ParisTech Review, economists, philosophers, and anthropologists have analyzed the crisis, its temporary or profound nature, its origins, and the way out.
In an interview with ParisTech Review, Claude Bébéar, the honorary chairman and former president of AXA, explains why he believes that financial crises, like the current meltdown triggered by problems in the mortgage and credit markets, are unavoidable because of basic human nature. He also argues for broad reforms in employee-compensations systems, including the remuneration of top executives. And he discusses his provocative views on a range of issues - shareholder voting rights and dividends, the speculative practice of short selling, leveraged buyouts, tax havens, and the nationalization of banks.
In the coming years, a huge "green" market bubble will emerge, driven by a pervasive fear of global warming, a panic away from oil, and U.S. government policies. Companies without a legitimate sustainability initiative will then face increasing difficulties as resources, including investments, begin to flow away from them and toward green businesses. As such, executives need to be achieving significant carbon reductions today to prepare for that upcoming shift.
