Here's one test to see if the global balance of power is shifting

Posted By Daniel W. Drezner Monday, September 29, 2008 - 6:05 PM

Ten years ago, when the Asian financial crisis was in full bloom, both Europe and Japan proposed some tweaks to global governance. Japan floated the idea of an Asian Monetary Fund, and France suggested the creation of an Economic Security Council. The United States effectively mooted both suggestions. I bring this up because of the following Financial Times story by Tony Barber:

Europe’s leading policymakers will convene in Paris next week to prepare the ground for a possible global summit on the financial crisis, Nicolas Sarkozy, France’s president, said on Monday. He said the Paris talks would bring together officials from France, Germany, Italy and the UK – the four European Union powers represented in the G8 group of industrialised nations – as well as Jean-Claude Trichet, the European Central Bank president, José Manuel Barroso, the European Commission president, and Jean-Claude Juncker, head of the eurozone’s finance ministers’ group. “We must not give in to the forces of destabilisation. We must support the banks. But there are structural problems. I confirm my call for a summit in coming weeks to establish the basis for a new international financial system,” Mr Sarkozy said.

This is exactly the kind of thing that the U.S. would have shot down a decade ago. If this goes anywhere, it will signal a decline in U.S. influence.

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What a difference a few months make

Posted By Daniel W. Drezner Sunday, September 21, 2008 - 9:44 PM

Back in May I attended a conference about American foreign policy from 2009 onwards. Here's a link to what I said,* but basically what I said is that global markets for capital, energy, food, and carbon emissions were badly dysfunctional. I remember being struck by the fact that I was the most optimistic of the panelists, and I was pretty damn gloomy. I bring this up because this Tyler Cowen quote perfectly captures how I'm feeling as of late:

[A]t the end of the day it is hard to escape the conclusion that markets simply have performed horribly in a number of important regards.

More on what this portends in a bit. Given that Tyler's one of the more optimistic economists I've met, however, this is a damning quote. * As is typical at these kinds of conferences, the economics-themed panel is always scheduled last. This can be pretty annoying, since, typically, it's only after the political economy panel that the rest of the attendees realized that they aren't going to be able to implement many of their more grandiose grand strategies.

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Quick hits on the Fannie Mae/Freddie Mac bailout

Posted By Daniel W. Drezner Thursday, September 11, 2008 - 2:02 PM

My latest Newsweek International column is online -- it's a quick take on the global implications of the Fannie Mae/Freddie Mac bailout. Here's the opening paragraph:

The U.S. Treasury Department's takeover of Fannie Mae and Freddie Mac is one of those mega events that simultaneously calls for instant analysis (and lots of it) and time out for a deep breath or two. The move is so vast in its implications and says so much about how the world has changed, it's about as hard to take in as a view of the grand canyon. In the spirit of deep breathing, here are four thoughts to keep in mind about the buyout.

I think there's something revealing that I thought I was doing instant analysis, while my editor thought it was deep breathing. Read it for yourself and let me know which it is!

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Your time-travel sentence of the day

Posted By Daniel W. Drezner Monday, September 8, 2008 - 1:32 PM

This one goes out to those readers old enough to have some kind of memory of the Cold War. Imagine, for a second, if you could go back in time and tell the people of, say, 1983 that, twenty-five years later, the following sentence would be written:

The Russian stock market's rise can be traced to positive news on the nationalization of US mortgage agencies Fannie Mae and Freddie Mac.

I'm going to be trying to wrap my head around the concepts in that sentence for the rest of the day.

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Open Fannie Mae/Freddie Mac thread

Posted By Daniel W. Drezner Monday, September 8, 2008 - 1:05 PM

Comment away on the government takeover of Fannie Mae and Freddie Mac. If you think I have something substantive to say about the economics of it, you'd be wrong -- I'm still puzzling over what the government will actually do. Instead, I will simply note some rather odd political effects:

Here's a fun counterfactual: step back for a minute and think about what would be happening right now if John Snow was still the Treasury Secretary instead of Henry Paulson. That's a scary f$#&ing thought, isn't it? For someone who ostensibly accepted the job during an administration's lame duck years, Paulson's been rather... vital, no? If you were a conspiracy theorist -- which I'm not -- you'd almost have to wonder if Bush officials, when they approached Paulson, let him know that a financial storm was a brewin'.
The effect on the presidential campaign seems obvious to me -- isn't it going to be very, very hard for the GOP to bash Obama as a big government liberal when a Republican administration takes over two of the largest financial institutions in the country with the support of the Republican candidate for president? It's not like this is a completely new phenomenon, but still.

Comment away. Readers are also encouraged to provide a complete list of U.S. companies that are "too big to fail" -- i.e., so vital to the economy that the U.S. government will bail them out regardless of what happens. UPDATE: Skimming at what's been reported, I am cheered by the fact that one of the goals of the takeover is to make sure, long term, that Fannie Mae and Freddie Mac will not be "too big to fail" in the future.

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