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Reading Wolf

A wise editor of mine once told me that Martin Wolf's columns in the Financial Times were the hardest things he read in the morning, and the most rewarding. That description fits Wolf's piece on the role that "surplus countries" -- namely, China and Germany, both of whom have giant current accounts surpluses -- played in the recent financial bust, and will need to play if there's to be any enduring recovery. This, I'd say, is the key bit:

low bond yields caused by newly emerging savings gluts drove the crazy lending whose results we now see. With better regulation, the mess would have been smaller, as the International Monetary Fund rightly argues in its recent World Economic Outlook. But someone had to borrow this money. If it had not been households, who would have done so – governments, so running larger fiscal deficits, or corporations already flush with profits? This is as much a macroeconomic story as one of folly, greed and mis-regulation.

Wolf explains why here. Bit of a slog, but worth it.

By Ezra Klein  |  June 12, 2009; 11:23 AM ET
Categories:  Financial Crisis , Solutions  
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Comments

There's a colorful explanation of at least part of this phenomenon in last year's "Global Pool of Money" piece from This American Life ... that piece was the seed from which the "Planet Money" podcast grew.

Posted by: scanjew | June 12, 2009 1:30 PM | Report abuse

I don't really feel like I am informed until I read the day's FT--especially if Wolf has a column in it.

Posted by: Castorp1 | June 12, 2009 1:32 PM | Report abuse

We've been hearing about the global 'savings glut' for some years now, and mucho freting about that money needing a place to go.

Doesn't that sound like some people have been able to accumulate far too much cash because their taxes were lowered, were sheltered, or taken to offshore hidey holes? They don't want to make productive investments (in some cases because that would reveal their illegal untaxed nature), they just want more greedy returns.

Maybe we need to more highly tax the income/wealth of those upper 5% of the income scale? Governments are broke but they can't tax to balance things because the money will flee to yet another tax haven. Eliminate the havens. Tax the rich until they claim torture.

Posted by: JimPortlandOR | June 12, 2009 1:39 PM | Report abuse

Clearly your wise editor told you that in the era after Wolf succeeded Sam Brittan as the FT's lead economic commentator. Wolf grapples with big ideas, and he doesn't shy from complexity. But he really is a model of clarity. It's all the Greek and Latin he studied before doing graduate work in economics.

Look up Brittan's old columns some time if you really want to deal with dense, obscure prose. For that, Mrs Thatcher knighted him.

Posted by: lknobel | June 12, 2009 9:59 PM | Report abuse

The FT is a fine paper. The world's best daily coverage on business and economics, and I used to read it from the late 1980s until a few years ago. The columnists, however left a bit to desire. Brittain was at least a more-or-less unreconstructed centrist Keynesian, while Wolf was more-or-less like Alan Greenspan, benighted by an overweening belief in the magic of markets and the natural (and more or less naturally self-correcting) stabilities of the market system as a whole. I teach economics as a set of incompatible (yet internally consistent) ideological & theoretical positions. Wolf, like Greenspan, seems to have had a conversion in the past few months: Hey the market can self destruct if left to its own devices. He is smart on the details often, but he did get the whole thing wrong in his previous economic personality. Now he sees a global imbalance as a main source of the problem; the CEPR groupings at Cambridge have been singing this tune for over a decade. Where was Wolf when it was not popular to identify inadequacies of neoliberalist macro and micro policies of the past? Or maybe he did not read history (modern) so that the megaphones of the fellow traveling market praisers of the Thatcher-Reagan-Bush era befuddled him for quite a long period of time. Welcome to Keynes who loved capitalism but had his eyes wide open for the last 15 years of his life.!

Posted by: crockpost | June 15, 2009 8:00 AM | Report abuse

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