Adam Tooze's Blog, page 40

Crashed to Corona 5: The first economic crisis of the anthropocene

‘We are living through the first economic crisis of the Anthropocene’

At the spring meeting of the IMF this April, Managing Director Kristalina Georgieva referred to our current situation as a “crisis like no other”. In this new piece for The Guardian I attempt to situate that claim in relation to the political economy of the anthropocene. 

“The great acceleration that defined the Anthropocene may have begun in 1945, but in 2020 we are facing the first crisis in which the blowback destabilises our entire economy. It is a reminder of how encompassing and immediate that challenge is. While the timeline of the climate emergency tends to be measured in years, Covid-19 circled the globe in a matter of weeks. And the shock goes deep. By calling into question our mastery over life and death the disease shakes the psychological basis of our social and economic order. It poses fundamental questions about priorities; it upends the terms of debate. Neither in the 1930s nor after 2008 was there any question that getting people back to work was the right thing to do.”

This Guardian piece is a first attempt to link our current COVID-19 preoccupations with the climate and energy political debate in which I, along with so many other people, was immersed only a few months ago.

I was reminded of a lecture I had the pleasure of giving at NYU Abu Dhabi what seems like an eternity ago in February 2020. Georgi M. Derluguian was my irrepressible and brilliant host.

The aim of the talk was to map the ways in which history engages with the anthropocene.

The slides can be downloaded Tooze NYU AD talk compressed II

One of the things that COVID-19 forces us to struggle with is that the challenges of the anthropocene come in different forms. Both zoonotic diseases and climate change are driven by the great acceleration but in rather different ways, with different political economy and making different demands on our political systems.

The Guardian piece is a first effort to get to grips with some of those differences.

Crashed to Corona 4: Central banks in action

The scale, pace and extent of central bank action in response to the  COVID-19 crisis has been spectacular. It dwarfs that which followed the financial crisis of 2008.

 

In this piece in the Guardian, I sketched a first analysis of action on the part of the Fed, the ECB and the Bank of England. My aim was simply to establish a chronology of the action.

This is no more than the beginning of a comprehensive investigation. That would involve a deeper analysis of the actual dynamics of crisis in the financial markets, which will be for another post.

We would also like to know more about the key decision-makers at the central banks.

The expansion of the programs is beginning to raise serious issues about conflicts of interest. We are exiting the phase of awed amazement at the scale of the actions taken. A more critical evaluation will soon begin.

This post is a collection of materials that expands upon the simple chronology I laid out in the Guardian piece.

For sheer analytical clarity this excellent piece by Craig Torres comes top of my list. He breaks down the Fed’s nine new programs launched since the beginning of the crisis into three groups:

Lender of Last Resort: Commercial Paper Funding Facility and the Money Market Mutual Fund Liquidity Facility the Primary Dealer Credit Facility and the Term Asset-Backed Securities Loan Facility –

Fiscal Partner: Programs in which the Fed is acting as an extended arm of Congressional stimulus policy – the Main Street lending program, which will buy up to $600 billion in loans from banks.  Municipal Liquidity Facility. Paycheck Protection Program Liquidity Facility

Investor of Last Resort: “the Primary Market Corporate Credit Facility, will buy debt or loans directly from corporations. The other — named the Secondary Market Corporate Credit Facility — will buy corporate debt in secondary markets, including exchange-traded funds that specialize in high-risk, high-yield debt.”

This is a typology which one can easily see having wide application.

At Politico a team of reporters assembled their own narrative review of the crisis-fighting in March. It is particularly illuminating concerning the officials around Treasury Secretary Mnuchin.

The Bloomberg reporters Jana Randow and PIotr Skolimowski are doing a great job covering the ECB. This is an excellent piece on the events in Frankfurt in mid March. They confirmed the bombshell that Lagarde’s gaffe on 12 March was not unmotivated. The crucial line about spreads not being the business of the ECB appears to have been fed to Lagarde directly by Isabel Schnabel.

The muffled rumbles of dissent within the ECB can be read off this official account of the meeting on the evening of 18 March.

What is becoming clear is that apart from Lagarde herself a key role in the formulation of the ECB’s policy response is being played by Chief Economist Philip Lane formerly of the Central Bank of Ireland and Lagarde’s advisor the macroeconomist Roland Straub. who was appointed to that role by Mario Draghi, and Massimo Rostagno the director of monetary policy.

Unsurprisingly, Jerome Powell and the Fed are attracting a lot of attention. Unlike Bernanke and Yellen, Powell is no super-wonk. Unlike his predecessors, Powell does not offer academic observers of the Fed a point of personal identification. But he has, nevertheless, hurled the institution into a feverish bout of activism.

Neil Irwin at the New York Times has a profile which argues that it is precisely Powell’s lack of doctrinal commitments and varied business career that has enabled his remarkable activism.

Gilliant Tett of the FT also points to the fact that Powell “forged most of his career in the camera-shy world of corporate law. Colleagues described him as “pragmatic”, “self-effacing”, “genial”, “humble” and “cautious”. However, Mr Powell is fast becoming the least cautious — or dull — Fed chair in history.” She ascribes his freedom of action to his close working relationship with Mnuchin at Treasury, Powell’s assiduous cultivation of Congress and the fact that Trump is preoccupied with turning COVID-19 into a daily electoral campaign. Tett also remarks that the sheer scale of the Fed’s intervention gives us an alarming indication of how serious it thinks the risks to the American economy are.

Richard Clarida (Fed Vice Chair), Jerome Powell, John Williams (NY Fed)

As is highlighted in an excellent profile by Nick Timiraos of the WSJ, Powell works with a close team of advisors. One is Vice Chair Richard Clarida, a monetary economist who until 2018 worked for the giant bond house PIMCO.

“Messrs. Clarida and Powell, both mild-mannered professionals who formed the nucleus of the Fed’s leadership team, had built a strong relationship during their first year working together and cultivated the respect of the Fed’s staff. At the central bank’s holiday party last December inside the marble atrium, Mr. Clarida sang “What the World Needs Now Is Love” with Mr. Powell playing guitar.”

Another key figure is Lorie Logan

“Lorie Logan, the manager of the Fed’s portfolio. Ms. Logan, a 21-year veteran of the bank, had been at the New York Fed on Sept. 11, 2001. When the World Trade Center towers collapsed a few blocks from the New York Fed’s fortresslike headquarters, she led a few colleagues to check on the markets, working upstairs while others hunkered down in the basement.”

Logan’s Fed biography is here.

Logan moved into her new role in . Her elevation followed a year of turmoil at the New York Fed after John Williams “ousted” Simon Potter who had previously been responsible for financial markets. The Fed faced a surge of turbulence in repo markets and questions were asked about the leadership. None of that hesitancy has remained in 2020.

Now at the PIIE, Simon Potter wrote a striking account of the sheer scale of Fed asset purchases. It has broken all records for central bank intervention.

In Dissent magazine historian Trevor Jackson offers a dramatic assessment of the Fed’s role. He remarks: “In terms of crisis governance, the United States is not a country with a central bank; it is a central bank with a country.”

Its a great line. But I cant help wondering whether it captures the dynamic of our current moment. The Fed’s degree of agency is undoubtedly dramatic. But what is sucking it into new engagements are the ramifying shocks to the American economy . Furthermore, by the third week of March it was clear that the Fed could no longer act alone. It needed to work in close conjunction with Treasury and Congress. That may turn out to be the more distinctive feature of this crisis.

Crashed to Corona 3: The Fed Beyond Swap Lines

On Tuesday 31 March the Fed added another weapon to its arsenal in the struggle to maintain global dollar liquidity and stability in key US financial markets. It announced a repo facility to allow foreign central banks to use their holdings of US Treasuries as collateral for immediate cash.

Nick Timiraos one of the WSJ’s Fed team had the story.

A FT team did coverage here.

This particularly good Bloomberg piece by Rich Miller is worth a look. He points out the long-standing questions surrounding the dollar’s role. Reminds us of Carney’s intervention last year etc.

In the world of “Fed as global lender of last resort” it was quite the day. There was a sense of witnessing history in the making.

Other central banks have such arrangements e.g. the ECB. A repo based on collateral is a less “generous” arrangement than a swap in which the other central bank provides its own (fiat) currency as the counterpart to the dollars provided by the Fed. But the Fed has never done these kind of repos before. And it may signal a widening of its activities in central bank- to-central bank liquidity provision. In principle any central bank in good standing can access the new facility, unlike the swap lines that remained reserved to a group of 14.

The significance of the move was not lost on dollar liquidity watchers like my tweep Macdonald Ukah in Lagos Nigeria. He commented on twitter and facebook:

“Everything I type below, I type in a rush and in a daze, so I apologize in advance for any observed incoherence  … This is literally happening in my lifetime!”.

I agree with his feeling of awe. There is a real sense that in 2020 we are seeing a concerted and self-conscious deployment of Fed resources in a global lender of last resort capacity that is even more prompt, larger in scale and more wide-ranging than what emerged in 2007-8. In 2007-8 it was improvisation. Today it seems extremely deliberate.

The sense of the dollar-financial system moving from a state “in itself” to a condition of being “for itself” was heightened by the news that the BIS, the chief observatory of the system, is beginning publication of a regular Bulletin.

Issue Number 1 addressed the question of Dollar funding costs during the Covid-19 crisis through the lens of the FX swap market.

 

Throughout the 2020 crisis there has been a slightly eerie sense of mind-meld between the wonkish/thinktank commentariat and the Fed. The Fed’s latest repo initiative raised that sense of mind-meld to a new level.

Since the crisis began, Brad Setser has been campaigning for precisely the kind of facility the Fed has now introduced. This was Brad’s, typically self-effacing, commentary on the news on Tuesday.

I could not help thinking of a wonderful passage that my friend Danilo Scholz sent to me this week in which Alexandre Kojève’s described the effect on him of transitioning from being a famous intellectual to being a French trade negotiator.

Whereas Kojève had once craved the splashy “succès” of a book. Now his life was measured in terms of réussite (results). 

 

Après la guerre, les affaires économiques. Je vous ai dit que parmi mes Hégeliens, il y avait Marjolin. C’est lui qui m’a demandé de venir travailler ici pour un intérim de trois mois et cela dure depuis vingt-cinq ans. J’adore ce travail. Pour l’intellectuel, le succès tient lieu de réussite. Vous écrivez un livre, il a du succès, c’est tout. Ici, c’est différent. Il y a des réussites. Je vous ai dit le plaisir que j’ai éprouvé quand mon système douanier a été accepté. C’est une forme de jeu supérieur.

Mind you, in his younger days, he did look the part!

 

Another important piece laying out the options for the Fed that appeared before the historic 31 March announcement came from Brad Setser’s sometime collaborator who writes under the blogger handle of Concentrated Ambiguity – you can’t get much more Kojèvian than that!

He has ideas for the even more seamless integration of the Fed into global financial system.

Who or what is moving the Fed right now is a fascinating question. As an academic I fancied, perhaps quite falsely, that i had some kind of access to the minds of Ben Bernanke and Janet Yellen. I have no idea who Jay Powell is.

Neill Irwin at the New York Times and Nick Timiraos at the WSJ both had pieces beginning to explore what makes the Powell Fed tick. It will no doubt be a long enquiry.

Setting aside the question of personnel, there may have been a more immediate trigger for the Fed’s actions in the Treasury market.

The oldest worry in the book is the fear of a big sell off of US Treasuries by a foreign holder – lets call it the China bear raid fantasy. It has never materialized. Nor, under normal circumstances, is this  a realistic prospect. But these are not normal times. The Treasury market has on several occasion behaved in a wobbly fashion. There are scenarios in which serious financial pressure builds on large Chinese corporate borrowers. The last thing anyone wants is for the PBoC to actually have to sell any of its Treasury portfolio. We do not, as far as I know, have any indication of movement on the Chinese side. But there has been a drawn down of Treasury securities held in custody on behalf of other central banks at the Fed.

Though this kind of movement can result from central banks reshuffling their custodial relationships, if there was an immediate trigger for the Fed in deciding to offer the new repo facility, this may have been it.

The events of this week may open a new chapter in the story that begins with swap lines.

For those who have stumbled into this area and would like to catch up on the background in the 2008 crisis this post by Nathan Tankus will be useful. Nathan is one of the young leading lights of the MMT movement.

New insights into the emergence of the eurodollar market in the 1970s is offered by a brilliant piece of historical research by a Benjamin Braun, Arie Krampf and Steffen Murau which just appeared in the Review of International Political Economy. These are people to follow in the world of academic IPE.

Contrary to the view which sees the state “stepping out of the way” of markets and private business activity, they highlight the work of “positive integration” done by monetary technocrats in central banks and the BIS. In the last couple of weeks we have seen precisely those people at work, managing the plumbing of the global dollar system.

How similar are the stresses in the current system relative to those in 2008 is a question addressed by two colleagues from Cambridge, Giancarlo Corsetti, Emile Mari, in their VoxEU contribution on the “The dollar and international capital flows in the COVID-19 crisis”. They have a nice graph showing the emergence of exchange rate stress and its reversal since the introduction of the swap lines.

On the way in which the swap lines actually operate everyone should read this fascinating piece by Daniela Gabor for Alphaville, still the mothership of swap line chat.

Amongst many, many things, Daniela is the leading critical expert on the collateral regime at the ECB. As she points out the current rather stiff regime at the ECB, which can have nasty pro-cyclical effects, is of recent vintage and contrasts with national practice before the advent of the euro area. Once again, apparently routine action by monetary technocrats can have major effects.

 

 

As the swap lines have been rolled out, their take up is being monitored in real time by a variety of observers. The bank research departments have been busy as have premium services at Bloomberg and the WSJ. Dan Hinge has taken it upon himself to update a spreadsheet in real time. We are all grateful to him for that.

 

So ample has the Fed’s dollar liquidity provision been for the core group of swap line countries ,that there are now signs that the market is glutted. Eric Burroughs is a great follow on this.

 

But the world of dollar liquidity is NOT flat. As Robin Brooks and his team at the IIF have tirelessly pointed out there continues to be huge pressure on the Emerging Markets.

 

To be clear, the Institute of International Finance (IIF) is the global association of the financial industry, with more than 450 members from more than 70 countries. It is, in other words, the central lobbying institution for global finance, or at least finance in the West. It no doubt reserves much privileged information for its members. It is an agency that lobbies hard over Basle banking regulation. But by the same token it also has a huge vested interest in the intelligent management of global credit. And Robin Brooks and his team provide the wider public with an extraordinary flow of near-real time information on global credit flows. If you are looking for the private counterparts to the monetary technicians at the central banks and the BIS, the economic research department at the IIF is a good place to start.

If we are focusing on stresses in the EM, as Brad Setser argues in yet another essential blog post, there is not one EM funding crisis there are many. We need to differentiate different types of commodity producers, East Asian countries with large shadow banking sectors and those with large national reserves. The challenge is to devise a system of liquidity provision which matches this uneven and interconnected landscape.

In responding to the 2020 crisis, the Fed has rolled out dollar liquidity instruments at a remarkable pace. But clearly this is a system that is structural asymmetrical and in many ways unsatisfactory. It is not surprising, therefore, that there are regular calls for a system that would be truly global and not as heavily reliant on the institutions of the American nation state.

Ted Truman has called for an expansion of IMF resources to match the crisis. As does this VoxEU column by Eduardo Levy Yeyati. 

Source: https://www.piie.com/blogs/realtime-e...

All of this is important technical stuff. But I remain convinced that it is not merely that. It is a crucial part of understanding the operation of the global economy, global power and America’s role in the world.

In light of what we have witnessed in the last few weeks of a “post-American world” is simply to miss the point.

On Wednesday morning in response to a Carl Bildt tweet, I fired off this short piece to Foreign Policy. Obviously, the Trump administration is a clown show. But it is a clown show that continues to matter and it exists side by side with global structures of power, to which the United States remains absolutely pivotal. As I conclude:

“The U.S. president’s coronavirus response is a contradictory, incoherent shambles. And many people will die as a result. But that doesn’t make this a post-American world. This is precisely what a world entangled with and exposed to America’s incoherent and erratic system of power looks like.”

A few minutes after that – shall we say “energetic” – burst of writing, I did this interview with Menaka Doshi for India’s Bloomberg Quint, home studio-to-home studio.

A rare privilege to have this much time with an interviewer asking questions as smart as this.

Crashed to Corona 2: Mapping the Global Funding Squeeze

It has been another week in which economic history has been made. On the heels of the trade wars and the mounting geopolitical tension between the US and China that marked 2017-2019, the shock to the dollar-based global financial system delivered by the corona crisis poses a fundamental challenge to economic globalization as we have known it.

The operation of the global economy was, in any case, undergoing change. As I argue in this new piece in Foreign Policy the days of the Washington consensus are long behind us. The relative positions of the US, China and International Financial Institutions like the IMF have undergone major shifts in recent years. But the collapse in confidence, the unprecedented sudden stop in real economic activity and the dislocation of 2020 are adding an extreme urgency to these changes. The question now is how the world economy will be put back together again.

Faced with the immediate crisis there is an intense burst of debate going on about the problem of securing dollar funding for the world economy. This is the second of two round ups. Round one is here.

This essay in Bloomberg by Chris Anstey and Enda Curran offered an excellent historical retrospect on the dollar question. They make the important point that back in 2009 China and then in 2010 Korea proposed that the question of the world economy’s dependence on dollars should be addressed, only to be stymied.

Matt Klein is back from parental leave at Barrons. It is great to have him as part of the discussion. On his return his first column focused on the dollar-funding issue.

To feed dollars into the stressed global financial system, central bank liquidity swap lines have been activated and dollars have begun to flow through them. We can actually map that flow more or less in real time through the regular weekly balance sheet data of the major central banks. The Fed released numbers this week which show how sums outstanding have surged. Matt provides this striking graph.

At Alphaville Claire Jones worked the BIS numbers and highlighted the fact that the global imbalances in dollar funding are highly concentrated in the advance economies and Japan in particular was under pressure. That is probably why the swap lines were activated so urgently. The aim was to ease the disruption in US asset markets as Asian investors made urgent sales.

South Korea was one of the real tell-tale crisis cases in 2008. This year, in early March, signs of funding difficulties have reemerged, as noted by this smart piece by Andy Mukherjee They have since been eased.

To really dig into the financial situation of the major Asian investors, Brad Setser is an essential read. On his CFR blog he outlines the stresses on the life insurers who hold $1.5 trillion in US bonds, including corporate bonds that have lost valued. Furthermore, these holdings normally need to be hedged against exchange risk.

Brad argues that though the scale of this financial entanglement is alarming in its dimensions, it can be handled by Asian governments leverage their large forex reserves to provide foreign exchange cover and the investors riding out the storm.

As Brad also points out in one of his brilliant twitter threads, the surge in the dollar may cause generalized pressure, but its impact varies according to the particular use to which dollar funding is put. There is not one world of dollar funding. There are many. This is beautifully anatomized in the work of Iñaki Aldasoro and Torsten Ehlers of the BIS. There are huge differences between Mexico where a large part of dollar funding is made up of bonds issued by non-financial corporations and Turkey where the is a remarkable reliance on bank-based funding.

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How to respond to this landscape of pressure points, was the gist both of my pieces both in the New York Times and in Foreign Policy.

In the FT Raghuram Rajan, ex of the Reserver Bank of India, threw his weight behind the calls for coordinated action to support emerging market economies in the face of the crisis.

Today Augustin Carstens, ex of the Bank of Mexico now of the BIS, points out the need to tailor dollar-liquidity provision to a crisis that is not being driven by problems in bank balance sheets. This is not a rerun of 2008. The plumbing needs to be extended.

Clearly, national economies and business interests vary greatly in their funding needs.

China has huge reserves and impressive governmental capacity but the sheer scale of the financial obligations of its corporations is, nevertheless, daunting. Can they really keep all the balls in the air?

Indonesia has been under intense financial pressure. Its corporates are highly exposed. The virus is spreading fast and is forcing a lockdown of the sprawling metropolis of Jakarta. There are rumors that it asked for a swap line. It did once before, in 2015. It was turned down.

South Africa is perhaps most worrying. Growth was stagnating even before the crisis, well below what is necessary in light of the rapidly growing population. The unemployment situation is disastrous. Last week its sovereign debt lost its last investment grade rating. Eskom, the giant power utility, is a menace both as a power supplier and as a financial liability.

On this and other EM Robin Brooks and his team at the IIF are a vital source:

Source: https://twitter.com/RobinBrooksIIF/st...

The virus has arrived and South Africa is a country with 7.7 m highly vulnerable people living with HIV. Perhaps not surprisingly, there are rumors this weekend that, for the first time, South Africa is turning to the IMF.

With both the Economist and the FT featuring alarming warning of an impending crisis across the developing world, South Africa will not be the last.

Crashed to Corona 1: The Dollar Shortage

In the last two weeks, as the financial markets have reacted to the corona shutdowns, one of the most alarming features of the panic has been a rush into cash dollars or the closest possible substitutes, which are ultra-short-term Treasury bills. As demand shot up, their yields have crashed.

In the US itself this has shaken the markets. Everything has sold off – shares, corporate bonds, even gold. Globally, this has produced a huge shock to stock markets, bonds, both sovereign and corporate and a lurching devaluation of all currencies against the dollar.

This would be disruptive enough in any case, but it is particularly alarming given that the world financial system is based on dollars and many banks, financial institutions and non-financial corporations around the world rely heavily on borrowing dollars to fund their operations. To cover at least some of the risk of being short dollars they hedge against exchange rate fluctuations. As dollar funding dries up, as there is a run into dollars and the dollar appreciates, large parts of the world economy face dramatically increased funding costs, exchange losses and increased costs of hedging or swapping other currencies into dollars.

In understanding the problem of global financial dependence on the dollar we all follow in the footsteps of the brilliant analysts at the BIS now led by Hyun Song Shin.

Brad Setser and collaborators have added key insights into private sector balance-sheets in Asia.

Once set in motion, the risk is that this becomes self-sustaining, further escalating the run into dollars. The problem first became acute in the week beginning Monday 9th March. Last week the dollar shortage tightened. On Wednesday 18th March the forex markets were in panic mode.

The major center of forex trading worldwide is the City of London. As rumors circulated that the Johnson government was finally going to shut London down, markets came close to collapse. In a market with daily turnover running into the trillions there were no buyers for anything other than dollars.

To staunch the panic-stricken demand for dollars, there needs to be a global lender of last resort that can provide dollars on demand. One option is the IMF. The other is the national central bank of the US, the Fed. In the face of the 2008 crisis the IMF was upscaled to meet the demands of a global financial crisis driven by private sector balance sheets rather than developing-country government fiscal problems. At the same time and in direct conjunction with the expansion of the IMF’s lending facilities, the Fed developed a system of liquidity swap lines with its partner central banks.

The swap lines have been the subject of an extensive academic discussion. They were a key theme of Crashed, my history of the crisis.

In the last two weeks the issue exploded back to the forefront of crisis-fighting. On Sunday 15th March – what we will probably come to think of as the second weekend of the financial panic – the Fed and its key partners signaled that the swap facilities institutionalized in 2013 are open for business.

As the news broke, several of us were trying to explain the significance of swaps and calling for more action. Izabella Kaminska at Alphaville took the lead laying out the work of Mathis Richtmann, the managing director of the German macro-finance think tank Dezernat Zukunft

I contributed a couple of short pieces. One in Prospect. One in Foreign Policy.

Thanks to real time analysis of central bank accounts funds by Richtmann and Dan Hinge, we know that funds did begin to be drawn on a substantial scale in the days that followed.

Dan Hinge has an excellent piece at Central Banking which you can download for a limited time only.

To really understand how the ECB was working the swap lines you need to read this twitter thread by the essential Daniella Gabor.

By the middle of the week it was clear that this would not be enough.

As the IIF economics team led by Robin Brooks has been pointing out insistently, the EM are suffering comprehensive and violent capital flight. This is worse that 2018, 2015-16 and the taper tantrum in 2013.

In response, on Friday the Fed extended the swap lines to a total of 14 countries including Mexico, Brazil and South Korea.

In effect, they restored the network of 2008. It was well-suited to that world, the key question I put in a New York Times piece is whether it actually fits the far more multipolar global economy that has emerged in the last 12 years.

Brad Setser is producing a rolling update on the question of global dollar funding. He argues for a repo facility that will enable the PBoC to use its US Treasuries for dollar borrowing without selling them.

Jon Turek’s global mapping is also highly recommended.

Claire Jones at Financial Times seriously canvassed the question of a Fed swap line with the PBoC. She draws on the early note by Pierre Ortlieb of MFIF.

Though it has been drowned out by the panic in the markets and the scale of national central bank action, the IMF has been pushing for concerted global action. This is welcome. But is the IMF in its current dimensions fit for purpose?

In the pages of the FT’s Alphaville Kevin Gallagher, José Antonio Ocampo & Uli Volz address the role of the IMF. As they point out “the harsh truth is that the Fund lacks sufficient resources to deal with a global crisis, and the decision taken last year to postpone the increase in quotas until 2023 came at the worst possible time. its current form, the global financial safety net is patchy: it lacks coverage and resources to deal with a crisis of the magnitude we are currently facing.” The authors call on the IMF to issue SDR’s to the tune of $ 500 bn to provide liquidity to the hardest hit.

As the last weeks have demonstrated, huge shocks are shaking the global financial system. It is a lop-sided construction at the best of times, dominated by its dependence on the US currency. Since 2008 it has not been fundamentally reformed. We were content to rely on the network of relationships put in place during that crisis. They remain dominated by the Fed and what can be broadly described as the “Western alliance”. It remains to be seen whether they are adequate to addressing a truly dramatic shock to a far more multipolar world economy.

Watch this space.

Scrapbook: Félix Vallotton – the war years

The Félix Vallotton show at the Met is a bit of revelation. It is still on until 26 January. If in NYC check it out.

As Julian Barnes lays out in the Guardian, Vallotton (1865-1925) is far less well known than he deserves to be. But who was he? The Met show presents Vallotton as a painter of fin de siecle Paris, of the new world of commerce, of the enigma of domestic disquiet and relations between men and women.

There were great highlights such as the Bon Marché triptych of 1898, a Diego Rivera-esque celebration of commerce.

And the Met orchestrated a remarkable juxtaposition of Vallotton and Gertrude Stein’s portraits of Gertrude Stein.

But when I began to google I discovered another Vallotton of which the Met show gave no clue: Vallotton the war artist.

Born Swiss, naturalized French, Vallotton was a passionately committed to the war effort. He tried to volunteer, but was instead designated as a war artist. The images he produced were quite extraordinary:

 

For more, I recommend this website.

Scrapbook: Half a block on West 24th, early December 2019

Yesterday we visited just half a block of the galleries between 10th and 11th on West 24th.

If you are into Richard Serra, visit the fantastic exhibition of glowing deep black “prints” at Gemini GEL at Joni Moisant Weyl

At the gallery see whether you can get a word with Chris Santa Maria. He is truly brilliant art whisperer.

“Prints” does not do these deep black textured layered etching/silk screen prints justice … They call them “composites”.

In fact, there is a bumper crop of Richard Serra “forms” in NYC right now: The beautiful deep black “Composites” at Joni Weyl:

The massive “Forged Rounds” at Gagosian just around the corner

… and the monumental “Equal” floating as if on air at the new MOMA.

As one of the fellow travelers on Chris’s impromptu tour suggested, an appropriate description might be: “from the elemental to the monumental”.

Producing black: One of the many fascinating thing we learned from Chris is that their art print workshop, working with Serra et al, helps maintain specialist ink manufacturing. They need very very deep black! Left me thinking that it would be great to do a project on the material networks of art production. What is the network of workshops and suppliers that enables the production of the contemporary art work of a figure like Serra?

Surely someone must already be working on this.

Across the street we loved the Christian Vincent show at C24 gallery.

He is a Californian. The light in his images is luminous. None of the pictures on show are up on their website, but we thought Grove 2019 was the standout. Reminded us of the Palais-Royal Gardens on a summer’s day. 

Next door at Lyon Weirs there is a cool show of Edie Nadelhaft’s romantic “road trip art”. Hopperesque but with a touch of Sturm und Drang. 

Self-taught Australian artist Jordan Kerwick is a great find for Anna Zorina Gallery. We loved the louche 1960s vibe.

See more of his fantastic stuff here. The photos dont do the colors justice.

Talking about the 1960s, at Susan Inglett Gallery there is a weird and wonderful collection of self-published artist work. The highlight for me, predictably enough, was …

Dan Graham INCOME (Outflow) PIECE, 1969, offers the sale of shares in DAN GRAHAM INC. The artist himself, becoming a limited company for all to buy and part own.

Going to do a future post on art and capitalism in the 1960s and 1970s.

Finally, at Lisson, the undulating, endless silver surfaces of Anish Kappor “turn themselves inside out”.

What an afternoon!

Climate Crisis: A debate with the Bundesbank about Green QE

I’ve found myself in a bit of an argument with Germany’s Bundesbank about the possibilities of harnessing central bank to the cause of climate change mitigation.

The exchange started with a piece in Foreign Policy this summer.

That produced a debate in Berlin hosted by the Heinrich Böll Stiftung associated with the Green party. Sabine Mauderer and Jakob von Weizäcker represented the Bundesbank and the Finance Ministry respectively.

My opening talk is here (in German).

There is video here.

As the momentum has built around climate change and central banking the Bundesbank hosted a meeting in Frankfurt earlier this week at which Jens Weidmann and Sabine Mauderer outlined the Bundesbank position.

Weidmann’s skeptical position on Green QE was reported by the FT.

When I checked Weidmann’s speech it turned out that the head of the Bundesbank, rather than engaging with the extensive discussion about Green QE that has been going on since 2011, had taken aim at my FP piece. Furthermore, he coupled his opposition to Green QE explicitly to his more general opposition to the latest round of QE launched by the ECB.

Already in the debate in Berlin in September it was remarkable how quickly the debate turned to broader issues of democratic legitimacy, central bank independence etc.

So FP and I felt that I should write a reply to Weidmann, which is here.

Rather than wishing itself back into the good old days when it conducted a sovereign, conservative monetary policy it is time for the Bundesbank to accept its new reality. It is a subordinate part of the eurosystem, more often outvoted than not.

The question is not whether or not there will be QE, but what we are going to do with it. The question is not whether there is democratic and legal legitimacy for climate action. The Paris agreements settled that. The question is whether central banks are going to be part of the solution or part of the problem.