Hélène Rey — The Global Financial System, the Real Rate of Interest and a Long History of Boom-Bust Cycles

Brad DeLong directs attention to:

Abstract

Financial cycles strongly determine real short-term interest rates. Wealth increases rapidly during financial booms, faster than consumption itself. As a consequence, the consumption to wealth ratio declines, as happened in the “Roaring 20s” and the “Exuberant 2000s”. In the subsequent busts, savings increase and keep real interest rates low. The related global financial cycle constrains monetary policy independence, even for countries with flexible exchange rates, transforming the Mundellian trilemma into a dilemma. Tackling these issues calls for combina- tions of monetary and fiscal policy coordination, macro-prudential policies, and possibly capital controls. It also means considering the role of the US as a provider of safe assets, and asking whether a multipolar system would be advantageous.

Andrew Crockett Memorial Lecture: The Global Financial System, the Real Rate of Interest and a Long History of Boom-Bust Cycles. ∗
Hélène Rey, London Business School, NBER and CEPR
July 3, 2017

RT — US dollar payments from Crimea blocked by Western banks - media

Western banks are reportedly refusing to transfer foreign currency payments from Crimea via the SWIFT transaction system.

All but guarantees the emergence of a dual banking system and subsequently dual financial and economic institutions, one under the rules set by the West and the other by the ROW.

The Central Bank of Russia launched in December a new SWIFT-style payment service aiming to move away from Western financial dominance. The system has already started operating and is said to be more convenient for banks as they won’t have to reconfigure their software.

RT
US dollar payments from Crimea blocked by Western banks - media

The US already sees it coming. Unwilling to cut others in in the deal, the West is killing the goose the lays the golden egg for it.

President Barack Obama intensified his push for a Pacific trade pact on Monday, warning that without it, China could come to dominate the region by using its size to “muscle other countries in the region around rules that disadvantage us.”

“If we don’t write the rules, China will write the rules out in that region,” Obama said in an interview with The Wall Street Journal. “We will be shut out — American businesses and American agriculture. That will mean a loss of U.S. jobs.”

Politico

Trade deal needed to curb China, Obama says