Global Strategic Finance Initiative

China’s surplus fell from 10.1% of GDP in 2007 to 5.2% in 2010.  Whether its current account will continue to decline or will return to higher levels seen in the mid-2000s is a subject of considerable disagreement.

It has been widely reported that China has dramatically reduced its purchases of US Treasuries over the past year.  But it would be wrong to conclude that China has stopped intervening in currency markets or even that it is dumping the dollar.

At this year’s Jackson Hole conference for central bankers, Fed Chairman Ben Bernanke admitted that the economic recovery so far this year has been “somewhat less vigorous than we expected,” but he expressed hope that the economy would return to a more satisfactory growth rate next year.  Considering that the Fed was already projecting a markedly slower recovery than America experienced after previous deep recessions, the Fed’s economic objectives are far too modest.  Ideally, the US economy should be growing at a 5 percent rate in 2010 and 2011 to recover lost ground and get work

President Obama, his economics team, and the Chairman of the Federal Reserve continue to display a curiously detached view of the economy.  Just the other day, the president indicated that “it took nearly a decade to dig the hole that we’re in” as if that provided an excuse for the lassitude he continues to display in regard to the problem of unemployment.

Speaking this past week at the Ex-Im Bank, President Obama laid out his strategy for doubling American exports within five years, a goal he announced in his State of the Union Address. Naming it the National Export Initiative, he described the strategy as “an ambitious effort to marshal the full resources of the United States government behind American businesses that sell their goods and services abroad.” The Initiative calls for the creation of an Export Promotion Cabinet, made up of the Secretaries of State, Treasury, Agriculture, Commerce, and Labor along with the United State

"Trade is the, if not the elephant in the room, certainly some animal as yet to be defined that's in the room," said Douglas Rediker. ...

"Had the world economy collapsed, and there was a reason to believe it could have, the leaders of this country and others may have been forced to take hugely dramatic steps," says Douglas Rediker, a former investment banker now running the New America Foundation's Global Strategic Finance Initiative. ... Original Article

"Any argument that Lehman's collapse served the positive purpose of letting the world financial system participants know there was a risk to be had, that message lasted 24 hours," said Doug Rediker, Director of New America Foundation's Global Strategic Finance Initiative and former Lehman Brothers investment banker. "We may now have the inverse message: There are banks that are too big to fail."... Original Article

This report traces the roots of the current financial crisis to a faulty U.S. macroeconomic paradigm. One flaw in this paradigm was the neo-liberal growth model adopted after 1980 that relied on debt and asset price inflation to drive demand. A second flaw was the model of U.S. engagement with the global economy that created a triple economic hemorrhage of spending on imports, manufacturing job losses, and off-shoring of investment. Deregulation and financial excess are important parts of the story, but they are not the ultimate cause of the crisis.