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Brad Setser

Bio: Brad Setser is an academic researcher. The author has contributed to research in topics: Emerging markets & Sovereign wealth fund. The author has an hindex of 1, co-authored 1 publications receiving 13 citations.

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TL;DR: In the late 1990s, private markets were widely assumed to have triumphed over the state as mentioned in this paper, while the public votes only every few years, the markets vote every minute.
Abstract: In the late 1990s, private markets were widely assumed to have triumphed over the state. State firms were perceived to be a recipe for failure. Large financial flows overwhelmed and humbled small states. Countries that wanted to succeed had to embrace the policies favored by private capital. Daniel Yergin wrote in 1998, "While the public votes only every few years, the markets vote every minute.... National governments ... must increasingly heed the market's vote--as harsh as it sometimes can be." (1) The rating agencies that helped to determine a country's ability to access market financing were thought to be the superpowers of the post-Cold War era. (2) Michael Mandelbaum summarized the mood of the late 1990s well: Capitalism requires capital and the countries of the periphery looked to the core countries to supply it.... Attracting private capital required having the appropriate institutions and pursuing the appropriate policies. It required, that is, putting on the 'golden straightjacket' in order to appear a worthy recipient of resources for investment ... (3) Ten years after the financial crises in Asia, Russia and most of Latin America, talk of the triumph of private markets over the interventionist state seems far from the mark. Today's global economic system is marked both by increased trade--including greater trade in financial assets--and by a far larger state role in the financial markets. Martin Wolf, the Financial Times' influential columnist, recently wrote that "Globalization was supposed to mean the worldwide triumph of the market economy. Yet some of the most influential players are turning out to be states, not private actors." (4) The reassertion of the state in the marketplace has come not from an expansion of the state's regulatory role, but rather from the growing role governments--particularly governments in the emerging world--play in key global markets. Global financial order once again depends heavily on the financial decisions of large states, not just on swings in private market flows. Stephen Weber and his colleagues have argued that the world's emerging powers prefer a "neo-Westphalian" global order that places a far higher premium on state sovereignty than full integration into existing "liberal" international institutions. (5) This new and still emerging global financial system can be considered neo-Westphalian in two senses. First, large states are again key actors in financial markets. While the total stock of privately held financial assets in the United States, Europe and Japan remains large relative to the stock of financial assets in government hands, the foreign assets of key emerging market governments are growing far faster than those of private intermediaries. The foreign portfolios of large emerging market states now exceed the foreign assets of even the largest private financial institutions. Foreign exchange traders believe that, through its sale of dollars for euros, the government of China influences the dollar's value against the euro. U.S. Department of Treasury traders believe that the government of China exercises more influence over the treasury and agency market than any actor other than the U.S. Federal Reserve. This should not be a surprise. The government of China now holds more dollar assets than the Federal Reserve. Ousmene Mandeng of Ashmore, a large fund manager, argues, "No market, not even the treasury market, is now deep enough to accommodate the unprecedented growth of emerging market reserves." (6) Second, national governments have more financial firepower than do the multilateral institutions. The International Monetary Fund (IMF) now has roughly $250 billion available to lend, with few takers. At the end of June 2008, China held US$1800 billion at its central bank, with another US$500 billion or so in the hands of the state banks and in China's new sovereign wealth fund. Russia now has well over US$500 billion in its central bank. …

13 citations


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Journal ArticleDOI
TL;DR: This paper reviewed the character and consequences of the global economic crisis in these countries, focusing on how forms of geoeconomic and geopolitical integration undertaken during their post-socialist transitions have contributed to economic vulnerabilities exacerbated by the emerging crisis, and the consequences for East-Central Europe of adhering to a development model based on internationalization of the financial sector, cheap credit, and increasing reliance on exports to compensate for energy resource imports.
Abstract: Two UK-based geographers specializing in the economies of East-Central Europe and the former Soviet Union review the character and consequences of the global economic crisis in these countries, focusing on how forms of geo-economic and geopolitical integration undertaken during their post-socialist transitions have contributed to economic vulnerabilities exacerbated by the emerging crisis. Particular emphasis is placed on the consequences for East-Central Europe of adhering to a development model based on internationalization of the financial sector, cheap credit, and increasing reliance on exports to compensate for energy resource imports. The authors explore the likely distancing within the broader region of a group of new "insiders" (Euro-zone countries as well as the new EU member states) from an uneven landscape of "outsiders" (including Ukraine and other FSU states), as well as some of the recent tensions emerging between old and new EU member states.Journal of Economic Literature, Classification Nu...

107 citations

Journal ArticleDOI
TL;DR: In this article, the authors argue that the evidence fails to support the theory that economic imperatives drive the creation of SWFs; governments create them as effective solutions to the challenges generated by reserve accumulation and commodity-export specialization.
Abstract: What accounts for the spread of Sovereign Wealth Funds (SWFs)? Despite the increasing importance of SWFs in the global economy, we lack persuasive systematic answers to that question. Most analysts take for granted that economic imperatives drive the creation of SWFs; governments create them as effective solutions to the challenges generated by reserve accumulation and commodity-export specialization. In this article, I argue that the evidence fails to support this theory. Instead, the spread of SWFs best resembles the diffusion of a fashion or fad. SWFs became fashionable as an appropriate approach for reserve- and resource-rich countries seeking to manage policy uncertainty related to these economic characteristics. As other countries developed the same characteristics, they followed the lead of their peers and also created SWFs. I provide, with the use of a new data set, the first cross-national political-economy statistical analysis of SWF creation. The results suggest peer group emulation has, indeed, been crucial in shaping the decision of many countries to create SWFs—especially in fuel-exporting countries.

35 citations

Journal ArticleDOI
TL;DR: In this article, the link between the financialization of European banks and US monetary power is considered. But the authors focus first on the Global Financial Crisis of 2008-09 (GFC), arguing that crisis origins are in Europe and not in the US.
Abstract: This article considers the link between the financialization of European banks and US monetary power. We focus first on the Global Financial Crisis of 2008-09 (GFC), arguing that crisis origins sho...

14 citations

Journal ArticleDOI
Ivan Manokha1, Mona Chalabi1
TL;DR: In this paper, the authors argue that the discipline of International Relations has been predominantly concerned with the analysis of political interactions of sovereign states, their external behaviour towards each other in an anarchic international system, with each of these territorial units seen as pursuing their national interests, usually vague defined in terms of power or resources.
Abstract: The latest financial crisis has put the state and the international system to the test. In this context one would expect an explosion in literature from the discipline that claims academic monopoly over the international sphere: International Relations. However, as our research shows, surprisingly few IR scholars have made any attempt to analyse the crisis. This article seeks to explain this paucity of engagement, and the failings of those few works that did attempt to engage with the crisis, by exposing the limits of the discipline's orthodoxy. It argues that the discipline of IR has been predominantly concerned with the analysis of political interactions of sovereign states, their external behaviour towards each other in an anarchic international system, with each of these territorial units seen as pursuing their national interests, usually vaguely defined in terms of power or resources. With such privileging of the political over the economic, of the external over the domestic, of state actors over non-state actors, and of the study of conflict over the analysis of other types of interactions, the discipline of IR has inherently and structurally been unable to engage with, and render intelligible, the latest financial crisis and its consequences. The article then sketches out an alternative approach which seeks to overcome the dichotomies that characterize the orthodoxy and provides a more holistic explanation of the crisis.La derniere crise financiere a mis l'Etat et le systeme international a rude epreuve. Dans ce contexte, on aurait pu s'attendre a une explosion de la litterature de la discipline qui revendique un monopole intellectuel sur le domaine international : les Relations internationales (RI). Or, comme le constate cette recherche, tres peu d'universitaires specialistes des RI ont tente d'analyser la crise. Le present article cherche donc a expliquer ce manque d'engagement ainsi que les apories du petit nombre d'?uvres qui ont essaye de traiter de la crise en mettant en evidence les limites de l'orthodoxie de la discipline. L'article affirme donc que la discipline des RI s'interesse principalement a l'analyse des interactions politiques entre Etats souverains, leur comportement les uns vis-a-vis des autres au sein d'un systeme anarchique ou chacune de ces entites territoriales poursuit ses interets nationaux, souvent vaguement definis en termes de pouvoir ou de ressources. En faisant ainsi prevaloir le politique sur l'economique, l'exterieur sur l'interieur, les acteurs etatiques sur les acteurs non etatiques ainsi que l'etude du conflit sur l'analyse d'autres types d'interactions, la discipline des RI est structurellement, en soi, incapable de traiter ni de rendre intelligible la derniere crise financiere et ses consequences. L'article esquisse une autre approche qui cherche a surmonter les dichotomies qui caracterisent l'orthodoxie et a offrir une explication plus holistique de la crise.

12 citations

Journal ArticleDOI
TL;DR: In recent years, a comprehensive debate has been taking place over the ontological, epistemological and methodological roots underlying the discipline of International Political Economy as mentioned in this paper, and a fundamen...
Abstract: In recent years, a comprehensive debate has been taking place over the ontological, epistemological and methodological roots underlying the discipline of International Political Economy. A fundamen...

9 citations