The Allure of Plaza and Louvre

No Country for Old Men

In the 1980s, as the Reagan administration was introducing a new political and economic wave, the Dollar was riding high on the stringent actions of the Federal Reserve led by Paul Volcker. By the mid-1980s, the Dollar was reaching one-to-one parity with the Sterling, leading to frantic calls from Maggie to Ronald to immediately reverse the possibility of the sacred Sterling barrier from being broken.

After having lived through the instability of floating rates in the Interwar years and the asymmetric rigidity of Bretton Woods, following the collapse of the Smithsonian agreement in 1973, was born a Brave New World in finance. A global economy determined by truly floating rates; which itself were supposedly determined by relative macroeconomic factors.

This was far from the truth, the stillbirth of the newly floating Dollar, joined by the other two dominant economies' currencies--Yen and Deutschmark--, needed immediate support. Governments heavily intervened over 1973 and 2004 to determine directly the value of their currencies. In the order of nearly a Trillion Dollars was spent by the U.S., Germany, and Japan, to dirty manage their currencies; a serious misallocation of resources which could have been put towards better use.

It was following Reagan's first term, with the Dollar so high, an immediate need for policy coordination was required. To dream of a concerted bona fide global economic policy in the 1980s was ludicrous let alone to actually have one. Such was the state of play, forty years since World War II, that national legislatures demanded prior approval before they could contemplate a forthcoming global policy coordination--for Bretton Woods had clearly instilled the belief that each nation is for themselves alone.

On the alibi he was going to play golf besides Narita Airport, the then Japanese Finance Minister, Noboru Takeshita flew out on Pan Am, thus also avoiding the hordes of corporates who took Jap Air, to New York in September 1985. Thus was born the Plaza accords, a measure to intervene and bind monetary policy towards a Dollar Depreciation. This was followed two years later with the Louvre Accords to put a floor on the Dollar, from which also the G-7 meetings were born--after the Italian finance minister demanded a piece of the action.

Some blackmailing was required by the U.S. Treasury for the Plaza-Louvre Accords to take place. Ultimately such was the dominance of the American economy and the threat of the Soviet Union that global policy coordination had to take place. This lesson bodes ill-well in a multi-polar world.

Plaza-Louvre were the beginnings of the global imbalances that led to the 2007-08 Financial Crisis. Japan and Germany were more than happy in the 1980s to take in low-yielding U.S. Assets--like Treasury Bonds--and give in return their high-yielding properties, equities, and so forth; thus allowing the U.S. to sustain an indefinite trade deficit. The irony was not missed--Japanese workers made goods for U.S. consumers only to get their pensions securitised by measly low returns from U.S. Bonds.

For the bigger picture: in the future, when the apex of development is reached with a few technological barriers broken and the return to Labour and Capital increased, global finance, dependent on arbitrage, would cease to exist. Exchange rates would reach their Purchasing Power Parity values. And Economics would move on towards Microeconomics--the central influences of psychology and neurology on human behaviour in the marketplace. Or so one hopes.

Rawlsian Justification for Progress

A theory of Justice

The recent antics of Prince Harry, a member of the British Monarchy, in Las Vegas are a perennial reminder for a need of a form of government which is instilled on utopian and grounded principles.

In British Jurisprudence and Governance many things are amiss. For a nation to bestow her parliamentary structure to the rest of the world, during a period when most of the globe was in absolute monarchism, if not in anarchic dystopia, is an outstanding contribution to Human progress.

But for all its traditions and uncharacteristic jingoism, Britain is a nation which needs to transgress from its ever increasing association of its cultural identity with inherited monarchies. For like in Economics, where rent-seeking and monopolies spell ill-results in markets, the institutions in Britain need an overhaul from the House of Lords to the overwhelming needs and requirements of a constitutional monarchy. Monarchism caters to a primeval, albeit irrational, instinct: a need to find comfort in the presence of a universal constant.

More so, in principle the lottery of birth puts us in a position where we justify our principles and actions from the womb we were placed in; born in a family of well-off means and connections in Guildford, London, is a different prospect altogether from becoming stuck in Kinshasa, D.R. Congo. Therefore each generation born from now is behoved to mitigate the plight of the worst-off in global society. If we are to believe in universal and timeless principles then it is necessary for us to adopt a society and system which is underpinned in advancing those aforementioned beliefs.

War and Peace

A tale of two different worlds

Curiosity's two year mission on Mars to climb to the centre of the Gale Crater in search of early rocks and sediments dating back to when Mars was earth-like is in striking contrast to the aimless machismo of the hard power superpower rivalry in the 1950s; for twenty years following WWII, the US and the Soviet Union were mindlessly testing ever more powerful nuclear weapons in a sad attempt to haggle over superpower bragging rights in the event of mutually assured destruction--MAD.

Compared to the Cold War, the world being defined in this century is one very much dissimilar. Unlike the 1900s and the 1950s when one major rival led the field with several followers, by the end of this decade a number arise with a united Europe, a confident Brazil--coming out from a decade for which at least two years the world's attentions turned to her--, a resolved China, and a vibrant India, leading the field.

But actual suitors, for rivalry to the US, are less than governments and policymakers would like to suppose. For despite the nature of governments to paint a common foe, this century would be composed by the product of individual actions. None more so demonstrated then on the internet, where a nation-less, ethnic-less, and religious-less identity is played out without constraint.

The ideal of a united world, determined by its citizenry as opposed to by its self-producing bureaucrats, would be one solid in its purpose. In its resolve to determine the role of Medicine, Finance, Pursuit of Exploration, amongst others, in the fabric of Society. This same individual resolve which came with the early advances in the Sciences, Discovery, and Philosophy.

The Sorry Case of Japan

In a forlorn state

Eisuke Sakakibara took over the Japanese Ministry of Finance's International Bureau in 1995, five years into the lost decade that would come to define an economy which was only a decade earlier going towards the heady heights of omnipotence; in the late 1980s, the imperial palace in Tokyo was worth more than the entire value of California.

Sakakibara was tasked by the powerful Ministry of Finance to stimulate the economy through pumping money into the foreign exchange market of the Yen. It was hoped a depreciating Yen would give impetus to the exporting industries and end premature delflation. Between 1991 and 2003, as a last resort Japanese policymakers spent half a trillion dollars in supporting the Yen. Whether it was fruitless is still a point of contention in academic circles.

By the beginning of the new millennia, the Bank of Japan introduced a number of measures, of which Quantitative easing was just one, to boost the economy from its doldrums. Yet to no avail the Japanese economy is a wounded soul of its earlier self, she presently is deficient of the aggregate demand, the innovation, or the policy guideline to support any further growth.

Olympus

Earth's Flag

As Great Britain scores six gold medals on an unrivalled Super Saturday for British Culture and Sport, it brings to light the unquantifiable aspects of human society. Although the Olympics were born out of the sole recognition of individual feats and achievements regardless of nationality or ethnicity, it slowly ventured into the nationalism of the twentieth century; from Berlin 1936, to Moscow 1980, and further still to Beijing 2008, the Olympics were made into a demonstration of a nation's prowess, against distant adversaries, on the field of sport.

The Olympic spirit is a microcosm for what is all good about humanity; her relentless drive towards progress, self-measured success, and wholesome unity; never more so displayed then by Jesse Owens in 1936, the Hungarian Water Polo team in 1956, and Usain Bolt in 2008. Bringing all nations together at one point of the globe every four years is a benchmark from which we subconsciously measure how far we have gone into making a more perfect world.

British support is overwhelming around team GB, so much so it brings one to tears at her success. More importantly, for a nation which strove to create the modern world in her image through empire from the U.S., to India, and the seven seas, Britain is living in the twenty-first century by absorbing all who come to her shores and creating a dynamic and evolving self-identity; best showcased by her capital city, London, and none more so exemplified than by Mo Farah, the recent British gold medalist for 10000m, a devout muslim who was born and raised up in Mogadishu, Somalia.

A nation's identity is ever evolving; neither is its expression a zero-sum game. The Olympic spirit is far ahead of its time even today, let alone in 1896, for it creates a sense of world identity which would not be unfamiliar in a generation from now as Human society becomes ever more integrated.