Endnotes

¹There is a view that the crisis was due principally to large capital flows into the United States, which lowered lending standards and fueled credit market excesses, and that these large capital inflows reflected the excess of saving over investment in Emerging Asia and the oil-exporting economies. My own view, expressed elsewhere, is that this problem of global imbalances, while adding fuel to the fire, was not the spark. And as for the origin of the imbalances, it takes two to tango; the inadequacy of saving relative to investment in the United States was equally part of the story.

²My own take is Eichengreen (2009a).

³See IMF (2009); te Velde (2008); and Griffith-Jones and Ocampo (2009).

⁴Another illustration is advances in air freight that encourage the export of cut flowers from Latin America or of Maine lobsters to Japan.

⁵In addition, the official community has stepped in with a range of initiatives to maintain the supply of trade credit.

⁶See International Organization for Migration (2008).

⁷Thus, while the crisis occupied center stage in the 2008 US presidential election, the issue of undocumented immigration largely fell off of the electorate's radar screen.

⁸See Carroll and Slacelek (2009) for a careful analysis.

⁹This is according to the July 2009 revision of figures for 2009 Q1. GDP in 2009 Q1 was down 10% of GDP in 2008 Q1.

¹⁰Bank for International Settlements (2009), p.75.

¹¹Absent offsetting government action.

¹²That Latin American trade, which is more heavily in raw materials, held up better in the crisis is consistent with the notion that recent sensitivity is somehow connected to production fragmentation and global supply chains, but this observation still does not identify the mechanism.

¹³See Jara, Moreno, and Tovar (2009).

¹⁴Bank for International Settlements (2009), p.83.

¹⁵That said, they appear to have cut back less than in earlier crises, reflecting greater capitalization, fewer nonperforming loans and higher profitability on the eve of the event.

¹⁶Or at least had been able to finance their operations at longer tenors, obviating the need to go back to the markets once conditions deteriorated. Bank for International Settlements (2009), p.84.

¹⁷It can be argued that the PRC is in fact doing more than this insofar as the authorities also directed the banks to increase their lending for infrastructure and other fixed-investment projects in the first half of 2009.

¹⁸Other than slap on controls or repudiate their debts.

¹⁹Here the counterexample of the Baltic countries is informative.

²⁰One can argue that one should apply such calculations only to a fraction of the PRC's total reserves, bringing down the sacrifice in income. On the other hand one can argue that the rate of return to physical capital is higher than 8%.

²¹US$200 billion was the ballpark for the country's external financing requirement over the next nine months on the assumption, hardly realistic, that none of its short-term external debt or maturing long-term external debt was renewed (Huang 2008).

²²And not just in Asia. The EU has outsourced the negotiation of conditionality for Eastern European countries receiving joint assistance to the IMF.

²³See Eichengreen (2009b). Unwilling to do so, ASEAN+3 instead outsources the responsibility to the IMF, which means in effect not outsourcing it at all.

²⁴European experience is revealing in this regard. So long as the decision over lending and conditionality remained in the hands of national governments and central banks, there was a reluctance to provide extensive support. The creditor countries took steps to limit their obligations, notably in the case of Germany and the Emminger letter. Arguably, now that the decision to provide emergency credits has been outsourced to an independent entity, the European Central Bank, the response to crises has been faster and more forceful.

²⁵As is the ECB in Europe. Since December the PRC has also moved to provide yuan swap facilities for a variety of trading partners. But since the yuan is inconvertible, these swaps are mainly useful for importers who would otherwise find it difficult, given foreign exchange shortages, to settle their accounts with Chinese firms; yuan credits cannot be easily used in other financial-market operations.

²⁶Especially in Asia, where turning to the IMF is seen as political poison by any self-respecting government.

²⁷Thus, the Chiang Mai Initiative Multilateralization involved a formula for the voting shares of the PRC, Japan, Korea, and the Asian countries that have not obviously made activation of that arrangement more likely.

²⁸For example, the SDR initiative could simply be addressed at domestic constituencies which are not pleased that so much of the national patrimony is invested in US dollars; the SDR proposal is thus a way for the People's Bank of China to signal its constituents that it is aware of its fiduciary responsibility. Or it could simply be a way for emerging markets to signal the G20 that it wants to be taken seriously in discussions of international monetary reform.

²⁹Thus, I am pushing back against the argument that increasing returns owing to network externalities are so strong that there is only room in the market for a single dominant international currency.

³⁰I develop the argument why in Eichengreen (2009c).

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