Three steps to heaven

The FT has started its series on the Future of Capitalism. I haven't read it all (no immediate sign of a discussion about whether or not it's worth saving) but the main editorial offers this three point plan to put things "right".

First, world demand is in freefall. Stimulus is necessary. The surplus countries with the most leeway to increase domestic spending – Japan and Germany, in particular – are not yet doing enough. They can afford to encourage serious spending and are, in any case, suffering the steepest contractions. In addition, if these habitual exporters were to become serious importers, it would be politically easier to hold back protectionism.

Second, governments must take responsibility for dealing with their financial systems. The toxicity which started in mortgage-backed securities is spreading through the world’s banks as ever more assets go bad in the recession. Politicians must make sure that their banking systems are adequately capitalised and deal with the illiquid securities at the heart of this crisis.

Third, governments must agree to put aside more money for the International Monetary Fund. The recession would enter a new, dreadful chapter if a rash of financial crises broke out across eastern Europe, Asia or South America. The fund’s current funds are clearly inadequate. The idea of a large issuance of SDRs – the IMF’s own reserve asset – is an excellent one. Changes in voting-weights, to raise Asia’s share and lower Europe’s, are also both inevitable and desirable