Lamy calls for better crafted regulation and a Doha Round deal to restore trust
3 Nov 2008
“Amidst the chaos that we are witnessing today, what we need is greater regulation. What we need is better global governance. While there is no doubt that global financial regulation must be crafted, there is no doubt either that global trade regulation must be reinforced. What is desperately needed at a time like this is to restore trust in markets by reassuring investors that they are still operating within a rules-based international trade and financial system.” So said WTO Director-General Pascal Lamy in his opening address for the Geneva Shipping and Trading Association’s Commodities Week on 3 November 2008. This is what he said:
Ladies and Gentlemen,
The turbulence that we have seen in the financial system these past few weeks would make anyone's head spin! Back in 2004, a trader had recommended a book to me, entitled “Fooled by Randomness; The Hidden Role of Chance in Life and in the Markets”, which I simply couldn't help but re-read once again this week. Written by a seasoned banker and trader, who had seen just about everything there is to be seen in a market, in terms of rises and falls, Nassim Taleb came to the conclusion that the only viable explanation for market swings is absolute pure and utter “randomness”. Needless to say, his book spread like wildfire on Wall Street, giving comfort to all those whose predictions were falling on their heads.
In his famous “Table of Confusion”, Taleb argued that in the financial system we were all too quick to confuse luck for skills; randomness for determinism; probability for certainty; theory for reality; coincidence for causality; and forecasts for prophecy. And, in having witnessed the events of the past few weeks, who can blame him — quite frankly — for finding markets completely and utterly mind-boggling!
Just a few months ago, the world was talking about a food crisis. Incidentally, it was also talking about an oil crisis. A world in which food prices had risen, and would continue to rise, with a detrimental impact on the world's poor. We had seen bread riots in various parts of the world, serious rice shortages in others, and tens of thousands of demonstrators marching through Mexico's capital to protest against the rising price of tortillas. And yet, from September to October this year, we find that food prices have fallen by 20%! 10% below last year's prices. Who would have expected this sudden change? This sudden reversal of fortunes?
We have gone from a world whose newspaper headlines smacked of protests and warnings of impeding starvation to headlines announcing a potential commodity glut — and all within the span of just a few weeks. And the same story goes for many other commodities, not just food. Metals which have seen their prices tumble by 26%, also in a single month, and oil by 38%! There is no doubt that the world is traversing some very uncertain times, and that policy-makers are now faced with the formidable challenge of restoring order — or some “semblance” of order — to a world which seems to be largely governed by chaos.
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Source: WTO
The turbulence that we have seen in the financial system these past few weeks would make anyone's head spin! Back in 2004, a trader had recommended a book to me, entitled “Fooled by Randomness; The Hidden Role of Chance in Life and in the Markets”, which I simply couldn't help but re-read once again this week. Written by a seasoned banker and trader, who had seen just about everything there is to be seen in a market, in terms of rises and falls, Nassim Taleb came to the conclusion that the only viable explanation for market swings is absolute pure and utter “randomness”. Needless to say, his book spread like wildfire on Wall Street, giving comfort to all those whose predictions were falling on their heads.
In his famous “Table of Confusion”, Taleb argued that in the financial system we were all too quick to confuse luck for skills; randomness for determinism; probability for certainty; theory for reality; coincidence for causality; and forecasts for prophecy. And, in having witnessed the events of the past few weeks, who can blame him — quite frankly — for finding markets completely and utterly mind-boggling!
Just a few months ago, the world was talking about a food crisis. Incidentally, it was also talking about an oil crisis. A world in which food prices had risen, and would continue to rise, with a detrimental impact on the world's poor. We had seen bread riots in various parts of the world, serious rice shortages in others, and tens of thousands of demonstrators marching through Mexico's capital to protest against the rising price of tortillas. And yet, from September to October this year, we find that food prices have fallen by 20%! 10% below last year's prices. Who would have expected this sudden change? This sudden reversal of fortunes?
We have gone from a world whose newspaper headlines smacked of protests and warnings of impeding starvation to headlines announcing a potential commodity glut — and all within the span of just a few weeks. And the same story goes for many other commodities, not just food. Metals which have seen their prices tumble by 26%, also in a single month, and oil by 38%! There is no doubt that the world is traversing some very uncertain times, and that policy-makers are now faced with the formidable challenge of restoring order — or some “semblance” of order — to a world which seems to be largely governed by chaos.
Read More...
Source: WTO
