The Russia Forum 2009 begins work in Moscow

Participants in the panel discussion “Towards a New Financial Architecture: Beyond Blowing Bubbles” discussed the reasons behind today’s economic challenges as well as avenues to restoring the global financial system.

The Russia Forum 2009, an investors’ conference which the Troika Dialog Group is holding for the second consecutive year, opened on February 4th at the World Trade Center in Moscow. Over 1000 participants and guests, including high ranking government officials, prominent investors and wealth managers, executives from leading Russian and international companies, as well as respected economists and political scientists, will spend two days in open, constructive discussions of issues in world and Russian politics and economics.

Speaking in a welcome address to the event’s participants, Ruben Vardanian, Chairman of the Board of Directors of Troika Dialog Group, said that the key topics at this year’s Forum will be problems in global economics, ways to overcome the financial crisis, and Russia’s role in these processes.

The Forum’s business program opened with the panel discussion “Towards a New Financial Architecture: Beyond Blowing Bubbles,” devoted to issues of restoring the world financial system. Joining in a discussion of macroeconomic policy and international coordination were Nouriel Roubini, Professor of Economics, New York University Stern School of Business, Raghuram Rajan, Professor of Finance, University of Chicago Booth School of Business, Nassim Taleb, Professor, New York University Polytechnic Institute, Hernando de Soto, President, Institute for Liberty and Democracy, Richard Clarida, Global Strategic Advisor, PIMCO, Joel Kurtzman, Chairman of the Board of Directors, Kurtzman Group, and Klaus Schmidt-Hebbel, Chief Economist, Organization for Economic Cooperation and Development (OECD). Sergey Guriev, Rector and Morgan Stanley Professor of Economics, New Economic School, acted as discussion moderator.

Is the present crisis a systemic crisis of capitalism in general? ‘Absolutely,’ most participants answered, if by ‘capitalism’ we mean the current financial market model.

For example, according to Nassim Taleb, “Tested by evolution, capitalism has proven itself durable and adaptable.” As for the current challenges, the economist points out excessive intervention on the part of regulators, especially the U.S. Federal Reserve. This opinion was shared by Hernando de Soto, who believes that the current financial system violates the fundamental rule of capitalism – a tie to reality. After all, just a small number of derivatives are backed up by real assets.

The first step to recovering from the crisis is ridding the market of “bad” debts and weak players, Nouriel Roubini and Raghuram Rajan say. Furthermore, tougher regulation must take place alongside the creation of a new financial architecture.

According to Klaus Schmidt-Hebbel, governments in the near-term will have to include anti-cyclical measures in their fiscal policies. This should lead to a system of “automatic stabilizers,” allowing for timely reactions to changes in the economic situation.

The global scale of the current challenges requires global anti-crisis measures, say the panelists. Raghuram Rajan argued that the new financial architecture should be built upon the existing international financial institutions. However, in order to combat protectionism in the anti-crisis plans of countries, major changes must be made to the status and authority of these institutions, as well as to the set of available instruments.

Troika Dialog

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