Global central bank to prevent future crises - William Overholt

William Overholt
by Fons1 via FlickrTo avoid future financial crises like we see now, a global central bank is needed to replace a failing IMF and World Bank, leading economist William Overholt said on a lecture at the Dubai School of Government.

To avoid another crisis, we need an ability to manage global liquidity. Theoretically that could be achieved through some kind of global central bank, or through the creation of a global currency, or through global acceptance of a set of rules with sanctions and a dispute settlement mechanism.

After Communism, now Capitalism has failed and we need a new way to look at global financial structures.

The crisis of the capitalist world does not mean that socialism is a more attractive alternative. All modern experience shows that government-owned banking and industrial systems are more prone to inefficiency and crisis than market-based systems. Nonetheless, in a crisis, governments have to intervene and this often means taking ownership positions in troubled institutions. If owners of banks mismanage the banks, they should lose ownership, as they would if the government did not intervene. If governments spend vast amounts of money rescuing banks, they should get ownership positions so that taxpayers can be repaid when the banks recover. But such ownership should be temporary; after the crisis, the government's equity should be sold, with taxpayers benefiting.

You can find William Overholt's full lecture here.

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William Overholt is teaching at the Kennedy School for Government at Harvard University. He is also a speakers at the China Speakers Bureau. If you are interested in having him for your seminar, conference or board meeting, let us know.

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