Dear ATCA Colleagues
[Please note that the views presented by individual contributors
are not necessarily representative of the views of ATCA, which is neutral.
ATCA conducts collective Socratic dialogue on global opportunities and
Dr Harald Malmgren is an internationally recognised expert on world trade
and investment flows who has worked for four US Presidents. His extensive
personal global network among governments, central banks, financial institutions,
and corporations provides a highly informed basis for his assessments
of global markets. At Yale University, he was a Scholar of the House and
Research Assistant to Nobel Laureate Thomas Schelling, graduating BA summa
cum laude in 1957. At Oxford University, he studied under Nobel Laureate
Sir John Hicks, and wrote several widely referenced scholarly articles
while earning a DPhil in Economics in 1961. His theoretical works on information
theory and business organization have continued to be cited by academics
over the last 45 years. After Oxford, he began his academic career in
the Galen Stone Chair in Mathematical Economics at Cornell University.
Dr Malmgren commenced his career in government service under President
John F Kennedy, working with the Pentagon in revamping the Defense Department's
military and procurement strategies. When President Lyndon B Johnson took
office, Dr Malmgren was asked to join the newly organised office of the
US Trade Representative in the President's staff, where he had broad negotiating
responsibility as the first Assistant US Trade Representative. He left
government service in 1969, to direct research at the Overseas Development
Council, and to act as trade adviser to the US Senate Finance Committee.
At that time, he authored International Economic Peacekeeping, which many
trade experts believe provided the blueprint for global trade liberalisation
in the Tokyo Round of the 1970s and the Uruguay Round of the 1980s. In
1971-72 he also served as principal adviser to the OECD Wise Men's Group
on opening world markets, under the chairmanship of Jean Rey, and he served
as a senior adviser to President Richard M Nixon on foreign economic policies.
President Nixon then appointed him to be the principal Deputy US Trade
Representative, with the rank of Ambassador. In this role he served Presidents
Nixon and Ford as the American government's chief trade negotiator in
dealing with all nations. While in USTR, he became known in Congress as
the father of "fast track" trade negotiating authority, which
he first introduced into the historically innovative Trade Act of 1974.
He was the first official of any government to call for global negotiations
on liberalisation of financial services, and he was the first US official
to call for the establishment of an Asian-Pacific Economic Cooperation
arrangement, known in more recent years as APEC.
In 1975 Dr Malmgren left government service, and was appointed Woodrow
Wilson Fellow at the Smithsonian Institution. From the late 1970s he managed
an international consulting business, providing advice to many corporations,
banks, investment banks, and asset management institutions, as well as
to Finance Ministers and Prime Ministers of many governments on financial
markets, trade, and currencies. He has also been an adviser to subsequent
US Presidents, as well as to a number of prominent American politicians
of both parties. Over the years, he has continued writing many publications
both in economic theory and in public policy and markets. He is Chief
Executive of Malmgren Global and also currently the Chairman of the Cordell
Hull Institute in Washington, a private, not-for-profit "think tank"
which he co-founded with Lawrence Eagleburger, former Secretary of State.
Dear DK and Colleagues
Re: The Fear of Central Bankers -- Flight from Illiquidity and Heightened
Risk of Contagion
It is true when ATCA states that "We are at one of those moments
in financial markets when the reality may not have changed much but perceptions
have clearly shifted. The shift is about risk, the willingness to accept
it and the premium to charge for it." At this moment financial traders
and many market analysts are focused on the deterioration of the US subprime
mortgage market because that is what fills daily business headlines.
A flight from "illiquid" assets to liquid assets would bring
about a major swing in financial markets. What bankers in the past traditionally
described as "flight to quality" would be reinterpreted in a
"flight to liquidity" - to assets that are easily tradeable
on short notice. This would mean assets that have a large and highly liquid
market. The largest and most liquid market in the world can still be found
in the US bond and equity markets. It may seem counterintuitive, but in
a flight to liquidity, it is unlikely that there will be a flight from
the dollar, at least in the next few years. There are no other alternatives
big enough and liquid enough to provide "safety" when the values
of more risky, relatively illiquid assets come into question.
We look forward to your further thoughts, observations and views. Thank
For and on behalf of DK Matai, Chairman, Asymmetric Threats Contingency