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 threats.]

We are grateful for the 70th contribution to the "Global Credit Crunch" Socratic dialogue:

. Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA, for, "The Fed's Bold Action confirms Multiple Threats to Financial Stability and Economic Growth;"

The number of iterations of an ATCA Socratic dialogue is a very rough indicator of how critical a particular asymmetric threat is perceived to be and how protracted it has become over time. This Socratic dialogue was started on 12th July 2007, nearly one month before the credit crunch crisis and associated fallout began with the European Central Bank (ECB) emergency injection of Euro 95bn on 9th August 2007. Two months and a week later, it remains the longest and deepest running Socratic dialogue on ATCA, since our inception in October 2001.

Dear DK and Colleagues

Re: The Fed's Bold Action confirms Multiple Threats to Financial Stability and Economic Growth

Euphoria erupted throughout financial markets with the US Federal Reserve's September 18 announcement of a bold 50 basis points cut in its target rate coupled with a further 50 basis points cut in the rate it charges banks which apply to its discount window. Will this bold attempt to "lubricate" the seized-up credit markets work? Will the US and global economies resume reasonably strong growth, and will the equity and bond markets be revitalized and energized for another bull run? Will the deep distrust about securitised debt assets be overcome by easier credit terms? Or will there be further challenges to overcome that could still drive the US into recession and the world economy into a prolonged slump?

[CONTINUES] [ATCA Membership]

Harald Malmgren

Dr Harald Malmgren is Chief Executive of Malmgren Global and also currently the Chairman of the Cordell Hull Institute in Washington, DC, a private, not-for-profit "think tank" which he co-founded with Lawrence Eagleburger, former US Secretary of State. He 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.

[ENDS]

50* The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, for "Credit Card Debt Default - The Domino Crisis post Sub-Prime Overflow;"
49* Dr George Feiger, President & CEO, Contango Capital Advisors, based in Berkeley, California, USA for "Responsibility for Credit, Securitisation and Moral Hazard."
48. Anthony Whitehouse, Founder, Bittiner Whitehouse (now Maitland), Geneva, Switzerland, for "Blame and Sanctions in the Credit Crunch;"
47. Prof Prabhu Guptara, Executive Director, Organisational Development, Wolfsberg (UBS), Switzerland, for "Unique Problems with 1990s Japan;"
46. The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, and Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA, for "Central Bankers, Monetary Policy and Moral Hazard;"
45* William Sturge, Partner, Reinsurance, Lawrence Graham (LG) based in Central London, UK, for "Litigation Exposure and Insurances that may Respond;"
44. Peter Tasker, Founding Partner, Arcus Investment, based in Tokyo, Japan, for "Invaluable Lessons from 1990s Japan - Risks of Schadenfreude;"
43. Andrew Leung, CEO, AL International, London, UK, and frequent visitor to China for "The China Dimension of The Global Credit Crunch;"
42* The ATCA Research & Analysis Wing (RAW), based in Canary Wharf, London, UK, and Dr Harald Malmgren based in Washington, DC, USA for "Off-Balance Sheet Conduits & SIVs Raise Wider Concerns;"
41* Prof Charles Calomiris, Columbia Business School, New York & Prof Joseph Mason, LeBow College of Business, Drexel University, Philadelphia, USA for "The Conflict of Rating Agencies and Regulation - We need a Better Way to Judge Risk;"

40. Dr George Feiger, President & CEO, Contango Capital Advisors, based in Berkeley, California, USA for, "Questioning the Views of a Nobel Laureate;"
39. Prof Joseph Stiglitz, Nobel Laureate in Economics (2001), Columbia University, New York, USA , for "Day of Reckoning for Americans who lived Beyond their Means;"
38. Dr George Feiger, President & CEO, Contango Capital Advisors, based in Berkeley, California, USA for "Suggestions for Resolving Sub-Prime Dilemma Step by Step;"
37* Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA for "Understanding Rating Agencies beyond the Sub-Prime Meltdown;"
36* The ATCA Research and Analysis Wing (RAW), based in Canary Wharf, London, UK, for "Asymmetric Knowledge Risk and Market Deadlock;"
35* Anthony Whitehouse, Founder, Bittiner Whitehouse (now Maitland), Geneva, Switzerland, for "High Credit Ratings and Breakdown of Trust;"
34* John Pickering, Vice-Chairman, Labour Finance and Industry Group, based in London and Tunbridge Wells, UK, for "Role of Auditors;"
33* The ATCA Research and Analysis Wing (RAW), based in Canary Wharf, London, UK, for "ATCA QUERY: Role of Credit Rating Agencies;"
32. Peter Tasker, Founding Partner, Arcus Investment, based in Tokyo, Japan, for "Resilience of Corporate Profits & Sub-Prime Fiasco -- Global View from Japan;"
31. Daniel Morler, Head of Middle East, LGT Private Bank, based in Vaduz, Liechtenstein, for "Human Factor, Information Lag, Geo-Politics and Central Banks;"

30. Justin Urquhart Stewart, Director, Seven Investment Management, London, UK, for "Pride Before the Fall -- Those Who Don't Know that they Don't Know;"
29. Martin Wolf, Associate Editor & Chief Economics Commentator, Financial Times, London, UK, for "To Cut or Not to Cut: Federal Reserve must Prolong the Party;"
28. The Hon Al McDonald, Chairman and CEO, Avenir Group, from Michigan, USA, for "Balancing The Role of Management in Extreme Financial Turbulence."
27. The ATCA Editorial Team based in Canary Wharf, London, UK, for "Subprime Crisis Spreads Across Regions and Financial Sectors;"
26* Hervé de Carmoy, European Vice-Chairman, Trilateral Commission, based in Paris, France, for "Role of Large Financial Institutions in Fuelling Crisis;"
25* Dr Jim Walker, Chief Economist, CLSA, based in Hong Kong for "China Chaos and Subprime Butterfly;"
24. Ashutosh Sheshabalaya, CEO, India-Advisory, based in Brussels, EU, and Bassilly, Belgium, for "India turns History Upside Down;"
23. John Elkington, Chief Entrepreneur, SustainAbility, based in London, UK, and returning from India, for "Mother Convulsion - India's Third Liberation;"
22. Stephen Lendman, based in Chicago, Illinois, USA, for "Slow Motion Train Wreck" via Ashok Khosla, Chairman, Development Alternatives, New Delhi, India;
21. The ATCA Editorial Team based in Canary Wharf, London, UK, for "Market Convulsions;"

20. Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA for "Federal Reserve's Changed Focus;"
19. Bill Emmott, Director, UK-Japan 21st Century Group, based in London and Somerset, UK, for "Japan's Strong Yen;"
18* Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA for "The Asymmetric Loss of Trust and Chain Reaction;"
17. The ATCA Editorial Team, based in Canary Wharf, London, UK, for "Public Inquisition of Credit Rating Agencies may Accelerate Downturn;"
16. Dr George Feiger, President and CEO, Contango Capital Advisors, based in Berkeley, California, USA, for "Watch out for Dramatic Winners;"
15* The ATCA Editorial Team, based in Canary Wharf, London, UK, for "Systemic Risk & Sectoral Meltdown: Heightened Correlation and Deleveraging;"
14. Rudi Bogni, Chairman, Medinvest, and Director, Old Mutual, from Basel, Switzerland, for, "Non-Stop Central Banks' Intervention;"
13. Dr Ravi Batra, Professor of Economics, Southern Methodist University, Dallas, Texas, USA, for, "Towards a Global Economic Crisis?;"
12. Aurora Carlson, Founder, Open One Center, based on the West Coast, Sweden, for "The Coming Storm of Change;"
11. The ATCA Editorial Team, based in Canary Wharf, London, UK, for "Large Quake hits Quants as Computer-Driven Quantitative Hedge Funds Short-Circuit;"

10* Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, USA for "Prolonged Credit Market Correction Ahead;"
9. Prof Dr Norbert Walter, Chief Economist, Deutsche Bank Group, based in Frankfurt, Germany, for "Economic Consequences of The Sub-Prime Crisis;"
8. Anthony Whitehouse, Founder, Bittiner Whitehouse (now Maitland), Geneva, Switzerland, for "Regulators, Hedge Fund Lending and Cross-Selling;"
7. The ATCA Editorial Team, based in Canary Wharf, London, UK, for "Perfect Storm: Credit Freeze and Distress Selling by Hedge Funds;"
6. Dr George Feiger, based in Berkeley, California, USA, for "Two Faces of the Same Coin;"
5* The ATCA Editorial Team, based in Canary Wharf, London, for "Contagion and Systemic Risk? ECB Injects Record Euro 95bn post Major Disturbance;"
4. The ATCA Editorial Team, for "Flight to Quality as Markets finally Appreciate Risk;"
3. Robert McNally, Chairman, London Chamber of Commerce Property and Construction Group, for "Erosion of Commercial Real Estate as a Solid Asset Class;"
2. Alexander Hoare, CEO, C Hoare and Co, Private Bankers, based in the City of London, for "Destructive Creativity, Leverage and The Derivatives Market;" and
1. Dr Harald Malmgren, CEO, Malmgren Global, based in Washington, DC, for "The Fear of Central Bankers -- Flight from Illiquidity, Derivatives and Heightened Risk of Contagion;"

in response to, "Are the Currency Markets Warning that there is Trouble Ahead? The Precipitous Decline of the US Dollar and its Impact on the World."

+ Denotes ATCA QUERY: The Question of Trust +

* Denotes ATCA QUERY: Role of Credit Rating Agencies *