Davos is probably the most selective club in the world. Outside, the temperatures are well below zero. The security is impressive and there are limos a-plenty. Indoors, the discussions are heating up about what recipes, if any exist, can be used to improve a world in crisis.
To prevent another financial crisis, its causes need to be determined. Financial speculation is certainly one of them. The bursting of the financial bubble impacted on the equity markets. States borrowed massively to buoy them, taking the problem into another sphere; the bond markets.
“The worst bubble we are facing today is not coming from the equity markets or from stocks. It is coming from the bond markets that are financing the enormous public debt that has been accumulated by all the countries in the world, first by the United States and then by all the European countries. That debt might create economic problems, really, as it always did before in history,”
said Xavier Sala, Professor of Economics at Columbia University.
Davos has often been accused of promoting an exclusively capitalistic vision of the world, but the recession seems to have altered the perception of some of the global economy’s key players.
“It is clear that capitalism has been the way to develop initiatives, to get people to get the best out of themselves, but collectively it has not been enough to give back to society what needs to be given back to society as a solution. So we need to rethink,” said Ben Verwaayen, CEO of Alcatel Lucent.
In order to restore trust and fight against speculation, political leaders want a global reform of financial regulation: they want smaller banks and a return to a separation between retail banking and investment banking.