New article: How to fix a broken financial system

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My report on the day one TIME Board of Economists’ session at Davos is in the new international edition(s) of TIME and online here. It begins:

Last year, the annual gathering of TIME’s Board of Economists on the first day of the World Economic Forum in Davos was dominated by a debate over just how bad the then-gathering financial crisis would be, and whether the rest of the world would share in the economic comeuppance facing the U.S.

This Jan. 28, on a day when the lowering snow-filled skies matched the mood of those inside the Davos Congress Center, there was no such debate. In a packed room for what has become an opening-day tradition, everybody agreed with Morgan Stanley Asia chairman Stephen Roach’s grim assessment that “this will most likely be the first year since the end of World War II when world GDP actually contracts.” In fact, after Roach predicted 2.5% average global growth over the next three years — which still qualifies by most standards as a recession or close to it — Keio University economist and former Japanese Minister for Internal Affairs Heizo Takenaka quipped that Roach was being “much more optimistic than expected.”

Later on, Roach and Financial Times columnist Martin Wolf, who was in the audience, differed on whether we’re in a “proto-depression” (Wolf) or a “global recession the likes of which we’ve never seen” (Roach). But that was more a linguistic debate than an economic one. There was also some disagreement over China’s growth prospects. World Bank chief economist Justin Yifu Lin said he thought the country’s big fiscal stimulus plans, including massive expenditure on infrastructure, would keep growth above 7% per year. No one else was that confident. Keep reading.