German Chancellor Angela Merkel said continental Europe should take the lead in financial market reform because the "Anglo-Saxon" model of regulation had failed, The Financial Times reported Wednesday.

Merkel, speaking before her meeting with U.S. President Bush and ahead of next month's G-8 leading industrialized nations economic summit, called for a European credit ratings agency to counter-balance Moody's and Standard & Poor's (NYSE: MHP), adding that despite the progress Europe has made with the euro, the financial regulatory framework is still "a strongly Anglo-Saxon dominated system."

Reforms sought by Berlin will include a ban on agency ratings for products they helped to create, new capital adequacy ratios for banks, and the prevention of bank sale of products they don't understand.

London-based economist Mark Chandler told BloggingStocks Wednesday he agrees with Merkel on the need for both financial market reform and a Europe-based counterweight to complement the largely U.S.-based regulatory framework, but is slightly surprised by Merkel's rhetoric.

The ever-incisive FT columnist Martin Wolf reminds us that while globalization's prize is plus-sum (everyone gains), as opposed to zero-sum (Country A gains only if Country B loses), it is not perfect sum (there are costs) nor egalitarian sum (everyone gains equally).

The biggest advantage of globalization, in Wolf's view? The spread of prosperity, including a wider distribution of innovation and bigger opportunities for profitable exchange/trade. Also valuable, although not guaranteed, Wolf says, is increased political stability in previously impoverished countries.

Globalization marches on

Further, in the globalization era's first decade, the United States can't do anything to halt the flow of ideas, and the diffusion of knowledge, skills, technology systems, and so forth, Wolf argues. Or at least the United States can't do anything decent to stop globalization.

With oil setting yet another record high Friday of $127.43 per barrel and Goldman Sachs renewing traders concerns about inadequate oil supply growth, economists and business executives are becoming increasingly concerned about gasoline prices in the quarters ahead.

U.S. gasoline prices are already up more than 100% since 2004 to a national average of about $3.78-3.83 per gallon. (Many high-cost zones, such as New York, Boston, San Francisco, and Los Angeles, are already experiencing prices well over $4 per gallon.) By any gauge, gasoline's surge is one for the record books - - rapidly approaching percentage increases registered during the first two oil shocks, in 1973-74 and 1979-80.

Given the run-up, how much higher can gasoline prices rise?

First, some may ask, why the emphasis on gasoline prices? In a nutshell, economists obsess over gasoline prices because, unlike the rest of the developed world, the United States has out-sized per capita energy consumption. That's econospeak for 'Americans use many more gallons of fuel to commute to work, do errands, etc. than their counterparts in Europe and around the world.'

U.K. home repossession claims by mortgage lenders increased 16% from a year ago to their highest level since the early 1990s, Bloomberg News reported Friday.

The U.K.'s Ministry of Justice said possession claims, the first step in the foreclosure process, increased to 38,688 in Q1 2008, from 27,530 in Q1 2007, Bloomberg News reported.

Anglo-American housing slump

London-based economist Mark Chandler told BloggingStocks Friday the large foreclosure rise indicates that the air is easing out of the housing balloon, and that the housing correction that began in the United States, is "clearly washing shore in the U.K."

As serious as the oil issue is in the United States, the west, and globally, considering its impact on economic development, circumstances could become even more challenging, in the quarters ahead, if present trends continue.

That's because, due to emerging market growth and per capita energy consumption rates in the United States - the oil -producing world "could be in a position of unprecedented pricing power," according to economist Glen Langan.

Langan says "could be" because the pricing power oil producers currently have, while significant, is not absolute. And oil-consuming nations still have time to regain some control over their oil bills. Oil Thursday reached a record high of $123.74 per barrel before closing slightly lower.

Here's the current global oil supply / demand landscape, as Langan sees it: daily global oil supply exceeds demand by the smallest of margins. It's the major reason the price of oil has been trending up for more than 5 years, but oil-consuming nations can increase that margin, via conservation, increased efficiency, and alternative sources of energy.

The dollar rallied to a six-week high Wednesday after U.S. productivity increased at a larger-than-expected rate and sentiment surfaced that Europe's economy may have slowed considerably.

The dollar rose about 2 cents versus the euro -- a large move in the currency market -- to $1.5370 on Wednesday afternoon. The dollar also gained against the world's other major currencies, rising about 2 cents to $1.9530 versus the British pound? about 0.5 cents to $1.0555 versus the Swiss franc and about one-half yen to 104.85 yen versus Japan's yen.

U.S. productivity gives dollar a lift

Earlier in the day, the U.S. Labor Department announced that U.S. worker productivity increased at a 2.2% annual pace in Q1 2008, well above the 1.7% Bloomberg News survey consensus estimate.

Independent currency trader Andrew Resnick told BloggingStocks Wednesday the Q1 2008 productivity data, combined with a sense that the European Central Bank is behind-the-curve concerning interest rate cuts to deal with slowing economic growth, put traders in dollar-buy mode.

Europe's economic growth will slow for a third straight year in 2009, to 1.5%, as higher inflation on the continent cuts into consumers' disposable income, the European Commission announced Monday.

The projection, provided in the EC's spring economic forecast, is 0.6 percentage points lower than the 2.1% 2009 GDP forecast projected in November 2007, and below the 1.7% growth rate anticipated for 2008.

Further the EC expects euro-zone inflation to increase to 3.2% this year, up from 2.6% in 2007, and then decline to 2.2% 2009.

Moreover, it's that higher, projected inflation for 2008 that in part led to the EC's more-modest growth expectations for 2009: the EC does not expect the European Central Bank to lower interest rates in the near future, as it attempts to reign-in rising inflation.

Europe's inflation rises

Higher oil, grain, and other commodity prices have amped-up inflation in both the United States and the European Union. However, the end of the housing boom in the U.S. economy has also substantially slowed the world's largest economy to near-recession levels, while Europe, with fewer housing-related problems to-date, has managed to maintain a modest growth level.

Oil zoomed past $119 per barrel Friday at mid-day after a cargo ship hired by U.S. military fired warning shots at boats suspected to be Iranian, Reuters reported Friday.

According to a U.S. Navy Bahrain-based Fifth Fleet spokeswoman, the Westward Venture, a cargo ship chartered by the U.S. Department of Defense, fired "a few bursts" of machine gun and rifle fire to warn two, approaching, unidentified small boats believed to be Iranian vessels, Reuters reported Friday. The small boats left the area, a short time later, the spokeswoman said.

Oil jumps $3

Oil surged $3.04 to $119.10 per barrel on word of the incident. The other major energy commodities also rose on the news. Heating oil rose about 4 cents to $3.30 per gallon, unleaded gasoline added about 4 cents to $3.05 per gallon, and natural gas gained 13 cents to $10.92 per million BTUs.

Independent energy trader Jim Dietz said the incident underscores how one unexpected event in today's oil-challenged world can send the oil markets into buy-mode in seconds.

China let the yuan rise to a record level versus the dollar Friday, Bloomberg News reported, in a sign Beijing may be modifying its currency stance in order to regain control of inflation.

The yuan strengthened to 6.9907 yuan versus the dollar Friday, its strongest level since the Chinese Government moved from a fixed or "dollar pegged" currency rate to a system that limits the yuan's currency appreciation to about 5% per year.

China has kept the yuan artificially low -- or not set by free-market, foreign exchange forces -- in order to stimulate economic growth and protect its young economy. The low yuan keeps the cost of Chinese exports low -- a major factor in both China's record trade surplus with the United States and its surging manufacturing export revenue. Critics charge that the low yuan gives China an unfair advantage versus foreign manufacturers: many of these producers, among others, argue that the yuan would appreciate to 5 or even 4.5 yuan to the dollar if allowed to float freely.

Financial eras, like social periods, are often defined by moments or epiphanies when decision makers and/or citizens realized that a serious flaw/mistake/problem was occurring through time, and across space, and needed to be corrected.

The ever-incisive FT columnist and economist Martin Wolf describes one contemporary concern that's likely to be addressed: the failure to align the interests of managers with those of investors.

My BloggingStocks colleagues Peter Cohan and Zac Bissonnette have also written on the subject on several occasions in this space, and now the FT's Wolf has assembled additional data that may very well lead to public policy changes, both in Wolf's United Kingdom and in the United States.

Margin call. Forced sale (liquidation). Stock / asset price decline. Cascading sales. Margin call. Forced sale (liquidation). Stock / asset price decline. Cascading sales. Margin call.

Concerned that current financial market and economic conditions might produce the above - - the dreaded financial vicious cycle? (It's also known as the financial decelerator.)

So is the International Monetary Fund, which is why the organization took the highly unusual step of recommending that governments should be prepared to use public funds to support struggling global credit and financial markets.

Saudi Arabia's Oil Minister Ali al-Naimi said Monday oil prices are unlikely to fall below $60 per barrel, Bloomberg News reported Monday.

Ali al-Naimi, head of the nation with the world's largest oil reserves and highest oil exports, did not indicate whether OPEC was leaning toward maintaining current production quotas in the face of oil's most-recent price rise. Oil has increased about $15 in the past two weeks to more than $100 per barrel, as concerns about underperforming U.S. stocks due to the sluggish U.S. economy, and inflation fears, have prompted investors to pile into oil as an investment and as an inflation hedge. Oil closed Wednesday up 61 cents to $102.45 per barrel.

Last week, OPEC President and Algerian Oil Minister Chakib Khelil told reporters in Algiers that "we don't expect to put more oil in the market."

New oil floor: $60?

Al-Naimi told Bloomberg News yesterday that obtaining energy from harder-to-refine sources, such as tar sands and alternative fuels, costs about $60-70 per barrel "and, therefore, a line has been drawn below which the price cannot fall."

Is China's trade surplus finally trending lower? One economist specializing in China's economy said possibly. but we won't know for certain for a few months.

China's trade surplus totaled $19.4 billion in January 2008 -- the first time the surplus has been below $20 billion in the last three months, The Associated Press reported Friday, citing the government's Xinhua News Agency. Exports rose 26.7% to $109.7 billion, while imports grew 27.6% to $90.2 billion.

U.S. consumer pullback?

"We may be starting to see the impact of the U.S. consumer pullback on China's exports to the U.S.," economist David H. Wang told BloggingStocks Friday. Wang was born and lived in China for more than twenty years before moving to the United States for graduate study. "If the U.S. economy continues in slow-growth mode, I suspect China's sales to the U.S. will continue to slow."

Ahh, just in time for the 2008 U.S. Presidential elections, word surfaces that the standard of living in Britain is now higher than in the U.S. For a country that has prided itself on McMansions, luxury cars and overpaid jobs, the U.S. has been knocked down by those across the pond. Feeling sad, Americans?

Researchers at the Oxford Economics consultancy are now stating that variables such as free health care and increasing incomes are making Britons better off than their American counterparts. When it comes to health care, this is no surprise.

47 million Americans don't have health insurance and health care insurance premiums continue to be abhorrently high. While those that continue arguing about taking health care insurance public instead of private, about a sixth of those living in the U.S. live every day without that type of insurance. From this standpoint, those in the U.S. that do pay health insurance costs continually see price increases. Result: less money to spend elsewhere.

Those Oxford researchers also state the GDP per citizen figures are higher among Britons than Americans, and Britain's continued financial market success has created a soaring housing market at the same time America is feeling a housing bust and a mortgage crisis created by greedy loan providers and ignorant homeowners. The researchers did state that British citizens may not feel more rich due to Americans having access to much cheaper goods. So, while Americans may make less, they can buy more.

Continued robust growth in developing countries will counteract an economic slowdown in the United States, but overall global economic growth will slow to a more-modest 3.6% rate, the World Bank announced Wednesday.

The bank's 3.6% global growth forecast is down 0.3 percentage point from 3.9% in 2006, a downturn that's primarily attributable to slower growth in high-income countries. The Washington, D.C.-based international bank also sees 2008 global GDP growth of 3.6%.

GDP growth in developing countries is expected to total 7.1% in 2008, while growth in high-income countries is expected to increase a modest 2.2% next year, the bank said.