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January 2008 Archives


New Hope on Climate Change
Jeffrey D. Sachs (Project Syndicate) Jan 2008
The world has taken an important step toward controlling climate change by agreeing to the Bali Action Plan at the global negotiations in Indonesia earlier this month. The plan may not look like much, since it basically committed the world to more talking rather than specific actions, but I am optimistic for three reasons.

The “Browning” of African Technology
G. Pascal Zachary (Project Syndicate) Jan 2008
Forget MIT. Hello, Tsing Hua University. For Clothilde Tingiri, a hot young programmer at Rwanda’s top software company, dreams of Beijing, not Cambridge, animate her ambitions. Desperate for more education, this fall she plans to attend graduate school for computer science – in China, not America.

Three Cures for Three Crises Recommended!
J. Bradford DeLong (Project Syndicate) Jan 2008
A full-scale financial crisis is triggered by a sharp fall in the prices of a large set of assets that banks and other financial institutions own, or that make up their borrowers’ financial reserves. The cure depends on which of three modes define the fall in asset prices.

The IMF’s Next Mission?
Harold James (Project Syndicate) Jan 2008
The world economy is increasingly threatened by volatile market reactions to global imbalances at a time when the IMF has largely lost its original raison d’être as the world’s central monetary institution. These two developments should stimulate the Fund to claim a new purpose as the world’s reserve manager.

Stagflation Cometh
Joseph E. Stiglitz (Project Syndicate) Jan 2008
The world economy has had several good years. Global growth has been strong, and the divide between the developing and developed world has narrowed, with India and China leading the way, experiencing GDP growth of 11.1% and 9.7% in 2006 and 11.5% and 8.9% in 2007, respectively. Even Africa has been doing well, with growth in excess of 5% in 2006 and 2007.

Workers’ Paradise?
Kenneth Rogoff (Project Syndicate) Jan 2008
Will the political resurgence of labor unions throw a wrench into the wheels of globalization? Or will their growing strength serve to make globalization more sustainable by fostering great equality and fairness? One way or the other, unions stand as a major wild card for the evolution of our economic system in 2008 and beyond.

Uncertainty and Action on Climate Change
Thomas Schelling (Project Syndicate) Jan 2008
The uncertainties about climate change are many and great. How much CO2 may join the atmosphere if nothing is done about it? How much global warming will it cause, and how will local climates, ecosystems, and vulnerable species be affected? What impact will such changes have on productivity, comfort, and health? And, of course, what are the likely costs of shifting to renewable energy sources and energy conservation?

The Year of the “China Model”
Ian Buruma (Project Syndicate) Jan 2008
It will be China’s year in 2008. The Olympic Games – no doubt perfectly organized, without a protester, homeless person, religious dissenter, or any other kind of spoilsport in sight – will probably bolster China’s global prestige. While the American economy gets dragged down further in a swamp of bad property debts, China will continue to boom. Exciting new buildings, designed by the world’s most famous architects, will make Beijing and Shanghai look like models of twenty-first century modernity. More Chinese will be featured in annual lists of the world’s richest people. And Chinese artists will command prices at international art auctions that others can only dream of.

China’s Gift to Europe
Melvyn Krauss (Project Syndicate) Jan 2008
Europeans are wrong to be angry with China because its currency peg to the US dollar has boosted the euro against most currencies on foreign exchange markets. On the contrary, they should view the currency peg as a valuable gift.

The New Role of Oil Wealth in the World Economy
McKinset Quarterly Jan 2008
Regulators may worry when Arab investors acquire stakes in Western companies, yet vast reserves of petrodollars have kept down interest rates and buoyed financial assets. What's the broader effect of the surge in petrodollars?

Inequality and Growth: Challenges to the Old Orthodoxy
Erwan Quintin and Jason L. Saving (FRB Dallas) Jan 2008
Discussions of how best to alleviate poverty often center on the relative merits of policies that boost growth and those that promote redistribution. If greater inequality allows economies to expand faster, or if it’s an inevitable consequence of pro-growth measures, the two principles seem incompatible. Under such a scenario, societies seeking rapid growth rates have to forgo redistribution from rich to poor. Conversely, choosing a high degree of redistribution implies the decision to accept lower growth rates.

The new role of oil wealth in the world economy Recommended!
Diana Farrell and Susan Lund (McKinsey Quarterly) Jan 2008
As oil prices continue to set new records, investors outside Europe and the United States are increasingly shaping trends in financial markets. The influence of these investors is likely to continue to grow over at least the next five years.

Putting a Plague in Perspective
Daniel Halperin (NYT) Jan 1, 2007
Could American foreign assistance to fight AIDS be better spent elsewhere?

Prepare for a global economic downturn but not a disaster
Wolfgang Munchau (FT) Jan 1, 2008
This is not really a 'subprime' or 'credit' crisis, but a banking crisis, and history has taught us that banking crises do not simply go away. It will probably linger on for most of the year and may get worse before it gets better.

What's Your Consumption Factor?
Jared Diamond Jan 2, 2008
The world has serious consumption problems, but we can solve them if we choose to do so.

Dollar fear sparks rush to oil and gold
FT Jan 3, 2008
Crude oil prices briefly hit the $100-a-barrel mark and gold prices jumped to an all-time high as investors poured money into commodities amid deepening fears about the weakness of the US dollar Read more »

The Rise of South-South Trade Recommended!
David Wessel (WSJ) Jan 3, 2008
At a recent meeting of global business executives convened in Abu Dhabi by consulting firm A.T. Kearney, managers of sovereign-wealth funds had a message for U.S. and European executives: Work with your government to keep your markets open to us. If not, we'll go elsewhere.

IEO Evaluates IMF Loan Conditions
IMF Survey Jan 3, 2008
In a study of conditionality in IMF-supported programs, the Fund's watchdog noted that conditions attached to loans have become more focused, but found that there were still too many and that some conditions may not have been tied to principal program goals.

The Invisible Hand of Globalization
Susan Froetschel (YaleGlobal) Jan 3, 2008
Billions of economic decisions from entrepreneurs and consumers are a force beyond the control of regulators.

Civil war: Does international trade help or hurt?
Philippe Martin (VoxEU) Jan 4, 2008
Civil war is a pivotal challenge for the development of the world’s poorest nations. Recent research finds that trade deters severe conflicts but fosters less severe ones. Here is the logic and evidence.

Inequality and redistribution: why such a weak link?
Andreas Georgiadis & Alan Manning (VoxEU) Jan 5, 2008
The standard framework for thinking about inequality and redistribution – the median voter approach – predicts that rising inequality should produce more redistribution. The facts reject this prediction for the UK and suggest that beliefs may be an important missing factor.

Stop the World (and Avoid Reality)
Alan S. Blinder (NYT) Jan 6, 2008
In the early 1960s, a Broadway musical called “Stop the World, I Want to Get Off” was all the rage. But you hear the sentiment of that title a lot these days.

Lesson From a Banana Republic Wall Street Journal Subscription Required
WSJ Jan 7, 2008
Management by smear at the World Bank.

Dollar rallies, helping European stocks edge higher
IHT/Reuters Jan 7, 2008
U.S. stock prices gyrated Monday as investors concerned about a possible U.S. recession saw a drop in oil and gold prices as easing some of those fears.

Microfinance Fever
Matthew Swibel (Forbes) Jan 7, 2008
A lot of people are chasing returns in barefoot banking. Here's what you should know before you follow.

Global Growth Estimates Trimmed After PPP Revisions
IMF Survey Jan 8, 2008
Based on new statistical calculations of purchasing power parity (PPP) exchange rates published last month by the International Comparison Program, the IMF has revised downward its estimates for global growth by around ½ percentage point each year during 2002-07.

The exchange rate of the Euro: cause for alarm?
Jörg Decressin and Emil Stavrev (IMF) Jan 8, 2008
The exchange rate of the euro is in the headlines, as it has been steadily appreciating over the past year and a half. Views on this development among euro-area policymakers were initially quite different but have now broadly converged to one of concern. Softening global growth prospects have probably played a role, as has the ongoing financial turmoil. Against the backdrop of these various cross currents, what is the challenge posed by exchange rate developments thus far?

Tigers or Kittens?
Eswar Prasad (IHT) Jan 8, 2008
The World Bank stunned the world recently when it announced that the economies of China and India are about 40 percent smaller than previous estimates.

Challenges for the world's divided economy
Martin Wolf (FT) Jan 8, 2008
The health of the global economy demands the survival of an open world. Whether the present crisis proves a blip or the end of an era depends on whether openness survives.

Gold prices climb to record high
IHT Jan 8, 2008
Gold futures surged to an all-time high above $875 an ounce Tuesday as traders bet that rebounding oil prices would boost demand for the metal as a safe haven investment.

Why sterling is the next dollar
Martin Wolf (FT) Jan 10, 2008
Policymakers must focus on preserving credibly low inflation, essential if a retreat of the pound is not to become a rout.

The challengers Economist Subscription Required
Economist Jan 10, 2008
A new breed of multinational company has emerged.

Currencies: Yen to Yo-Yo
Stephen Jen & Luca Bindelli (MSDW) Jan 11, 2008
We reiterate our tactical call that USD/JPY should be sold in 1H. The global economic slowdown and general risk-aversion should assist the JPY’s ascent. But when the world recovers, this trade should be reversed as the structural decline in Japan’s financial ‘home bias’ should resume.

How Much Assets Could SWFs Farm Out?
Stephen Jen (MSDW) Jan 11, 2008
Sovereign wealth funds (SWFs) will outsource part of the management of their assets to external fund managers. In this note, we guesstimate that, in the aggregate, SWFs could farm out US$150 billion worth of capital in the next two years and, thereafter, roughly US$200 billion every year for the next decade.

Fact Check, Reality Check? New GDP Data
Arvind Subramanian (Business Standard/PIIE) Jan 11, 2008
Why did nearly 15 years have to elapse before GDP data were updated?

Lives of Grinding Poverty, Untouched by China's Boom
NYT Jan 13, 2008
China has moved more people out of poverty than any other country in recent decades, but places like southern Henan Province still remain destitute.

Europe can't agree on anti-dumping rules
IHT Jan 13, 2008
Acknowledging differences of opinion in the EU, the EU trade commissioner, Peter Mandelson, said plans to change rules had been shelved and warned that a lack of clarity in the current system was hurting business.

This is not merely a subprime crisis
Wolfgang Münchau (FT) Jan 13, 2008
If the credit default swap market hits problems – under a pessimistic scenario involving a nasty , long recession – it could produce global financial meltdown.

World Bank Disgrace
WSJ Jan 14, 2008
The worst corruption so far, this time in lending to India.

Markets and the Dollar Wall Street Journal Subscription Required
David Malpass (WSJ) Jan 14, 2008
The best stimulus policy is a sound currency.

Booming Africa Economist Subscription Required
Economist Jan 14, 2008
African growth is set to rise a record 6.4%.

Can the global commodities boom survive a U.S recession?
IHT Jan 14, 2008
Commodities have always been subject to boom-and-bust cycles, but many economists see a fundamental shift -- led particularly by the industrialization of China -- driving the markets these days.

The Real Key to Development Wall Street Journal Subscription Required
Mary Anastasia O'Grady (WSJ) Jan 15, 2008
The world's freest economies have many times the per capita income of those strangled by the state.

Bad Management and Sub-Sarahan Africa
Globalist Jan 15, 2008
Why has development aid not helped Africa all that much?

How Wall Street broke the free market Recommended!
Andrew Leonard (Salon) Jan 15, 2008
Globalization, thy name is Wall Street bailout. There is no better demonstration of the new global financial order than the cavalcade of "sovereign wealth fund" white knights riding to the rescue of the world's name-brand investment banks all winter long. On Tuesday, Citigroup and Merrill Lynch both announced huge additional sales of stock to foreign buyers. Some observers are alarmed, fearing a parade of boogeymen out to do the West harm under cover of their aid drops. But they should take heart -- the new players will be hard-pressed to do more damage than the old.

Why regulators should intervene in bankers' pay
Martin Wolf (FT) Jan 16, 2008
The regulatory net should cover all systemically important financial institutions. The question the authorities need to ask themselves is simple: if a specific institution fell into substantial difficulty would they have to intervene?

What to Expect When You’re Free Trading Recommended!
Steven E. Landsburg (NYT) Jan 16, 2008
In the days before Tuesday’s Republican presidential primary in Michigan, Mitt Romney and John McCain battled over what the government owes to workers who lose their jobs because of the foreign competition unleashed by free trade. Their rhetoric differed — Mr. Romney said he would “fight for every single job,” while Mr. McCain said some jobs “are not coming back” — but their proposed policies were remarkably similar: educate and retrain the workers for new jobs.

Ag Chair to Issue Revised Draft Text by End January
BRIDGES Weekly Trade News Digest - Vol. 12, Number 1 Jan 16, 2008
The chair of the WTO agriculture talks has told Members that he plans to circulate a revised draft 'modalities' text by the end of the month, setting out formulae and figures for tariff and subsidy cuts.

Antigua Awarded Modest Cross-Retaliation Rights in Gambling Dispute with US
BRIDGES Weekly Trade News Digest - Vol. 12, Number 1 Jan 16, 2008
Antigua and Barbuda last month won the right to retaliate against US intellectual property, including patents and copyrights, as part of their longstanding WTO dispute on internet gambling. However, the value of the penalties Antigua was awarded fell far short of what it had initially sought.

Investing in China: Fool’s Gold?
Thomas I. Palley Jan 16, 2008
Americans tend to disregard history. Henry Ford declared bluntly, “History is bunk,” while Gore Vidal calls the U.S. “the United States of Amnesia.” Usually, this disregard has few consequences, but sometimes not. That may be so with investing in China, where history suggests profits will be far below expectations, possibly making those investments fool’s gold.

The global inflation scare
Economist Jan 17, 2008
Inflation is on the rise, but don't worry too much about it

Christian Noyer sees 'partial decoupling' of U.S. and EU economies
IHT Jan 18, 2008
The Bank of France governor said consumers and financial institutions in the euro zone appeared relatively insulated from effects of the subprime mortgage market meltdown.

Valuable predictions of exchange rates
Pasquale Della Corte, Lucio Sarno & Ilias Tsiakas (voxEU) Jan 18, 2008
The forward premium, the difference between the forward exchange rate and the spot exchange rate, contains economically valuable information about the future of exchange rates. Here is the evidence that it can help predict short-run rates and that investors who ignore it and use random walk models may be leaving money on the table.

Don’t Cry for Me, America
Paul Krugman (NYT) Jan 18, 2008
Mexico. Brazil. Argentina. Mexico, again. Thailand. Indonesia. Argentina, again. And now, the United States.

Asia's Interests in IMF Reform
Edwin M. Truman (PIIE) Jan 18, 2008
Asian regional integration and International Monetary Fund (IMF) reform is not an either-or proposition—either Asian integration is advanced or the IMF is reformed, but not both. Successful Asian economic and financial integration depends on the continued prosperity of the global economy; the principal guardian and promoter of that prosperity is the IMF. However, the Fund has not continued to evolve with the global economy and financial system over the past decade and now faces a twin crisis of relevance and legitimacy. These two reform agendas are well known. The most important issue of relevance for the Asian region is increasing the Fund’s effectiveness in surveillance, because the region is home to the largest global imbalances and distortions in effective exchange rates. The most important issue of legitimacy for the Asian region is the substantial redistribution of voting power within the Fund, as called for in the September 2006 Singapore resolution.

The challenge of sovereign wealth funds
Philipp M. Hildebrand (VoxEU) Jan 21, 2008
The rapid growth of sovereign wealth funds risks provoking a protectionist response by industrialised countries. Here is the argument that a voluntary code of conduct could help avert the problem.

Currencies: On Economic and Financial De-Coupling
Stephen Jen, Luca Bindelli & Charles St-Arnaud (MSDW) Jan 21, 2008
The dollar’s general weakness in the first trading days of the year suggests that investors, collectively, are not yet fearful enough for the ‘Dollar Smile’ to work. We take another look at the issue of economic and financial de-coupling, for selected countries.

Ratings agency reform
Richard Portes (VoxEU) Jan 22, 2008
Recent financial market troubles highlight a number of problems with the credit ratings agencies. This column argues only a few of the proposed policy solutions are likely to be both feasible and helpful.

The financial turmoil is like an elephant in a dark room
Martin Wolf (FT) Jan 22, 2008
For one person it feels like a snake; for another a leathery sail. A third says a tree trunk. A fourth a pull rope. Explanations for what has happened to the world economy are just as diverse. The accurate story is that it is a combination of the various elements.

A Global Selloff Wall Street Journal Subscription Required
WSJ Jan 22, 2008
As America goes, so goes the rest of the global economy.

Globalization and the Markets
David Dapice (YaleGlobal) Jan 22, 2008
Complicated new financial tools outpaced the comprehension of regulators, bankers or customers

Sweet and Sour Wall Street Journal Subscription Required
WSJ Jan 22, 2008
Now the sugar lobby wants a North American cartel.

The worst market crisis in 60 years
George Soros (FT) Jan 22, 2008
The crisis is less likely to cause a global recession than a radical realignment of the global economy with a relative decline of the US.

Fed's Action Stems Sell-Off in World Markets
NYT Jan 23, 2008
Confronting panic about a possible recession, the Federal Reserve announced the biggest one-day reduction of interest rates on record.

Capitalism's Enemies Within
Robert J. Samuelson (WP) Jan 23, 2008
Amid the mayhem on world financial markets, it is becoming clear that capitalism's most dangerous enemies are capitalists.

The Dollar and the Market Mess Wall Street Journal Subscription Required
Bill Wilby (WSJ) Jan 23, 2008
In a world of fiat currencies, dollar strength is a better measure of monetary policy than "core" inflation.

Sovereign Wimp Funds Wall Street Journal Subscription Required
Holman W. Jenkins, Jr. (WSJ) Jan 23, 2008
If they're so rich, why aren't they smart?

On the Cusp of Economic History
Katrin Bennhold (IHT) Jan 23, 2008
Policymakers and economists consider whether capitalism could use some fine-tuning.

NAMA Impasse Persists, As WTO Members Await New Draft Texts
BRIDGES Weekly Trade News Digest - Vol. 12, Number 2 Jan 23, 2008
WTO Members insist that they have not given up on concluding the Doha Round of global trade talks in 2008. Director-General Pascal Lamy, too, sounds optimistic. "It's an Olympic year for China and maybe an Olympic year for Doha too," he told a Chinese newspaper last week.

As Antigua Considers Cross-Retaliation against US, WIPO Official Creates Stir
BRIDGES Weekly Trade News Digest - Vol. 12, Number 2 Jan 23, 2008
In a rare move, the WTO last month awarded Antigua and Barbuda the right to place sanctions on US patents, copyrights, and other intellectual property, as compensation for being unduly shut out of the US' online gambling market.

African development from a comparative perspective
Thorvaldur Gylfason (VoxEU) Jan 25, 2008
Are some African economies poised for prolonged growth and human development? This article assesses African development prospects using Iceland’s economic ascent over the last century as a benchmark.

IMF head in shock fiscal appeal
FT Jan 27, 2008
The intensifying credit crunch is so severe that lower interest rates alone will not be enough "to get out of the turmoil we are in", warned IMF managing director Dominique Strauss-Kahn.

Singapore fund pledges greater transparency
FT Jan 27, 2008
Singapore's Government Investment Corporation has promised greater disclosure about its activities, amid mounting concerns about the secretive fund's influence after high-profile investments in UBS and Citigroup

Five ways to reform Asia's regional bank
FT Jan 28, 2008
Priorities are not being honestly, transparently or courageously tackled, resulting in an ADB that is in danger of slipping into irrelevance.

The tenuous future of Africa-EU trade relations
Peter Draper (VoxEU) Jan 29, 2008
Many African economies recently signed economic partnership agreements with the European Union. This commentary analyses the agreements and identifies some significant challenges for future Africa-EU trade relations.

IMF Sees World Growth Slowing, With U.S. Marked Down
IMF Survey Jan 29, 2008
Buffeted by recent financial market turbulence and a weakening U.S. performance, world growth is projected to slow to 4.1 percent in 2008, down from an estimated 4.9 percent last year, the IMF says in its quarterly update for the global economy.

Instant Nutrition
NYT Jan 30, 2008
The United States is the largest single donor of food aid in the world, but it doesn't provide enough of what young children really need.

Not liberal enough
Economist Jan 30, 2008
African economies suffer from a lack of liberalisation.

Mountain meltdown
Economist Jan 30, 2008
Davos 2008: Sing, drink and be gloomy.

Davos Meet Urges New Push for Doha Deal, Amidst Economic Uncertainty
BRIDGES Weekly Trade News Digest - Vol. 12, Number 3 Jan 30, 2008
Some of the world's leading economies have called for another push for a deal in the long-running Doha Round of global trade negotiations, motivated this time by growing anxiety about the world economy.

Divisions Persist on Anti-Dumping Draft Text
BRIDGES Weekly Trade News Digest - Vol. 12, Number 3 Jan 30, 2008
Longstanding divisions appear to be persisting in the Doha Round negotiations to modify WTO rules on the use of anti-dumping measures, following discussions last week on a set of potential amendments tabled in November by the chair of the negotiating group.

Different money, different rules Recommended!
Lawrence Summers (IHT) Jan 30, 2008
Along with the prominent emergence of sovereign wealth funds on the global scene, some key questions arise.

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