Asia’s Changing Power Dynamics
Brahma Chellaney (Project Syndicate) Jan 2010
Never before have China, Japan, and India all been strong at the same time. But there can be no denying that these three leading Asian powers and the US have different playbooks: America wants a uni-polar world but a multi-polar Asia; China seeks a multi-polar world but a uni-polar Asia; and Japan and India desire a multi-polar Asia and a multi-polar world.
Grandmasters and Global Growth
Kenneth Rogoff (Project Syndicate) Jan 2010
As the global economy limps into a new one in 2010, what will be the next big driver of global growth? Evidence from the world of chess suggests that it will be artificial intelligence, the uses of which will multiply, generating an economic impact on par with the emergence of India and China.
Why Big Banks Will Get Bigger
Harold James (Project Syndicate) Jan 2010
From banks’ perspective, the most obvious lesson of the financial crisis was the need for a strong national government to bear the potential costs of a rescue. It is no longer best to be where the most favorable regulatory regime prevails, but to be where the state has the deepest pockets.
The Year Ahead
John Makin (AEI) Jan 2010
We can expect 2010 to be a volatile year. This likelihood is underscored by looking back at 2008 and 2009. Two thousand eight was a highly volatile year leading up to the collapse of Lehman Brothers in September, which was followed by the risk of a total systemic meltdown. That sharp and obvious risk spike prompted massive policy responses that were simply the largest that central banks, with rate cuts and liquidity provision, and governments, with tax cuts and spending increases, could manage. The result--beginning in March 2009--was a linear rise in the prices of risky assets, the result of massive relief once the slip into a global depression had been averted and the acute phase of the crisis in the financial sector had passed.
Let’s Get Fisical
Bill Gross (PIMCO) Jan 2010
Downdrafts and discipline lie ahead for governments and investor portfolios alike.
Overcoming the Copenhagen Failure
Joseph E. Stiglitz (Project Syndicate) Jan 2010
Underlying the failure of the climate change summit in Copenhagen last month is the failure of the idea that carbon-emission rights can be allocated fairly. Perhaps it is time to try another approach: a commitment by each country to raise the price of emissions (whether through a carbon tax or emissions caps) to an agreed level, say, $80 per ton.
Will China Rule the World?
Dani Rodrik (Project Syndicate) Jan 2010
Americans and Europeans blithely assume that China will become more like them as its economy develops and its population gets richer. But a world order centered on China will reflect Chinese values rather than Western ones - that is, if China can continue its rapid economic growth and maintain its social cohesion and political unity.
Crises
Paul Krugman (AEA) Jan 2010
Most of what has gone wrong with the world these past two years has not taken the form of classic currency crises (though give it time – the Baltic nations, in particular, seem well positioned to follow in Argentina’s footsteps). But there are strong parallels between the kinds of crises we actually have been experiencing and what those of us in the currency crisis biz call “third-generation” crises. Both the similarities and the differences are, I think, illuminating.
Waiting for Better Times Is No Substitute for Action
Mohamed El-Erian (PIMCO) Jan 2010
I argued almost two years ago that industrial countries could learn from the crisis management experience of emerging economies. The tenet of the argument at that time was simple: Policymakers faced what, for them, was a very unusual, and highly disruptive set of deleveraging dynamics.
The dollar's next challenge: Inflation or deflation?
David A. Levy & Al Ehrbar (McKinsey) Jan 2010
In the wake of the current crisis, is the U.S. economy more likely to suffer inflation or deflation?
Managing China’s Crisis Management
Yu Yongding (Project Syndicate) Jan 2010
The Chinese government has signaled that it is beginning its exit from expansionary measures aimed at mitigating the impact of the global financial crisis and recession. A change of policy can't come soon enough: China’s long-term growth prospects may be seriously affected if the authorities fail to tackle the economy’s structural problems head on.
Rethinking Poverty Reduction
Jomo Kwame Sundaram (Project Syndicate) Jan 2010
The United Nations’ biennial Report on the World Social Situation (RWSS 2010), entitled Rethinking Poverty, makes a compelling case for rethinking poverty-measurement and poverty-reduction efforts. But there will be no real poverty eradication without equitable and sustainable economic development, which deregulated markets have proved unable to deliver on their own.
Deleveraging: Now the hard part
Susan Lund, Charles Roxburgh, and Tony Wimmer (McKinsey) Jan 2010
The challenge of managing the enormous debt burden weighing on global recovery is only just beginning.
Uncorrelated Assets Are Back
Andrew Balls (PIMCO) Jan 2010
Increased focus on sovereign risk is inevitable, not just for smaller economies or emerging markets, but for all.
The Risky Rich
Nouriel Roubini (Project Syndicate) Jan 2010
Traditionally, sovereign risk has been concentrated in emerging-market economies. But ratings downgrades, a widening of sovereign spreads, and failed public-debt auctions in countries like the UK, Greece, Ireland, and Spain provide a stark reminder that unless advanced economies begin fiscal consolidation, investors, bond-market vigilantes, and rating agencies may turn from friend to foe.
Engineering Financial Stability
Robert J. Shiller (Project Syndicate) Jan 2010
The severity of the global financial crisis that we have seen over the last two years has to do with a fundamental source of instability in the banking system, one that we can and must design out of existence. To do that, we must advance the state of our financial technology.
Off With Their Heads
Simon Johnson (Project Syndicate) Jan 2010
At last the Obama administration seems to be contemplating a decisive move against America’s banking elite. Following the recent electoral setback in Massachusetts the proposals laid down by former Federal Reserve chairman, Paul Volcker, to reduce the market power of the banks, are being dusted off.
Back to the Future in Finance
Harold James (Project Syndicate) Jan 2010
While former US Fed Chairman Paul Volcker provided the central inspiration for Barack Obama’s recent proposal for overhauling banking, he has also been a prominent critic of the dangers of currency volatility. Returning to fixed exchange rates would run counter to almost every argument of modern economics, but, at a moment when we are looking to the past for financial solutions, it is no longer unthinkable.
Is Russia’s Economic Crisis Over?
Irina Yasina (Project Syndicate) Jan 2010
It is not yet certain whether the engine of the global economy will be able to run without additional liquidity, possibly undermining fiscal stability worldwide. Elsewhere, that will become clear in the first half of 2010; in Russia, signs of recovery, if they appear at all, will lag well behind the rest of the world.
Fruitful Decade for Many in the World
Tyler Cowen (NYT) Jan 2, 2010
For China, India, Indonesia and Brazil, which have more than 40 percent of the world's people, the decade was one of solid economic growth.
Beware the crisis around the corner
Clive Crook (FT) Jan 3, 2010
If the financial crisis continues to ease, there is a danger that politicians will relax and minds will wander from the need for new financial rules.
The west's preaching to the east must stop
Ronnie Chan (FT) Jan 3, 2010
The west must acclimatise to the new global reality – it will not be as dominant as it was in the past.
Unlearnt lessons of the Great Depression
Harold James (FT) Jan 3, 2010
The default of an agglomeration of smaller countries would end any hope of an open international economy and inaugurate an age of financial nationalism.
We cannot afford to spurn the emerging investors
Matthew Slaughter (FT) Jan 3, 2010
For leaders of companies based in developed countries, the lesson is simple – to beware and prepare.
Return to risk differences and imbalances
John Plender (FT) Jan 3, 2010
Investors have to recognise one inescapable reality: as long as exceptional monetary measures remain, the penalty for holding cash will be harsh
Monetary Policy and the Housing Bubble
Ben S. Bernanke (Fed) Jan 3, 2010
The financial crisis that began in August 2007 has been the most severe of the post-World War II era and, very possibly--once one takes into account the global scope of the crisis, its broad effects on a range of markets and institutions, and the number of systemically critical financial institutions that failed or came close to failure--the worst in modern history. Although forceful responses by policymakers around the world avoided an utter collapse of the global financial system in the fall of 2008, the crisis was nevertheless sufficiently intense to spark a deep global recession from which we are only now beginning to recover.
Blaming Bankers for the Failings of Economists
Richard Posner (Bloomberg) Jan 4, 2010
The financial industry collapse of September 2008 and the ensuing precipitate decline of the entire economy taught many lessons, both economic and political.
U.S. and China in a snowballing trade fight
WP Jan 4, 2010
Trade disputes between Beijing and Washington over exports of tires, chickens, steel, nylon, autos, paper and salt are multiplying and further damaging the already tense relationship between the two economic powers.
Bubbles Threaten as China Shakes Off Bank Crisis
Liu Mingkang (Bloomberg) Jan 4, 2010
The worst of the crisis seems to be over. When we look back at 2009, encouraging signs of economic recovery are emerging in both developed and developing markets. Yet, when we look ahead, uncertainties and challenges loom large on many fronts.
America is losing the free world
Gideon Rachman (FT) Jan 4, 2010
The Obama administration is facing an unexpected and unwelcome development in global politics. Four of the biggest and most strategically important democracies in the developing world – Brazil, India, South Africa and Turkey – are increasingly at odds with American foreign policy. The US has been slow to pick up on this development.
Asia must loosen the grip of its exporters
Lorenzo Bini Smaghi (FT) Jan 4, 2010
A gradual appreciation of Asian currencies, in particular the renminbi, is in the interests of those countries and of the world economy as a whole.
External Imbalances Are Not Caused by the International Monetary System
Edwin M. Truman (PIIE) Jan 4, 2010
Before the global economic and financial crisis began in August 2007, the enormous current account deficits and surpluses of some major countries and groups of countries (the United States, China, and oil producers, for example) were widely identified as posing the greatest risk to international economic and financial stability. As the crisis winds down, attention has shifted to whether flaws in the international monetary system contributed to such imbalances as well as to the actual crisis.
The eurozone's next decade will be tough
Martin Wolf (FT) Jan 5, 2010
The countries on the periphery of Europe's single currency are in deep trouble thanks to the imbalances within the eurozone. And none of the solutions look palatable.
The cause of our crises has not gone away
John Kay (FT) Jan 5, 2010
The public support of markets keeps providing the fuel to stoke the next crisis – and each boom and bust is larger than the last.
The case for messy multilateralism
Richard Haas (FT) Jan 5, 2010
To acknowledge that we are all multilateralists now is only to start the conversation. Copenhagen is but the most recent reminder that classic multilateralism is increasingly difficult to achieve.
Emerging markets need to target inflation
Ravi Kanbur and Eswar Prasad (FT) Jan 5, 2010
Increasing the responsibilities of central banks could make them more subject to political pressures and erode their credibility.
Insight: China must promote consumption
John Plender (FT) Jan 5, 2010
China needs to find a way of promoting private consumption growth and become less dependent on exports.
Iceland can refuse debt servitude
Michael Hudson (FT) Jan 6, 2010
Opponents of the deal to repay €3.8bn to Britain and the Netherlands are not seeking to repudiate debts, Argentina-style. They merely wish to exercise their rights under European law.
Sovereign debt and the spectre of risk
Michael Gordon (FT) Jan 6, 2010
The potential for government bonds to lose their risk-free status has huge implications.
Crisis Lessons Learned Bring Economic Recovery
Jeremy Siegel (Bloomberg) Jan 6, 2010
The evidence is building that the world economy is headed for a substantial recovery from the worst financial crisis since the Great Depression.
The need for special resolution regimes for financial institutions
Martin Cihák & Erlend W Nier (VoxEU) Jan 7, 2010
The global financial crisis forced governments facing failing financial institutions to choose between disorderly bankruptcies and costly injections of public funds. This column argues that special resolution regimes are a better alternative. It analyses their structure and function and argues EU member states ought to introduce and strengthen such regimes.
A Teachable Collapse
Robert Kuttner (TAP) Jan 7, 2010
When it comes to understanding Wall Street, we need both narratives that show how it failed and analysis that makes clear there were alternatives.
Global: Five Themes for 2010
Joachim Fels (MS GEF) Jan 7, 2010
Our first piece of the year focuses on five global economic themes that we think will be highly relevant for investors in 2010.
The prospects for recovery: Clambering out of the hole
Economist Jan 7, 2010
The economy will grow again in 2010 but the upswing will be moderate at best.
Asset markets and the bounce
Economist Jan 7, 2010
Once again, cheap money is driving up asset prices.
Bubble warning
Economist Jan 7, 2010
Markets are too dependent on unsustainable government stimulus. Something’s got to give.
China in Treasuries cul-de-sac
Henry CK Liu (AT) Jan 8, 2010
With United States sovereign debt no longer the obvious safe place as a store of value, China's continued purchase of US Treasuries with its trade surplus dollars is open to question. Yet the answer is that China has no other options.
Why free trade is failing the US
Peter Morici (AT) Jan 8, 2010
Currency manipulation creates a 25% subsidy on China's exports, creating an effective barrier to the genuine free trade that would benefit the United States. Until the US has a president prepared to stand up to China on this issue, it will be impossible for the country to create the 9 million jobs needed to bring unemployment down.
Multinational firms, agglomeration, and global networks
Laura Alfaro & Maggie Chen (VoxEU) Jan 8, 2010
Agglomeration effects are important but difficult to measure. This column uses a new database with precise geographical information to investigate the locational interdependence of multinational firms. Knowledge spillovers and capital- and labour-market externalities exert a significant effect on the co-agglomeration of multinational headquarters, while input-output linkages also play a significant role in the case of subsidiary co-agglomeration.
Deficit Reduction and Rebalanced Growth Are Key
Laura Tyson (Bloomberg) Jan 8, 2010
History reveals that financial crises and the recessions they trigger have disastrous effects on government finances. The credit crisis that exploded in the U.S. in late 2008 is no exception.
The Icesave deal is unfair and unreasonable
Magnús Árni Skúlason (FT) Jan 10, 2010
Iceland will be plunged into an economic deep freeze by the unreasonable demands of Britain and the Netherlands. But the island is ready to pay realistic terms.
Iceland would benefit from paying up
Risto Penttil (FT) Jan 10, 2010
Paying the debt is a lot to ask after the country has been so bitterly let down by the very countries that are its creditors now. But its integrity is more important than the debt-to-GDP ratio.
The Fed and the Crisis: A Reply to Ben Bernanke
John Taylor (WSJ) Jan 11, 2010
In his recent speech, the Fed chairman denied that too-low interest rates were responsible. Does this mean we're headed for a new boom-bust cycle?
After the Blowup
John Cassidy (New Yorker) Jan 11, 2010
Letter from Chicago about the state of the Chicago School of economics after the financial crash.
IMF Studies How to Pay for Financial Sector Rescues
IMF Survey Jan 11, 2010
Last September, leaders of the Group of Twenty (G-20) industrial and emerging market countries, meeting in Pittsburgh, asked the IMF to prepare a "range of options" for "how the financial sector could make a fair and substantial contribution toward paying for any burdens associated with government interventions" to counteract financial sector crises.
How the financial crisis raised euro-area bond spreads
Maria Grazia Attinasi, Cristina Checherita & Christiane Nickel (VoxEU) Jan 11, 2010
The crisis has raised long-term government bond yield spreads across Europe. This column discusses the causes. Increased risk aversion and concern about public finances explain most of the movements in sovereign bond spreads. Moreover, bank bailouts transferred credit risk from the private sector to governments.
Bottom Dollar
Daniel Gross (Slate) Jan 11, 2010
Conservatives claim Obama's policies are weakening the dollar. Let's examine the evidence.
Bankruptcy could be good for America
Gideon Rachman (FT) Jan 11, 2010
If the US keeps running huge deficits, sooner or later the country will start flirting with bankruptcy. Oddly, it might be best if the crisis came sooner rather than later. For a surprising number of countries, running out of money has been the prelude to national renewal.
Why Greece will have to leave the eurozone
Desmond Lachman (FT) Jan 11, 2010
Much like Argentina a decade ago, Greece is approaching the final stages of its currency arrangement. There is every prospect that its euro membership will end with a bang.
Insight: The myth of the Brics
Peter Tasker (FT) Jan 11, 2010
Why many emerging markets are becoming mainstream.
The Dragon's Swagger
Roger Cohen (NYT) Jan 11, 2010
The United States and China are codependent through trade and debt, but their relations are heading into rough waters as Beijing's assertiveness grows.
Financial globalisation has improved international risk sharing
Robert Flood, Nancy P. Marion & Akito Matsumoto (VoxEU) Jan 12, 2010
Financial globalisation makes it easier for individuals to trade financial assets, and that should help them diversify against country-specific risks. But empirical support for improved international risk sharing is limited. This column says that there is evidence of improved international risk sharing, and it comes mostly from the convergence in rates of consumption growth among countries.
Global 'Imbalances' and the Crisis
David Backus and Thomas Cooley (WSJ) Jan 12, 2010
Don't blame international capital flows for the runup and crash in home prices.
What we can learn from Japan's decades of trouble
Martin Wolf (FT) Jan 12, 2010
Japan's experience indicates that when fast growth begins to slow in a catch-up economy with high corporate savings and comparably high fixed investment, demand may well prove hard to manage.
Dangerous liaisons: US rates and emerging market spreads
Eduardo Levy-Yeyati & Tomás Williams (VoxEU) Jan 13, 2010
Emerging markets have undergone structural changes that reduced their exposure to a global tightening, but they are still affected by US rates. This column suggests that positive US economic surprises that bring forward the undoing of quantitative easing and steepen the US Treasury yield curve may translate into wider emerging markets spreads. US economic strength may play a welcome sobering role in the surge of emerging market assets.
Ambulance economics and the global crisis
Max Corden (VoxEU) Jan 13, 2010
The world economy has had a heart attack. “Ambulance economics” is about the immediate reanimation process, i.e. the fiscal stimulus. This column introduces a new CEPR Policy Insight that reviews practical aspects of fiscal stimulus policies, noting especially the inevitable trade-offs involved. It discusses the relationship between a long-term public debt problem caused usually by demographic factors and the need for short-term fiscal stimulus for Keynesian reasons. Also, it analyses critically seven common arguments against fiscal stimuli.
The ticking time bomb and the dollar
Gerard Lyons (McKinsey) Jan 12, 2010
There is a ticking time bomb under the dollar. It could explode at any time.
The coming eclipse of the dollar: By default, not design
Martin Gilman (McKinsey) Jan 12, 2010
On the threshold of the new decade, it seems fitting to take a long-term view. There are a plethora of issues that crystal-ball gazers could usefully contemplate.
China, the dollar, and the return of the Triffin dilemma
Benn Steil (McKinsey) Jan 12, 2010
In March 2009, Chinese central bank Governor Zhou Xiaochuan caused a brief stir in the currency markets by suggesting that a dollar-based international monetary system was inherently unsustainable. “Issuing countries of reserve currencies are constantly confronted with the dilemma between achieving their domestic monetary policy goals and meeting other countries’ demand for reserve currencies,” he wrote.
The dollar is the worst international currency, except for all the others
Charles Wyplosz (McKinsey) Jan 12, 2010
The international currency of choice, the dollar, is under the control of a single country, a worrisome arrangement. Even worse, this country has been running huge external deficits for more than a decade and is now the world’s single largest debtor.
The almighty dollar in 2025
Tim Adams (McKinsey) Jan 13, 2010
The dollar’s prolonged swoon throughout much of 2009, coming at the end of a near ten-year slide, has sent currency analysts, financial officials, and politicians of all stripes into a hand-wringing melancholy regarding the greenback’s long-term prognosis. Of course, many ignore the fact that the world fled to the dollar during the financial crisis as a safe harbor from the stormy seas of financial and economic chaos.
China’s exchange rate policy and what it means for the dollar
Geng Xiao (McKinsey) Jan 13, 2010
The debate over the exchange rate between the renminbi (RMB) and the dollar is usually framed in terms of global imbalances: excessive US consumption beyond its savings on the one hand and excessive Chinese production and savings beyond its own spending on the other. This quickly leads to the view that the United States should export and save more and China import and spend more.
Is China Using its Checkbook to Lock up Natural Resources Around the World?
Theodore H. Moran (PIIE) Jan 13, 2010
Backed by the Chinese government, Chinese companies have been acquiring equity stakes in natural resource companies, extending loans to mining and petroleum investors, and writing long-term procurement contracts for oil and minerals. These activities have aroused concern that China might be locking up natural resource supplies, gaining preferential access to available output, and extending control over the world's extractive industries.
Preference Erosion List Marks 'New Era' in WTO Farm Talks
Bridges Weekly Trade News Digest, Volume 14, Number 1 Jan 13, 2010
Alongside December's landmark deal on banana tariffs, a new proposal put forward in the WTO's agriculture talks offers a potential resolution of long-standing differences among exporters of tropical farm products.
Open Markets Would Support Rebound in Trade
IMF Survey Jan 13, 2010
World trade looks set to continue its tentative recover in 2010, but the sustainability of any upturn will depend on policymakers' actions.
Intolerance of small crises led to big one
Jacek Rostowski (FT) Jan 13, 2010
This is a crisis of the 'deep Keynesian project', under which economic policy sought the maximum smoothing out of fluctuations in the real economy while keeping inflation under reasonable control.
Insight: Sovereign default risks loom large
George Magnus (FT) Jan 13, 2010
Effective political leadership and imagination are essential.
New insight on the role of imbalances in the global crisis
Ricardo Caballero (VoxEU) Jan 14, 2010
Global imbalances have been suggested as the root cause of the global crisis. This column argues that another imbalance is the guilty party. The entire world had an insatiable demand for safe debt instruments that put an enormous pressure on the US financial system and its incentives. This structural problem can be alleviated if governments around the world explicitly absorb a larger share of the systemic risk.
Against a separate resolution fund
Dirk Schoenmake (VoxEU) Jan 14, 2010
There are calls to establish a separate resolution fund to deal with future financial crises. This column says such a fund is not desirable. It likely would be procyclical, counterproductive, and give a false sense of safety. Rather, governments should levy Pigouvian taxes on the financial system to address negative externalities.
The Status Report: Obama and Global Financial Stability
Kemal Dervis & Eswar Prasad (Brookings) Jan 14, 2010
During the presidential transition, Eswar Prasad wrote a memo to the incoming president on how to restore global financial stability. One year later, Kemal Dervis and Eswar Prasad give their assessment on the president's progress in the Status Report, a daily series of commentary and video featured in POLITICO's Arena. They give President Obama a B+ for what the new administration accomplished on global economic policy during the crisis, but temper it with an incomplete for the big tasks that lie ahead.
The Status Report: Obama's Commitment to Global Development
Noam Unger (Brookings) Jan 14, 2010
In this installment of the Status Report, Noam Unger gives President Obama a B- for his leadership in global development. He discusses the administration's mixed track record on seizing global development leadership opportunities in 2009 and late-breaking developments that could help the administration improve its grade in 2010.
Global Recovery Seems Stronger, But Still Fragile, Says IMF
IMF Survey Jan 14, 2010
The global economy is recovering significantly faster than previously expected, but growth is still dependent in most advanced economies on government stimulus measures and remains fragile, the Managing Director of the International Monetary Fund, Dominique Strauss-Kahn, said.
How the Icelandic saga should end
Martin Wolf (FT) Jan 14, 2010
The combination of cross-border banking with generous guarantees to creditors is unsustainable. Taxpayers cannot be expected to write open-ended insurance on the foreign activities of their banks.
Europe cannot afford a Greek default
Simon Tilford (FT) Jan 14, 2010
The financial markets would quickly turn their attention to the other eurozone states with unsustainable fiscal positions and poor economic growth prospects.
The Underlying Tragedy
David Brooks (NYT) Jan 14, 2010
The devastation from the earthquake in Haiti should be used as an occasion to rethink our approach to global poverty.
Central banks under fire: Policy punchbags
Economist Jan 14, 2010
From Argentina to America, politicians are taking aim.
Exchange rates and asset prices: Floating all boats
Economist Jan 14, 2010
The link between exchange rates and asset markets.
The deleveraging process: Digging out of debt
Economist Jan 14, 2010
The rich world's debt reduction has barely begun.
A better bonus scheme: Carrots dressed as sticks
Economist Jan 14, 2010
An experiment on economic incentives.
Princelings, Inc.
Steven Hill (Globalist) Jan 14, 2010
What really unites the United States and Japan in their current doldrums?
Economic Democracy and Codetermination: Harnessing the Capitalist Engine
Steven Hill (Globalist) Jan 15, 2010
How can the European economic model be applied to the United States?
Global: The China Cracker
Joachim Fels & Manoj Pradhan (MS GEF) Jan 15, 2010
We expected the exit from ultra-expansionary monetary policy to be the dominant theme for global markets this year. The surprisingly early hike in banks’ reserve requirements in China suggests that the exit has now begun. The move also fits our global script.
Did Foreigners Cause America's Financial Crisis?
Stephen Gandel (Time) Jan 15, 2010
Much of the fault of the financial crisis has been heaped on Wall Streeters, unscrupulous mortgage lenders and weak regulators. But in a new research paper, economist Ricardo Caballero says there is another major group of contributors to America's monetary mess who are not getting the blame they deserve: foreigners.
Saudi Arabia and the oil bank
Chris Cook (AT) Jan 16, 2010
Recent relative steadiness in the oil market, a situation that suits suppliers and end users, indicates an unstable equilibrium that is of little benefit to trading intermediaries, particularly investment banks that thrive on volatility and opacity. When volatility returns, fingers will again point at "speculators" - while the real culprits lie elsewhere.
Opinion: Keep the Economy Underground
Sudhir Venkatesh (NYT) Jan 16, 2010
Countries aiding Haiti must be careful not to drum out the positives of informal development.
Blue Skies
Daniel W. Drezner (NYT) Jan 16, 2010
Gregg Easterbrook argues that the financial crisis is just a small cloud over the road to rapid global innovation.
Who should decide on emergency liquidity assistance?
Jorge Ponce (VoxEU) Jan 16, 2010
What government agency should decide lender-of-last-resort policy? This column discusses the optimal allocation of decision-making authority, suggesting that the central bank decide emergency loans and the deposit insurance agency guarantee them. But providing greater liquidity assistance will also require punishment to deter moral hazard problems.
Designing a systemic risk warning system
Anne Sibert (VoxEU) Jan 16, 2010
Economists largely neglected systemic risk in the financial sector. This column discusses how governments should gather data about systemic risk and assess its implications. It says the new European Systemic Risk Board is far from the ideal – it is too big, too homogeneous, and lacks independence.
Does the Great Recession really mean the end of the Great Moderation?
Olivier Coibion & Yuriy Gorodnichenko (VoxEU) Jan 16, 2010
Was the Great Moderation “something of a fluke”? This column argues that good monetary policy did play a role in taming inflation. It argues that the current recession, while clearly severe by historical standards, does not seem to imply a return to the levels of volatility observed in the 1970s.
After Dubai
NYT Jan 17, 2010
Unless the world's richest nations come to the rescue of weakened states, the financial crisis might sprout another leg and stop the nascent recovery in its tracks.
Crushed aid: Why is fragmentation a problem for international aid?
Emmanuel Frot & Javier Santiso (VoxEU) Jan 18, 2010
The rapid growth in the fragmentation of aid donors is seen by many to be a burden for recipient countries. This column argues that too much fragmentation is not the issue; the problem is that there is too little competition between the suppliers of aid.
Why America and China will clash
Gideon Rachman (FT) Jan 18, 2010
US dogma has it that economic growth in China will lead to political liberalisation. So far, it has not – as the clash with Google has shown. Once this assumption is dropped, pressure will rise in the US to disengage.
Central Banking: Central Banks Enter Age of Improvisation
Benn Steil (Dow Jones' Financial News) Jan 18, 2010
The monetary forces behind the crashes of 1929 and 2008 were very similar. In the 1920s, as in the mid-2000s, Fed officials mistakenly thought that they had found, in the practice of trying to stabilize a price index, the holy grail of monetary policy. In consequence, central bankers are once again grasping for a new orthodoxy.
A bank levy will not stop the doomsday cycle
Peter Boone and Simon Johnson (FT) Jan 18, 2010
Just as in the USSR's final days, western leaders are trying to rescue the system by fiddling with regulations. They need to be bolder.
How the big banks rigged the market
Philip Stephens (FT) Jan 18, 2010
Taxes and fees on the banks are only a start. The next step must be to tackle the oligopolies which gave rise to their fat profits.
Bank fee has merits but lacks financial clout
Mohamed El-Erian (FT) Jan 18, 2010
Thursday's announcement by the US administration of a "Financial Crisis Responsibility Fee" has turbo-charged an already heated debate.
To Help Haiti, End Foreign Aid
Bret Stephens (WSJ) Jan 19, 2010
For Haitians, just about every conceivable aid scheme beyond immediate humanitarian relief will lead to more poverty, more corruption and less institutional capacity.
The Greek tragedy deserves a global audience
Martin Wolf (FT) Jan 19, 2010
The problems of Greece are extreme, because it alone of the vulnerable eurozone member countries has both high fiscal deficits and high debt. Some say it should be bailed out, but there are two other possibilities – it toughs it out or just defaults, writes
Return Our Investment
Incoming EU Ag Commissioner Fields Questions on CAP, Doha
Lessons to learn from emerging market success
Reason v emotion in China's growth story
The Problems With The Bank Tax
Haiti and the Dominican Republic: One Island, Two Worlds
Who fell in 2009: Those with current account deficits or with extra froth?
The Great Piggy Bank of China
The west is wrong to obsess about the renminbi
Lula, Not Bernanke, for the U.S. Fed
New rules for banks: The weakest links
Reforming banking: Base camp Basel
The world economy: Pulling apart
Investment in Asia: Invested interests
Parametric estimations of the world distribution of income
Obama v. Wall Street
Financial Reform: Obama's bank solution goes too far---and not far enough
The Myth of Permanent U.S. Global Dominance
China's free-trade shot in Asia's arm
Global: Living with the Trilemma
Export credit agencies to the rescue
The Minds Behind the Meltdown
Three Faces of Market Danger
Making sense of Obama’s bank reform plans
How to put Haiti on the road to recovery
China's $2.4 trillion slush fund
The Rise and Fall of the Guardians
When nations turn into hoarders
Where the Walker Review stops short
A better way to reduce financial sector risk
Do immigrants create exports? New evidence from Spain
World Bank aims to earn stripes through tiger summit
Too interconnected to fail = too big to fail?
The saga of Icesave: A new CEPR Policy Insight
Financial Stability Improves, but IMF Sees Fresh Challenges
IMF Revises Up Global Forecast to Near 4% for 2010
How Will the Markets React to the Fed Appointment Process? Lessons from Case Studies
Why trade war is very likely to break out this year
A true Marshall plan for Haiti
Greek Tragedy's Next Act
Lobbying and the financial crisis
BRICs as emerging international financial powers
Ministers to Discuss Swiss 'Checklist' for Doha Talks at Davos Meeting
A Frank Exchange
Beijing could be tempted to board the Athens express
At Davos, Sarkozy Calls for Global Finance Rules
Why we should expect low growth amid debt
An early warning system for asset bubbles
China's 'little dollar' spreads its wings
Greek burdens ensure some Pigs won't fly
Calls for a new Bretton Woods not so mad
Exit America
Regulating banks: Garrottes and sticks
The law of unintended consequences: Not what they meant
Hedge funds and private equity: off target
A better bank-resolution framework
The implications of globalisation: A needier era
A new approach for measuring crowded trades in financial markets
Icesave: The big ultimatum
From Crisis to Recovery, Together
How to Reform Our Financial System
Happy peasants and miserable millionaires
Financial system reform from first principles
A bubble bursts in Davos
Economic Recovery Linked to Global Stability and Peace
What the eurozone must do if it is to survive
Douglas W. Diamond & Anil K. Kashyap (NYT) Jan 19, 2010
Holman Jenkins, Jr (WSJ) Jan 20, 2010
Government Sachs, indeed.
Bridges Weekly Trade News Digest, Volume 14, Number 2 Jan 20, 2010
In a hearing on 15 January, Dacian Ciolos, the EU Agriculture Commissioner-designate, outlined his agenda on agriculture trade and subsidy reform in front of the European Parliament.
Jonathan Garner (FT) Jan 20, 2010
EM companies outperform by selling globally and in local markets.
David Pilling (FT) Jan 20, 2010
A surging money supply and excess investment threaten asset bubbles and overcapacity. But simultaneous fears of inflation suggest a middle road may be possible.
Thomas F. Cooley (Forbes) Jan 20, 2010
Populist politics trumps economic reasoning once again.
Jared Diamond (Globalist) Jan 20, 2010
How did the Dominican Republic’s and Haiti's environmental pasts determine their economic futures?
Ashoka Mody (VoxEU) Jan 21, 2010
Virtually no country was untouched by the crisis. But which countries saw the sharpest declines in GDP – and why? This column shows that those with higher growth rates before the crisis fell harder while relatively closed economies were somewhat insulated. In contrast, the relationship between current account deficits and the decline in growth rates is fuzzier.
Samuel Brittan (FT) Jan 21, 2010
China's savings rate is phenomenal, but it is no use lecturing the country's leaders to consumer more. We must find a way to offset the savings.
Michael Spence (FT) Jan 21, 2010
The singular focus on the exchange rate appears to be based on the assumption that it is the key cause of the surplus and the main policy instrument for removing it.
Stephan Richter (Globalist) Jan 21, 2010
How would Brazilian President Lula make a better U.S. Federal Reserve chairman than Ben Bernanke?
Economist Jan 21, 2010
New capital and liquidity rules will make the average bank safer. But what about the outliers?
Economist Jan 21, 2010
Regulators are trying to make banks better equipped against catastrophe.
Economist Jan 21, 2010
The world's big economies were all hit by the recession. Now the field is spreading
Economist Jan 21, 2010
China aside, most Asian economies need to invest more, not consume more.
Maxim Pinkovskiy & Xavier Sala-i-Martin (VoxEU) Jan 22, 2010
World poverty is falling. This column presents new estimates of the world’s income distribution and suggests that world poverty is disappearing faster than previously thought. From 1970 to 2006, poverty fell by 86% in South Asia, 73% in Latin America, 39% in the Middle East, and 20% in Africa. Barring a catastrophe, there will never be more than a billion people in poverty in the future history of the world.
WSJ Jan 22, 2010
The President gets serious about moral hazard.
Sebastian Mallaby (CFR) Jan 22, 2010
Obama's proposal to shut down proprietary trading desks at "too big to fail" banks goes too far. The President's plan for a tax on size would be better, but unfortunately the proposed rate was far too modest and the recoup-the-bailout rhetoric obliged Obama to limit the levy to a few years.
Martin Sieff (Globalist) Jan 22, 2010
What mistakes have U.S. policymakers made when dealing with China and India?
Marwaan Macan-Markar (AT) Jan 22, 2010
China has strengthened its position as a trading partner with Southeast Asia's export-reliant economies with a free-trade agreement that took effect this year. Yet the welcome shot in the arm for regional economies battered by the global financial crisis may not come without some pain.
Manoj Pradhan (MS GEF) Jan 22, 2010
AXJ economies could either reinforce the approach they currently have in place for dealing with the Trilemma, or they could relent by allowing their currencies to appreciate meaningfully, or by bringing interest rates more in line with those of the major central banks, though the latter would mean less control over inflation.
Jean-Pierre Chauffour & Christian Saborowski (VoxEU) Jan 23, 2010
What saved trade from collapsing totally during the global crisis? This column argues that export credit agencies played a key role in stabilising the trade finance market, and thus helped reduce credit risks and allowed exporters to offer open account terms in competitive markets.
Scott Patterson (WSJ) Jan 23, 2010
How a swashbuckling breed of mathematicians and computer scientists nearly destroyed Wall Street.
Paul J. Lim (NYT) Jan 23, 2010
No one knows how treacherous the markets will be in 2010, but earnings, valuation and policy are expected to be the three top risk categories.
Viral Acharya & Matthew Richardson (VoxEU) Jan 24, 2010
Obama’s sweeping proposal for financial regulation took the world by surprise. Here two of the world’s leading professors of finance explain why it is step in the right direction from the standpoint of addressing systemic risk. They also point out a number of drawbacks that should be fixed.
Paul Collier and Jean-Louis Warnholz (FT) Jan 24, 2010
The opportunity must be seized to rebuild the devastated island for the long term, before the international community loses interest. A sensible recovery plan is already prepared.
Robert J. Samuelson (WP) Jan 25, 2010
China, with its $2.4 trillion grip on the global economy, is growing at the expense of others.
Alasdair Roberts (Foreign Affairs) Jan 25, 2010
The recent financial crisis has battered the credibility of technocrats. It is no longer clear that, left to their own devices, they will produce the one thing that justifies giving them authority: better decisions.
Gideon Rachman (FT) Jan 25, 2010
Across the world, major powers are moving to secure access to energy, food and, in some cases, water. Faith in a trade-based system, with nations buying what they need on open, world markets, is giving ground to an effort by individual nations to secure supplies.
Hugo Banziger (FT) Jan 25, 2010
A dedicated resolution regime for financial institutions will enable failed banks to be wound down in an orderly way, minimising maroeconomic risk.
Raghuram Rajan (FT) Jan 25, 2010
Rather than limit the size or activity of banks, why not phase out deposit insurance as deposits grow beyond a certain size.
Giovanni Peri & Francisco Requena-Silvente (VoxEU) Jan 26, 2010
Immigration is increasingly recognised by economists as a key factor in promoting trade. This column presents evidence from Spain suggesting that doubling the number of immigrants leads to a 10% increase in exports to their country of origin. The effect is even bigger for countries which are culturally different. This is an important and rarely considered benefit from immigration.
Marwaan Macan-Markar (AT) Jan 26, 2010
The World Bank, associated more with mega dams than with conservation efforts, is polishing its "green" credentials through involvement with efforts to save the tiger in Asia, just as China and its neighbors prepare to celebrate the Year of the Tiger. The bank will also push for more stringent controls to curb the US$10 billion to $20 billion illegal trade in tiger parts.
Daniel Gros (VoxEU) Jan 26, 2010
Did allowing financial institutions to become “too big” play a role in the financial crisis? This column argues that being “too interconnected” is also a factor, and that US accounting standards should recognise gross derivatives exposure on the balance sheet to make this interconnectedness, and the resulting exposure, clear.
Jon Danielsson (voxEU) Jan 26, 2010
Icelanders may well reject the terms of the financial deal with Britain and the Dutch in a March referendum. This column introduces a new CEPR Policy Insight arguing that responsibility for Icesave losses falls jointly on Iceland, Britain and the Netherlands. Regardless of the vote, the three governments should come to a more reasonable agreement that enables Iceland to pay its obligations without tipping the economy into the abyss.
IMF Survey Jan 26, 2010
The world economy is shaking off the global financial crisis, but policymakers still face extraordinary challenges as they seek to unwind the unprecedented interventions that kept their economies, financial institutions, and markets from collapsing, a new IMF report said.
IMF Survey Jan 26, 2010
The global economy, battered by two years of crisis, is recovering faster than previously anticipated, with world growth bouncing back from negative territory in 2009 to a forecast 3.9 percent this year, the IMF says. It has also published a revised assessment of global financial conditions
Adam S. Posen (PIIE) Jan 26, 2010
With all the current attention to the reappointment vote on Fed Chairman Bernanke, we would direct people to our recent paper, "Do Markets Care Who Chairs the Central Bank?", forthcoming in next month's issue of the Journal of Money, Credit, and Banking. In it, we make the first ever assessment of the effects of central bank governor appointments on financial-market expectations of monetary policy. To measure these effects, we assemble a new dataset of appointment announcements from 15 countries and conduct an event-study analysis on exchange rates, bond yields, and stock prices.
Michael Pettis (FT) Jan 26, 2010
If trade issues are to be resolved optimally, policymakers have to understand the problems faced by their counterparts.
Glenn Hubbard (FT) Jan 26, 2010
Haiti has received enormous amounts of aid – of the wrong kind – over the past decades, and the aid agencies are ready to repeat the same mistakes as before.
Emre Deliveli (Forbes) Jan 27, 2010
The country's fiscal problems could spill into the surrounding region, echoing Latin America's woes of the 1990s.
Deniz Igan, Prachi Mishra & Thierry Tressel (VoxEU) Jan 27, 2010
Should the political influence of large financial institutions take some blame for the financial crisis? This column presents evidence that financial institutions lobbying on mortgage lending and securitisation issues were adopting riskier lending strategies. This contributed to the deterioration in credit quality and to the build-up of risks prior to the crisis.
Markus Jaeger (DB Research) Jan 27, 2010
The international financial position of the BRIC countries (Brazil, Russia, India and China) has improved beyond recognition, reflected largely in their large official FX reserves. However, as of 2008, only China and Russia were creditors in terms of their net international investment position. China is already the world’s second largest net creditor, trailing only Japan. On current trends, China will not only replace the US as the world’s largest economy over the course of the next two decades, but it will also replace Japan as the world’s largest net international creditor.
Bridges Weekly Trade News Digest, Volume 14, Number 3 Jan 27, 2010
A new 'checklist' from Switzerland could provide a breath of fresh air for the WTO's struggling Doha Round of trade talks, but some trade officials continue to doubt whether the organisation's members will be able to
Tom Buerkle (II) Jan 27, 2010
An odd couple shares the stage during Wednesday’s global macroeconomic policy debate.
Paul Betts (FT) Jan 27, 2010
It seems a perfectly sensible strategy for Greece to try to woo the Chinese to come to its rescue. The country is struggling to fund its soaring public debt, and there are not many alternatives to raise the €55bn or so it will need this year except to go where the money is.
NYT Jan 27, 2010
The French president called for a "revolution" in regulation that would make labor, health and environmental standards as solid as trade rules.
Carmen Reinhart and Kenneth Rogoff (FT) Jan 27, 2010
With government debt burdens racing towards thresholds of about 90 per cent of GDP. Yesterday's financial crisis could easily turn into tomorrow's government debt crisis.
Charles Roxburgh and Susan Lund (FT) Jan 27, 2010
Rising leverage is a good indicator of an emerging asset bubble. Policymakers need to develop tools that could identify the next crisis years before it breaks.
Reginald Smith (AT) Jan 28, 2010
The China-ASEAN free-trade pact, which came into effect this month, will be a vehicle for the widescale adoption of the yuan as a de facto regional currency. Though official statistics are not available, numbers show this process is already well along. China is likely to use penetration into Southeast Asia as the first step to converting the yuan into a global currency.
Daniel Gros (FT) Jan 28, 2010
The "Pigs". Portugal, Ireland, Greece and Spain have found their bonds moving together, with Greece and its troubles a bellwether for the entire group.
Gillian Tett (FT) Jan 28, 2010
Banking bonuses or credit markets may no longer dominate the debate; instead, the next big bogeyman may be exchange rates.
Roger Cohen (NYT) Jan 28, 2010
The rise of China appears to be unstoppable, but let's try imagining a world in which Beijing no longer freeloads on a declining United States.
Economist Jan 28, 2010
The first of four articles on the implications of the Volcker rule examines reactions on Wall Street
Economist Jan 28, 2010
The unintended consequences of past financial reforms.
Economist Jan 28, 2010
Some will benefit from curbs on the banks.
Paul Calello and Wilson Ervin (Economist) Jan 28, 2010
A new process for resolving failing banks.
Economist Jan 28, 2010
The politics of global disruption, and how they may change.
Richard M. Levich & Momtchil Pojarliev (VoxEU) Jan 29, 2010
Regulators understand the potential threat of crowded trades, but they also recognise the difficulty of tracking them. This column suggests a new approach for regulators to monitor crowdedness of selected trades. Fund managers and financial regulators could use data on crowdedness to assess the risk that a financial market may enter an asset bubble.
Friðrik Már Baldursson (VoxEU) Jan 29, 2010
Many expect Iceland’s March referendum on Icesave to produce a “no” vote. Despite the dire consequences, this column argues that Icelanders, faced with the hard end of the “ultimatum game”, are likely to reject the standing offer which they regard as unfair. This column proposes lowering the interest rate on the loans as a compromise that could solve the problem and avoid a referendum.
Alistair Darling (WSJ) Jan 29, 2010
We have to take steps to secure the economic recovery while creating a safer and better global banking system to support strong and sustainable growth.
Paul Volcker (NYT) Jan 30, 2010
Reform of the financial system, including regulation of the banks whose collapse would disrupt the market, can do away with the concept of "too big to fail."
Carol Graham (VoxEU) Jan 30, 2010
What measures of human wellbeing are the most accurate benchmarks of economic progress and human development? This column presents new research suggesting that while people can adapt to be happy at low levels of income, they are far less happy when there is uncertainty over their future wealth. This may help explain why different societies tolerate such different levels of health, crime, and governance, and why US happiness plummeted during the global financial crisis but has since been restored despite incomes remaining lower.
Alberto Giovannini (VoxEU) Jan 30, 2010
The debate over reform of the financial system has intensified even as the crisis has started to recede. This Policy Insight argues that too much investment activity has been able to operate without detection by regulators. To prevent a repeat crisis, regulators must have an informational advantage over market participants to assess the weaknesses in the financial system as they develop.
David Ignatius (WP) Jan 31, 2010
The World Economic Forum is the last place I would have expected to encounter the new populism. But when a venerable European central banker, a man whose very bearing connotes the old capitalist values, told me privately that he is now convinced that the financial system is too important to be left to the free market, I knew we were wandering into new territory.
Dominique Strauss-Kahn (IMF) Jan 31, 2010
History is replete with examples of how economic and financial insecurity stoke social tensions, which in turn can undermine political stability, and even result in war.
Wolfgang Münchau (FT) Jan 31, 2010
While the Greek government is at least beginning to recognise the need for reform, perhaps too late, Spain's political establishment remains in denial.
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