Reconsidering Revaluation
David D. Hale and Lyric Hughes Hale (Foreign Affairs) Jan/Feb 2007
Pressuring China to strengthen its currency is a bad solution to the wrong problem.
How Business Can Help Save the World
Klaus Schwab (Foreign Affairs) Jan/Feb 2007
the private sector is now a stakeholder in global development, and should act accordingly.
The Truth About Sovereign Wealth Funds
Robert M. Kimmitt (Foreign Affairs) Jan/Feb 2007
Foreign governments' investments should be welcomed -- as long as they play by common-sense rules.
Global Governance: Who's in Charge?
Finance and Development Dec 2007/Feb 2008
Examines the challenges--financial, health, environmental, and trade--facing the international community in the 21st century and asks whether today's system of global governance is equipped to cope with them. The lead article asserts that the system that served as a model for much of the 20th century is out of date, and it explores what needs to be done to strengthen it. Other articles on this theme look at the recent U.S. subprime market crisis, the differences between financial crises of the 19th and 20th centuries and what future crises will look like, the need for a stronger system of multilateral trade, and how global health threats can be handled. 'People in Economics' profiles Michael Kremer; 'Picture This' describes the changing aid landscape; 'Country Focus' spotlights the United Arab Emirates; and 'Straight Talk' examines the impact of high food prices. Also in this issue, articles examine development in Africa, and 'backcasting' data in Latin America.
A World Without Islam
Graham Fuller (Foreign Policy) Jan/Feb 2008
What if Islam had never existed? To some, it's a comforting thought: No clash of civilizations, no holy wars, no terrorists. Would Christianity have taken over the world? Would the Middle East be a peaceful beacon of democracy? Would 9/11 have happened? In fact, remove Islam from the path of history, and the world ends up exactly where it is today.
China’s Currency Crunch
Marvin Goodfriend and Eswar Prasad (Foreign Policy) Jan/Feb 2008
Why China needs to adopt a floating exchange rate.
China Unlearns U.S. Trade Lessons
Van Jackson (FEER) Jan/Feb 2008
China must learn from the United States' errors and move toward a cooperative trade policy.
Sweating It Out About Asean Growth
David Jay Green (FEER) Jan/Feb 2008
What Asean countries must do to increase economic growth.
Staff in black: IMF faces structural adjustment
Bretton Woods Update 59 Jan/Feb 2008
Plus: Bank violates indigenous rights; IFC and health: "unsubstantiated claims; IMF conditionality high, effectiveness low; Dollar, markets crash: Where is the IMF?; Zoellick and corruption: A new approach?; and more.
The Sixty-Year Storm
George Soros (Project Syndicate) Feb 2008
Today’s financial crisis, triggered by the collapse of the housing bubble in the United States, also marks the end of an era of credit expansion based on the dollar as the international reserve currency. It is a much bigger storm than any that has occurred since the end of World War II.
Trends and Trendiness at Davos
Dominique Moisi (Project Syndicate) Feb 2008
The annual World Economic Forum is rightly perceived as a global “barometer.” But the superb sunshine in Davos these days cannot avoid the shadows of the financial crisis that have enveloped the world, casting an atmosphere of gloom and doom on this year’s meeting. Today, more than ever, the Forum’s proud motto, “Committed to the improvement of the world,” seems disconnected from reality. It is not confidence that dominates Davos 2008, but rather a sense of impotence, if not bewilderment, at the world’s growing complexity.
Alpine Schadenfreude
Joseph E. Stiglitz (Project Syndicate) Feb 2008
Not surprisingly, the atmosphere at this year’s World Economic Forum was grim. Those who think that globalization, technology, and the market economy will solve the world’s problems seemed subdued. Most chastened of all were the bankers. Against the backdrop of the sub-prime crisis, the disasters at many financial institutions, and the weakening of the stock market, these “masters of the universe” seemed less omniscient than they did a short while ago. And it was not just the bankers who were in the Davos doghouse this year, but also their regulators – the central bankers.
Instability from Rigidity
Simon Johnson and Jonathan D. Ostry (Project Syndicate) Feb 2008
Everyone wants economic stability, and many are reluctant to abandon today what gave them stability yesterday. But trying to obtain stability from rigidity is illusory. The stability of the international financial system today depends on the willingness of countries with rigid exchange rates to allow greater flexibility.
Breaking the Neoclassical Monopoly in Economics
Thomas Palley (Project Syndicate) Feb 2008
For 25 years, the so-called “Washington Consensus” – comprising measures aimed at expanding the role of markets and constraining the role of the state – has dominated economic development policy. As John Williamson, who coined the term, put it in 2002, these measures “are motherhood and apple pie, which is why they commanded a consensus.”
Long-term trends in the global capital markets
Diana Farrell, Christian S. Fölster, and Susan Lund (McKinsey) Feb 2008
Long after the present bout of turbulence ends, several long-term trends will continue to influence the world's financial markets. Among these are the growth and deepening of capital markets (particularly in emerging economies) and the rising clout of China, the eurozone, and the Gulf countries. The exhibits in this piece, based on research by the McKinsey Global Institute, track the progress of these trends.
America Goes from Teacher to Student
Kenneth Rogoff (Project Syndicate) Feb 2008
As the United States’ epic financial crisis continues to unfold, one can only wish that US policymakers were half as good at listening to advice from developing countries as they are at giving it. Americans don’t seem to realize that their “sub-prime” mortgage meltdown has all too much in common with many previous post-1945 banking crises throughout the world.
The IMF as Global Financial Anchor
Age Bakker and Perry Warjiyo (Project Syndicate) Feb 2008
Today’s financial market turmoil has exposed weaknesses in the current global financial system, of which many were known but went unaddressed. This lack of action reflects the increased complexity and linkages of the global financial system, and the absence of an effective anchor for financial stability. Restoring financial market confidence has had to rely on liquidity injections by major central banks. While this appears to have been successful, questions remain as to whether the turmoil could have been averted and its impact mitigated.
Anatomy of a Financial Meltdown
Nouriel Roubini (Project Syndicate) Feb 2008
A vicious circle is currently underway in the United States, and its reach could broaden to the global economy. America’s financial crisis has triggered a severe credit crunch that is making the US recession worse, while the deepening recession is leading to larger losses in financial markets – thus undermining the wider economy. There is now a serious risk of a systemic meltdown in US financial markets as huge credit and asset bubbles collapse.
China’s Inflation Hits American Price Tags
NYT Feb 1, 2008
China’s latest export is inflation. After falling for years, prices of Chinese goods sold in the United States have risen for the last eight months.
Currencies: A Hyper-Proactive Fed and the ‘Dollar Smile’
Stephen Jen (MSDW) Feb 1, 2008
Our fundamental view on the USD remains unchanged, that EUR/USD will end the year significantly lower than the current spot rate. However, a hyper-proactive Fed may make the USD rally more back-loaded to 2H than we had thought.
World Bank Appoints Chinese Academic as Top Economist
Bloomberg Feb 5, 2008
The World Bank appointed Chinese national Justin Lin as its chief economist, the first time the post has gone to a candidate outside Europe and the U.S.
Surprise farewells: Exits from currency unions
Andrew Rose (VoxEU) Feb 6, 2008
Since World War II, economies have exited currency unions at an average rate of one per year. Yet the evidence confounds established theory: economists are unable to predict which economies are likely to leave currency unions.
Asian Markets Follow Dow's Decline
NYT Feb 6, 2008
Asian markets plunged after a new signal of U.S. recession prompted steep declines on Wall Street.
Bottom Line for (Red)
NYT Feb 6, 2008
The "Red" campaign launched a year ago by rock star Bono has generated more than $22 million to fight H.I.V. and AIDS in Rwanda, but critics say not enough money is getting to clinics.
The Candidates and Trade
David Ranson (WSJ) Feb 6, 2008
Trade is a real test of leadership since its benefits are often less obvious than its downsides.
Waiting to Start Modalities Push, WTO Members Seek Clarity on Scope of Discussions
BRIDGES Weekly Trade News Digest - Vol. 12, Number 4 Feb 6, 2008
As WTO Members kick off another push to conclude an accord in the troubled Doha Round talks, they face an unavoidable conundrum: how to strike a framework 'modalities' deal on agriculture and industrial goods trade (which they now aim to do by March or April), while other issues in the negotiations remain unresolved.
Rough Sailing for Fisheries Subsidy Talks
BRIDGES Weekly Trade News Digest - Vol. 12, Number 4 Feb 6, 2008
Divisions among WTO Members marked discussions last week on a set of potential multilateral disciplines on fisheries subsidy spending.
Lamy: Trade expansion is insurance against financial turbulences
Pascal Lamy (WTO) Feb 6, 2008
The global trading system during the past 60 years “has underpinned un unprecedented period of economic growth and development”. He said that “at a time when clouds are darkening over the world economy, the Doha Round is the one global initiative that may boost confidence of world businesses, workers and consumers”.
Has Globalization Deepened Inequality?
Dieter Braeuninger (YaleGlobal) Feb 6, 2008
Evolving technology, not global connectedness, has spurred a growing income gap in industrial nations
Regional monetary integration
Peter B. Kenen & Ellen E. Meade (VoxEU) Feb 7, 2008
Many regions are discussing possible monetary unions; a new book argues that they are not in the position to replicate the European experience.
Why Bill Gates Hates My Book
William R. Easterly (WSJ) Feb 7, 2008
This newspaper reported recently that Bill Gates hates my ideas. I have no hurt feelings... Mr. Gates, after all, has allied himself with the foreign aid establishment. This establishment is notoriously sensitive to criticism from people like me, who find no evidence that the aid industry's grand schemes are actually lifting anyone out of poverty.
Europe's top two central banks focus on hazards to growth
IHT Feb 7, 2008
The Bank of England cut interest rates and the European Central Bank, in a reversal, signaled it might follow suit.
CIC close to fund deal with JC Flowers
FT Feb 8, 2008
China Investment Corporation, the Chinese sovereign wealth fund, is close to an agreement with JC Flowers, the US private equity group, to put about $4bn into a new fund to invest in ailing financial institutions.
Why a crisis is also an opportunity
Martin Wolf (FT) Feb 8, 2008
The credit crunch is the economy's brutal way of telling us that this era of unsustainable growth in spending and debt is over.
G-7 finance leaders to try for global response to market turmoil
IHT Feb 8, 2008
Officials arriving in Tokyo on Friday for weekend meetings showed a readiness to begin tackling problems together.
Why we need antidumping reforms
Hylke Vandenbussche & Maurizio Zanardi (VoxEU) Feb 8, 2008
Political divisions among EU member states seem to have derailed the reform process envisaged by Mr Mandelson, the EU Trade Commissioner, for the most important of the EU’s trade defence instruments – antidumping. Here is a discussion of antidumping and what a minimal proposal for reforms should include.
Wealth Of Bad Thinking On Sovereign Funds
Paul Maidment (Forbes) Feb 8, 2008
Logic had little to do with criticism of government-controlled investment vehicles aired at a Washington hearing Thursday.
Currencies: A US$100 Billion Supra-Sovereign Wealth Fund?
Stephen Jen (MSDW) Feb 8, 2008
We argue that the IMF should seriously contemplate setting up a supra-sovereign wealth fund, out of the gold holdings it has. Fully financing the operating expenses of the IMF, this prospective fund could be launched at US$92 billion and grow to US$130 billion in 10 years’ time.
A repeat of the Great Depression is unlikely
Wolfgang Munchau (FT) Feb 10, 2008
There is one scenario that could produce a 1930s-style deflationary depression in the US: a large-scale financial meltdown.
Fallout From the Fed
Mary Anastasia O'Grady (WSJ) Feb 11, 2008
The weak dollar is having an impact in El Salvador.
Global: The Year of Recoupling
Richard Berner (MSDW) Feb 11, 2008
Recoupling will come in many shades, and history may not be a good guide to distinguish which economies will be most affected.
Developing Countries Worse Off Than Once Thought - Part I
Branko Milanovic (YaleGlobal) Feb 11, 2008
New estimates of global prices expose poverty and revolutionize the field of economics.
Aging and death on a dollar a day
Richard Baldwin (VoxEU) Feb 12, 2008
Raising incomes of the world’s poorest is about more than raising living standards. Poverty kills. This column discusses recent research illustrating the links between extreme poverty and early death.
Time for Sovereign Wealth Rules
Evan Bayh (WSJ) Feb 13, 2008
If the U.S. government started amassing shares no one would hesitate to call it socialism.
IMF Head Urges Global Action to Counter Slowdown
IMF Survey Feb 13, 2008
IMF Managing Director Dominque Strauss-Kahn, in speech in New Delhi, urges industrial and emerging market countries to do their share through macroeconomic and financial market policies to mitigate the impact of the current financial crisis which is causing a global slowdown.
Developing Countries Worse Off Than Once Thought - Part II
Devesh Kapur (YaleGlobal) Feb 13, 2008
Perhaps the World Bank should stop helping those unwilling to help themselves.
WTO Ag Chair's New Text: Gradual Progress on Market Access, 'Headline Numbers' Unchanged
BRIDGES Weekly Trade News Digest - Vol. 12, Number 5 Feb 13, 2008
A new text outlining a plausible Doha Round deal on farm subsidy and tariff cuts circulated last week by the chair of the WTO agriculture negotiations contained no big surprises, according to trade diplomats in Geneva.
Singapore to be top investor in TPG fund
FT Feb 14, 2008
Government Investment Corp of Singapore, a sovereign wealth fund, is expected to be the lead investor in a $6bn fund that TPG, the private equity firm, is raising to invest in troubled financial firms.
China Is Improperly Taxing Car-Part Imports, WTO Rules
WP Feb 14, 2008
The World Trade Organization on Wednesday issued its first official condemnation of Chinese commercial practices, siding with the United States, the European Union and Canada in a dispute over car parts.
Preventing a global downturn
Economist Feb 14, 2008
Why the world economy needs an insurance policy.
The Moody's Blues
WSJ Feb 15, 2008
The ratings game: Why lousy opinions cost so much.
Currencies: Foreign Official Reserves Now Over US$6.4 Trillion
Stephen Jen (MSDW) Feb 15, 2008
The world’s official reserves continue to grow very rapidly, by around US$150 billion a month, reaching US$6.4 trillion around end-2007. In terms of both stocks and flows, Asia and the Middle East dominate official reserve holdings.
Decoupling Was a Sucker Play From the Start
Michael R. Sesit (Bloomberg) Feb 15, 2008
``I always thought that decoupling was a myth,'' U.S. Treasury Secretary Henry Paulson told reporters last week after a Tokyo meeting of finance ministers and central bankers from the Group of Seven countries.
Currencies: JPY and AXJ Currencies: A Parting of Ways
Stephen Jen & Luca Bindelli (MSDW) Feb 15, 2008
The correlation between the JPY and other Asian currencies began to decline in mid-2006 and turned outright negative in 2007. We believe that this negative correlation is well-justified by the divergent economic fundamentals of Japan and the rest of Asia, and expect this trend to persist.
Do professional currency traders earn their fees?
Richard M. Levich & Momtchil Pojarliev (VoxEU) Feb 16, 2008
Professional currency trading managers earn large fees. This column summarises research evaluating their performance and identifies a select group of traders whose achievements may warrant their wages.
New Labour, Free Trader
Kyle Wingfield (WSJ) Feb 16, 2008
Brussels's Blairite trade chief worries about protectionist rhetoric in the U.S. presidential race.
The perils of a weak dollar
Brad Setser (Boston Globe) Feb 16, 2008
Over the last several months, the US economy has slowed, interest rates have been cut, and global demand for US bonds - setting those from the Treasury aside - has dried up.
Did globalisation cause the ‘Great Divergence’ between rich and poor economies?
Oded Galor & Andrew Mountford (VoxEU) Feb 18, 2008
The last 200 years saw a ‘Great Divergence’ in per capita income, as some countries industrialised while others remained less developed. This column attributes the divergence to international trade. Comparative advantage encouraged industrialising economies to invest in human capital, while non-industrial economies experienced population growth.
IMF Sees Global Imbalances Narrowing, But More to Be Done
IMF Survey Feb 19, 2008
Global economic imbalances appear to have peaked in 2006-07 and are now projected to narrow faster than earlier forecast, but more remains to be done to correct a worrying disequilibrium in the world economy, according to IMF analysis.
Crude oil closes above $100
IHT Feb 19, 2008
The price rise of more than 4 percent in New York on Tuesday capped a weeklong run-up that began when Venezuela threatened to cut off oil exports to the United States.
Sovereign funds might be jumping the gun
FT Feb 19, 2008
John D. Rockefeller used to say that the way to make money is "to buy when blood is running in the streets". But has enough blood been spilled in the US subprime crisis to justify the heady investments being made by the world's sovereign wealth funds in US and European banking institutions?
WTO Ag Talks: Progress on Substance Must Determine Deadlines, Warn Members
BRIDGES Weekly Trade News Digest - Vol. 12, Number 6 Feb 20, 2008
If trade ministers are indeed to meet in the foreseeable future to try to hammer out a Doha Round deal on cutting tariffs and farm subsidies, their gathering must be scheduled on the basis of substantive progress in the talks and not on arbitrary deadlines, agriculture negotiators from several countries stressed last week.
Persistent Divisions, Crowded Agenda Loom Over Doha Modalities Push
BRIDGES Weekly Trade News Digest - Vol. 12, Number 6 Feb 20, 2008
WTO Member delegations are still behaving as though a ministerial-level meeting will be held between mid-March and mid-April to reach a framework accord that would make it possible for the Doha Round negotiations to be concluded by the end of the year.
What history says about the euro’s future
Nikolaus Wolf (VoxEU) Feb 21, 2008
Europe suffered the collapse of a currency system when countries abandoned the gold-exchange standard in the 1930s. What lessons does that break-up offer for the euro today?
Africa Growing Rapidly, But Faces Risks
IMF Survey Feb 21, 2008
IMF Managing Director Dominique Strauss-Kahn begins a trip to Africa on February 24 as the continent experiences its highest growth rates in decades, but the slowing of the global economy and higher world oil prices could threaten the outlook in some countries.
Why the Crisis?
Allan H. Meltzer (AEI) Feb 21, 2008
The roots of the subprime meltdown can be found in the financial industry's compensation system and in the Basel Accords.
Currencies: A Petrodollar Tsunami Warning
Stephen Jen & Charles St-Arnaud (MSDW) Feb 22, 2008
We calculate that the stock of the world’s proven oil reserves is now worth some US$121 trillion. While up to 10% of these receipts may be spent on infrastructure and other investments, the rest will be invested in the global financial markets. A tsunami is coming.
Healthy Hedge Funds, Sick Banks
Peter J. Wallison (AEI) Feb 22, 2008
Banks have been heavily regulated, ostensibly for stability. Yet in the current crisis, banks are suffering and unregulated hedge funds are doing fine.
We must curb international flows of capital
Dani Rodrik & Arvind Subramanian (FT) Feb 22, 2008
First large downhill flows of capital – from rich countries to poor countries – led to the Latin American debt crisis of the early 1980s. In the 1990s similar flows begat the Asian financial crisis.
Do Sovereign Wealth Funds Pose a Risk to the United States?
Edwin M. Truman (PIIE) Feb 25, 2008
Establish a set of best practices to make sovereign wealth funds more accountable to their own citizens and governments and the international financial community.
Africa's Improved Debt Outlook Sparks Investor Interest
IMF Survey Feb 25, 2008
Strengthened macroeconomic fundamentals and lower debt levels following debt relief from the IMF and other international institutions have increased the attractiveness of low-income African countries to a broader universe of investors.
Debt Relief Bringing Benefits to Africa
IMF Survey Feb 25, 2008
Debt relief under two international initiatives promoted by the IMF has helped reduce significantly the debt burden of heavily indebted poor countries in Africa and freed up additional resources for poverty-reducing and social expenditures.
Hungary floats the forint
FT Feb 25, 2008
Hungary surprised financial markets by abandoning its long-standing currrency trading range against the euro and opting instead to let the forint float freely
The dangerous protectionism of Barack Obama
Willem Buiter & Anne Sibert (VoxEU) Feb 26, 2008
Barack Obama, the likely Democratic presidential candidate, has proposed tax breaks for US corporations that invest at home rather than abroad. This column argues that his proposal is protectionist, reactionary, and economically unsound.
U.S. Democrats talk trade, but what would they really do?
IHT Feb 26, 2008
Despite the rhetoric, neither Barack Obama nor Hillary Rodham Clinton are likely to repeal U.S. trade deals.
Divide Over 'Exchange Rate' Stymies Progress in Doha Round Talks
BRIDGES Weekly Trade News Digest - Vol. 12, Number 7 Feb 27, 2008
For any commercial exchange to work out, buyers and sellers need to be able to agree on a price. Without overlap between what a carpet salesman is willing to accept and what a wily customer deems to be a fair bargain, there will be no deal.
Dollar hits new low as Fed signals rate cut
Private equity turns to sovereign funds
Rising euro pushes BMW into eliminating 8,100 jobs
France adopts a sovereign wealth fund model
Obama, Bush Offer a U.S. Kiss of Death to Africa
Mobilization for Globalization
Democratising recessions
Watching Sovereign Wealth
Can the World Afford a Middle Class?
Can we multilateralise regionalism?
FT Feb 27, 2008
The dollar fell to a fresh record low against the euro as Ben Bernanke signalled that the Federal Reserve is likely to cut interest rates again next month Read more »
FT Feb 27, 2008
Private equity firms are now approaching sovereign wealth funds for loans for big leveraged acquisitions, filling the gap left by investment banks struggling with the credit squeeze, leading buy-out bosses said.
IHT Feb 27, 2008
Until now, Bayerische Motoren Werke had consistently avoided layoffs. But the has decided to follow its German rivals, Mercedes and Audi, which began tough cost-cutting long ago.
FT Feb 27, 2008
Speculation mounts that President Nicolas Sarkozy is set to step in over Alcatel-Lucent.
Amity Shlaes (Bloomberg) Feb 27, 2008
Africa is easier than the Middle East. It's not all about the oil. You don't have to send the 1st Cavalry Division there. All Africa needs is money to become healthier, more democratic, friendlier -- you name it.
Steven Pearlstein (WP) Feb 27, 2008
Unwilling to try new ideas, Americans are their own worst enemy when it comes to confronting globalization.
Antonio Ciccone (VoxEU) Feb 28, 2008
According to theory, demands for democratic change are more likely to be realised during economic downturns, which lower the cost of overthrowing autocrats. This column presents empirical evidence from Sub-Saharan Africa suggesting that recessions may indeed open a window of opportunity for democratisation.
Heidi Crebo-Rediker & Douglas Rediker (WSJ) Feb 28, 2008
Another monitor for the funds: their own citizens.
Moisés Naím (Foreign Policy/YaleGlobal) Feb 28, 2008
The world can expect increased demand for basic products along with higher prices.
Richard Baldwin (VoxEU) Feb 29, 2008
Trade liberalisation is proceeding everywhere but at the WTO: while nations drag their feet in Geneva, they sign bilateral trade agreements by the dozen. Finishing the ongoing WTO talks is important, but regionalism is the new reality. To maintain its relevance, the WTO must adapt, as regionalism is here to stay.
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