News & Commentary:

February 2012 Archives


What’s in store for China in 2012?
Gordon Orr (McKinsey QUarterly) Feb 1, 2012
Despite food price inflation and a stagnant housing market, China should maintain a rapid rate of growth.

Three snapshots of Chinese innovation
McKinsey Quarterly Feb 1, 2012
Chinese innovation is evolving in diverse ways and at an uneven pace across a range of different industries. Presented here are ground-level views from three of them: automobiles, semiconductors, and pharmaceuticals.

Coronary Capitalism
Kenneth Rogoff (Project Syndicate) Feb 1, 2012
Just as the financial industry caused a near-meltdown of the global economy in 2008, the food industry has facilitated the explosion of obesity around the world. In both cases, the links to broader problems with contemporary Western capitalism have become impossible to ignore.

Next-generation system-wide liquidity stress testing
Heiko Hesse, Benjamin Neudorfer, Claus Puhr, Christian Schmieder & Stefan W Schmitz (VoxEU) Feb 1, 2012
The global financial crisis has shown that neglecting liquidity risk comes at a substantial price. This column presents a new framework to run system-wide, balance sheet data–based liquidity stress tests. The liquidity framework includes a module to simulate the impact of bank-run type scenarios, a module to assess risks arising from maturity transformation and rollover risks, and a framework to link liquidity and solvency risks.

Understanding past and future financial crises
Pierre-Olivier Gourinchas & Maurice Obstfeld (VoxEU) Feb 1, 2012
What explains the different effects of the crisis around the world? This column compares the 2007–09 crisis to earlier episodes of banking, currency, and sovereign debt distress and identifies domestic-credit booms and real currency appreciation as the most significant predictors of future crises, in both advanced and emerging economies. It argues these results could help policymakers determine the need for corrective action before crises hit.

IMF Study Examines Changing Patterns in Global Gas Markets
IMF Survey Feb 1, 2012
Recent developments in regional gas markets across the world point to important structural changes. But patterns in Europe and the United States are diverging, a new IMF study finds.

Global: Risk of EM Sudden Stops: Who's Most Exposed to Reversals in Capital Flows?
Manoj Pradhan & Patryk Drozdzik (MS GEF) Feb 1, 2012
EM economies that saw the largest capital inflows are also the most at risk from a deceleration or even reversal triggered in Europe. The result? A possible sudden stop.

WTO Appellate Body: China Raw Material Export Restrictions Illegal
Bridges Weekly Trade News Digest Volume 16, Number 4 Feb 1, 2012
In a high-profile dispute over access to natural resources, the WTO's Appellate Body on Monday confirmed that China violated WTO law and its accession protocol by restricting the exportation of nine raw materials.

African Union Aims for Continental Free Trade Area by 2017
Bridges Weekly Trade News Digest Volume 16, Number 4 Feb 1, 2012
Plans to establish a pan-African trade pact are well underway, as part of a broader effort to increase intra-regional trade within the continent. However, these plans also hit an early roadblock during a week-long meeting of African leaders in Addis Ababa, Ethiopia, after various participants questioned such an agreement's feasibility.

UN Sustainability Panel Provides Input to Rio+20 Process
Bridges Weekly Trade News Digest Volume 16, Number 4 Feb 1, 2012
On 30 January, the UN Secretary-General's High-level Panel on Global Sustainability delivered its long-awaited report, entitled 'Resilient People, Resilient Planet: A Future Worth Choosing'. The report was released at a key juncture in the preparations for Rio+20, for which informal negotiations took place in New York from 25-27 January.

Bilateral Trade Deals, Doha in the Spotlight at Davos
Bridges Weekly Trade News Digest Volume 16, Number 4 Feb 1, 2012
The annual meeting of the World Economic Forum, held in the Swiss ski resort of Davos, came to a close on Saturday 28 January, with many policymakers making a push for bilateral and regional trade pacts - including an EU-US agreement - in the absence of progress in the Doha Round. WTO members are also set to explore other negotiating approaches this year, in the hopes of eventually moving the ten-year trade talks forward.

EU Inks Anti-Counterfeiting Pact as Cyber Piracy Debate Ramps Up
Bridges Weekly Trade News Digest Volume 16, Number 4 Feb 1, 2012
In an official ceremony held in Tokyo last week, representatives from the European Union and 22 of its member states signed the Anti-Counterfeiting Trade Agreement (ACTA), joining the eight other countries - including the US - that had signed the intellectual property trade pact late last year.

The Great China Debate
Derek Scissors; Arvind Subramanian (FA) Feb 1, 2012
China's rise is overstated, and its financial problems are massive, argues Derek Scissors. Arvind Subramanian disagrees, claiming that Beijing already calls the shots in the global economy.

It Is Safe to Resume Ignoring the Prophets of Doom ... Right? New York Times Subscription Required
Adam Davidson (NYT) Feb 1, 2012
Why lots of the smartest economists believe the worst is yet to come.

Globalization: The Good, The Bad and the Uncertain
Ian Goldin (Globalist) Feb 1, 2012
A failure to manage globalization might lead to a backlash of protectionism, xenophobia and nationalism.

Merkel Vs. Lagarde: Battle of the (Female) Titans
Stephan Richter (Globalist) Feb 2, 2012
History is replete with examples of world events being driven by two men going head-to-head on the world stage. The current financial crisis is no different, writes Stephan Richter, except for the fact that events are being driven by two women.

Central Bankers in the Line of Fire
Luigi Zingales (Project Syndicate) Feb 2, 2012
The decision in January by Philipp Hildebrand to resign as Chairman of the Board of the Swiss National Bank, after a suspicious trade made by his wife, is to be welcomed. But, while Hildebrand’s resignation should serve as a precedent to be followed elsewhere, the circumstances surrounding his departure smell much worse than what caused it.

Sovereign ratings when default can come explicitly or via inflation
Charles A.E. Goodhart (VoxEU) Feb 2, 2012
Inflation in the UK is now more than double that of France, but only one country has had its credit rating downgraded. This column argues that government credit ratings should be aided by a second rating measuring the potential loss of real value, whether by inflation or default.

The Decline of the West Revisited
Shlomo Ben-Ami (Project Syndicate) Feb 2, 2012
Since the publication in 1918 of Oswald Spengler’s The Decline of the West, prophecies about the inexorable doom of what he called the “Faustian Civilization” have been a recurrent topic for thinkers and public intellectuals. But the debate's recurrence is itself proof that Spengler was wrong.

Our ignorance will yield more crises Financial Times Subscription Required
Kenneth Rogoff (FT) Feb 1, 2012
The idea that Chinese capitalism provides a blueprint for the rest of the world economy is an absurd exaggeration.

Longer-term forecasts are a step backwards Financial Times Subscription Required
Charles Goodhart (FT) Feb 1, 2012
Central bankers need to refocus attention away from point forecasts and instead be flexible to respond as events unfold

Two cheers for ‘Super Mario’
David Ignatius (WP) Feb 1, 2012
The ECB president has fortified the markets.

The 'Financial Recession' Excuse Wall Street Journal Subscription Required
Phil Gramm & Mike Solon (WSJ) Feb 2, 2012
Why did the U.S. recover faster from the Panic of 1907 than from the 2008 recession and the Great Depression?

Big, Bad Bourse Wall Street Journal Subscription Required
WSJ Feb 2, 2012
Europe's trust-busters have merely helped Asian markets.

My Experience as a Private-Equity CEO Wall Street Journal Subscription Required
Armand Lauzon (WSJ) Feb 2, 2012
Managers like me are required to put our own capital into the company.

Both Sudans risk heavy price for oil shutdown Financial Times Subscription Required
William Wallis (FT) Feb 2, 2012
Social disaffection grows as President Omar al-Bashir deals with political tensions amid South Sudan’s stranglehold on oil revenues.

China’s capital flight looks ready for take-off Financial Times Subscription Required
Henny Sender (FT) Feb 2, 2012
As sentiment toward the renminbi sours and the political outlook is more uncertain, more money will leave the mainland.

As Jobs Go Global, U.S. Workers Pay New York Times Subscription Required
Chrystia Freeland (NYT) Feb 2, 2012
Globalization is working -- the world overall is getting richer. But a lot of the costs of that transition are being borne by specific groups of workers in the developed West.

Expect China to Shape Next Bretton Woods Pact
Philip Coggan (Bloomberg) Feb 2, 2012
When the world economy heads into crisis, the international currency system often breaks down. This occurs either because debtors can’t meet their obligations, or because creditors fear they are not being repaid in sound money. The first condition exists today in the euro zone; the second is likely to emerge in the China-U.S. relationship.

Global: QE Coming of Age
Spyros Andreopoulos (MS GEF) Feb 3, 2012
Balance sheet expansion could end up being quasi-permanent. This could be inflationary if the size of the monetary base does not keep in lockstep.

Despair in the air at Davos Financial Times Subscription Required Recommended!
Peter Lee (AT) Feb 3, 2012
The absence of heavy hitters from China at Davos this year did not prevent the West's movers and shakers who were present clamoring for Chinese assistance in bailing out capitalism - ignoring the point that capitalism is in fact stronger, freer and more powerful than ever.

Austerity under Attack
Daniel Gros (Project Syndicate) Feb 3, 2012
As the European economy risks falling into recession, many observers are asking whether austerity could lead to such a sharp decline in economic activity that revenues fall and the fiscal position actually deteriorates further. But it would be dangerous for the eurozone’s highly indebted countries to abandon austerity now.

Europe without euro and EU
Bruno S Frey (VoxEU) Feb 3, 2012
What will happen if the euro collapses? For many people, the answer is unmitigated disaster. But this column argues that to identify the euro, the EU, and Europe as one, as many politicians like to do, is totally misleading. A possible demise of the euro and the EU can be seen as a chance for the evolution of a better future Europe.

A Long-Term Slide in Growth for Industrialized Economies New York Times Subscription Required
Floyd Norris (NYT) Feb 3, 2012
The major developed countries are all experiencing slowdowns in growth, a trend the International Monetary Fund's new projections indicate will continue.

An American History Lesson for Europe Wall Street Journal Subscription Required Recommended!
Thomas Sargent (WSJ) Feb 3, 2012
Our federal government refused to bail out the states in the 1840s, thus preserving their fiscal independence.

How Euro Brinkmanship Is Beginning To Succeed
Jacob Funk Kirkegaard (PIIE) Feb 3, 2012
European Union leaders had the umpteenth euro crisis summit at the end of January. Indeed the EU Council meets so often that the descriptions of these gatherings should be changed from "yet another summit" to "back in session." The slide to near-permanent policymaking has occurred as the EU Council begins to resemble a sitting parliament. But on January 30, 2011 the leaders made tangible progress on several fronts, though not necessarily on the stated goal of the summit—job creation and growth. Most importantly, at German insistence, they cleared the political and institutional way for an increase in European bailout funds.

IMF in a euromess?
Bretton Woods Update No. 79 Feb 3, 2012
The IMF responds to calls from European leaders to get more involved in the European debt crisis through greater lending to the region, however, the austerity policies being demanded are stoking further criticism from civil society organisations.

Do Manufacturers Need Special Treatment? New York Times Subscription Required
Christina D. Romer (NYT) Feb 4, 2012
Government manufacturing policies must go beyond the belief that it's better to produce "real things" than services. People value health care and haircuts as much as washing machines and hair dryers.

Central banking: The Reserve Bank of India Economist Subscription Required
Economist Feb 4, 2012
India’s central bank is one of its best institutions. It is also complicit in a government-borrowing binge

Germany: A Bric, or just stuck in a hard place? Financial Times Subscription Required
Wolfgang Münchau (FT) Feb 5, 2012
With unification Germany has become too big to be an ordinary European state, yet not big enough to be a superpower.

Forget Fred and focus on the real banking scandal Financial Times Subscription Required
Nigel Lawson (FT) Feb 5, 2012
Capitalism works – and works far better than any other system – because the discipline of the marketplace keeps greed, folly and incompetence in check.

Defeating Dictators Financial Times Subscription Required
Alec Russell (FT) Feb 5, 2012
George B. N. Ayittey, an expert in the nature and flaws of tyranny, explains why undermining dictators is a science that requires time and thought.

Seven things I learned about the transition from communism
Andrei Shleifer (VoxEU) Feb 5, 2012
Twenty years ago, communist countries began their shift towards capitalism. What do we know now that we didn’t know then? Harvard's Andrei Shleifer, the Russian-born, American-trained economist, provides his answers and their relevance for contemporary policymakers.

Africa can remind us of the capitalist way Financial Times Subscription Required
Dambisa Moyo (FT) Feb 6, 2012
A decade ago, the end of fuel subsidies in Nigeria could have led to political crisis. Now Nigerians just want to work.

Shame Obama for pandering on trade Financial Times Subscription Required
Jagdish Bhagwati (FT) Feb 6, 2012
If he is wet behind the ears on outsourcing, then his surrender to the fetish of manufacturing is a disaster.

Uncharted territory
Robert J. Samuelson (WP) Feb 6, 2012
Crises harder to resolve in new global economy.

Shifting motives: Explaining the build-up in official reserves in emerging markets since the 1980s
Atish R Ghosh, Jonathan D Ostry & Charalambos Tsangarides (VoxEU) Feb 6, 2012
Over the past three decades, emerging market economies have been rapidly accumulating reserves – a trend that has resumed, and even accelerated, following the 2008 global financial crisis. This column examines factors driving this accumulation and how these factors have evolved over time and differed across countries.

Capturing the ECB
Joseph E. Stiglitz (Project Syndicate) Feb 6, 2012
There are several explanations for the ECB’s insistence on a "voluntary" restructuring of Greece's sovereign debt, none of which speaks well for the institution. Indeed, as we have seen elsewhere, institutions that are not democratically accountable tend to be captured by special interests.

Seizing Sustainable Development
Jacob Zuma & Tarja Halonen (Project Syndicate) Feb 6, 2012
The world is on an unsustainable path, and must urgently chart a new course forward, one that brings equity and environmental concerns into the economic mainstream. To do so, we must put sustainable development into practice now, not in spite of the economic crisis, but because of it.

Gold, bonds as options on inflation
Spengler (AT) Feb 7, 2012
Economists, commentators and financial advisers are talking nonsense when they insist on referring to gold as an inflation hedge. Clear-headed comparison of the gold price and US government bond yields shows gold for what it is: an undated put option on the dollar's reserve role.

IMF and capital flows: all talk, no solution
Bretton Woods Update No. 79 Feb 7, 2012
As the IMF and Bank of England predict that increasing volatility of global capital flows will motivate widespread use of capital controls, academics and civil society organisations are calling for coordinated global solutions.

New World Bank infrastructure strategy: Paving over development?
Bretton Woods Update No. 79 Feb 7, 2012
A World Bank infrastructure strategy update, developed because of a G20 push for more infrastructure investment, reaffirms the Bank's commitment to large-scale projects and scaled up private finance through public-private partnerships (PPPs), despite questions about bloated costs and development impact.

Crisis must not change India’s course Financial Times Subscription Required
Martin Wolf (FT) Feb 7, 2012
A vast, poor country can still generate rapid growth by catching up on high-income countries, regardless of the global environment.

Visit Asian factories for capitalist lessons Financial Times Subscription Required
Kishore Mahbubani (FT) Feb 7, 2012
For all its flaws, capitalism remains the best system to improve human welfare but it requires careful supervision Asians never forgot this. The west did.

Avoiding EM economies is the biggest gamble of all Financial Times Subscription Required
Jerome Booth (FT) Feb 7, 2012
The most likely path for unwinding global imbalances is through appreciation of emerging market currencies.

Global: A Great Future Behind it
Gerard Minack (MS GEF) Feb 7, 2012
With the credit super-cycle now working in reverse, it seems that finance is a sector with a great future behind it.

The Vatican's Calls for Global Financial Reform
Samuel Gregg (FA) Feb 7, 2012
The Vatican has recently made pointed calls for global financial reform, but the Church's teaching is grappling to accommodate the growing divergence between the immediate economic expectations of Catholics in developed European nations and those living in emerging economies.

How Democracy Can Save Europe
Timothy Snyder (NYRB) Feb 7, 2012
The European crisis, which we process from headline to headline as a matter of currencies and bailouts, is really a test of large-scale democratic capitalism. The deeper issue is whether institutions of continent-wide democracy, European or American, can keep pace with the twin threats of global financial instability and national populism.

Greece: Why Not Go Back to the Drachma?
Thanos Skouras (Globalist) Feb 7, 2012
Some economists believe it's only a matter of time before Greece abandons the euro. There would be an unexpected beneficiary to such a strategy.

World Bank or US Bank? President selection debate launched
Bretton Woods Update No. 79 Feb 7, 2012
Rumours that Robert Zoellick will not seek another term as World Bank president after his term ends in June have thrown open the debate about leadership selection at the Bank.

Watch out as sovereigns eye company cash piles Financial Times Subscription Required
David Bowers (FT) Feb 8, 2012
Companies should put surpluses to work in their home countries.

Tensions over EU Emissions Levy Reach New Heights as China Tells Airlines Not to Comply
Bridges Weekly Trade News Digest, Volume 16, Number 5 Feb 8, 2012
The Chinese government has barred the country's airlines from participating in Brussels' controversial plan to place a levy on foreign airlines for the emissions they use on incoming and outgoing flights. With China also set to meet with other opponents of the aviation emissions levy - including India, Russia, and the US - later this month to discuss a plan of action, tensions over the EU scheme are expected to escalate much further.

US Agrees to Quit Zeroing, Avoids EU and Japan Retaliation
Bridges Weekly Trade News Digest, Volume 16, Number 5 Feb 8, 2012
The United States, on 6 February, signed roadmap agreements with the European Union and Japan on ending its controversial "zeroing"method to calculate anti-dumping duties. The deal was announced only days before WTO arbitrators were scheduled to examine the EU's and Japan's request on retaliating against Washington for its failure to comply with WTO rulings that had deemed the use of zeroing illegal. Though the US' agreements are formally limited to the two trading giants, the changes are also set to affect other countries.

China to Boost Farm Subsidies for Science and Technology
Bridges Weekly Trade News Digest, Volume 16, Number 5 Feb 8, 2012
In its first major policy announcement of the new year, China has revealed plans to boost spending on agricultural science and technology - continuing a trend towards rapidly-growing farm support in recent years.

Goods Council Approves EU Trade Concessions for Pakistan
Bridges Weekly Trade News Digest, Volume 16, Number 5 Feb 8, 2012
Pakistan is set to receive a package of trade concessions from the EU, over a year after Brussels initially tabled its request for a WTO waiver. The flood-battered Asian country will receive preferential treatment for 75 tariff lines, though not all of those will receive full liberalisation. The granting of the WTO waiver follows a politically fraught process that saw the original trade package altered in response to concerns from some members.

Europe’s Tobin Tax Distraction
Barry Eichengreen (Project Syndicate) Feb 9, 2012
European leaders have revealed their top-secret plan for solving the euro’s crisis: a version of the “Tobin tax,” a levy on financial transactions first suggested in 1972. The only problem is that the tax was intended to solve an entirely different problem from those that afflict Europe today.

The Eurozone’s Fork in the Road
Mario I. Blejer & Eduardo Levy Yeyati (Project Syndicate) Feb 9, 2012
The ECB's recent decision to lend unlimited funds to eurozone commercial banks at very low rates acknowledges the need to address a core drawback in the euro-architecture: the ECB itself. However the banks use the money, it is now clear that the eurozone’s future will be determined largely by the ECB.

The trade effects of natural disasters: New evidence from developing countries
Jorge Andrade da Silva & Lucian Cernat (VoxEU) Feb 9, 2012
Natural disasters often hit developing countries hardest. To add to the devastating death toll, trade and development can be knocked off course. This column suggests that exports of small developing countries fall by nearly a quarter, and that this continues for up to three years. Exports of larger developing countries, on the other hand, are not significantly affected.

We're All State Capitalists Now
Niall Ferguson (FP) Feb 9, 2012
The rivalry between America or China is a red herring that distracts us from the real contest of our time.

Why the world economy still splutters away Financial Times Subscription Required
Samuel Brittan (FT) Feb 9, 2012
The important question is how the world deals with its excess savings potential.

Greek deal faces the fate of its forebears Financial Times Subscription Required
Mohamed El-Erian (FT) Feb 9, 2012
Only pure genius or enormous luck could produce a perfectly designed Greek programme.

A Revolution of Machines Quietly Hums
Chrystia Freeland (Reuters/NYT) Feb 9, 2012
Futurists and fantasists have long been dreaming about the rise of intelligent machines. Now it is actually starting to happen, and it may bring deep economic, social and political change.

Will China's Yuan Rival the Dollar? Wall Street Journal Subscription Required
Eswar Prasad (WSJ) Feb 9, 2012
Safe and liquid financial markets help make for a strong currency. Beijing isn't there yet.

Will Currency Devaluation Fix the Eurozone?
Frank Shostak (Mises Daily) Feb 9, 2012
The NYU professor of economics Nouriel Roubini said in Davos, Switzerland, on January 25, 2012, that tight policies are making the recession in the eurozone worse. According to Roubini what Europe needs is less austerity and more growth. In particular, the NYU professor is concerned about the deep recession in the eurozone's peripheral countries: Spain, Portugal, Greece — all are on a strict regime of austerity. For instance, in Spain the yearly rate of growth of government outlays stood at minus 12.4 percent in November against minus 15.7 percent in the month before. In Portugal the yearly rate of growth stood at minus 3.6 percent in December against minus 2.5 percent in November. In Greece the yearly rate of growth fell to 2.9 percent in December from 6.2 percent in the prior month.

Dodd-Frank and the Myth of 'Interconnectedness' Wall Street Journal Subscription Required
Peter J. Wallison (WSJ) Feb 10, 2012
There's no evidence exposure to Lehman imperiled other banks. So why base law on that premise?

Why Manufacturing Still Matters New York Times Subscription Required
Laura D’Andrea Tyson (NYT) Feb 10, 2012
As one of a rare group of economists who believe that “manufacturing matters” for the health of the American economy, I was heartened to hear President Obama emphasize manufacturing in his State of the Union address. Though there are economists who do not share my heretical view, I believe that a strong manufacturing sector matters — and deserves the attention of policy makers — for several reasons.

Global: QE: What's Different This Time?
Manoj Pradhan (MS GEF) Feb 10, 2012
Despite better data, the Fed appears to be on course to deliver another round of QE. We look at what’s different about it this time.

Why non-tariff measures matter more in a world of sliced-up supply chains
Michael J Ferrantino (VoxEU) Feb 11, 2012
As tariffs have declined steadily since the 1940s, government interventions to restrict imports have increasingly taken non-tariff forms. This column argues these add many trade costs along the supply chain and, in a world where production is fragmented across countries, they are associated with development traps. Regional initiatives and a focus on logistics measures can help bring supply chains to new parts of the world.

The rich world's fragile recovery
Economist Feb 11, 2012
There are some promising signs, but wait until politicians start doing the right things.

Sovereign bonds: Oat cuisine Economist Subscription Required
Economist Feb 11, 2012
A stodgy asset class has become more complex and more dangerous.

Why Greece and Portugal ought to go bankrupt Financial Times Subscription Required
Wolfgang Münchau (FT) Feb 12, 2012
Let both default inside the monetary union, and use a sufficiently increased rescue fund to help them rebuild.

Europe can learn from Japan’s austerity endgame Financial Times Subscription Required
Peter Tasker (FT) Feb 12, 2012
The message is clear – you can’t get blood out of a stone. New taxes and higher taxes can lead to less tax revenue.

Help in European Financial Crisis Could Spawn 'Zombie Banks'
NYT Feb 12, 2012
Because of the central bank's cheap financing, some economists warn, sick banks now face less pressure to confront their problems, which could worsen in the years ahead.

Failed forecasts and the financial crisis: How to resurrect economic modelling
Volker Wieland & Maik Wolters (VoxEU) Feb 13, 2012
Where were economists when the global recession hit? Or rather, where were their forecasts in the years before? This column argues that clearly some of the models were at fault. To correct this, it proposes a ‘comparative approach’ to macroeconomic analysis where models compete for the right to be taken seriously.

China and America: A Profitable Partnership Wall Street Journal Subscription Required
Tung Chee Hwa (WSJ) Feb 13, 2012
U.S. exports have risen at an astonishing pace, growing at a compound annual rate of 35%, a trend that is set to continue.

The ECB’s trillion euro bet
Charles Wyplosz (VoxEU) Feb 13, 2012
Spreads on public debts in the Eurozone – with the exception of Greece – are falling hard and fast. This column argues that this is in large part because the ECB is now effectively guaranteeing Eurozone government debts. But it cautions that in doing so, the central bank is taking enormous risks.

Nixon Then, China Now
Minxin Pei (Project Syndicate) Feb 13, 2012
When US President Richard Nixon began his historic trip to China 40 years ago this February 21st, he could not have imagined what his gamble would unleash. The question today is whether China can sustain its success under a one-party regime that is hostile to the liberal values that inspire and underpin globalization.

The Nation-State Reborn
Dani Rodrik (Project Syndicate) Feb 13, 2012
One of our era's foundational myths is that globalization has condemned the nation-state to irrelevance. But national governments remain our best hope for collective action – indeed, in the absence of transnational identities and viable global-governance mechanisms, they are all that we have.

The Public and Its Problems
Raghuram Rajan (Project Syndicate) Feb 13, 2012
Why, many Europeans are wondering nowadays, do their politicians fail to see the abyss that yawns before them, and come together to resolve the euro crisis once and for all?But, if leaders in Europe (and America) appear short-sighted and indecisive, the fault may lie with us, the public, for not listening to the worrywarts.

Street Freak
Doug French (Mises Daily) Feb 13, 2012
Wall Street traders, like high-stakes poker players, are a different breed. The constant pressure, the appetite for risk, the ability to think and react in split seconds, all the while calculating odds in their heads that most can't do with an HP12C.

A budget for the rich and powerful Financial Times Subscription Required
Jeffrey Sachs (FT) Feb 13, 2012
The poor are the losers as US political parties converge not to the centre of public opinion, but well to the right.

Obama and Xi should talk tech, not trade Financial Times Subscription Required
Yukon Huang (FT) Feb 13, 2012
There is potential for productive discussion – provided US does not complain about exchange rates and unfair competition.

Leverage cap has the power to reshape banking Financial Times Subscription Required
Feb 13, 2012
Finding a solution that curbs banker excess without choking growth will not be easy.

Understanding the Great Trade Collapse of 2009
Matthieu Bussière, Fabio Ghironi & Giulia Sestieri (VoxEU) Feb 14, 2012
At the height of the 2008–09 financial crisis, global trade fell by far more than global output – a pattern that defied past experience and became known as the Great Trade Collapse. This column uses a new model for analysis to argue that the collapse was caused mainly by the crash in global demand.

A Clarion Call for Emerging Markets
Eswar Prasad (Project Syndicate) Feb 14, 2012
From the dramatic events in the Middle East, to the groundswell of support for the anti-corruption crusader Anna Hazare in India, leaders in emerging markets are getting a clear message from the streets that growth is not everything. They ignore this message at their peril.

The Global Future of Europe’s Crisis
Kemal Dervis (Project Syndicate) Feb 14, 2012
The stock of financial assets worldwide has grown so large, relative to national income flows, that financial-market movements can overwhelm most countries. Indeed, the European crisis is a mere foretaste of the central political debate of the first half of the twenty-first century: how to resolve the tension between global markets and national politics.

China: The Optimistic BRIC
Jim O'Neill (Globalist) Feb 14, 2012
As China's Vice President Xi Jinping visited the United States this week, Jim O'Neill of Goldman Sachs Asset Management (and coiner of the term BRIC) explains why he remains optimistic about China.

The Chaos of Greece Wall Street Journal Subscription Required
WSJ Feb 14, 2012
What happens to countries that choose economic decline.

Fear and Loathing in Athens Wall Street Journal Subscription Required
Brian M. Carney (WSJ) Feb 14, 2012
About one-third of the Greek work force is now in the public sector, and the government has proven unable to boost tax collections.

Downgrading Europe
Nita Ghei (WT) Feb 14, 2012
As the smoke cleared from another weekend of riots in Athens, more gloom descended on Europe. On Tuesday, Moody's Investors Service dished out downgrades for Italy, Spain and Portugal, among others. Though Austria, France and the United Kingdom hang on to their valued AAA ratings, Moody's slapped them with a negative outlook.

Much too much ado about Greece Financial Times Subscription Required
Martin Wolf (FT) Feb 14, 2012
That this economically weak country has been able to cause such difficulty indicates the eurozone’s structural fragility.

China growth paradox baffles Walmart Financial Times Subscription Required
Simon Rabinovich (FT) Feb 14, 2012
The world’s biggest retailer has met its match – China is simply too large for retailers to develop a nationwide presence quickly.

Dollar bears in for shock if US cuts energy imports Financial Times Subscription Required
Mansoor Mohi-uddin (FT) Feb 14, 2012
Breakthroughs in technology will improve the country’s current account and long-term outlook of the greenback.

Drachma's History Offers Hints About its Future
Richard Doty (Bloomberg) Feb 14, 2012
Before Greece entered the euro area, its basic monetary unit was called the drachma. As the country debates with growing seriousness whether to return to its old currency, the coin's history and design repay a closer look. They speak of the extreme persistence of an idea, a coin and an image -- going back 25 centuries.

From Argentina to Athens?
Mohamed A. El-Erian (Project Syndicate) Feb 15, 2012
What Greece is facing today is, in key respects, what Argentina faced in August of 2001. Unless Europe reflects on Argentina's experience, the parallels with Greece may end up including financial meltdown, a deep output collapse, and social and political turmoil.

Europe’s fiscal union still lacks a blueprint
Nicolas Véron (VoxEU) Feb 15, 2012
Market conditions in Europe have improved of late – but this column reminds us that improvement on the turmoil of 2011 is hardly difficult. It argues that Europe’s fundamental design problems still remain unresolved and that leaders should use the market lull to prepare the next steps.

Lighting the Dark Continent
Achim Steiner, Adnan Amin & Kandeh K. Yumkella (Project Syndicate) Feb 15, 2012
Nineteenth-century European explorers called Africa the Dark Continent, because to them it was vast and largely unknown. Today, Africa may still be dark, but for a very different reason: it is chronically short of electricity.

A New European Growth Agenda
Philippe Legrain (Project Syndicate) Feb 15, 2012
The EU's leaders now recognize austerity alone cannot solve Europe's economic and financial crisis, and that growth and jobs need to be promoted with equal zeal. But, while kick-starting growth in 2012 was high on the agenda for the European Council on January 30, the big question remains: how?

Capital Shrugged
Mark Spitznagel (Project Syndicate) Feb 15, 2012
Capitalism’s greatest strength has been its resiliency – its ability to survive the throes and challenges of crises and business cycles to fuel innovation and economic growth. Today, however, more than four years into a credit crisis, this legacy is being called into question as never before.

The Uptick’s Downside
Nouriel Roubini (Project Syndicate) Feb 15, 2012
Since late last year, a series of positive developments has boosted investor confidence and led to a sharp rally in risky assets, starting with global equities and commodities. But at least four downside risks are likely to materialize this year, undermining global growth and negatively affecting investor confidence and market valuations of risky assets.

India’s ‘bumble bee’ defies gravity
David Pilling (FT) Feb 15, 2012
The country’s top industrialists lament that the ‘I’ in Brics now stands for Indonesia. That would be the wrong conclusion.

Bank crisis looms as Europe’s debt woes deepen
Charles Dumas (FT) Feb 15, 2012
The threat from private debt is underestimated amid eurozone orthodoxy.

2012 Should Not be a "Wasted Year," Lamy Urges WTO Members
Bridges Weekly Trade News Digest, Volume 16, Number 6 Feb 15, 2012
"2012 cannot and should not be a wasted year," WTO Director-General Pascal Lamy told delegates in Geneva on Tuesday 14 February. Instead, WTO members should use this year to try taking "small steps" in their efforts to move the Doha talks out of their current stalemate, and avoid setting "unattainable targets or packages."

Lamy Takes Aim at "Starve-thy-Neighbour" Food Export Restrictions
Bridges Weekly Trade News Digest, Volume 16, Number 6 Feb 15, 2012
"Starve-thy-neighbour" food export restrictions can bring importing countries to their knees "to plead for food security," WTO Director-General Pascal Lamy told an international conference in Geneva last week.

Uncertainty Looms over EU Ratification of Anti-Counterfeiting Pact
Bridges Weekly Trade News Digest, Volume 16, Number 6 Feb 15, 2012
Amplified protests and delays in the domestic procedures of several European Union member states have cast doubts on the future EU ratification of the controversial Anti-Counterfeiting Trade Agreement (ACTA), which was signed by the EU and 22 of its member states in Tokyo last month.

Obama Proposes Billions in Subsidy Cuts as Farm Bill Process Kicks Off
Bridges Weekly Trade News Digest, Volume 16, Number 6 Feb 15, 2012
The US Congress is set to start hearings on Wednesday 15 February concerning the US Farm Bill - the omnibus legislation on US agricultural policy that is up for renewal this year. The hearings begin just two days after US President Barack Obama announced a federal budget proposal for the 2013 fiscal year that would cut farm subsidies by over US$30 billion over the next decade.

The renminbi will become a reserve currency within the next decade
Eswar Prasad (VoxEU) Feb 16, 2012
Is China’s currency destined to become the dominant global reserve currency? This column argues that despite not yet having a flexible exchange rate or open capital account, China’s government is pursuing ‘liberalisation with Chinese characteristics’. It argues that the renminbi will become a reserve currency within the next decade, eroding but not displacing the dollar’s dominance.

How 3 Myths Drive Europe's Response to Debt Crisis
Harald Uhlig (Bloomberg) Feb 16, 2012
In many ways, things in Europe look better than they did just a month or two ago. The European Central Bank is providing banks with almost unlimited cash to buy their governments’ bonds. Yields on Italian debt have declined.

The quiet revolutionary who saved the World Bank Financial Times Subscription Required
Sebastian Mallaby (FT) Feb 16, 2012
The bank under the stewardship of Robert Zoellick has adapted nimbly to the new world of globalisation and emerging markets.

China’s gold rush reflects a loss of faith in the growth miracle Financial Times Subscription Required
John Lee (FT) Feb 16, 2012
The country’s rush to buy the precious metal is a sober reminder that locals are looking to a traditional haven for their savings.

Bank crisis looms as Europe’s debt woes deepen Financial Times Subscription Required
Charles Dumas (FT) Feb 16, 2012
The threat from private debt is underestimated amid eurozone orthodoxy.

Do Not Humiliate the Greeks New York Times Subscription Required
Alexis Parahelas (NYT) Feb 16, 2012
We know what diktat toward Germany after World War I led to. Greece is on the verge of such a meltdown.

Nanosecond Trading Could Make Markets Go Haywire
Brandon Keim (Wired) Feb 16, 2012
The afternoon of May 6, 2010 was among the strangest in economic history. Starting at 2:42 p.m. EDT, the Dow Jones stock index fell 600 points in just 6 minutes. Its nadir represented the deepest single-day decline in that market’s 114-year history. By 3:07 p.m., the index had rebounded. The “flash crash,” as it came to be known, was big, unexpected and scary — and a new study says flash events actually happen routinely, at speeds so fast they don’t register on regular market records, with potentially troubling consequences for market stability.

Who Should Lead the World Bank?
Arvind Subramanian & Devesh Kapur (Project Syndicate) Feb 17, 2012
With Robert Zoellick departing in June as President of the World Bank, the Bank requires a new selection process that will enable it to choose the most qualified person, regardless of nationality. More importantly, it needs to identify the qualifications needed to run the Bank at a time when its role must be adapted to far-reaching global changes.

The Sustainability Mindset
Michael Spence (Project Syndicate) Feb 17, 2012
The global economy will probably triple in size in the next quarter-century, fueling concern that the planet’s natural resources and recuperative capacities will not withstand the pressure. The challenge is to change the growth model in order to lighten the impact of higher levels of economic activity.

Tobin Trouble
Mark Roe (Project Syndicate) Feb 17, 2012
European leaders are seriously considering a Tobin tax, which would put a small levy on financial transactions, thereby dampening trading. But that is neither a desirable outcome nor an appropriate goal.

Obama’s Recovery?
Jeffrey Frankel (Project Syndicate) Feb 17, 2012
With November’s election in the United States fast approaching, the Republican candidates seeking to challenge President Barack Obama claim that his policies have done nothing to support recovery from the recession that he inherited in January 2009. If anything, they claim, his fiscal stimulus, the bank bailouts, and US Federal Reserve Chairman Ben Bernanke’s aggressive monetary policy made matters worse. Obama’s Democratic defenders counter that his policies staved off a second Great Depression, and that the US economy has been steadily working its way out of a deep hole ever since. Middle-ground observers, meanwhile, typically conclude that one cannot settle the debate, because one cannot know what would have happened otherwise.

Self and the City
Daniel A. Bell & Avner de-Shalit (Project Syndicate) Feb 17, 2012
Today, when more than half of the world's population lives in urban areas, many critics worry that people are losing their sense of self and community. In fact, cities may be the key to empowering identity in the twenty-first century.

China’s economic rebalancing is already underway
Yiping Huang (VoxEU) Feb 17, 2012
The international community, and particularly policymakers in the US, put great expectations on the contribution that China can make to a global economic recovery by rebalancing its economy through promoting consumption growth. This column, drawing on both official and unofficial data, argues that China’s long-awaited economic rebalancing is already well under way.

Rethinking industry policy: Size matters
John Van Reenen (VoxEU) Feb 17, 2012
The Great Recession has beckoned the ominous return of protectionism. While not condoning such policies, this column argues that if governments must provide investment subsidies to domestic firms, there is a much larger bang for their buck if they target small businesses rather than larger ones. Cash-strapped governments should take note.

Europe's Supply-Side Revolution Wall Street Journal Subscription Required
Donald L. Luskin and Lorcan Roche Kelly (WSJ) Feb 17, 2012
Following Germany's lead, euro-zone nations are pursuing pro-growth reforms that Reagan and Thatcher would admire.

Manufacturing Decline Wall Street Journal Subscription Required
WSJ Feb 17, 2012
Obama, Santorum and the political allocation of capital.

DreamWorks and Chinese Protectionism Wall Street Journal Subscription Required
WSJ Feb 17, 2012
A new joint venture shows the barriers to investment in China.

Europe's Failed Course on the Economy New York Times Subscription Required
NYT Jan 17, 2012
Austerity measures clearly are not working, so why are leaders still forcing it on Greece and others?

Who should lead the World Bank?
Mohamed A. El-Erian (WP) Feb 17, 2012
How the U.S. can avoid hypocrisy.

How China Copies the Ways and Means of U.S. Government
Stephan Richter (Globalist) Feb 17, 2012
Why does it bother Americans that China's power seems to be increasingly dispersed throughout many government ministries? After all, that's the way it's done in America.

Global: Global Inflation: Merry-Go-Round Spinning Again?
Spyros Andreopoulos (MS GEF) Feb 17, 2012
The Great Monetary Easing Part 2 is in full swing – and begets inflation risks.

The Six Mistakes of Germany's Finance Minister
Charles Wyplosz (Bloomberg) Feb 17, 2012
One can accuse Germany’s finance minister of many things, but not of hiding his views. By saying that a Greek default is possible because the rest of the euro area can now bear it, Wolfgang Schaeuble has simply admitted that the strategy adopted since late 2009 has been designed to protect Germany, not to help Greece. By further suggesting that elections be delayed in Greece and that technocrats replace the remaining politicians holding ministerial jobs, Herr Schaeuble has shown how little he cares about elementary democratic principles.

The lexicon of hedge funds: From alpha to smart beta Economist Subscription Required
Economist Feb 18, 2012
The industry’s language is changing.

Free exchange: Latin lessons Economist Subscription Required
Mario Blejer and Guillermo Ortiz (Economist) Feb 18, 2012
Why Greece should not leave the euro.

Consumption economics: The incredible shrinking surplus Economist Subscription Required
Economist Feb 18, 2012
At least one of China’s economic imbalances is narrowing.

How can European banks learn from the US?
Mathias Hoffmann & Iryna Stewen (VoxEU) Feb 19, 2012
Few would deny that there is a strong link between the health of a country’s banks and its public finances. With that in mind, this column argues that the banking system can learn from banking deregulation in the US, with knock on effects for Europe’s sovereign debt crisis.

Lessons from the flawed ‘Rothschild model’ Financial Times Subscription Required
Jonathan Ford (FT) Feb 19, 2012
The low standard of governance among foreign-owned companies threatens more than those who invest in them.

Liquidity-Versus-Capital Debate Divides Stanford
Simon Johnson (Bloomberg) Feb 19, 2012
Top researchers at the Stanford University Graduate School of Business are taking diametrically opposing views on the Volcker rule, one of the most important issues in financial reform. The sharp distinctions can be seen in their public comments to U.S. bank regulators writing the rule, the part of the Dodd-Frank law that restricts proprietary trading by very large banks.

Has austerity gone too far?
Giancarlo Corsetti & Gernot Müller (VoxEU) Feb 20, 2012
Numerous countries faced with debt problems have recently embarked on fiscal tightening. Yet it is not clear if this is a cure or a self-defeating strategy. This column argues that, where sovereign risk is high, fiscal tightening remains an important avenue to bring down deficits at a limited cost to economic activity.

Beware talk of business-friendly Myanmar Financial Times Subscription Required
Joshua Kurlantzick (FT) Feb 20, 2012
The country went through a similar glasnost in the mid-1990s, but then hardliners rolled back the changes.

What Ptolemy tells us about Germany and Greece Financial Times Subscription Required
Stephen King (FT) Feb 20, 2012
A German-centric eurozone requires economic adjustment by others to protect German taxpayers and voters.

Bull run to be powered by low valuations Financial Times Subscription Required
Tim Bond (FT) Feb 20, 2012
The valuation gap between equities and bonds offers a forecast of prospective returns that should not be ignored.

When Did We Give Up on Governing Globalization?
Peter Mandelson (Globalist) Feb 20, 2012
The end of a world in which the West dictates the terms of globalization is not necessarily a tragedy.

Reinventing the World Bank
Ana Palacio (Project Syndicate) Feb 21, 2012
Robert Zoellick’s announcement that he will not seek reelection as President of the World Bank has focused attention on whether the tradition of putting an American in charge will or should endure. But, legitimate as that question is, it is just a minor aspect of the debate that is needed about the World Bank’s role in the twenty-first century.

Grit is Good
Howard Davies (Project Syndicate) Feb 21, 2012
Nowadays, many are questioning the old assumption that greater market efficiency is always and everywhere a public good. Phrases like “sand in the machine” and “grit in the oyster,” which were pejorative before the 2008 financial crisis, are now used to support regulatory or fiscal changes that might slow down trading and reduce its volume.

The Middle Class Goes Global
Johannes Jütting (Project Syndicate) Feb 21, 2012
We are moving at high speed toward a world based on a new geography of growth, with millions of people in the east and the south moving out of extreme poverty to become powerful middle-class consumers. Will their dreams be achieved, or will governments’ failure to provide adequate social protection and services lead to a global nightmare?

Political constraints in the aftermath of financial crises
Atif Mian, Amir Sufi & Francesco Trebbi (VoxEU) Feb 21, 2012
Political environments appear systematically different in the aftermath of a financial crisis relative to before the crisis. This column argues that the ensuing gridlock and the delay in potentially beneficial policy reforms should come as no surprise.

Foreign firms and firm survival: A look at Ireland in crisis
Olivier N. Godart, Holger Görg & Aoife Hanley (VoxEU) Feb 21, 2012
When disaster strikes, what happens to foreign firms? Do they move away, leaving an already unstable economy even further off balance? Or do they sit on their sunk costs and help steady the ship? This column looks at data from Ireland during the recent financial turmoil.

Currency Trading Goes Bipolar
Charles Wallace (II) Feb 21, 2012
RORO is one of the greatest headaches of the currency trader’s existence. Short for “risk on/risk off,” RORO has been the most powerful influence on foreign exchange in the past few years.

Short Selling and the Great Depression
Philip Scranton (Bloomberg) Feb 21, 2012
In the midst of the Great Depression, people who bet on stock-market declines were considered unpleasant, unwanted, un-American, un-something. Yet as a New York Times writer noted in February 1932, "The bearish speculator is not often reviled in healthy markets; it is when prices are declining that opprobrium is heaped upon him."

ECB must rescue Greece – or pay more later Financial Times Subscription Required
Gregorz Kolodko (FT) Feb 21, 2012
Expecting the Greeks to tighten their belts again is unrealistic. One should not push people beyond the limits of endurance.

EU politics take centre stage in crisis Financial Times Subscription Required
Tony Barber (FT) Feb 21, 2012
The most important trail to follow over the next three months will be France’s presidential and legislative elections.

India’s global banking dreams confront reality Financial Times Subscription Required
James Lamont (FT) Feb 21, 2012
For the moment the wings of the country’s lenders are clipped by their balance sheets and a need for urgent recapitalisation.

Investors should prepare for Greek ‘bail-out III’ Financial Times Subscription Required
Sushil Wadhwani (FT) Feb 21, 2012
When pressure builds again, the authorities will do the same: let Greece remain in the euro.

Getting Somalia Right This Time New York Times Subscription Required
Alex de Waal (NYT) Feb 21, 2012
The international community can help Somalia function, but only if it takes its cues from Somalia's own successes.

Europe’s miscalculation
Gordon Brown (WP) Feb 21, 2012
Leaders are ignoring the banking crisis and a severe drop in growth.

Greece should leave the eurozone
John N. Kallianiotis (WT) Feb 21, 2012
I grew up in a different Greece, where saving, not debt, was a virtue. Everyone I knew had a savings account, and we all felt it was wrong to borrow money.

Too Big to Jail
Simon Johnson (Project Syndicate) Feb 22, 2012
Among the fundamental principles of any functioning judicial system is the following: Don’t lie to a judge or falsify documents submitted to a court, or you will go to jail. These are serious criminal offenses, but apparently not if you are the heart of America’s financial system.

Don’t Blame it on Rio
Michel Rocard (Project Syndicate) Feb 22, 2012
Little more than a decade into the twenty-first century, all major international negotiations and cooperative efforts thus far have ended in failure. The upcoming Rio+20 summit will end the same way If we do not give up the naive dream of consensus and allow the UN General Assembly to vote on environmental and economic measures.

Precautionary savings in the Great Recession
Ashoka Mody, Franziska Ohnsorge & Damiano Sandri (VoxEU) Feb 22, 2012
Uncertainty rose sharply during the Great Recession, as did saving rates. This column shows that these two developments were related. Using a panel of OECD countries, it estimates that at least two-fifths of the increase in households’ saving rates between 2007 and 2009 was due to increased uncertainty about labour-income prospects. It adds that restoring higher levels of consumption and aggregate demand will require employment-friendly social insurance and reduced policy-induced uncertainty.

A Better Grecian Bailout Wall Street Journal Subscription Required
John Taylor (WSJ) Feb 22, 2012
The fears of contagion from Athens were always exaggerated. Now the issues are whether Greece will reform and whether Europe will cut it off if it doesn't.

The Tragic Greek Sideshow Wall Street Journal Subscription Required
WSJ Feb 22, 2012
No country should be forced to remain in the euro against its will.

Jeremy Lin and America's 'New Exports'
Austan Goolsbee (WSJ) Feb 22, 2012
The U.S. runs a huge trade surplus in tourism, tuition paid by foreign students, even NBA jerseys sold abroad.

Rethinking Risk: Pension Plans Should Adjust to Global Realities
Jeff Helsing (PIMCO) Feb 22, 2012
Many governments are carrying higher levels of debt, which can increase both economic and asset volatility as well as default risk. The resulting incremental increase in default risk suggests pension portfolios may have less duration than implied by traditional measures. Pension plans with high levels of equity exposure should consider increasing durations and credit exposure. Investment guidelines may need to be adjusted so they don't measure credit risk simply by the World Bank's definition of emerging markets.

Opponents of EU Aviation Carbon Law Agree on Possible Countermeasures
Bridges Weekly Trade News Digest, Volume 16, Number 7 Feb 22, 2012
Countries that oppose an EU rule requiring airlines to surrender carbon permits for the emissions they produce during all flights taking off or landing in the 27-country bloc now have an agreed set of options for retaliation. The 22 February announcement by Russian officials is the latest salvo in an ongoing row over the Brussels plan that some fear could escalate into a 'trade war.'

Trade Issues Come to the Fore as US Hosts Chinese Vice President
Bridges Weekly Trade News Digest, Volume 16, Number 7 Feb 22, 2012
Washington and Beijing's often contentious trade relationship again found itself in the spotlight last week, with the much-anticipated visit of Chinese Vice President Xi Jinping - expected to take the helm of the Chinese government next year - to the US. Trade dominated the agenda of the weeklong trip, which saw the resolution of a five-year conflict regarding Beijing's restrictions on the importation and distribution of foreign films.

WIPO Ctte Advances Draft Text on Genetic Resources Amid Controversy
Bridges Weekly Trade News Digest, Volume 16, Number 7 Feb 22, 2012
Members at a World Intellectual Property Organization (WIPO) meeting dedicated to genetic resources agreed this week to work on a single text for a future instrument. However, it was not all smooth sailing as major disagreements between countries and a walk-out by an indigenous peoples group threatened to derail the talks.

Disputes Roundup: India Challenges Turkish Cotton Safeguards; DSB Election Stalls
Bridges Weekly Trade News Digest, Volume 16, Number 7 Feb 22, 2012
Last week saw India take its complaints about Turkey's safeguard duties on cotton yarn to the next level by formally initiating WTO dispute proceedings between the two countries. Meanwhile, the 2012 chairmanship of the organisation's Dispute Settlement Body (DSB) remains in limbo, with members unable to reach consensus on who would replace Norway's ambassador in the role.

Trade Tensions Soar as EU Prepares to Vote on Canadian Oil
Bridges Weekly Trade News Digest, Volume 16, Number 7 Feb 22, 2012
Canada says it will not back away from a trade war with the EU if the bloc votes in favour of a motion to label oil from the vast Alberta oil sands deposits as "highly polluting." The communiqué raises the rhetoric between the trading partners to new heights just days ahead of the 23 February vote.

How to Step Up Financing for African Infrastructure
IMF Survey Feb 22, 2012
Africa can step up investment in its infrastructure by augmenting traditional sources of financing with foreign borrowing and private investment, but, Andrew Berg of the IMF's Research Department cautions, tapping alternative sources of financing is not a cure-all for meeting Africa’s infrastructure needs.

Beware the risks of the rush to regulate Financial Times Subscription Required
George Osborne and Jun Azumi (FT) Feb 22, 2012
All countries need to be alert to the unintended consequences of financial regulation and reform.

Japan’s policy will spur high debt economies Financial Times Subscription Required
Peter Tasker (FT) Feb 22, 2012
Artificial reduction of the supply of risk-free assets ignites demand for risky assets. The implications are likely to be profound

The government drag on growth
Nita Ghei (WT) Feb 22, 2012
Europe's leaders on Tuesday decided to give another very expensive band-aid to Greece. The latest bailout will cost $170 billion and enable Greeks to borrow from one set of creditors to pay off another, while other private creditors agree to take a haircut.

U.S. leadership at World Bank remains critical
John F. Kerry (WT) Feb 22, 2012
Robert Zoellick's announcement that he would not seek another term as president of the World Bank has begun anew an old debate: Should an American continue to lead this institution?

Global Integration, Act II New York Times Subscription Required
Samuel J Palmisano (NYT) Feb 22, 2012
Global integration is entering a new phase, with particular challenges for mature markets.

Ringfencing Greece
Stephan Richter (Globalist) Feb 22, 2012
Europe has done its best to "ringfence" Greece. That process isn't finished yet, but it has earnest forward motion.

The Economic Crisis and the Need to Rethink Economics
Diane Coyle (Globalist) Feb 23, 2012
I wasn't doing macroeconomic forecasting, and I never worked in finance. Am I still somehow to blame for the current crisis just because I'm an economist?

Machines from hell
Martin Hutchinson (AT) Feb 23, 2012
The global economy and finances are now replete with "machines from hell" that together threaten the collapse of the economic system, yet turning any of them off is extremely difficult and poses its own dire threats.

Greek knife to Wall Street
Ellen Brown (AT) Feb 23, 2012
Calling a default something else shores up the US$32 trillion credit default swap market and the bankers behind it. But with the house so obviously rigged, as MF Global discovered and owners of Greek debt are finding out, players in the future may simply refuse to play.

How to Save the Euro
George Soros (NYRB) Feb 23, 2012
What lies ahead? Economic deterioration and political and social disintegration will mutually reinforce each other. During the boom phase the political leadership was in the forefront of further integration; now the European leaders are trying to protect a status quo that is clearly untenable.

For Europe: ‘The Firepower Is There’
Klaus Regling (NYRB) Feb 23, 2012
The head of the European Financial Stability Facility on financial reform efforts, leveraging options, and S&P’s downgrade of the eurozone countries.

The Doom Loop
Andrew Haldane (LRB) Feb 23, 2012
The continuing backlash against banking is a response not just to the fact that the world is poorer, as pre-crisis riches have turned to rags, but to the way these riches were privatised, while the rags are being socialised. The structure of banking has been transformed by the emergence of banks deemed ‘too big to fail’. At the start of the 20th century, the assets of the UK’s three largest banks accounted for less than 10 per cent of GDP; by 2007 that figure had risen above 200 per cent. When these institutions have run into problems, insurance has been provided by taxpayers: only they have pockets deep enough. We have had survival not of the fittest, but the fattest, and households, companies and even countries have borne the brunt. Putting equity, social and financial, back into banking is essential if the financial system is to be durably repaired.

Disease Busters Going Bust
Sisonke Msimang (Project Syndicate) Feb 23, 2012
In the wake of the global financial crisis, Western donors are now withdrawing funding from The Global Fund to Fight AIDS, TB, and Malaria. But if they fail to support the Fund, we could soon find ourselves facing epidemics that are far worse than any financial contagion.

Contagion during the Greek sovereign debt crisis
Jakob de Haan & Mark Mink (VoxEU) Feb 23, 2012
Since 2010, Eurozone countries have engaged in unprecedented rescue operations to avoid contagion from a potential Greek sovereign default. This column argues that news about Greek public finances does not affect Eurozone bank stock prices, while news about a Greek bailout does. This suggests that markets consider news about a Greek bailout to be a signal of Eurozone countries’ willingness to use public funds to combat the financial crisis.

Greek Bailout Leaves Europe on Road to Disaster
Clive Crook (Bloomberg) Feb 23, 2012
If Europe’s new plan for Greece succeeds, nobody will be more surprised than the politicians who designed it. At best, the arrangement is a holding action, one that fails yet again to deal with the much larger confidence crisis facing the euro area.

Hong Kong Was Better Under the British
Hugo Restall (WSJ) Feb 23, 2012
It wasn't a democracy, but its rulers were uncorrupt and accountable. Now its government is none of the above.

China: Managing inflation expectations requires structural changes in the domestic economy
Syetarn Hansakul (DB Research) Feb 23, 2012
On February 18, the People’s Bank of China (PBOC) announced it would lower the reserve requirement ratio by half a percentage point to 20.5% for larger financial institutions in an effort at “fine tuning”, as Premier Wen Jiabao said a week ago. It’s a move intended to maintain economic growth by pumping substantial amounts of liquidity into the financial system while keeping inflation in check.

The Future of the Euro
Philipp Bagus (Mises Daily) Feb 23, 2012
The problems of the eurozone are ultimately malinvestments. In Greece these days the struggle continues about who will ultimately foot the bill for these investments. During the early 2000s an expansionary monetary policy lowered interest rates artificially. Entrepreneurs financed investment projects that only looked profitable due to the low interest rates but were not sustained by real savings. Housing bubbles and consumption booms developed in the periphery.

Is Prosperity Strengthening Beijing's Iron Grip? New York Times Subscription Required
Chrystia Freeland (NYT) Feb 23, 2012
Globalization and the technology revolution mean that China's authoritarian rulers have been able to deliver strong economic growth without surrendering political and social control.

Weimar Europe?
Harold James (Project Syndicate) Feb 24, 2012
Germany’s critics nowadays make two points: the real European problem is the German current-account surplus, and Germans are perversely obsessed with their past. But Germans are right to notice the parallels between conditions in Europe today and those in the interwar period.

A World Bank for a New World
Jeffrey D. Sachs (Project Syndicate) Feb 24, 2012
The world is at a crossroads: Either the global community will join together to fight poverty, resource depletion, and climate change, or it will face a generation of resource wars, political instability, and environmental ruin. The World Bank, if properly led, can play a key role in averting these threats and the risks that they imply – but only with the right leader.

Why U.S. Treasuries Won’t Always Be a Haven
Alexander David and Pietro Veronesi (Bloomberg) Feb 24, 2012
At the onset of the financial crisis in 2008, the volatility of stock returns increased dramatically as the equity markets plunged. At the same time, U.S. Treasury bond prices shot up. The correlation of bonds and stock prices has been mainly negative ever since.

The United States Should Focus on Business Services, Not Manufacturing
J. Bradford Jensen (WP) Feb 23, 2012
Opening foreign markets could aid the economy.

Global: The Rules of the Game
Manoj Pradhan (MS GEF) Feb 24, 2012
Retroactive changes to regulations have created an extremely uncertain landscape for financial markets.

Europe: Till Debt Do Us Part
Arnaud Marès (MS GEF) Feb 24, 2012
The agreement of February 20 has avoided a disorderly default but not resolved the ‘Greek question’, in our view.

It's the family, stupid!
Edoardo Campanella (VoxEU) Feb 24, 2012
Western countries with ageing populations are in the grip a cruel irony. At the same time as having more old people than ever to support, youth unemployment is at its highest levels for a generation. As many of these countries go into elections this year, this column warns against populist politics that panders to the grey vote, and instead calls for leadership that puts the family first.

Lost economic time: The Proust index
Economist Feb 25, 2012
Advanced economies have gone backwards by a decade as a result of the crisis.

Buttonwood: Repressed memories Economist Subscription Required
Economist Feb 25, 2012
The difficulty of deciding how to invest during a time of financial repression.

The euro crisis: Greek rescue fatigue Economist Subscription Required
Economist Feb 25, 2012
Faith that private-sector losses on Greek bonds are a one-off is hard to sustain.

The Failing State of Greece New York Times Subscription Required
Rachel Donadio (NYT) Feb 25, 2012
Where is the line between a weak state and a failed state?

Oops, I Underestimated China’s GDP
Arvind Subramanian (PIIE) Feb 26, 2012
More than a year ago, I argued that China’s GDP in purchasing power parity (PPP) dollars had overtaken that of the United States in 2010. This calculation is used in my book, Eclipse: Living in the Shadow of China’s Economic Dominance and plays a role in my conclusion that China has overtaken or is close to overtaking the United States in terms of a broader index of economic dominance. (The broader index combines measures of a country’s GDP measured both at PPP and market dollars, its trade, and its net international creditor/debtor position.)

Greece really needs a year to prepare for total default Financial Times Subscription Required
Wolfgang Munchau (FT) Feb 26, 2012
Months of misery lie ahead, but if all goes well, Greece will have finally gained some room for manoeuvre.

Draghi must be wary of LTRO elixir’s power Financial Times Subscription Required
Ralph Atkins (FT) Feb 26, 2012
Risk that loan level will change his reputation from ECB president who created breathing space for eurozone to the one who spoilt bankers.

What Ails Europe? New York Times Subscription Required
Paul Krugman (NYT) Feb 26, 2012
The two common explanations---call it the Republican narrative and the German narrative---are just wrong.

Europe’s Empty Fiscal Compact
Martin Feldstein (Project Syndicate) Feb 27, 2012
The EU’s current focus on creating a “fiscal compact,” which would bind member states to supposedly inviolable deficit ceilings, reflects the “European project” of political integration. Unfortunately, the proposed compact subordinates economic reality to political leaders’ desire for bragging rights about progress toward "ever closer union."

A Euro Sabbatical
Hans-Werner Sinn (Project Syndicate) Feb 27, 2012
Eurozone crisis countries that do not want to take it upon themselves to lower their prices should be given the opportunity to leave the monetary union temporarily in order to devalue prices and debts. After the ensuing financial thunderstorm died down, the sun would come out again very quickly.

Europe’s Fairness Crisis
Giles Merritt (Project Syndicate) Feb 27, 2012
For many years, Europeans viewed the EU as a catalyst for economic growth and greater “cohesion” through policies that primarily benefited Europe’s poorer countries and more backward regions. That seems less and less true of public opinion today: it is doubtful that EU institutions are still widely regarded as champions of the underdog.

Right-wing political extremism in the Great Depression
Alan de Bromhead, Barry Eichengreen & Kevin H O’Rourke (VoxEU) Feb 27, 2012
The enduring global crisis is giving rise to fears that economic hard times will feed political extremism, as it did in the 1930s. This column suggests that the danger of political polarisation and extremism is greatest in countries with relatively recent histories of democracy, with existing right-wing extremist parties, and with electoral systems that create low hurdles to parliamentary representation of new parties. But above all, it is greatest where depressed economic conditions are allowed to persist.

What would the wealth distribution look like without redistribution?
Ricardo Fernholz & Robert Fernholz (VoxEU) Feb 27, 2012
What does the distribution of wealth look like in an economy in which all households have identical skills and patience, but there is no redistribution? This column argues that without some redistributive mechanism – either explicit in the form of government tax or fiscal policies, or implicit in the form of limited intergenerational transfers – the wealth in the economy tends to concentrate at the top.

For the Fed, There's No Easy Exit Wall Street Journal Subscription Required
George Melloan (WSJ) Feb 27, 2012
Rising returns on private loans will raise the central bank's borrowing costs and put pressure on its balance sheet.

Emerging economies should all prepare for the worst Financial Times Subscription Required
Felipe Larrain (FT) Feb 27, 2012
Fiscal policy has allowed Chile to accumulate over $20bn in sovereign wealth funds, to protect against external shocks.

Merkel’s intransigence is a way of playing for time over a question of survival Financial Times Subscription Required
Quentin Peel (FT) Feb 27, 2012
Germany’s chancellor will not be rushed into agreeing to an increase in the eurozone’s ‘firewall’ against contagion despite growing pressure.

Cushions to stem Iran oil price spike are proving elusive Financial Times Subscription Required
FT Feb 27, 2012
Oil market has reacted to US and European Union sanctions in ways none of the leaders on either side of the Atlantic apparently contemplated.

China Needs to Loosen Grip on Economy, Study Says New York Times Subscription Required
David Barboza (NYT) Feb 27, 2012
The government should alter its development model and steer the nation toward a market economy, researchers say.

Colonialism in Africa helped launch the HIV epidemic a century ago Recommended!
Craig Timberg and Daniel Halperin (WP) Feb 27, 2012
We are unlikely to ever know all the details of the birth of the AIDS epidemic. But a series of recent genetic discoveries have shed new light on it, starting with the moment when a connection from chimp to human changed the course of history.

The Banks and the Reich: Echoes
Philip Scranton (Bloomberg) Feb 27, 2012
Although many Americans had chafed at the Federal Reserve’s creation in 1913 (and some still do), American banking practice differed sharply from Germany’s. In the U.S., thousands of stand-alone banks served local needs. In Germany, a few huge banks performed multiple financial functions, using branches scattered across the Reich. Such government ownership was inconceivable in the U.S.

Japan’s Rubble Economy
Yuriko Koike (Project Syndicate) Feb 28, 2012
On March 11, a year will have passed since Japan was struck by the triple tragedy of earthquake, tsunami, and nuclear accident. The biggest obstacle to reconstruction has been the authorities' inability to dispose of the mountains of debris left behind.

Asia’s Take on Austerity
Stephen S. Roach (Project Syndicate) Feb 28, 2012
With Europe on the brink of recession and recovery in the US finally getting some traction, the case for fiscal consolidation appears increasingly weak. But the case becomes stronger when one considers Asian countries' path from crisis in the late 1990's to astounding growth and prosperity today.

Who Lost Greece?
Jean Pisani-Ferry (Project Syndicate) Feb 28, 2012
The blame game in Europe may be about to begin. An agreement between Greece and its private creditors and public lenders will enable it to meet its next debt repayment deadline of March 20, but then what?

China’s Growing Growth Risks
Yao Yang (Project Syndicate) Feb 28, 2012
If everything goes right for China, it will surpass the US as the world’s largest economy, at least in current dollar terms, by 2021, and its per capita income will reach that of today’s lower tier of high-income countries. But the Chinese economy faces looming risks in the coming decade.

Rethinking Basel, Part I
Paul E Atkinson & Adrian Blundell-Wignall (VoxEU) Feb 28, 2012
Amid the chaos of the Eurozone crisis, the debate over how to fix the banking system has been pushed to one side. This column, the first of two, aims to bring banking regulation back to the centre of attention. It argues that the Basel III regulations currently being proposed are already desperately out of date.

Bernanke in theory versus Bernanke in practice
Laurence Ball (VoxEU) Feb 28, 2012
What explains Bernanke’s caution as Fed chair? This column argues that one possible factor is ‘groupthink’, where individuals go along with what they perceive as the majority view. Many of the Fed’s features – its tradition of decision-making by consensus, limited interaction with outsiders, and atmosphere of camaraderie – encourage groupthink. And Bernanke’s personality, often described as modest and unassuming, may have reinforced the effects of groupthink.

Tight credit, low growth: How will private equity fare in Europe? Adobe Acrobat Required
Thommas Meyer (DB Research) Feb 28, 2012
Macroeconomic and debt market conditions indicate restrained investment activity by PE funds this year. European PE investments in 2012 are likely to be 8 to 17% lower than our estimate for 2011 – although a lot will depend on the management of the European debt crisis. Historical evidence suggests that periods of low growth and sluggish fundraising – as seen in Europe at present – tend to make for PE vintages with strong returns. This holds even in comparison to investments in public equity as the analysis of public market equivalents illustrates. However, the overhang of uncalled capital commitments (dry powder) and potential competition from cash-rich strategic buyers might bear on this effect this time, meaning that PE performance might eventually be somewhat lower than pure historical experience would have suggested.

Reauthorize the Export-Import Bank: Part II
Gary Clyde Hufbauer (PIIE) Feb 28, 2012
Reauthorization of the Export-Import Bank is stalled in Congress because of opposition from odd bedfellows. The issue has been addressed previously in this forum, but in this posting a solution to the impasse is offered that could clear the way for funding a vital federal program.

China is right to open up slowly Financial Times Subscription Required
Martin Wolf (FT) Feb 28, 2012
Discussion is needed for a successful timetable of reform to fit with country’s and world’s needs.

China should open up markets to investors Financial Times Subscription Required
Henny Sender (FT) Feb 28, 2012
Quotas that allow renminbi investment in the country’s young financial markets are as sought after, and as elusive, as shark’s fin.

Europe's Austerity Mirage New York Times Subscription Required
Jean-Paul Fitoussi (NYT) Feb 28, 2012
European governments are following the same path Asian countries pursued in the late 1990s---austerity and competitiveness---but they are less likely to succeed.

White House Trade Momentum Builds as Election Heats Up
Bridges Weekly Trade News Digest, Volume 16, Number 8 Feb 29, 2012
With the US election year well underway, the White House appears to be making a concerted push to advance the trade agenda outlined in January's State of the Union address, with President Barack Obama signing an executive order yesterday for the creation of a new agency that would target "unfair" practices in US trading partners.

With Eurozone Crisis in the Background, Beijing and Brussels Spar over Anti-Dumping Probe
Bridges Weekly Trade News Digest, Volume 16, Number 8 Feb 29, 2012
Sino-EU tensions are building over a European Commission investigation into Chinese steel products, with Beijing suggesting that the trade probe would "undermine" efforts to resolve the ongoing eurozone crisis.

Russia Trade Debate Prepares to Kick Off in Washington
Bridges Weekly Trade News Digest, Volume 16, Number 8 Feb 29, 2012
US-Russia trade ties are entering back into the spotlight, with Washington lawmakers set to begin debating the repeal of Cold War-era trade restrictions that would allow Moscow to become a full trade partner.

Philippines: US Linking Rice Import Deal to Frozen Meat Standards
Bridges Weekly Trade News Digest, Volume 16, Number 8 Feb 29, 2012
A bid by the Philippines to extend special treatment on rice imports at the WTO is being blocked by the US over health and safety standards for frozen meat, the Filipino agriculture minister claimed last Thursday. The two sides met today in the Philippines in an attempt to resolve the row.

Why I Am (Still) Optimistic About Russia
Jim O'Neill (Globalist) Feb 29, 2012
With the almost certain return of Vladimir Putin to the Russian presidency, it is getting harder to find people who are optimistic about Russia and its future. That is not a view that I share.

Banks should learn to go it alone Financial Times Subscription Required
Lorenzo Bini Smaghi (FT) Feb 29, 2012
A serious concern is that cheap three-year funding will delay adjustment needed for banks to stand on their own feet.

Germany knows way to solve crisis Financial Times Subscription Required
Guy Verhofstadt (FT) Feb 29, 2012
We are no nearer a resolution than in December 2009, when Greece’s fiscal situation first became apparent.

Middle East needs to plot its digital course Financial Times Subscription Required
Bahjat El-Darwiche and Louay Abou Chanab (FT) Feb 29, 2012
Region’s governments must enable the information technology sector to flourish and thereby reap its many economic and social rewards.

Why the ‘risk-on’ rally will not last Financial Times Subscription Required
Richard Bernstein (FT) Feb 29, 2012
The question is whether policymakers can fully alleviate the effects of a deflating global credit bubble. Longer-term investors should be sceptical.

The waning of finance
Martin Hutchinson (AT) Feb 29, 2012
The share of financial services in the United States economy has quadrupled over the past six decades, but it is not the first time bankers and their like have enjoyed a comparable surge before economic downturn and regulation took their toll.

Free Trade Ad Nauseam
Jagdish Bhagwati (Project Syndicate) Feb 29, 2012
So much has been written, by so many, against the muddled ideas that have now overwhelmed good sense on trade policy in the US government that one wonders whether there is anything left to say. Unfortunately, there is.

When Technophobia Becomes Toxic
Henry I. Miller (Project Syndicate) Feb 29, 2012
Activists opposed to genetically modified food have succeeded in stopping commercialization of a promising new technology that has no proven risks and many demonstrated benefits, including lower levels of fungal toxins. That is not a public policy that has the public’s interest at heart.

Merkel’s Next Crisis
Joschka Fischer (Project Syndicate) Feb 29, 2012
With Europe bogged down by the financial crisis and its national governments failing or being voted out of office across the continent, Germany has looked like an island of prosperity and stability. But, having kept Europe’s crisis from Germany’s door, Chancellor Angela Merkel faces a new crisis at home.

The Usual Suspect
J. Bradford DeLong (Project Syndicate) Feb 29, 2012
Across the Euro-Atlantic world, economic recovery remains sluggish and halting, turning readily curable cyclical unemployment into structural unemployment, and a brief hiccup in capital accumulation into a prolonged investment shortfall. Unless governments spend more now,output could suffer for decades.

Brazil, Country of the Future No More?
Andrés Velasco (Project Syndicate) Feb 29, 2012
At first glance, Brazil appears to be an unambiguous success story – democratic, macroeconomically sound, and poised to host the world's two largest and most prestigious sporting events. But dig a little deeper and a more complex picture emerges.

Rethinking Basel, Part II
Paul E Atkinson & Adrian Blundell-Wignall (VoxEU) Feb 29, 2012
It wasn’t long ago that people were blaming banks, not governments – and the issue of the day was financial regulation, not fiscal compacts. This column, the second of two, focuses on the Basel framework for banking regulation that it argues has led to a ‘vast, poorly diversified, highly interconnected banking system’. In this section it outlines how to put this right.

Preventive macroprudential policy
Charles A.E. Goodhart & Enrico Perotti (VoxEU) Feb 29, 2012
Banking runs are a major threat to modern finance. This column makes the case for preventive tools over ex post intervention. It argues for assigning responsibility and novel tools to microprudential regulators for supervising individual liquidity and capital ratios, and to central banks those tools for aggregate liquidity-risk management, with overall control switching to fiscal authorities once intervention appears to require fiscal means.

The Conservative Case for Foreign Aid Wall Street Journal Subscription Required
John Kerry (WSJ) Feb 29, 2012
Reagan knew that diplomacy and development policy neutralize threats before they become crises.

Money-Market Funds Aren't What You Think Wall Street Journal Subscription Required
Sallie Krawcheck (WSJ) Feb 29, 2012
As recently as last summer, the largest ones averaged 45% of their investments in European bank paper, with one major player at just under 70%.

Why I Am (Still) Optimistic About Russia
Jim O'Neill (Globalist) Feb 29, 2012
More and more analysts are taking a dark view of Russia's economic future.

London Is Eating New York's Lunch New York Times Subscription Required
Adam Davidson (NYT) Feb 29, 2012
It helps to be located between the U.S. and China.

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