News & Commentary:

March 2008 Archives


The End of (Economic) History
Jean-Paul Fitoussi (Project Syndicate) Mar 2008
Some academic works, for reasons that are at least partly obscure, leave a persistent trace in intellectual history. Such is the case with John Maynard Keynes’s paper “Economic Possibilities for our Grandchildren.”

Capitalist Meltdown
Michel Rocard (Project Syndicate) Mar 2008
There is a strange foreboding in the world economy. Newspapers report downward revisions in growth estimates for all the major developed countries: the United States, Germany, France, Japan. No one, it seems, is being left out. Indeed, these estimates are roughly half a percentage point lower than those issued only last autumn.

Fair Contracts for Poor Countries
Karl P. Sauvant (Project Syndicate) Mar 2008
A number of countries in Latin America, Africa, Eastern Europe, and elsewhere are abrogating or renegotiating contracts with multinational enterprises (MNEs), and others are likely to follow suit. The costs can be high. Governments may get better terms, but they may also become embroiled in international investment disputes and discourage other investors. For companies, renegotiations mean uncertainty and possible interruptions of production and revenue.

China: Guangdong Exodus Far Eastern Economic Review Subscription Required
Alexandra Harney (FEER) Mar 2008
Look to Guangdong to gain insight into China’s slow climb up the value chain.

An Inflation Reality Check
Kenneth Rogoff (Project Syndicate) Mar 2008
As inflation continues to soar everywhere, maybe the world’s central bankers need a jolt to awaken them from complacency. How about holding one of their bi-monthly meetings in hyperinflationary Zimbabwe? It might not be comfortable, but it would be educational.

A Fresh Start for Europe in Latin America?
Carlo Secchi (Project Syndicate) Mar 2008
By 2050, Brazil and Mexico will be among the world’s six leading economies, according to analysts at the investment bank Goldman Sachs. Does the European Union care? Is Latin America to be Europe’s next missed business opportunity?

The Party is Over
Hans-Werner Sinn (Project Syndicate) Mar 2008
With the United States teetering into recession, the global economic boom has ended. The boom was unusually long and persistent, with four years of roughly 5% growth – a period of sustained economic dynamism not seen since around 1970.

The Politics of Sovereign Wealth Recommended! Adobe Acrobat Required
Laura Badian and Gregory Harrington (TIE) Winter 2008
Global financial markets enter a new era.

Globalization and the Beautiful Game
Dani Rodrik (Project Syndicate) Mar 2008
How does globalization reshape wealth and opportunity around the world? Is it mainly a force for good, enabling poor nations to lift themselves up from poverty by taking part in global markets? Or does it create vast opportunities only for a small minority?

The Falling Dollar
Martin Feldstein (Project Syndicate) Mar 2008
When the euro’s value reached an all-time high of $1.52, Jean-Claude Trichet, the president of the European Central Bank, told the press that he was concerned about its rapid appreciation and wanted to “underline” the United States Treasury’s official policy of supporting a strong dollar. Several European finance ministers subsequently echoed a similar theme.

Good Capitalism, Bad Capitalism
William J. Baumol, Robert E. Litan and Carl Schramm (Project Syndicate) Mar 2008
Many people assumed that when the Berlin Wall fell in 1989, “capitalism” had won the ideological cold war and that “communism” had lost. But, while “capitalism” – defined as an economic system built on private ownership of property – clearly has prevailed, there are many differences among the nearly 200 countries that now practice it in some form.

Free Trade, Free Labor, Free Growth
Kym Anderson and Bjørn Lomborg (Project Syndicate) Mar 2008
Protectionist sentiment and fear of globalization are on the rise. In the United States, presidential candidates appeal to anxious voters by blaming the North American Free Trade Agreement (NAFTA) for the erosion of the country’s manufacturing base. Liberal trade initiatives have run into trouble in Congress, while new trade barriers have been mooted for products flooding in from China.

Has Financial Innovation Been Discredited? Recommended!
Robert J. Shiller (Project Syndicate) Mar 2008
Skeptics of financial liberalization and innovation have been emboldened by the crisis in the world’s credit markets that erupted in mid-2007, when the problems with sub-prime mortgages first appeared in the United States. Are these skeptics right? Should we halt financial liberalization and innovation in order to prevent crises like the sub-prime disaster from recurring?

Asia’s Questions for America’s Next President
Vishakha N Desai (Project Syndicate) Mar 2008
In one of the longest American Presidential campaigns in history, neither party has addressed one of the most critical issues of the day: how can the United States successfully integrate its domestic concerns with an increasingly competitive global marketplace?

Barroso warns on protectionist pressures
José Manuel Barroso (EC/FT) Mar 2, 2008
Protectionist pressures are increasing across Europe, even among political forces traditionally committed to free markets.

Why we need a world education bank
David Manning (FT) Mar 2, 2008
Education is now an urgent security and foreign policy priority as well as a developmental one.

United States: Dollar Smile Becoming Fixed
Stephen Jen (MSDW) Mar 3, 2008
The ‘Dollar Smile’ has become rather fixed, and we see the over-valued EUR/USD possibly staying higher for longer. We maintain our year-end biases in favour of the USD, relative to the EUR and GBP, but against it relative to many EM currencies, particularly the AXJ currencies.

Bravo, Bangkok Wall Street Journal Subscription Required
WSJ Mar 3, 2008
Thailand's central bank lifts the last remnants of its harmful capital controls.

Dollar at low on economy worries
FT Mar 3, 2008
The US dollar fell to an all-time low against the euro, oil surged to new highs and Asian and European shares slipped back on fears of a US recession and further fallout from the global credit crisis.

Countering Global Economic Crisis
Kalpana Kochhar (IMF) Mar 3, 2008
A global economic slowdown is underway. What began as a problem in a single sector in a single economy—the housing market in the United States—has become a global problem. In the face of this spreading financial crisis, recent IMF forecasts are for a marked slowdown in the U.S. and a more moderate, but still significant, slowdown in other industrial countries. Emerging market economies will not be immune from the global slowdown either.

Obama's Border Incident Wall Street Journal Subscription Required
WSJ Mar 4, 2008
His trade policy loses something in translation.

IMF Intensifies Work on Sovereign Wealth Funds
IMF Survey Mar 4, 2008
With sovereign wealth funds rapidly gaining importance in the international monetary and financial system, the IMF has stepped up its work across a broad range of issues related to these state-owned funds, including their impact on global financial stability and capital flows.

Sovereign wealth funds hold out for a tough bargain
FT Mar 4, 2008
Middle East-based SWFs are striking a harder deal with bankers, creditors, investors and other parties involved in their negotiations

Yen's Sharp Rise Against Dollar Is Stirring Anxiety
WP Mar 4, 2008
Japan's finance and economy ministers voiced concern Tuesday about the yen's sharp rise against the dollar, warning that the trend may slow the nation's export-dependent economy.

Life in a tough world of high commodity prices
Martin Wolf (FT) Mar 4, 2008
If central banks are confident commodity prices will stop rising, they should slash rates. But, given the continued growth of emerging economies, they cannot be sure of that. Worse, core inflation seems to be drifting upwards.

It's the Dollar, Stupid Wall Street Journal Subscription Required
Judy Shelton (WSJ) Mar 5, 2008
How do the candidates propose to strengthen our weakling currency?

LDCs Outline Priorities, As WTO Members Try Once Again for Doha Deal
BRIDGES Weekly Trade News Digest - Vol. 12, Number 8 Mar 5, 2008
The world's poorest countries have set out a common set of priorities for a global trade accord, as WTO Members gear up for another attempt to strike a deal in the long-running Doha Round trade talks.

Easter Mini-Ministerial Unlikely, Says WTO Ag Chair
BRIDGES Weekly Trade News Digest - Vol. 12, Number 8 Mar 5, 2008
The chair of the WTO agriculture negotiations has admitted what many trade diplomats have been saying privately for some time: a 'mini-ministerial' meeting around Easter to finalise a framework global deal on cutting tariffs and subsidies is not a realistic possibility.

Grand Old Protectionists
Robert E. Lighthizer (NYT) Mar 6, 2008
John McCain may be a conservative, but his unbridled free-trade policies don't help make that case.

On global cash flows issue you can jump in without drowning
Simon Johnson and Jonathan Ostry (IMF) Mar 6, 2008
Desmond Lachman is right to take Dani Rodrik and Arvind Subramanian to task for their advocacy of capital controls. There is evidence that controls undercut efficiency by insulating domestic companies from competitive forces and make it difficult for small companies to raise capital.

The decoupling debate
Economist Mar 6, 2008
As America's economy struggles to stay aloft, the developing world is learning to spread its wings.

New strategies to promote gender equality
Denis Drechsler & Johannes P. Jütting (VoxEU) Mar 7, 2008
Discrimination against women significantly hampers the economic development of many poor countries. This column introduces two new OECD Development Centre efforts to assess and reduce gender discrimination, including a new portal

Doing a Job on NAFTA
Philip I. Levy (AEI) Mar 7, 2008
Barack Obama's criticism of the North American Free Trade Agreement reflects either a willful disregard of the facts or a poor command of economics.

Dollar R.I.P.: `Biography' Tracks Life, Predicts Grave Decline
James Pressley (Bloomberg) Mar 7, 2008
Early in his ``Biography of the Dollar,'' Craig Karmin sits down with John Taylor, the chairman of FX Concepts Inc., a New York-based hedge fund that manages $12 billion in currencies. It was the middle of 2006, and FX Concepts was betting the dollar would rebound.

Protectionist Pandering a Strategy for Losers
Michael R. Sesit (Bloomberg) Mar 7, 2008
Free trade is under attack all over the world because of slowing growth, unemployment worries, accelerating inflation, misaligned currencies, paranoia about China's economic juggernaut and anxiety about sovereign funds.

Much Ado about NAFTA
Robert Z. Lawrence (PIIE) Mar 7, 2008
In a recent Fortune magazine poll, 78 percent of Americans said that trade has made things worse for American workers. The Democratic presidential candidates have both said they would withdraw from NAFTA unless Canada and Mexico come back to the negotiating table and the labor and environmental provisions are strengthened.

Valuing the Dollar Wall Street Journal Subscription Required
Bob McTeer (WSJ) Mar 8, 2008
Lord, make our currency strong. But not quite yet.

A Global Need for Grain That Farms Can't Fill
NYT Mar 9, 2008
When much of the country is contemplating recession, farmers are flourishing because of runaway demand.

Credit derivatives turmoil strikes
FT Mar 9, 2008
Turmoil in the credit derivatives markets is having an increasingly brutal impact on the wider financial system as forced selling drives risk premiums to new highs.

Central bankers cannot stop this contagion
Wolfgang Münchau (FT) Mar 9, 2008
For as long as the world's financial crisis persists, interest rates will be determined by toxic market conditions, not central bankers.

Farmers struggle to keep up with world food demand
IHT Mar 9, 2008
The same high prices that are helping farmers are depriving poor people of food, setting off social unrest and even spurring riots in some countries.

Tribalism Here, and There
Roger Cohen (NYT) Mar 10, 2008
We're beyond tribalism, right? Wrong. The main forces in the world today are the modernizing, barrier-breaking sweep of globalization and the tribal reaction to it.

World Bank Confidential Wall Street Journal Subscription Required
WSJ Mar 10, 2008
Corruption and accountability.

Currencies: USD: The Dollar’s Undershoot: A Forecast Revision
Stephen Jen (MSDW) Mar 10, 2008
We concede that the USD could weaken further in 2Q, but still see EUR/USD meaningfully lower by year-end. Against the EM currencies, however, the USD, as well as other major currencies, will likely weaken for structural, not cyclical, reasons.

Lessons of 1000 years of trade history
Ronald Findlay & Kevin H. O’Rourke (VoxEU) Mar 10, 2008
Globalisation is fundamentally political, not technological. This is the lesson from a new book tracing 1000 years of international trade history. Here the authors use lessons from the past to identify challenges for globalisation in the 21st century.

ECB president criticizes volatility of currency markets
IHT Mar 10, 2008
The president of the European Central Bank, Jean-Claude Trichet, on Monday criticized the increasing volatility of currency markets, which have repeatedly sent the dollar to record lows against the euro. The remarks, carefully calibrated to question the euro's sharp moves rather than its overall strength, sent the euro briefly downward.

Paying at the Pump, in a Big Way
NYT Mar 11, 2008
When half a tank costs $505, rising fuel prices sting. While the price of gasoline may be on the verge of setting another record, diesel is already there.

Bush and the Dollar Wall Street Journal Subscription Required
WSJ Mar 11, 2008
When it comes to currency strength, words can work magic.

Who's Afraid of Super Euro? Wall Street Journal Subscription Required
Holger Schmieding (WSJ) Mar 11, 2008
The problem isn't a strong currency.

Sovereign Wealth Messiahs
Tim Swanson (Mises Daily) Mar 11, 2008
In the wake of the Société Général investment fiasco, rogue trader Jerome Kerviel has been accused of fraudulently siphoning off billions of assets into ill-advised investments. Since the story broke last month nearly every commentator has justifiably called for prosecuting these illicit actions as unequivocal theft.

Can Africa Make Trade an Engine for Growth?
IMF Survey Mar 11, 2008
Sub-Saharan Africa's share in world trade has declined since the 1970s. But increased demand for commodities from Asia's emerging economies is creating opportunities to reverse the decline. A new book explores the region's trade prospects.

The U.S. Dollar: From Greenback to Cheapback
Peter Morici (Globalist) Mar 11, 2008
What are the roles of the Federal Reserve, the U.S. Treasury and the Bush Administration in creating and perpetuating the fall of the dollar? As Peter Morici explains, a reliable banking system and a revival of U.S. credit are the keys to avoiding an economic recession of unknown depth and duration.

Going, going, gone: a rising auction of scary scenarios
Martin Wolf (FT) Mar 11, 2008
A trillion dollars here, a trillion dollars there, and pretty soon you are talking real money, even for the US. Most of the losses will fall not on the financial sector but elsewhere.

The New Face Of Hunger
Ban Ki-moon (WP) Mar 12, 2008
Fast-rising food prices threaten the world's 'bottom billion.'

IMF Urges Action to Strengthen Financial System
IMF Survey Mar 12, 2008
The IMF calls for "decisive policy action" to strengthen the global financial system, buffeted by fallout from the subprime crisis, noting that authorities worldwide must also "think the unthinkable" so that they can better anticipate and react to potential global economic risks.

Euro hits new record against the dollar
IHT Mar 12, 2008
Investors remain skeptical about the effect of the Fed's move to inject funds into the market on Tuesday.

Venezuelans taking circuitous route to get dollars
IHT Mar 12, 2008
In a quest for American cash, Venezuelans are flocking to the island of Curacao to take part in a backroom scheme to get around currency controls imposed by the government of President Hugo Chavez.

A gamble on global markets
Philip Stephens (FT) Mar 12, 2008
Darling is navigating the global economic storms without a compass. All depends on whether the darkening clouds on international credit markets break into another storm.

Economics and the rule of law
Economist Mar 13, 2008
The difficulties of a new Big Idea in economics.

The U.S. Dollar: From Greenback to Cheapback
Peter Morici (Globalist) Mar 13, 2008
What are the keys to avoiding an economic recession of unknown depth and duration?

Economy Hammered by Toxic Blend of Ailments
NYT Mar 14, 2008
Call it a perfect storm: on Thursday, the dollar plumbed new lows, the price of gold jumped above $1,000 for the first time and lenders raised home loans once again.

Chair signals major push in farm talks by end of month
WTO Mar 14, 2008
Intensive consultations among a group of importing and exporting countries will be allowed to continue for a few more days in an effort to achieve a breakthrough that would also allow progress in the agriculture talks as a whole. By 31 March or earlier New Zealand Ambassador Crawford Falconer, who chairs the talks, will reconvene multilateral talks so that representatives of the full membership can negotiate the outcome and continue with other major issues, leading to a revised draft blueprint of the final deal. That is what he concluded after hearing members’ comments on 14 March 2008.

Global: Easing Into the Great Monetary Easing
Joachim Fels (MSDW) Mar 14, 2008
We revisit our thesis from early January that 2008 would be the year of the ‘great monetary easing’. We survey our interest rate forecasts around the globe and conclude that, while the picture is mixed across regions, more central banks are likely to jump on the easing bandwagon.

Subprime crisis: causes, consequences and cures
Carmen M. Reinhart (VoxEU) Mar 15, 2008
We may just have started to feel the pain. Asset price drops – including housing – are common markers in all the big banking crises over the past 30 years. GDP declines after such crises were both large (-2% on average) and protracted (2 years to return to trend); in the 5 biggest crises, the numbers were -5% and 3 years. This column, based on the author’s testimony to the Congress, picks through the causes and consequences. It argues that when it comes to ‘cures,’ it would be far better to get the job done right than get the job done quickly.

Free fall
Economist Mar 16, 2008
Where will the dollar's woes end?

Beyond the Noise on Free Trade
N. Gregory Mankiw Mar 16, 2008
NO issue divides economists and mere Muggles more than the debate over globalization and international trade. Where the high priests of the dismal science see opportunity through the magic of the market’s invisible hand, Joe Sixpack sees a threat to his livelihood. This gap in perspective grows especially wide whenever the economy experiences short-run difficulties, as it is now. By all indications, the issue could come to dominate the presidential campaign.

The Buck Stops Where? Wall Street Journal Subscription Required
WSJ Mar 17, 2008
A dollar rout could turn financial panic into a crash.

Global: Still on Intervention Watch, but Time Not Yet Ripe
Stephen Jen (MSDW) Mar 17, 2008
We recommended remaining short the dollar for now, despite it being grossly undervalued against the majors. The preconditions for coordinated interventions are not yet met, but since a weakening dollar is fueling dangerous vicious circles, it is prudent to remain on intervention watch.

Global: Four Fall-Lines for the Dominos
Stephen Jen (MSDW) Mar 17, 2008
We try to consider how the ‘dominos’ could fall in the months ahead as the US slows. While there are too many uncertainties for us to be committed to one particular scenario, we propose four possible fall-lines for the dominos. They are not mutually exclusive.

Scramble to calm markets
FT Mar 17, 2008
Bankers and regulators scrambled to shore up confidence in financial markets as the sudden collapse of Bear Stearns heightened fears that the credit crunch would claim more victims

The battle for global business is not yet won
Michael Skapinker (FT) Mar 17, 2008
These are perilous times. If we are heading into an international downturn, protectionist pressures will only grow.

Company lessons in reaching the world's poorest
Christian Seelos (FT) Mar 17, 2008
Companies can offer a bigger market to the existing organisations that serve those at the very bottom of the income pyramid.

The euro could surpass the dollar within ten years Recommended!
Jeffrey Frankel (VoxEU) Mar 18, 2008
One of the world’s leading international economists explains how the euro could surpass the dollar as the premier international currency and examines the geopolitical implications of such a shift.

Dollar Bears Wall Street Journal Subscription Required
Reuven Brenner (WSJ) Mar 18, 2008
There's an obvious link between the weak currency and the credit crisis.

Downward Dollar Delivers Blow to Outsourcing
Stas Holodnak (Mises Daily) Mar 18, 2008
The slowdown of the American economy and the ensuing devaluation of the US dollar deliver gloomy headlines as timely as weather forecasts. The weakening currency may excite entrepreneurs anticipating increased exports. As well, it might have a stimulating effect for American professionals who are paid in return for our services.

Why today's hedge fund industry may not survive
Martin Wolf (FT) Mar 18, 2008
Just as it is particularly difficult to know whether a manager is skilful rather than lucky, it is hard to distinguish talented managers from untalented, so the business is bound to attract the unscrupulous and unskilled.

Dollar doldrums Mar 18, 2008
The dollar has plunged in recent days as the collapse of Bear Stearns and the Fed's discount-rate cut contributed further to its continuing slump. In trading on Monday March 17th the greenback fell to ¥95.76, its lowest point since August 1995, while also touching its lowest level against the euro since trading began in 1999. Although the dollar rallied on Tuesday, markets awaited the Federal Reserve's interest-rate decision later in the day. Futures markets anticipated a cut of up to one percentage point, but there were fears this would cause further flight from the beleaguered currency, perhaps into gold

Would an EU banking authority have done better?
Guido Tabellini (VoxEU) Mar 19, 2008
The recent financial trouble has prompted much examination of private financial institutions, but few have asked why regulatory supervision did not prevent the crisis. This column argues that supervisory failure was also due to regulatory competition between national authorities and calls for a consolidated EU authority.

Can’t Grasp Credit Crisis? Join the Club
David Leonhardt (NYT) Mar 19, 2008
Raise your hand if you don’t quite understand this whole financial crisis.

An Export in Solid Supply
NYT Mar 19, 2008
A reorganization of the global coal trade is making the United States a major exporter for the first time in years, and driving up prices of the one fossil fuel the nation has in abundance.

World's No. 2 Economy Has Vacancy at Top
WP Mar 19, 2008
Imagine turmoil in financial and currency markets, with skidding stocks and a soaring currency that threatens an export-dependent nation. Then imagine that the nation's central bank -- the one institution capable of responding quickly in a global financial crisis -- has no Greenspan, no Bernanke, no boss.

NAMA Talks Budge Slightly, As WTO Members Look Forward
BRIDGES Weekly Trade News Digest - Vol. 12, Number 10 Mar 19, 2008
After months of near-complete deadlock, some hints of flexibility have emerged in the Doha round talks on trade in industrial goods, officials say.

New Ag Draft Text Delayed By Differences on Sensitive Products Data
BRIDGES Weekly Trade News Digest - Vol. 12, Number 10 Mar 19, 2008
Progress in the Doha Round agriculture talks is unlikely unless a handful of competitive farm exporters and major import markets manage to resolve some technical issues affecting future market-opening for the 'sensitive' agricultural products eligible for gentler tariff cuts, the chair of the WTO negotiating committee suggested last week.

Act now to stop the markets' vicious circle
Paul De Grauwe (FT) Mar 19, 2008
Slowing the spiral that is driven by marking to market will stop innocent bystanders being caught by the whirlwind.

Commodity prices (wonkish)
Paul Krugman (NYT) Mar 19, 2008
Jeff Frankel has been arguing for some time, most recently in a new blog post, that low real interest rates are driving up commodity prices. Others argue that we’re witnessing a commodity bubble. These are, of course, not mutually exclusive — we could have a situation in which low rates started the upward movement, and investors, extrapolating, magnified the rise beyond what the low rates themselves can justify.

Ask the oil producers to rescue Wall Street
Anil Kashyap and Hyun Song Shin (FT) Mar 19, 2008
The fire sale of Bear Stearns, the US investment bank, brings the credit crisis to a new, more dangerous phase. Many market participants seem to be hoping for a short-term miracle from the Federal Reserve to end the turmoil. They will be disappointed.

Currencies: Currency Interventions and Relative Monetary Policy
Stephen Jen & Charles St-Arnaud (MSDW) Mar 20, 2008
Examining the relationship between monetary policy and interventions, we find strong support for the notion that the relative monetary policies need to be in sync with the intervention objective. The Fed-ECB monetary path will need to stop diverging for joint interventions to be successful.

Global: Opening the Floodgates
Joachim Fels & David Greenlaw (MSDW) Mar 20, 2008
While the Fed will soon be running out of basis points, it would be a mistake to argue that it is running out of bullets. Quantitative easing is an option the Fed could consider. The events of the past few days also increase the likelihood of earlier and more easing, and in some cases less tightening, on the part of other central banks.

Commodity Prices Surge Despite Global Economic Slowdown
IMF Survey Mar 20, 2008
Against the backdrop of intensifying credit market problems and dampening growth, the current strength of commodity prices is puzzling to some analysts. The continued resilience of commodity prices will depend on the extent of spillovers of slowing growth in advanced economies to the rest of the world.

Privatizing Africa’s Development
Austine Ometoruwa (Project Syndicate) Mar 2008
There has been considerable progress on achieving the Millennium Development Goals since their inception in 2000. But, despite the best efforts of governments, reaching those goals by the 2015 target date still remains a distant prospect for many countries, not the least of in Africa.

US agrees on principles for wealth funds
FT Mar 20, 2008
The US Treasury Department said it agreed with Abu Dhabi and Singapore on a set of principles for sovereign wealth fund investment that specifies politics should not influence their decisions.

Coping With Food Price Increases in Sub-Saharan Africa
IMF Survey Mar 20, 2008
African countries face some difficult policy choices because of rising inflationary pressures that have caused a spike in food prices. But rising food and fuel prices will not translate into higher sustained inflation if the policy response is correct, according to an IMF analysis.

Managing Surging Oil Prices in the Developing World
IMF Survey Mar 20, 2008
Countries that don't let the market operate by passing on to consumers the full cost of oil price hikes risk incurring large fiscal costs (through higher generalized subsidies and forgone petroleum revenues). But well-targeted safety nets can mitigate the impact of higher petroleum prices on the poor, while ensuring a sustainable fiscal position.

Oil and Gold Prices Continue to Slide
NYT Mar 21, 2008
Oil, gold and other major commodities fell sharply on Thursday, capping their steepest weekly drop in a half-century, as investors fled what many had believed to be the last safe haven in turbulent markets.

Partying Like It’s 1929
Paul Krugman (NYT) Mar 21, 2008
If Ben Bernanke manages to save the financial system from collapse he will — rightly — be praised for his heroic efforts.

Freedom for Zimbabwe Wall Street Journal Subscription Required
Morgan Tsvangirai (WSJ) Mar 21, 2008
Mugabe has destroyed the country's economy and currency.

Sovereign Development Funds
Javier Santiso (Globalist) Mar 21, 2008
What are the consequences of the growing influence of developing economies in the global market?

IMF Board Endorses Work Agenda on Sovereign Funds
IMF Survey Mar 21, 2008
The IMF's Executive Board gave the green light for further analysis on the role of sovereign wealth funds in the global economy and endorsed a proposal for the IMF to work with SWFs and other relevant parties to prepare a set of best practices for the state investment institutions.

WFP plea for $500m to avoid food aid cut
FT Mar 23, 2008
The World Food Programme has launched an 'extraordinary emergency appeal' to governments to donate at least $500m in the next four weeks to avoid rationing food aid in response to the spiralling cost of food.

This crisis could bring the euro centre-stage
Wolfgang Münchau (FT) Mar 23, 2008
A simulation shows that the euro could replace the dollar as the world's largest reserve currency within 10 or 15 years.

Reforming to attract foreign investors
Nauro F. Campos & Yuko Kinoshita (VoxEU) Mar 24, 2008
What policy reforms can emerging economies adopt to attract foreign investment? This column presents evidence that financial reforms may be the most important, even though foreign investors are not financially constrained.

Brown and Sarkozy Take on Banks, IMF
James McKeigue (Forbes) Mar 24, 2008
British PM gets French president's support on bank disclosure and new powers for the IMF.

Big Hurt in Emerging Markets
Carl Delfeld (Forbes) Mar 25, 2008
The market weakness has been hard on emerging-markets stocks. They need the rest of the world to grow.

An Explanation for Soaring Commodity Prices Recommended!
Jeffrey Frankel (VoxEU) Mar 25, 2008
The standard story for high commodity prices is rapid growth by China, India and company. But world growth is slowing, while commodity prices still hit new highs. This column suggests that the key may be low real interest rates.

Hoarding by banks stokes fears on credit crisis
FT Mar 25, 2008
Central banks' efforts to ease strains in the money markets are failing to stop financial institutions from hoarding cash, stoking fears that an end to the credit crisis may not be in sight. Meanwhile US consumer confidence hit a five-year low.

Trade in mammoth ivory, helped by global thaw, flourishes in Russia
IHT Mar 25, 2008
As global warming releases the remains of extinct woolly mammoths from the frozen Siberian tundra, the traditional Russian business of ivory carving is flourishing once more.

The rescue of Bear Stearns marks liberalisation's limit
Martin Wolf (FT) Mar 25, 2008
For three decades we have moved towards market-driven financial systems. By its decision to rescue Bear Stearns, the Federal Reserve, the institution responsible for monetary policy in the US, chief protagonist of free-market capitalism, declared this era over.

Different dilemmas in America and the eurozone
Daniel Gros (FT) Mar 25, 2008
In Europe a fall in prices may make consumers poorer, but it does not threaten the stability of the banking system.

More regulation will not prevent next crisis
John Kay (FT) Mar 25, 2008
Since financial stability is unattainable, the state should aim to insulate the real economy from the effects of instability.

Our Overextended Fed Wall Street Journal Subscription Required
Vincent Reinhart (WSJ) Mar 26, 2008
How can we say no to the next investment bank that asks for help?

Europe Needs Crisis Manager for Banking Meltdowns
Matthew Lynn (Bloomberg) Mar 26, 2008
When Northern Rock Plc ran out of money last year, the U.K. government stepped in to rescue the mortgage lender. Likewise, when Bear Stearns Cos. found itself a victim of the credit crunch, the Federal Reserve organized a bailout for the U.S. investment bank.

Microfinance Meets Wall Street
Susan Davis and Rod Dubitsky (Forbes) Mar 26, 2008
Making very small loans to very poor people can be good business in parlous times.

It is time for reflection, not regulation on banking
John Gapper (FT) Mar 26, 2008
Everyone insists that something ought to be done to stop this financial crisis recurring. Take a deep breath, everyone. The last time that right-thinking Americans agreed on the need for more regulation as rapidly as possible, we got Section 404 of the Sarbanes-Oxley Act.

Emergency Bank Debt Insurance: The Silver bullet solution?
Javier Suarez (VoxEU) Mar 27, 2008
Lender of Last Resort interventions aren’t working. It is time for more radical thinking. This column argues for the creation of a “Emergency Bank Debt Insurance Mechanism” that would go beyond Lender of Last Resort interventions. It would short-circuit the panic logic by temporarily providing full coverage to any short-term lending explicitly supported by the insurer.

Food for thought
Economist Mar 27, 2008
Soaring prices for products like rice (see article) and wheat are causing headaches for aid agencies and politicians

Academics urge countries to reject IMF vote formula
Reuters Mar 27, 2008
A group of influential Washington-based academics have urged IMF member countries in a letter to vote against a proposed new voting formula, arguing it falls far short of what is needed to give emerging and developing nations a bigger voice in the institution.

Global: Recession, Recoupling and Reflation
Joachim Fels (MSDW) Mar 27, 2008
Our global economics team’s core views for this year – recession in the US, recoupling of advanced economies but decoupling of EM, and reflation by the major central banks – remain intact. If anything, the recent data flow and policy action have increased our conviction in the three R’s.

The dollar is falling at the right time
Martin Feldstein (FT) Mar 27, 2008
The dollar’s recent decline triggered numerous calls for exchange rate intervention. But intervention proposals misunderstand the significance of the recent dollar declines, and the potential adverse effects of intervention.

Quality matters: Everything is (not) made in China
Lionel Fontagné, Guillaume Gaulier & Soledad Zignago Mar 28, 2008
China and Germany have nearly the same export profile in terms of breadth, but the prices and quality of their exports differ greatly. Here are some of the policy implications of international specialisation across varieties within products.

Odd Crop Prices Defy Economics
NYT Mar 28, 2008
Economists note there should not be two prices for one thing at the same place and time. But, in effect, that has been happening in trading that sets prices for corn, soybeans and wheat.

Directors Back Reforms to Overhaul IMF Quotas and Voice
IMF Survey Mar 28, 2008
In a key step toward reforming the International Monetary Fund, the Executive Board backed a resolution that would achieve a significant shift in the representation of dynamic economies, many of which are emerging market countries, and give poorer countries a greater say in running the institution.

Bush says U.S. willing to make concessions in trade round
IHT/Reuters Mar 28, 2008
The United States is ready to make significant agricultural concessions to reach a new world trade deal if other countries open their markets to more U.S. exports, President George W. Bush said on Friday.

WTO said to rule against EU in beef hormone dispute
IHT/AP Mar 28, 2008
The ruling will permit the United States and Canada to maintain sanctions worth tens of millions of dollars a year on European products.

Good Sense
WSJ Mar 28, 2008
Cutting tariffs to fight inflation.

High Rice Cost Creating Fears of Asia Unrest
NYT Mar 29, 2008
The price of rice, a staple in the diets of nearly half the world's population, has almost doubled on international markets in the last three months.

The sting of poverty
Drake Bennett (Boston Globe) Mar 30, 2008
What bees and dented cars can teach about what it means to be poor - and the flaws of economics.

Too Dumb to Fail
James Surowiecki (New Yorker) Mar 31, 2008
Rescuing failing companies obviously runs the risk of creating moral hazard—if we insulate people from the consequences of their irresponsibility, they’re more likely to be irresponsible in the future. But the Fed did a good job of lessening that risk, making sure that Bear Stearns suffered a heavy toll

Financial markets need more than a patch-up
Clive Crook (FT) Mar 30, 2008
In bad times, the risks that adventurous investors take burden the rest of us. Insisting that losing gamblers pay up is necessary, but not enough.

Currencies: Reassessing the Reserve Currency Status of the USD
Stephen Jen (MSDW) Mar 31, 2008
In our view, the USD has well-retained its international roles as the unit of account and medium of exchange, but its status as an international store of value has deteriorated. USD’s incumbency advantages are insurmountable for the EUR, but perhaps not for an Asian currency centred on China.

Currencies: Spending SWF Money
Stephen Jen (MSDW) Mar 31, 2008
SWF money is meant to be spent. Some countries may want to spend it now, while others have the luxury of being able to save it for future generations. In this note, we propose some key considerations when thinking about this issue.

Free Colombia
WP Mar 31, 2008
A trade pact everyone can love.

Subprime crises and Bagehot’s wisdom
Xavier Vives (VoxEU) Mar 31, 2008
The current crisis is a modern form of a traditional banking crisis. The 125-year-old Bagehot's doctrine tells us how governments should react – lend to solvent but illiquid financial institutions. While easy to state, the doctrine is hard to apply. The key question to assess the future consequences of current central bank policy is whether the subprime mortgage crisis arises in the context of a moderate or a severe underlying moral hazard problem.

The perils of collegiate regulation
FT Mar 31, 2008
Governments usually promise not to react precipitately to financial crises. But you can virtually guarantee that even as they sign their pledge, they are simultaneously dusting off sketchy blueprints for intervention.

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