Greek Lessons for Europe
Joschka Fischer (Project Syndicate) Mar 2010
Europe’s leaders – first and foremost Germany and France – must act quickly to defuse the Greeck crisis. Doing so will not come cheap, and therefore will entail substantial political risks, but, given a global economic environment that promises scant sustainable growth in the coming years, things could get very tough very soon for the euro zone if they do nothing.
Can Asians Resolve Global Problems?
Simon Chesterman and Kishore Mahbubani (Project Syndicate) Mar 2010
In the past, Asians put a premium on protecting their sovereignty and were wary of any multilateral approaches that could dilute it. Now, in response to global challenges – for example, pandemics, financial crises, and climate change – the vast majority of Asian countries understand that collective action does not erode but instead protects sovereignty.
Time to outlaw naked credit default swaps
Turning the Corner in Eastern Europe
Thomas Mirow (Project Syndicate) Mar 2010
Many countries in Central and Eastern Europe were hit hard by the global financial crisis, owing to a massive build-up of debt - much of it in foreign currencies - during the boom years that preceded it. Sustainable recovery will require the development of strong local capital markets, as well as stronger institutional and regulatory frameworks – and not just at the national level.
Japan’s Slow-Motion Crisis
Kenneth Rogoff (Project Syndicate) Mar 2010
Investors who have bet against Japan in the past have been badly burned, grossly underestimating the Japanese people’s remarkable flexibility and resilience. But, while Japan’s ability to trudge on in the face of huge adversity is admirable, the risks of crisis ahead are surely greater than bond markets seem to recognize.
Could A Global Trading “Network Map” Prevent Another Crisis?
Janice Fioravante (II) Mar 2010
As far-fetched as a master "network map" of the world’s securities activity sounds, it has some quite serious proponents.
The Global Roots of Euro-Jitters
Harold James (Project Syndicate) Mar 2010
It is too simplistic to explain the current wave of concern about the euro in terms of Greece’s problems. The euro’s current problems are, instead, a reflection of Europe-wide and global problems that have remained unresolved for the past 30 years.
Complexity and Collapse
Niall Ferguson (Foreign Affairs) Mar/Apr 2010
Imperial collapse may come much more suddenly than many historians imagine. A combination of fiscal deficits and military overstretch suggests that the United States may be the next empire on the precipice.
The Dangers of Deficit Reduction
Joseph E. Stiglitz (Project Syndicate) Mar 2010
Even with large deficits, economic growth in the US and Europe is anemic, and forecasts of private-sector growth suggest that in the absence of continued government support, there is risk of continued stagnation – of growth too weak to return unemployment to normal levels. if these forecasts are right, a premature “exit” from deficit spending is not worth the risk.
The End of an Era in Finance
Dani Rodrik (Project Syndicate) Mar 2010
In the world of economics and finance, revolutions occur rarely and are often detected only in hindsight. But what happened on February 19 can safely be called the end of an era in global finance.
Too big to fail
Serge Halimi (La Monde) Mar 2010
States rescued the banks in country after country, neither asking nor getting anything in return. The banks are now using their newfound strength against the state, threatening to reveal the accounting tricks the banks themselves had recommended to hide some of the debt. After all, interest rates on loans are higher when the financial reputation of the state is in question.
How to Handle the Sovereign Debt Explosion
Mohamed El-Erian (PIMCO) Mar 2010
We should all be paying attention to the deterioration in the public finances of many advanced economies.
States of Risk
Nouriel Roubini (Project Syndicate) Mar 2010
Unsustainable private-debt problems must be resolved by defaults, debt reductions, and conversion of debt into equity. If, instead, private debts continue to be excessively socialized, the advanced economies will face a grim future: serious sustainability problems with their public, private, and foreign debt, together with crippled prospects for economic growth.
A Crisis of Understanding
Robert J. Shiller (Project Syndicate) Mar 2010
Few economists predicted the current economic crisis, and there is little agreement among them about its ultimate causes. So, not surprisingly, they are not in a good position to forecast how quickly it will end, either.
The Substitution Account as a First Step Toward Reform of the International Monetary System
Peter B. Kenen (PIIE) Mar 2010
The creation of a substitution account might be costly to the United States, but the cost could be greatly reduced by adopting a cost-sharing regime or assessing an annual fee on depositors. The United States also must consider the effect of reserve currency diversification by central banks that now hold larger dollar reserves than they need to cope with balance-of-payment problems. Large-scale diversification could cause extremely disorderly depreciation of the dollar. To avoid this, Kenen recommends revisiting the potential costs and benefits of a substitution account lodged in the International Monetary Fund (IMF), which could act as a barrier against further development of a multi-currency reserve system.
Who Should Lead the IMF?
Barry Eichengreen (Project Syndicate) Mar 2010
The rumor mill is heating up with gossip that the IMF's managing director, Dominique Strauss-Kahn, will leave in order to oppose Nikolas Sarkozy in the 2012 French presidential elections. If he does, his successor should be chosen solely on the merits, not on the basis of nationality - even if that nationality happens to be Asian rather than European.
How to Save the Euro
Daniel Gros (Project Syndicate) Mar 2010
The euro zone was created on two assumptions: member countries would adhere to strict deficit and debt limits, and those who violated the limits would not be bailed out. Now that the Greek crisis has proved both assumptions invalid, the only hope for imposing market discipline throughout the euro zone is the creation of a European Monetary Fund.
The Euro Zone’s Default Position
Simon Johnson and Peter Boone (Project Syndicate) Mar 2010
Like the over-leveraged euro-zone countries today, Kazakhstan binged on easy loans from global investment banks in recent years, before its banks defaulted on their loans in 2009. If European leaders are smart, they will recognize that a Greek default is similarly inevitable - and that it may be just what the European (and global) financial system needs.
Trial by Crisis
Leszek Balcerowicz (Project Syndicate) Mar 2010
Episodes like the current financial crisis seriously disrupt economic growth. But the question that we should be asking concerns such episodes’ impact on longer-term development – and that question has attracted surprisingly little interest.
China’s Bad Debtor
Yu Yongding (Project Syndicate) Mar 2010
China’s foreign-exchange reserves are facing a triple whammy: a decline in the US dollar’s purchasing power, a fall in the prices of US government securities, and possible inflation in the longer run. If the US government cannot safeguard the value its securities, it should compensate China in one way or another.
Funding a Global Health Fund
Jeffrey D. Sachs (Project Syndicate) Mar 2010
World leaders will come together at the UN in September in order to accelerate progress towards the Millennium Development Goals, three of which involve bringing primary health services to the entire world’s population. The key step to saving millions of lives each year - at a very modest cost - is to expand the Global Fund to Fight AIDS, Tuberculosis, and Malaria into a Global Health Fund.
As China Turns
Zhao Yunfeng (Project Syndicate) Mar 2010
Thirty years of economic reform have transformed China into an increasingly materialistic, money-worshipping society that has lost touch with traditional ethics. Nothing captures this moral vacuum more vividly than the recent television drama, “Wo Ju” (“Crowded Spaces”), which has been riveting Chinese audiences.
The Naked Euro
Robert Skidelsky (Project Syndicate) Mar 2010
Like the little boy who was unafraid to declare the emperor naked, German Finance Minister Wolfgang Schauble, in criticizing the euro, has pointed the finger of realism at the aspirational rhetoric in which all European leaders are still compelled to clothe their utterances. For those who prefer solid construction to hot air, his words should be welcomed.
Ms. Europe or Frau Germania?
Joschka Fischer (Project Syndicate) Mar 2010
Only a short while ago, Angela Merkel was celebrated as “Ms. Europe”; now, she increasingly gives the impression of being Frau Germania. Instead of providing resolute leadership in the global financial and economic crisis, the EU's largest economy is withdrawing into its shell.
Renminbi and Reality
Fan Gang (Project Syndicate) Mar 2010
The renminbi's exchange rate has once again become a target of the US Congress, but revaluation by China would only push up US inflation, as Vietnamese, Indian, and other low-cost producers fill the export gap. Only serious efforts by both sides to fix their domestic fundamentals, including over-consumption in the US, will imbalances be reduced in a sustained way.
New Tremors in Global Finance and Trade
Michael Boskin (Project Syndicate) Mar 2010
A long period of sluggish growth as a result of bloated government debt would be the equivalent of an extended bout with cancer after the heart attack that our economies have just survived. Prevention begins by curbing trade friction and developing sensible post-crisis monetary and fiscal exit strategies, sooner rather than later.
Is the Euro Overvalued?
Martin Feldstein (Project Syndicate) Mar 2010
Although prices in the euro zone seem high relative to those in the US, much of the difference reflects Europe's value-added tax. In fact, far from being overvalued, the euro is set to strengthen against the dollar, owing to complementary pressures on Europe to import funds, and on surplus countries to diversify their foreign-exchange holdings.
Harvard's Rogoff Gives Legs to China Crash Talk
William Pesek (Bloomberg) Mar 1, 2010
The tale had Tom Clancy written all over it, with the CIA investigating a far-off economy out of concern that its collapse might pose problems for America.
Britain’s lack of credibility hurts sterling
Willem Buiter (FT) Mar 1, 2010
The currency is weakening and if the election does not deliver a strong government, markets will be panicked. Political parties should work together to reduce that risk.
Swapping Blame Over Athens
WSJ Mar 2, 2010
Europe finds scapegoats in derivatives and Goldman Sachs.
Greece, Act II—More Kabuki than Tragedy
Jacob Funk Kirkegaard (PIIE) Mar 2, 2010
In the nearly three weeks since European Union leaders called on the Greek government to produce a credible fiscal austerity plan and broader economic reform package, an increasingly strange, but predictable and scripted political theater has unfolded among the key actors. All are trying to pass the cost of restoring Greece to a long-term sustainable path on to someone else.
India's elephant charges on through the crisis
Martin Wolf (FT) Mar 2, 2010
The world's biggest democracy has changed. But economic pragmatism alone will not be enough: reforms are still needed
We need a Plan B to curb the debt headwinds
William White (FT) Mar 2, 2010
If the repeated asymmetric use of macro policies has rendered them ineffective, what other policies might help deal with the debt problem?
Greece calls in war debts
Julian Delasantellis (AT) Mar 3, 2010
Germany appears to be moving reluctantly, and with some fancy financial legerdemain, to bail out Greece from its debt crisis. The fix might work in the short term, and defuse increasingly vitriolic exchanges over the two countries' war history. Further ahead, the European Union must sort out how to handle its fiscal imbalances, or it must necessarily break apart under their weight.
'Multilatinas' Gain Prominence
Oxford Analytica (Forbes) Mar 3, 2010
More Latin American companies are turning into multinational corporations through global expansion.
EU Concludes FTA Talks with Colombia, Peru
Bridges Weekly Trade News Digest, Volume 14, Number 8 Mar 3, 2010
Trade negotiations between the European Union and Colombia and Peru ended on Monday with the resolution of a handful of outstanding issues in the nearly three-year-old talks. Spain's wish for the EU to finalise its trade agreements with Latin America during its six-month presidency of the bloc may well be coming true.
France looks on brighter side of Greek crisis
Paul Betts (FT) Mar 3, 2010
Christine Lagarde, the French economy minister, has conceded that the Greek crisis has at least had some collateral benefits.
Do not rush to switch off the life support
Robert Skidelsky (FT) Mar 3, 2010
Now is not the time to be scoring party-political points on the conduct of economic policy. It is a time for a radical reappraisal of the regulation of finance.
Lessons for Greece from an outpost of empire
David Hale (FT) Mar 3, 2010
Facing the humiliating prospect of default, Newfoundland’s parliament dissolved its country’s democratic government.
Markets look for political leadership
George Magnus (FT) Mar 3, 2010
The fundamental, and at times, passionate debate about sovereign debt is a predictable part of the sequencing of the financial crisis rumbling through the West.
Divorced Before Puberty
Nicholas D. Kristof (NYT) Mar 3, 2010
It's no coincidence that Yemen is home to child brides - including Nujood Ali, who fought for and won a divorce at 10 - and terrorists.
Why Europe should reject a new Glass-Steagall Act
Hans-Werner Sinn (VoxEU) Mar 4, 2010
A return of the Glass-Steagall Act has been suggested by US policymakers and commentators as a way to reduce risk in financial markets. This column argues that the legacy of separate commercial and investment banks actually made the crisis worse. Europe should not follow these proposals but should instead concentrate on strengthening the capital reserves of its banks.
Employment protection legislation and the financial crisis
Marco Leonardi, Julián Messina & Giovanni Pica (VoxEU) Mar 4, 2010
How do financial crises alter the effects of employment protection legislation? This column argues that firms with insufficient access to credit are even less able to rationalise their costs by switching from labour to capital – reinforcing the negative effects on productivity. But policymakers should also consider that, in countries with less-developed financial markets, employment protection provides insurance against labour-market risk.
The IMF's Inflation Illusion
Axel A. Weber and Philipp Hildebrand (WSJ) Mar 4, 2010
Central banks would sacrifice hard-won credibility by aiming at a 4% annual cost-of-living target.
Greece's Exit Remains Unlikely
Oxford Analytica (Forbes) Mar 4, 2010
Voluntary withdrawal from the euro-area is unlikely because the repercussions are too great.
Sterling throws a wobbly
Economist Mar 4, 2010
Why Britain's currency remains vulnerable to worries about a hung parliament.
Economist Mar 4, 2010
Killed, aborted or neglected, at least 100m girls have disappeared—and the number is rising.
Multilateral development banks: Cap in hand
Economist Mar 4, 2010
A difficult time for a fund-raising spree.
Currencies under pressure: Race to the bottom
Economist Mar 4, 2010
Countries compete to weaken their currencies.
Sovereign-debt ratings: The grim rater
Economist Mar 4, 2010
Countries don't like bad news about their creditworthiness.
Who pays for the budget deficits?
Economist Mar 4, 2010
Throughout the rich world battle lines are being drawn in the coming fight over deficit reduction.
Fiscal deficits: Sharing the pain
Economist Mar 4, 2010
Increasing budget deficits and rising government debts will entail fierce political battles.
What Really Ails Europe (and America): The Doubling of the Global Workforce
Richard Freeman (Globalist) Mar 4, 2010
How are workers from emerging markets changing the global economy? A Globalist Retrospective.
Is Population Growth a Ponzi Scheme?
Joseph Chamie (Globalist) Mar 4, 2010
When it comes to population growth, why is more not always better?
I.M.F. Help for Greece Is a Risky Prospect
Sewell Chan & Liz Alderman (NYT) Mar 4, 2010
If Greece asks the International Monetary Fund for help, it could touch off political and financial tension in other European countries.
A.I.G., Greece, and Who's Next?
NYT Mar 4, 2010
Washington must stop stalling and fix the derivatives market, which kneecapped American firms and contributed to the debt crisis in Greece.
Africa Faces Twin Challenges After Global Crisis
IMF Survey Mar 4, 2010
With world recovery under way, Africa faces the twin challenges of reviving strong growth and reinforcing resilience to the economic shocks that regularly batter the continent, IMF officials say, as the IMF's head embarks on a three-country visit to the region.
Vipal Monga (The Deal) Mar 5, 2010
The innovative financial technology has grown into the very engine of financing markets. Now policymakers are trying to revive it without blowing everyone up.
Six Steps Toward Financial Reform
Maurice R. Greenberg (WSJ) Mar 5, 2010
Our position as a global leader is at stake. Let's take time to get it right.
Greece, Act III--Athens's Leverage versus Eurozone Solidarity?
Jacob Funk Kirkegaard (PIIE) Mar 5, 2010
In the latest phase of its financial melodrama, Greece successfully placed a €5 billion 10-year government bond in the financial markets on Thursday (March 4). The bond issue was heavily oversubscribed, but it still produced a high yield of approximately 6.3 percent (or approximately 300 basis points above the benchmark risk-free mid-swaps rate, reflecting the market's demand for a risk premium). In many ways, this Greek return to the financial markets represents a huge success for the government and at least a temporary sign of approval from bond market vigilantes for its recently announced additional austerity measures. Ironically, however, this very success means that the leverage of the Greek government over its eurozone partners in the game of chicken related to possible financial assistance to Athens has been greatly reduced.
Global: Debating Debtflation
Spyros Andreopoulos, Joachim Fels & Manoj Pradhan (MS GEF) Mar 5, 2010
Colleagues and clients disagree that inflating away debt – debtflation – would work. In our view, inflation can result in substantial debt erosion: debt rolls slowly, implying that government interest costs respond sluggishly to increases in market yields; and bond markets are late in realising shifts to a new inflation regime.
Consumer reactions to exchange rate and trade price shifts: New evidence from online book retailing
Jean Boivin, Robert Clark & Nicolas Vincent (VoxEU) Mar 6, 2010
How much of a change in exchange rates is required to redress global imbalances? This column presents new evidence from online bookstores suggesting that neither shoppers nor retailers react to price differences across borders. This implies that realignment of cross-country consumption levels may require large and persistent exchange rate changes.
Argentina all over again? Lessons for Europe
Augusto de la Torre, Eduardo Levy-Yeyati & Sergio Schmukler (VoxEU) Mar 6, 2010
The fiscal crisis in several European countries has led many commentators to suggest novel solutions, including a holiday from the euro. This column examines the much-cited example of Argentina and argues that such ideas look better on paper than in practice. What these countries need is a “good old bailout” – conditional on “getting the house in order”.
Why policymakers need to take note of high-frequency finance
Richard Olsen (VoxEU) Mar 6, 2010
Why should high-frequency finance be of any interest to policymakers interested in long-term economic issues? This column argues that the discipline can revolutionise economics and finance by turning accepted assumptions on their head and offering novel solutions to today’s issues.
The political limits to globalisation
Daron Acemoglu & Pierre Yared (VoxEU) Mar 7, 2010
Is globalisation inevitable and irreversible? This column argues that globalisation is a policy choice. It examines the relationship between military expansion and international trade flows, finding that increased nationalist and militarist sentiments are negatively associated with trade. A 10% increase in military spending between 1985 and 2005 is associated with a reduction in the trade share of GDP of around 2%.
For a fair treatment of trade finance under Basel III
Marc Auboin (VoxEU) Mar 7, 2010
Trade finance is an essential facility for world trade. But this column argues that the safe, short-term, and self-liquidating character of trade finance has not been properly recognised under the Basel II framework and the proposed revised rules ("Basel III") seem to raise additional hurdles to trade finance. Both trade financiers and regulators should strive to avoid this.
Why the euro will continue to weaken
Wolfgang Münchau (FT) Mar 7, 2010
We have always known a monetary union cannot exist without political union in the long run.
How banks can help the world’s poor
Alexander Friedman (FT) Mar 7, 2010
The financial crisis wreaked havoc with poor nations. Banks may have played a central role in causing this suffering, but they can also help lead the way out.
An Irish Mirror
Paul Krugman (NYT) Mar 7, 2010
The financial crisis in Ireland offers clues about our own, and about how to prevent another one.
Trade Deficits and Fiat Currencies
Robert P. Murphy (Mises Daily) Mar 8, 2010
There is a connection between fiat currencies and trade deficits, and many cynics have argued that the US dollar's status as global reserve currency allowed Americans to consume more than they produced for decades. However, this "deficit without tears" argument is sometimes overstated. To gain a deeper understanding of both monetary theory and international trade, it's useful to probe the issue more carefully.
A tale of two depressions: What do the new data tell us? February 2010 update
Barry Eichengreen & Kevin H. O’Rourke (VoxEU) Mar 8, 2010
This column updates the original Vox columns by Barry Eichengreen and Kevin O’Rourke comparing today’s global crisis to the Great Depression. The three previous columns have shattered all Vox readership records with over 450,000 views. This latest edition covers up to February 2010 showing that, while there is cause for optimism, there is no room for complacency.
Antidumping: Much ado about nothing?
Hylke Vandenbussche & Maurizio Zanardi (VoxEU) Mar 8, 2010
The global crisis has raised fears that governments would engage in a protectionist spiral. This column argues that, while countries have by and large kept their promises not to raise barriers to trade, antidumping has crept up. Far from being a “small price to pay”, the new tough users of antidumping laws such as Brazil, India, Mexico, Taiwan, and Turkey have 5.9% fewer annual imports as a result.
The Euro Has Been a Smashing Success
George Melloan (WSJ) Mar 8, 2010
Greeks knew it would be a boon to taverna keepers to share a currency with rich German tourists.
Foreign Aid and Salvadoran Corruption
Mary Anastasia O'Grady (WSJ) Mar 8, 2010
The World Bank should audit former President Tony Saca.
Why Europe needs its own IMF
Giancarlo Corsetti and Harold James (FT) Mar 8, 2010
Historical flaws in the continent’s single currency are threats to stability and need to be fixed.
A social vision for the world after socialism
John Lloyd (FT) Mar 8, 2010
Capitalism need not conform to Adam Smith’s rules of marketplace behaviour as interpreted by our financial masters of the universe.
Shorting US Treasuries could be a mistake
Dino Kos (FT) Mar 8, 2010
There are reasons to expect the Treasury market to hold its own, and perhaps even surprise with lower yields.
Greek Bailout Needs IMF `Bad Cop' to Relieve Euro
Matthew Lynn (Bloomberg) Mar 9, 2010
“Who you gonna call?” wasn’t just a catchphrase in the 1984 film “Ghostbusters.” If the worst happens in Greece, Spain or Portugal, we’re going to hear it all over again, and Europe’s taxpayers will want to know the answer.
Anne Applebaum (WP) Mar 9, 2010
Why you can't blame the Germans for being unwilling to bail out the Greeks.
Germany's eurozone crisis nightmare
Martin Wolf (FT) Mar 9, 2010
The twin imperatives of sound money and European integration are clashing. Ironically, Germany must become less German if the eurozone is to become more so.
Greece Is Not an Island
George A. Papandreou (NYT) Mar 9, 2010
Greece is taking tough steps to fix its economy, but the E.U. and U.S. also need to make changes.
Somalia Food Aid Bypasses Needy, U.N. Study Finds
NYT Mar 9, 2010
As much as half the food aid sent to Somalia is diverted to a web of corrupt contractors, Islamist militants and local U.N. staff, according to a report.
Obama's U.S. Trade Goals in a Global Context
Stefan Tangermann (Globalist) Mar 9, 2010
President Obama wants to double U.S. exports within the next five years. But trade is not a zero-sum game in which there are always equal numbers of winners and losers. If the people of developing countries win, so can the developed world.
The political resource curse
Fernanda Brollo, Tommaso Nannicini, Roberto Perotti & Guido Tabellini (VoxEU) Mar 10, 2010
Is the discovery of natural resources necessarily a good thing? Examining data from Brazil, this column finds that a 10% windfall in government revenues leads to a 12 percentage point increase in corruption and a 3 percentage point reduction in the probability that politicians have a degree. The chance that an incumbent is reelected raises by over 4 percentage points.
Athens and the 'Speculators'
WSJ Mar 10, 2010
Blaming the very folks who buy Greek debt.
Ruble Rally Powers Ahead
Andrei Ostroukh and Toni Vorobyova (Forbes) Mar 10, 2010
Tax payments will only add to the momentum next week as the Russian currency hits a 14-week high.
2010 Shaping Up as a Bad Year for Doha Deal, Climate Talks
Bridges Weekly Trade News Digest, Volume 14, Number 9 Mar 10, 2010
2010 was the year in which two long-running sets of global negotiations were supposed to finally end in agreement: the WTO's Doha Round of trade talks and multilateral negotiations to secure a deal to curb emissions of greenhouse gases. But fewer than 10 weeks into the year, officials involved in both sets of talks are issuing gloomy predictions for the odds of deals being struck during the remainder of 2010.
Spain has the means to avoid Greece’s fate
Luis Garicano (FT) Mar 10, 2010
This is a three-point plan to help Spain, which was particularly exposed by the recent financial crisis, avoid becoming the next Greece.
Debunking the myth of a China collapse
Jing Ulrich (FT) Mar 10, 2010
Global sentiment towards China's economy and asset markets has turned from exuberance just a few months ago to overriding concern about the side-effects of last year's remarkable credit growth.
China's bubble trouble
David Ignatius (WP) Mar 11, 2010
China's export-led growth will be the biggest hindrance to its economic expansion.
Hossein Askari and Noureddine Krichene (AT) Mar 11, 2010
Countries that make up the Group of 20 insist that there can be no exit from crisis-fighting policies until economic recovery has been fully established. But as these policies may have helped cause the problem, is escape from crisis possible with them still in place?
Africa Rebounding Almost in Line with World Recovery
IMF Survey Mar 11, 2010
IMF chief Dominique Strauss-Kahn says he is optimistic about Africa's economic prospects in the wake of the global economic crisis and that the continent is bouncing back after the recession.
China, America and exchange rates
Economist Mar 11, 2010
The best thing American politicians can do to encourage a stronger Chinese currency is keep calm.
Russia's hot rouble keeps seducing foreign investors
Paul Betts (FT) Mar 11, 2010
Some policymakers in Moscow are once again suggesting that the time may have come to bring back capital controls as investors seem to be gleefully buying the currency.
Why Europe’s monetary union faces its biggest crisis
Wolfgang Schäuble (FT) Mar 11, 2010
The euro is the second most important reserve and investment currency, largely because financial markets trust the ECB. To maintain this, the crisis must be surmounted rapidly.
All for one
Economist Mar 11, 2010
Eurocrats offer up half-baked ideas to prevent a future sovereign-debt scare
Sovereign credit-default swaps: Smokescreen
Economist Mar 11, 2010
Blaming speculators for sovereign-debt woes is misguided. Banning them would be worse.
Engineering inflation: The inflation solution
Economist Mar 11, 2010
The merits of inflation as a solution to the rich world's problems are easily overstated ... more
The IMF's plan for Africa: Going green
Economist Mar 11, 2010
The IMF says it wants to help Africa handle climate change.
Underappreciated benefits of the Eurozone
Francesco Paolo Mongelli (VoxEU) Mar 11, 2010
Why would countries share a single currency? This column introduces a new CEPR Policy Insight and argues that some aspects are missing in the current debate on the merits of the EMU. Benefiting from monetary union is a matter of time, perseverance, and seizing opportunities.
WTO Has Obstacles to Trade In Retreat
John W. Miller (WSJ/YaleGlobal) Mar 11, 2010
WTO says it is still a risk, but some governments are opening up.
China lassoes its neighbors
Walden Bello (AT) Mar 12, 2010
The China-ASEAN Free-Trade Area, which came into effect in January, should boost China's trade with its neighbors. It will also likely erode Southeast Asia's industry and agriculture. Smaller economies in the region are already paying what will be a big price for a bad deal.
Global: What Fiscal Tightening?
Joachim Fels, Manoj Pradhan & Spyros Andreopoulos (MS GEF) Mar 12, 2010
We disagree with the widespread view that high budget deficits throughout the developed world will lead to major fiscal tightening in most countries next year or even earlier. The implications: lower potential growth, higher bond yields and elevated longer-term inflation risks.
America's Foreign-Owned National Debt
Bruce Bartlett (Forbes) Mar 12, 2010
Is it a threat to the U.S. economy?
Greece: It's not all tragedy
Michael Burda (VoxEU) Mar 13, 2010
Greece’s recent deficit-cutting budget was met with planned strikes and protests in the streets. This column argues that the painful fiscal adjustments could turn out to be a good thing for Europe’s political integration, but the region has to take the next step and set up a European Monetary Fund.
Learning From Lehman
NYT Mar 13, 2010
A new report on the Lehman collapse would leave anyone dumbstruck by the firm's audacity - and reminded of the crying need for adult supervision of Wall Street.
Shipping out the best beer: Why export prices increase with distance
Holger Görg, László Halpern, Balázs Muraközy (VoxEU) Mar 14, 2010
Why are the prices of exports higher for countries that are further away – even when transport costs are excluded? This column suggests that this is partly because firms choose to ship out their best quality goods, just like a brewery with its “export” brands.
Shrink the eurozone, or create a fiscal union
Wolfgang Münchau (FT) Mar 14, 2010
Germany’s EMF idea is just a smokescreen. It is not about helping countries in trouble. It is about helping them to get out of the eurozone.
A frugal policy is the better solution
George Osborne and Jeffrey Sachs (FT) Mar 14, 2010
Governments have enabled, if not enthusiastically promoted, recklessness, through chronic deficits and lax financial regulation.
Taking On China
Paul Krugman (NYT) Mar 14, 2010
It's time for America to confront China about the undervaluation of its currency, which is adding to the world's economic problems at a time when those problems are already severe.
Books: Investors Who Foresaw the Meltdown
Michiko Kakutani (NYT) Mar 14, 2010
Michael Lewis's book does not attempt a macro view of the financial crisis, but instead proposes to open a small window on the calamities.
The Hedge Fund Wars
WSJ Mar 15, 2010
Treasury is right to protest Europe's latest assault on capital.
John Cassidy (New Yorker) Mar 15, 2010
Timothy Geithner’s financial plan is working—and making him very unpopular.
Bubble or not, China’s rise is real
Gideon Rachman (FT) Mar 15, 2010
In other, more important ways, China is a much more serious challenger to American hegemony than Japan ever was. If China keeps growing fast then inevitably its economy will, at some point, become larger than that of the US.
Who Needs Wall Street?
Roger Lowenstein (NYT) Mar 15, 2010
Mike Mayo is a veteran of six Wall Street banks. In the wake of the street’s disaster, he found refuge at a boutique brokerage and has lately taken to startling his peers with the question “What part of Goldman Sachs is good for the country?”
We need explicit rules for bail-outs
Lorenzo Bini Smaghi (FT) Mar 15, 2010
The developments of the past few months related to assessments of financial institutions, or even of sovereign countries, suggest that the issue of moral hazard cannot be tackled simply by assuming that crises will not occur.
Japan's mythical debt crisis
Peter Tasker (FT) Mar 15, 2010
At some point Japanese policymakers will have to lift rates. Far from portending imminent doom, that would signify that Japan's journey back to economic health had begun.
Wen hints at yuan move
Olivia Chung (AT) Mar 16, 2010
Premier Wen Jiabao, backed by a slew of trade figures, insisted on Sunday that China's currency policy played a helpful role in the global economic recovery. But with the United States renewing demands for the yuan to appreciate, he also promised further currency reforms.
Don’t split up the banks: Outlining a new regulatory architecture
Stefano Micossi (VoxEU) Mar 16, 2010
Policymakers and commentators have suggested that large banks should be broken up. This column argues that such an idea risks the very existence of a global financial system. It outlines an alternative framework in which deposit insurance should be covered by banks not taxpayers, banks should not be guaranteed a bailout, and regulators should be mandated to step in when the warning signs begin.
China and Germany unite to impose global deflation
Martin Wolf (FT) Mar 16, 2010
Suggestions from Schäuble and Wen would hit their own economies if followed through. But it is not too late for a co-operative approach
China’s property bubble is worse than it looks
Takatoshi Ito (FT) Mar 16, 2010
If the renminbi is appreciated, overheating of export sectors will be slowed, while standards of living will improve with higher purchasing power.
Is Italy the real joker in the eurozone pack?
Mike Dicks (FT) Mar 16, 2010
There is a general presumption that public debt concerns are behind us and that, if things do deteriorate further, Greece will not be left high and dry.
Protectionism: The Dog That Didn't Bark
Edward Alden (Globalist) Mar 16, 2010
The ongoing U.S.-China trade spat notwithstanding, what explains the reluctance around the world to embark on protectionism during the global economic crisis? Edward Alden examines the role of the WTO, the strengthening role of emerging markets, global sourcing — and the lowering of national affiliations among big corporations.
Too Big to Fail?
John Bruton (Globalist) Mar 17, 2010
Banks that had become "too big to fail" were a central cause of the global financial crisis. As former Prime Minister of Ireland John Bruton argues, ensuring that no bank is ever again allowed to be too big to fail will involve a new approach to competition policy at the national, EU and international level.
The “Great Risk Shift” – or why it may be time to re-think the developed-/emerging-markets distinction
Markus Jaeger (DB Research) Mar 17, 2010
After defaulting on their external loans during the 1980s, many emerging markets (EM) experienced often severe financial crises during the second half of the 1990s and in the early 2000s. Most top-tier EM have weathered the global crisis much better in terms of public-debt sustainability and the short/medium-term growth outlook than many developed markets (DM). Following what may in the future be remembered as the “great risk shift”, it may be time to re-think old labels and traditional distinctions – and established views of economic and financial risk.
In the European Monetary Fund proposal, a chance to get the IMF right
Kati Suominen (VoxEU) Mar 17, 2010
Discussions over a European Monetary Fund have gained momentum over the last week. This column argues that regionalising the IMF is sub-optimal. But discussions over a European Fund offer an opportunity for a complementary fund, which can offer a reference for Asian countries.
Capitalism without leeches
Martin Hutchinson (AT) Mar 17, 2010
Managerial capitalism has become entrenched over half a century, although no viable theory argues that resources are effectively created or allocated when owners of capital do not control its use. The adoption of "founder's shares" for long-term investors would ensure that capital is not leeched away by professional managers.
Economist Mar 17, 2010
Our Big Mac index shows the Chinese yuan is still undervalued.
Adieu, Atlantic Blue Fin Tuna?
Alex David Rogers (YaleGlobal) Mar 17, 2010
Global governance has failed to protect biodiversity.
The Global Accounting Make or Break
Nicolas Véron (PIIE) Mar 17, 2010
The report of the court-appointed examiner in Lehman Brothers' US bankruptcy proceedings, issued on March 11, was a bombshell for the accounting profession by revealing how the failing investment bank hid liabilities in the tens of billions with the use of accounting shenanigans. Despite alerts from whistleblowers, auditors from Ernst & Young appear to have neglected informing Lehman's board about the scheme. Echoes of Enron, WorldCom, and the fall of Arthur Andersen resonate loudly, even though it is impossible to predict at this stage how disruptive the consequences will be.
Brazil Takes Aim at US Intellectual Property in Cotton Dispute
Bridges Weekly Trade News Digest, Volume 14, Number 10 Mar 17, 2010
Upping the ante in a long-running trade spat with the United States, Brazil announced on Monday that it intends to break US patents and intellectual property rights in retaliation against Washington's failure to put an end to its illegal cotton subsidies.
US-China Exchange Rate Tensions Climb
Bridges Weekly Trade News Digest, Volume 14, Number 10 Mar 17, 2010
Tensions between Washington and Beijing over China's currency policies rose sharply during the past week, as the Chinese leadership and US lawmakers traded accusations of protectionism over the value of the yuan.
The weak renminbi is not just America’s problem
Arvind Subramanian (FT) Mar 17, 2010
The Chinese currency requires a multilateral rules based solution rather than a bilateral confrontation. What is needed is a new rule in the World Trade Organisation proscribing undervalued exchange rates.
How Much Can China Really Diversify Its Reserves?
Daniel H. Rosen (PIIE) Mar 17, 2010
Could China move out of US Treasurys and into US real economy assets in a big way? In early 2009, China's Premier Wen Jiabao drew attention by announcing an intention to manage foreign-exchange reserves more actively and seek to diversify away from US government holdings. China currently holds more than one trillion of US Treasurys and another $500 billion of US government-backed agencies.
Why bankers must bear the risk of 'too safe to fail' assets
Viral Acharya and Arvind Krishnamurthy (FT) Mar 17, 2010
Regulation should be more concerned about seemingly fail-safe assets and secured financing, rather than worrying much about riskier assets and unsecured financing.
Closer Policy Coordination Needed in Europe
IMF Survey Mar 17, 2010
The global financial crisis has heightened the need for closer international cooperation, globally and in Europe, to help avoid future crisis such as the one the world economy just went through, IMF Managing Director Dominique Strauss-Kahn told the European Parliament on March 17, 2010.
The Yuan Scapegoat
WSJ Mar 18, 2010
The U.S. establishment flirts with a currency and trade war with China.
A China-U.S. Reckoning
Nouriel Roubini, Rachel Ziemba and Adam Towle (Forbes) Mar 18, 2010
The two powers grope for a new normal.
Greece Act IV: No Reason to Beware Any Gifts or Bailout for the Greeks
Jacob Funk Kirkegaard (PIIE) Mar 18, 2010
Judging from their communiqué on March 15, the eurozone finance ministers have essentially decided to sit back, cross their fingers, and expect that in the end Greece will bail itself out and that no eurozone financial assistance will ultimately be needed.
Productivity: Slash and earn
Economist Mar 18, 2010
Surging in America, slumping in Europe.
Headroom for economic recovery
Samuel Brittan (FT) Mar 18, 2010
From the onset of the financial crisis in 2007 and the subsequent recession, inflation targeting regimes broke down in spectacular fashion.
Prophets of the slump
Economist Mar 18, 2010
A handful of outsiders come out of the crisis in credit.
The credit crunch: A novel view
Economist Mar 18, 2010
Wit and wisdom for the general reader.
The financial crisis explained
Economist Mar 18, 2010
Two influential economists take a potshot at financial policymakers.
Reregulating finance: In praise of Doddery
Economist Mar 18, 2010
At last a decent effort to tackle the problem of "too big to fail."
East European economies: Fingered by fate
Economist Mar 18, 2010
A region that a year ago looked as bad as Greece does now has averted catastrophe—but is not yet completely safe.
Ban Naked CDS
Richard Portes (Eurointelligence) Mar 18, 2010
A good side effect of Greece’s troubles is that politicians, regulators and central bankers are finally paying serious attention to this market. For two years, I have been pointing out the destabilising effects of naked CDS in the financial crisis and the dangers in the use of these instruments as a speculative device. Only now is this taken seriously.
The Global Economy: Light at the End of the Tunnel?
Angel Gurria (Globalist) Mar 18, 2010
The current financial crisis stands out for the strength of many emerging market economies, in contrast to persistent weakness in the “advanced” countries. OECD Secretary-General Angel Gurría explains why, given this new balance of economic power, the time has come to pursue a model investment treaty.
The Vindication of Joe Stiglitz
Prakash Lougani (Globalist) Mar 19, 2010
As the U.S. Congress attempts to undertake financial-sector reform, policymakers are trying to prevent a future repeat of the 2008 financial crisis. However, in this Globalist Interview, conducted by the IMF’s Prakash Loungani, Joseph Stiglitz explains why there is a reasonable risk of another crisis within five to ten years.
Global: Risks in the Policy Mix
Manoj Pradham & Joachim Fels (MS GEF) Mar 19, 2010
The timing of fiscal and monetary policy exits is a contentious issue in markets right now. Our clients see a significant fiscal tightening while markets are pricing in a late start to the monetary policy tightening cycle. We disagree on both counts.
One Currency Doesn't Require 'One Europe'
Judy Shelton (WSJ) Mar 19, 2010
The euro has gained stature as an alternative to the U.S. dollar. Preserving it will require letting profligate state like Greece pay their own way.
Greece's Financial Odyssey: Enter the IMF
Anders Åslund (PIIE) Mar 19, 2010
The news that Germany prefers the International Monetary Fund (IMF) to a European ad hoc solution for rescuing Greece from financial chaos is welcome for multiple reasons.
Greece Act V: Talk is Cheap--and the Eurozone Likes It That Way
Jacob Funk Kirkegaard (PIIE) Mar 19, 2010
For weeks European leaders have talked about eurozone solidarity and their promise of "determined and coordinated action, if needed" while supporting the successful austerity measures taken by Athens. It is becoming increasingly clear, however, that words are what "euro solidarity" amounted to, and that the International Monetary Fund (IMF) will be invited to assist Greece after all.
How Europe should harness market forces to deal with sovereign credit risk
Mathias Hoffmann (VoxEU) Mar 20, 2010
If a European Monetary Fund does happen, how would it work? This column proposes a European Sovereign Insurance Scheme to sell bond insurance on EMU members' sovereign debt. In good times the insurance fees would allow the EMF to build up a capital cushion. In bad times, the EMF could use these funds to facilitate an orderly unwinding of the default – while imposing tough conditions.
Europe’s macro mess: Dysfunctional diversity that gets the job done
Charles Wyplosz (VoxEU) Mar 20, 2010
As the debate over a European Monetary Fund continues, this column argues that Germany’s enthusiasm for the new fund lies in its desire to impose fiscal discipline on countries it didn’t want in the Eurozone in the first place. The EU is not Germany and despite its dysfunctional diversity, the avoidance of a currency crisis in Greece shows that it works.
Moody's and the Debt Threat
NYT Mar 20, 2010
The credit rating agencies that threatened to downgrade the United States are the same ones that bestowed shining ratings on mortgage-backed securities.
Trade collapse or trade crisis?
Kristian Behrens, Gregory Corcos & Giordano Mion (VoxEU) Mar 21, 2010
World trade fell dramatically during 2009, as widely documented on this site and elsewhere. But there has been little econometric analysis of the different explanations put forward. This column uses data from Belgium to argue that a fall in demand was the main culprit. It is not a trade crisis – it is a trade collapse.
Why financial regulation must also rebuild trust
Giancarlo Corsetti, Michael P. Devereux, Luigi Guiso, John Hassler, Gilles Saint-Paul, Hans-Werner Sinn, Jan-Egbert Sturm & Xavier Vives (VoxEU) Mar 21, 2010
Public distrust of bankers and financial markets has risen dramatically with the financial crisis. This column argues that this loss of trust in the financial system played a critical role in the collapse of economic activity that followed. To undo the damage, financial regulation needs to focus on restoring that trust.
US financial reform ignores wider terrain
Clive Crook (FT) Mar 21, 2010
A consensus is emerging on the needed elements of regulatory reform, but not on the international co-operation necessary to make them work.
Gaps in the eurozone ‘football league’
Wolfgang Münchau (FT) Mar 21, 2010
The reality is that the eurozone, as it works today, is not a monetary union but a souped-up fixed exchange rate system.
A pseudo solution to the euro's failings
Martin Taylor (FT) Mar 21, 2010
I had always supposed that the euro would hold together, writes Martin Taylor. But when both partners in a marriage seriously question the arrangement, divorce is only a matter of time.
Stifling the Economy, One Argument at a Time
Robert E. Lighthizer (NYT) Mar 21, 2010
China's currency manipulation is yet another reason to end the round of Doha World Trade Organization negotiations.
Krugman Versus Roach Is Right Fight for Don King
William Pesek (Bloomberg) Mar 22, 2010
Don King, hop on a plane to China for the fight of the year.
The World Needs Rebalancing, Not China Alone
Jeffrey E. Garten (YaleGlobal) Mar 22, 2010
Rather than pointing fingers at each other, the US and China should seek accommodation.
Analyzing the Crisis and its Aftermath
IMF Survey Mar 22, 2010
While governments focus on winding down stimulus measures used to combat the global economic crisis even as unemployment remains high, researchers are looking back at what caused the crisis, how it affected countries differently, and what the longer-term implications are.
Renminbi reform is just the start for China
George Magnus (FT) Mar 22, 2010
The excess savings that sustain a development model built on exports will not decline without extensive political reform.
Obama Trade Initiatives Are a Good Start
C. Fred Bergsten (PIIE) Mar 22, 2010
The Obama administration has now unveiled its first positive trade policy initiatives. One seeks to negotiate a transpacific partnership between the United States and key Asian countries. The second aims to double US exports over the next five years.
Too big to fail is too costly to continue
Thomas Huertas (FT) Mar 22, 2010
The world is well aware that it needs an exit strategy from the massive monetary and fiscal stimulus that started in the final months of 2008. But we also need an exit strategy from too big to fail.
Post-Apocalyptic zombie finance
Spengler (AT) Mar 23, 2010
The whole world is bailing out the US government by purchasing US debt - with money lent by America. While such zombie financing persisted for two decades in Japan, the US arrangement is weakening the reserve status of the dollar, the very foundation on which it depends. The situation is so absurd and unstable that the list of potential points of failure is endless.
Conflict and development: Lessons from South Asia
Ejaz Ghani & Lakshmi Iyer (VoxEU) Mar 23, 2010
Is conflict a cause or a result of underdevelopment? This column presents research on South Asia – the second most violent region in the world. It argues that conflict is both a cause and an effect. To break out of the trap, policymakers need to reduce poverty while at the same time restraining conflict to enable the much needed economic growth.
Excessive virtue can be a vice for the world economy
Martin Wolf (FT) Mar 23, 2010
Germany is wrong to reject a role in rebalancing global demand. Beggar-my-neighbour policies to boost exports cannot work for everybody.
Why CoCos are dangerous to our system of finance
John Plender (FT) Mar 23, 2010
Contingent capital securities, otherwise known as CoCos, are possibly the only financial innovation that currently gladden regulators' hearts.
Flexible Exchange Rates and the Domestic Savings Rate
Antonio Carlos Lemgruber (RGE) Mar 23, 2010
In the past few years, a new theory is being developed with respect to the level of the exchange rate under a system of freely floating exchange rates or even under fixed rates. More and more, economists are explaining situations of overvaluation or undervaluation of the exchange rate of a country through a direct link with domestic savings. To use two excellent examples: it is argued that China can sustain an undervalued exchange rate because the country has a huge level of domestic savings; in contrast, the exchange rate would tend to be overvalued in Brazil because of the very low level of domestic savings.
Shanghai and Hong Kong: China’s Emerging Global Financial Hubs
Dan Steinbock (Globalist) Mar 23, 2010
Since the early 2000s, Shanghai and Hong Kong have increasingly been seen as rivals for the economic center of the Greater China region. An exploration of how the two cities have contributed profoundly to China's economic progress and financial development, albeit in different ways.
Commodity terms of trade: New data on the history of booms and busts
Nikola Spatafora & Irina Tytell (VoxEU) Mar 23, 2010
How do commodity-price booms affect the economic performance of commodity exporters? This column presents comprehensive new data on country-specific commodity terms of trade. It finds that, on average, countries grow nearly 2 percentage points faster during booms than during busts. But policy plays an important role – sharp currency appreciations and large government deficits are associated with lower growth.
The Bad Kind of Corruption
Ray Fisman (FP) Mar 24, 2010
Corruption may be a fact of life in today's China, but until recently, most businesses at least knew the rules of the game.
Public Sector Efforts to Contain Crisis Calmed Markets
IMF Survey Mar 24, 2010
There are promising signs that large public sector interventions are working to alleviate systemic risk, and calm markets and restore their functioning, the IMF says in a report. When stability is established, it will be time to start removing extraordinary measures, the report adds.
Doha 'Stocktaking' Begins in Geneva
Bridges Weekly Trade News Digest, Volume 14, Number 11 Mar 24, 2010
Answering a call made by trade ministers late last year, senior officials are meeting in Geneva this week to "take stock" of the remaining gaps in the WTO's struggling Doha Round of world trade talks.
It is time to stop punishing prudence
John Plender (FT) Mar 24, 2010
There are strong arguments for a more neutral treatment of equity and debt on grounds of economic efficiency and fairness.
Resource wealth need no longer be a curse
Mats Berdal and Nader Mousavizadeh (FT) Mar 24, 2010
As post-conflict governments seek to complement aid with trade, a new path to development and peace in Africa is opening up.
Reasons to be cheerful about Europe
David Marsh (FT) Mar 24, 2010
The clouds over Greece have been obscuring some fundamentally positive developments favouring European financial markets. Why we should be optimistic.
ECB must re-examine its dependence on rating agencies
Erik Nielsen (FT) Mar 24, 2010
No country would hand the controls of a nuclear device to a third party. But that is, in effect, what the European Central Bank is doing with its repo facility for eurozone sovereign debt.
Escaping From Poverty
Nicholas D. Kristof (NYT) Mar 24, 2010
Even though there's no magic bullet, experiments with jobs and schooling gleaned promising results for improving the lives of the poor.
Why The Yuan Can't Become The World's Reserve Currency
Ignacio de la Torre (Forbes) Mar 24, 2010
Far too many things would have to go right in China and wrong in the U.S.
Rent capture through financial innovation
Bruno Biais, Jean-Charles Rochet & Paul Woolley (VoxEU) Mar 25, 2010
How does economic theory need to adjust in light of the global financial crisis? This column presents a new insight on how innovation leads to rent capture, which in turn is a sign of a potential crisis. This stems from asymmetric information in the financial sector. To avoid a repeat of the crisis, policymakers need to increase transparency.
Correcting the Chinese Exchange Rate: An Action Plan
C. Fred Bergsten (PIIE) Mar 24, 2010
The renminbi is undervalued by approximately 25 percent on a trade-weighted average basis and by approximately 40 percent against the dollar. This undervaluation is a blatant form of protectionism and, when coupled with the currency undervaluation of neighboring Asian countries, has a substantial impact on the United States. A 25- to 40-percent appreciation of the renminbi would cut China's global surplus to 3 to 4 percent of its GDP while producing a reduction in the annual US current account deficit by $100 billion to $150 billion and thus creating 600,000 to 1.2 million US jobs. The present is an opportune time for China to consider restoring an equilibrium exchange rate: The Chinese economy is booming, inflation is rising, and the Chinese authorities have already begun to take measures to avoid overheating. Currency appreciation would be an effective tool in lowering the price of imports and dampening the demand for exports—serving both the internal and external policy objectives of the Chinese authorities. Reason and multilateral rules implementation have been unsuccessful in prompting China to act on its currency undervaluation. While these efforts should continue, C. Fred Bergsten recommends that they become part of a three-pronged US strategy promoting early and substantial appreciation of the renminbi. First, the United States must publicly label China as a currency manipulator in order to help "name and shame" it into corrective action. Second, the United States should seek a special consultation via the managing director of the IMF pursuing Chinese agreement to remedy the situation. Finally, the Obama administration should ask the WTO to constitute a dispute settlement panel that would determine whether China has violated its obligations under the WTO charter and to recommend remedial actions that other member countries could take in response.
Shine a light
Economist Mar 25, 2010
The parallel “shadow” banking system needs fixing: that should mean painful choices for money-market funds
A tax on bank risk: There will be blood
Economist Mar 25, 2010
A levy on banks for systemic risk is a budget and an election issue.
Tricky Dick and the dollar
Economist Mar 25, 2010
Does Richard Nixon have anything to teach Barack Obama about economic diplomacy?
Latin America's unproductive economies: Service break
Economist Mar 25, 2010
How public policies have promoted inefficiency.
Did the Capital Markets Fail Us?
Karen Johnson (Globalist) Mar 25, 2010
With the debate over healthcare reform moving off the front pages, Washington's attention is now turning to financial reform. Addressing the questions of whether the capital markets failed us — and if so, why and how — is crucial to lowering the odds of another financial crisis.
China Officials Wrestle Publicly Over Currency
NYT Mar 25, 2010
Leaders are engaged in a bitter struggle over whether to allow the renminbi to rise against the dollar or to escalate a war of words with the U.S.
A euro exit is the only way out for Greece
Wilhelm Hankel, Wilhelm Nolling, Karl Albrecht Schachtschneider and Joachim Starbatty (FT) Mar 25, 2010
Should eurozone governments contravene the no bail-out rule, we would have no hesitation in lodging a new lawsuit.
Cultural change is key to bank reform
Justin Fox (FT) Mar 25, 2010
Smart, well-paid financial market participants cannot be relied on to get things right. But neither can the regulators.
London faces battle to stop trading shift to eurozone
Gillian Tett (FT) Mar 25, 2010
On the prompting of Christine Lagarde, the telegenic French finance minister, senior bankers and regulators are finalising plans to launch Europe's first electronic platform to trade corporate bonds---initially just for French companies, but later for non-French entities too.
A wage rule against excessice trade imbalances
Fabian Fritzsche (Eurointelligence) Mar 25, 2010
When the French treasury secretary Christine Lagarde called on Germany to stimulate domestic demand and reduce net exports, she prompted a debate about surplus countries and fair competition. German media and politicians reacted with an outcry. The German consensus is that exports are strong not because of their price competitiveness, but because of their quality. Thus, other economies should make an equal effort to be similarly successful. This debate is dominated by emotional arguments rather than economic reasoning.
Greece: Hardly an Epilogue!
Jacob Funk Kirkegaard (PIIE) Mar 26, 2010
One-third IMF money, two-thirds from all eurozone countries, according to their European Central Bank (ECB) capital share, which translates into Germany with just over a quarter and France 20 percent of the eurozone contribution. There are no hard figures in the eurozone statements, but subsequent press announcements suggest a total of about €20 billion to €22 billion, or substantially enough (about 50 percent of the total estimated need) guaranteed financing to assist Greece in refinancing its needs during April and May. This is more European money than could have been expected and clearly gives Europe the lead in terms of quantity of financing.
Trying to Tame the Unknowable
N. Gregory Mankiw (NYT) Mar 26, 2010
The economy is recovering, in baby steps, from the financial crisis and deep recession of 2008 and 2009. A big question still looms on the horizon: What can policy makers do to prevent this kind of thing from happening again?
For the IMF, read China
Axel Merk (AT) Mar 26, 2010
European politicians should swallow their pride over whether the International Monetary Fund should bail out Greece. After all, that is not much different from the United States getting its funding, with the risks involved, from China.
Globalization yet to have its day
Francesco Sisci (AT) Mar 26, 2010
Globalization - the most recent phase in capitalism's evolution - is a poor fit for China's idea of stability. But the attention to common interests that it fosters adds a new dimension to traditional thinking. A revaluation of the yuan encouraging the transfer of technology would be the strongest proof to China that a new paradigm exists and that the zero-sum game is dead or dying.
China, the US, and the renminbi: A rejoinder to Krugman
Yiping Huang (VoxEU) Mar 26, 2010
Should the US follow Paul Krugman’s advice and use protectionist policies against China’s exports to encourage a revaluation of its currency? This column argues against this idea. Far from saving jobs, a revaluation of the Chinese currency might even cut global economic growth by 1.5%.
Why have developing-country data on real incomes been revised so much?
Martin Ravallion (VoxEU) Mar 26, 2010
The World Bank’s estimate of China’s real GDP per capita was revised down by 40% in 2005. This column explains how price surveys led to dramatically different estimates once they considered the effect of economic growth. It argues that while large revisions were needed, they could have been avoided with better economic models to measure PPPs.
U.S.-China Trade Is Win-Win Game
Zhong Shan (WSJ) Mar 26, 2010
There's little connection between the trade balance and the value of the renminbi.
Trade to expand by 9.5% in 2010 after a dismal 2009
WTO Mar 26, 2010
After the sharpest decline in more than 70 years, world trade is set to rebound in 2010 by growing at 9.5%, according to WTO economists. “WTO rules and principles have assisted governments in keeping markets open and they now provide a platform from which trade can grow as the global economy improves. We see the light at the end of the tunnel and trade promises to be an important part of the recovery. But we must avoid derailing any economic revival through protectionism,” said Director-General Pascal Lamy.
Global: Trying Times Thanks to the Trilemma
Manoj Pradhan (MS GEF) Mar 26, 2010
Weak recoveries in the major economies imply that the AAA liquidity regime is likely to remain in place for 2010, and most if not all of 2011.
The source of global trade imbalances
Johanna Mollerstrom (VoxEU) Mar 27, 2010
Global imbalances are seen by some as contributing to the global crisis – but what caused the imbalances themselves? This column argues that the popular savings glut hypothesis appears to be at odds with the data. Instead a behavioural explanation based around asset-price bubbles is a much better match for the key facts.
The global crisis: Why were some countries hit harder?
S. Pelin Berkmen, Gaston Gelos, Robert Rennhack & James P. Walsh (VoxEU) Mar 28, 2010
Despite the global reach of the financial crisis, some countries fared better than others. This column argues that this was due to differences in trade or financial openness, underlying vulnerabilities to external forces, or the strength of their economic policies.
Joachim Starbatty (NYT) Mar 28, 2010
The euro zone is broken. Germany should leave and form its own monetary union.
China knows the time for lying low has ended
Ian Bremmer (FT) Mar 28, 2010
Though this will not be easy to carry out, Beijing is now quietly embarking on political and economic ‘decoupling’ from the US.
Europe has resolved nothing over Greece
Wolfgang Münchau (ft) Mar 28, 2010
It is hard to imagine even a hypothetical scenario in which the European Union would disburse emergency aid.
How exorbitant is the dollar’s “exorbitant privilege”?
Maurizio Michael Habib (VoxEU) Mar 29, 2010
Does the dollar enjoy an “exorbitant privilege”, in which US residents pay relatively low interest on their foreign liabilities while receiving relatively high returns on their foreign assets? This column argues that the answer is “yes”, while the excess returns are not explained by different risks between the US and elsewhere.
The euro’s big fat failed wedding
Gideon Rachman (FT) Mar 29, 2010
Increasingly the euro looks less like an indissoluble union, and more and more like an unhappy marriage between incompatible partners.
Blaming China will not solve America’s problem
Stephen Roach (FT) Mar 29, 2010
From Google to the renminbi, China is being blamed for all that ails the US. Unfortunately, this reflects a potentially lethal combination of political scapegoating and bad economics.
Fiscal policies in “normal” and “abnormal” recessions
Paul De Grauwe (VoxEU) Mar 30, 2010
Should governments continue with fiscal expansion or should it be cut back as soon as possible? This column compares different economic models and argues that the answer depends on the type of recession we are facing. In “normal recessions” the New Keynesian model is best, but in “abnormal recessions” it is the Keynesian model.
Greece Goes to the Markets Again and Access Has a Price!
Jacob Funk Kirkegaard (PIIE) Mar 30, 2010
Greece on Monday "successfully" returned to the international financial markets for the first time after the announcement of the joint eurozone-International Monetary Fund (IMF) assistance pact last week. This provides the first indication of the real world impact of last week's discussions at the European Union (EU) summit. For Greeks, the outcome seems ominous.
Why Germany cannot be a model for the eurozone
Martin Wolf (FT) Mar 30, 2010
Last week's European Council was not a solution but a fudge. Evidently, Germany can get its way in the short run, but it cannot make the eurozone succeed in the way it desires. The IMF cannot save Europe.
This is the way for Japan to return to durable growth
Tadashi Nakamae (FT) Mar 30, 2010
Twenty years of recession – or near-recession – and a potent dash of deflation may not seem like a recipe for economic success.
Why getting tough on CDSs does more harm than good
Christian Weistroffer (DB Research) Mar 30, 2010
Speculators are said to have been involved in the escalation of the Greek crisis. For this reason, politicians want to ban the purchase of naked credit default swaps (CDSs). This would not be of any help to sovereign borrowers, however.
Germany, current accounts, and competitiveness
Charles Wyplosz (VoxEU) Mar 31, 2010
Should Germany increase its spending on other Eurozone exports to help ease the region’s imbalances? This column argues that telling Germany to reduce its current account surplus is unwarranted. With an ageing population, Germany would be well-advised to save for a couple of decades – as would the rest of Europe.
The dollar’s international roles
Linda Goldberg (VoxEU) Mar 31, 2010
Is the dollar still the dominant international currency? This column argues that the answer is “yes”. The dollar is used as a major form of cash currency, and is the main currency for exchange rate pegs and for invoicing foreign transactions. Network externalities create inertia – everyone uses the dollar because everyone else is using the dollar.
China Convicts Itself
Holman Jenkins (WSJ) Mar 31, 2010
Beijing needs to commit to the global economy.
Doha 'Stocktaking' Outcome: More of the Same
Bridges Weekly Trade News Digest Volume 14, Number 12 Mar 31, 2010
The WTO's week-long "stocktaking" of the Doha Round trade talks ended on Friday with a whimper, not a bang. The much-touted goal of concluding the negotiations toward a global trade deal before the end of 2010 - an objective laid out by heads of state last year - was quietly set aside, as officials acknowledged that political hurdles continue to block progress in the round, much as they have for the past 18 months.
When Beijing and New Delhi pull together
James Lamont (FT) Mar 31, 2010
To bring China and India closer, an awkward trading alignment first needs to be fixed.Trade flows are terribly lopsided and India harbours deep resentment over a yawning deficit overwhelmingly in China’s favour.
Tough talk on China ignores economic reality
Jim O’Neill (FT) Mar 31, 2010
At the moment, rather oddly, our model suggests that the renminbi is very close to the price that it should be. This has not always been the case.
Why Germany cannot be a model for the eurozone
Martin Wolf (FT) Mar 31, 2010
Last week’s European Council was not a solution but a fudge. Evidently, Germany can get its way in the short run, but it cannot make the eurozone succeed in the way it desires. The IMF cannot save Europe.
Watch out for sovereign debt black holes
David Roche and Bob McKee (FT) Mar 31, 2010
A repricing of governments' debt as dangerous debt would be an earthquake for financial markets and blow a hole in the balance sheets of once safe financial institutions.
The IMF, Greece and the End of Euro-Chauvinism
Alfred Steinherr and Stephan Richter (Globalist) Mar 31, 2010
In dealing with the Greek debt crisis, the worst outcome has been avoided. While bringing in the IMF is a positive development, the intra-European decision-making process used to craft a proper response signals European dysfunction — but may hold the promise of a solid outcome.
Government bond markets: Dangerous curve
Economist Mar 31, 2010
Government-bond markets enter the twilight zone.
Fiscal tightening and growth: A good squeeze
Economist Mar 31, 2010
Bigger budgetary adjustments are not always better.
Bailing out Greece: Smoke and mirrors
Economist Mar 31, 2010
When it comes to communiqués, it's all in the translation.