Asia and the Old World Order
Thomas DuBois (History Today) Mar 1, 2013
Some commentators predict that the 21st century will be the ‘Asian century’, marking a significant shift in power from West to East. If so, it will not be so different from the global order of the 19th century, says Thomas DuBois.
Capitalism and Inequality
Jerry Z. Muller (FA) Mar 1, 2013
What the Right and the Left get wrong.
Can Changes in Exchange Rate Valuations Affect Trade Imbalances?
TIE Mar 1, 2013
In his new book, The Unloved Dollar Standard: From Bretton Woods to the Rise of China, Stanford economist Ronald McKinnon argues that the “China bashers” have been captured by a false theory of the U.S. trade balance. A collection of noted experts tackles McKinnon’s thesis.
Adam Posen Takes the Stage
David Smick (TIE) Mar 1, 2013
Just back from his three-year stint on the Monetary Policy Committee of the Bank of England, an interview with the new president of the Peterson Institute for International Economics.
Two Cheers for Christine Lagarde
Desmond Lachman (TIE) Mar 1, 2013
Bringing an era of IMF bumbling to an end.
The End of the Oil Crisis
Philip K. Verleger, Jr. (TIE) Mar 1, 2013
For good and bad the earthquake has occurred; the tsunami is underway.
Did inward capital controls work?
Márcio Garcia (VoxEU) Mar 1, 2013
Did inward capital controls work for Brazil? This column assesses the evidence, concluding that capital controls are desirable if they help avoid excessive debt and asset price bubbles, a risk given the appetite of foreign investors towards Brazilian assets. That said, policymakers needs to complement capital controls with foreign savings in order to enable an investment rate compatible with sustaining GDP growth.
Emerging Markets’ Feminine Future
Shaukat Aziz (Project Syndicate) Mar 1, 2013
Gender discrimination makes women vulnerable to sexual slavery, trafficking, and forced marriage, deprives women of their inalienable rights, and diminishes their quality of life. It is also undermining emerging markets' social and economic progress – on which the rest of the world increasingly relies.
The Euro’s House Divided
Jean Pisani-Ferry (Project Syndicate) Mar 1, 2013
The European Commission’s latest economic outlook paints a disheartening picture of a deep and persistent economic and social divide within the eurozone. Such a gulf within a monetary union cannot be sustained for very long.
Global Volatility
Josh Thimons (PIMCO) Mar 1, 2013
Right or wrong, the Fed has taken the markets one step further down the path of experimental and untested policy. The Fed’s new communication strategy may, in fact, be a more sensible policy prescription than calendar rate guidance. However, the likely unintended consequence of such a move is a heightened level of market volatility. We expect increased market volatility, particularly around economic data releases. Investors with an understanding of the Fed’s now increasingly transparent reaction function will find opportunities to profit in the volatility markets. According to our model of the Fed’s reaction function, presently every ¼ of a percent unexpected change in the unemployment rate is likely to lead to roughly an 11 basis point change in the five-year Treasury yield.
Tobacco: The Opium War of the 21st Century?
César Chelala (Globalist) Mar 2, 2013
Does the Chinese obsession with smoking have its roots in British trade policy?
Sovereign default and the rules of engineering
Ugo Panizza (VoxEU) Mar 2, 2013
Policymakers charged with sovereign debt restructuring would do well to take an engineer’s approach: know what’s broken, and know exactly what your solution aims to fix. This column argues that Europe may yet face several complex sovereign defaults and, like engineers, in dealing with these defaults we must find a way to avoid characteristically panicked policymaking.
Policy-related uncertainty: At the root of the lost resilience of Eurozone labour markets?
Alfonso Arpaia & Alessandro Turrini (VoxEU) Mar 2, 2013
Is policy-related uncertainty at the root of lacklustre Eurozone job creation? This column presents evidence that is consistent with this idea. The main implications for policy are straightforward: credible solutions to the Eurozone debt crisis will alleviate the critical unemployment situation of a number of Eurozone countries. How? Not only by helping to kick start investment and production, but also by an additional, direct boost to job creation that is linked to confidence.
Better out than in
Economist Mar 2, 2013
If Barack Obama wants a cleaner world and a richer America, he should allow natural-gas exports.
Incentives for avoiding delayed sovereign defaults
Ugo Panizza (VoxEU) Mar 3, 2013
Can we avoid delayed sovereign defaults? This column sketches out a flexible mechanism focused on the international lender, and competition between lenders, of last resort to ensure timeliness, transparency and larger sums than are currently available. The threat of competition should provide strong incentives for addressing imbalances in the governance of the main multilateral financial institutions
Japan: Hey, big spender
Jonathan Soble (FT) Mar 3, 2013
Shinzo Abe, the new prime minister, has ambitious plans to shake Tokyo out of its economic torpor but his expansionary agenda carries risks.
Let the market decide our energy sources
Robert McFarlane and George Olah (FT) Mar 3, 2013
Thanks to the discovery of massive quantities of natural gas, we have alternatives to petrol. No subsidies are needed.
Transatlantic trade deal is a US priority
Max Baucus (FT) Mar 3, 2013
After years of stalled trade negotiations, the US and EU must show leadership and make tough choices to boost the world economy.
Eurozone macro orthodoxy: Options for the coming reversal
Richard Wood (VoxEU) Mar 4, 2013
Despite recent calm in the markets, the Eurozone crisis seems far from over. So far, responses have worked little magic. This column argues that at some point soon, Eurozone governments will be forced by voters to reverse austerity and stimulate growth. A number of policy options are available, but it is clear that pro-growth fiscal stimulus policies should take their place. Longer-term fiscal consolidation will nonetheless also be required to reduce excessive levels of public spending relative to GDP.
Winning the Transatlantic Trade Challenge
Ana Palacio (Project Syndicate) Mar 4, 2013
US President Barack Obama’s announcement that negotiations will begin on a comprehensive “Transatlantic Trade and Investment Partnership” has generated excitement on both sides of the Atlantic. But, to prevent negotiations from stalling over sensitive topics, key political actors should first convene to resolve core differences.
What is Italy Saying?
Joseph E. Stiglitz (Project Syndicate) Mar 4, 2013
The outcome of the Italian elections should send a clear message to Europe’s leaders: the austerity policies that they have pursued are being rejected by voters. Indeed, it will take a decade or more to recover the losses that austerity has wrought.
Don’t Believe Spain's Deficit Numbers
Megan Greene (Bloomberg) Mar 4, 2013
Last week, Spanish Prime Minister Mariano Rajoy gave investors and analysts a pleasant surprise, announcing that his country’s budget deficit had fallen to 6.7 percent of gross domestic product in 2012, far below the European Commission’s estimate.
Japan's Kuroda Says He'll Be Cautiously Bold
Clive Crook (Bloomberg) Mar 4, 2013
Haruhiko Kuroda, the Japanese government's nominee to become head of the Bank of Japan, mostly told financial markets what they wanted when he appeared at a parliamentary confirmation hearing today. If he gets the job, monetary policy will change: The "scale and scope" of BOJ asset purchases will increase, he said.
New Products, More Value Can Advance Economic Take-Off
IMF Survey Mar 4, 2013
To reach the next level of development, low-income countries should strive to transform the structure of their economies by diversifying into new sectors and producing new, higher value-added products, speakers told a conference at the IMF.
Welcome the Robot Revolution, but Beware
Bloomberg Mar 4, 2013
Robots are evoking some deep economic anxiety these days. They’re routinely mastering human tasks -- driving cars, trading securities, diagnosing diseases - - that not long ago appeared permanently beyond their capabilities. And as automated technology advances at an exponential rate, more and more jobs, in more and more fields, will be done by intelligent machines in the very near future.
Euro crisis is breeding comics not fascists
Gideon Rachman(FT) Mar 4, 2013
Times may be tough but this is not the 1930s. Modern Europe is a much richer and less traumatised continent.
India’s masters suffer the ‘Downton’ effect
Ranjani Iyer Mohanty (FT) Mar 4, 2013
The Indian domestic labour market is undergoing a quiet but noticeable change: the servants no longer want to serve.
Get technical to fix rating agencies
Arturo Cifuentes (FT) Mar 4, 2013
The three agencies that dominated the market before the subprime crisis still do: fresh thinking is needed to improve the ratings environment.
Wall Street’s latest idea
Tracy Alloway (FT) Mar 4, 2013
The banking industry has high hopes for its new business of ‘collateral transformation’. But regulators are raising concerns.
Natural Gas Exports and the Mythical 'Sweet Spot'
Bennett Johnson (WSJ) Mar 4, 2013
Congressional meddling so warped the market in 1977 that an emergency law was needed to undo the harm.
Basel III: Europe’s interest is to comply
Nicolas Véron (VoxEU) Mar 5, 2013
The EU was once a champion of global financial regulatory convergence. What happened? This column argues that the EU should drop its lacklustre inertia and pursue Basel III because, in the end, it’s in its interests to comply. EU policymakers ought to aim at enabling the adoption of a Capital Requirements Regulation that would be fully compliant with Basel III.
Europe, Unemployment and Instability
George Friedman (Stratfor) Mar 5, 2013
The global financial crisis of 2008 has slowly yielded to a global unemployment crisis. This unemployment crisis will, fairly quickly, give way to a political crisis. The crisis involves all three of the major pillars of the global system -- Europe, China and the United States. The level of intensity differs, the political response differs and the relationship to the financial crisis differs. But there is a common element, which is that unemployment is increasingly replacing finance as the central problem of the financial system.
Europe: A loaded chamber
Joshua Chaffin (FT) Mar 5, 2013
The EU parliament’s capping of bank bonuses shows it has matured as a political force, but its democratic legitimacy is still queried.
The risky task of relaunching Japan
Martin Wolf (FT) Mar 5, 2013
The question is whether the BoJ can raise inflation and lower real interest rates without destabilising domestic or global economies.
A guide to gifting in the new China
Patti Waldmeir (FT) Mar 5, 2013
Tigers and flies and having to change their diet at a time when party bigwigs are talking about austerity and corruption.
ECB battles demons as growth slows
Michael Steen (FT) Mar 5, 2013
Central bank wants eurozone to continue enforcing budgetary discipline and implementing reforms to attain sustainable growth.
The Broadband Engine of Economic Growth
Julius Genachowski (WSJ) Mar 5, 2013
The U.S. has as many 4G subscribers as the rest of the world combined.
How the Central and Eastern European Banking System Managed the Financial Crisis
Anders Åslund (PIIE) Mar 5, 2013
In early 2009, the International Monetary Fund (IMF) and the European Bank of Reconstruction and Development (EBRD) raised a cry of despair. They feared that several of the 15 Western European banks that dominated the banking system of Central and Eastern Europe (CEE) would withdraw from the region because of their problems at home. In fact, the CEE banking sector had many advantages. Leverage was limited, and toxic assets were unknown. The main concern was that the three Baltic states (Estonia, Latvia, and Lithuania) suffered from severe overheating, because their credits expanded far too fast in 2005 and 2006, and they were financed with foreign bank credits, which drove up their inflation.
Europe, Unemployment and Instability
George Friedman (Stratfor) Mar 5, 2013
The global financial crisis of 2008 has slowly yielded to a global unemployment crisis. This unemployment crisis will, fairly quickly, give way to a political crisis. The crisis involves all three of the major pillars of the global system -- Europe, China and the United States. The level of intensity differs, the political response differs and the relationship to the financial crisis differs. But there is a common element, which is that unemployment is increasingly replacing finance as the central problem of the financial system.
China and the End of the End of History
Zhang Weiwei (Globalist) Mar 5, 2013
Could the Western democratic system only a transitory phenomenon in the long history of mankind?
P>Why Europe?
Harold James (Project Syndicate) Mar 5, 2013
The threat of an explosive disintegration of the eurozone – and with it of the EU – is receding. But the confused outcome of Italy's parliamentary election, with an upper house dominated by an anti-EU party and a pro-EU majority in the Chamber of Deputies, has revived the fundamental debate about the purpose of European integration.
Learning from Germany
Daniel Gros (Project Syndicate) Mar 5, 2013
In just ten years, Germany has gone from being the sick man of Europe to being a role model that the eurozone's distressed economies are instructed to emulate. But there is much in the German model – particularly its neglect of service-sector reforms – that economies struggling to boost productivity should ignore.
A Rest Stop for Europe
Ashoka Mody (Project Syndicate) Mar 5, 2013
The EU is mired in a crisis of confidence. Rather than continue to stumble toward more unity, EU leaders should restore effective sovereignty to national authorities in eurozone countries, giving Europeans the opportunity to regroup in preparation for future steps toward a more integrated Europe and a more resilient euro.
China's Looming Crisis: Daunting Troubles Mount
Joel Brinkley (World Affairs) Mar 5, 2013
China’s slowing growth, increasing unemployment, legendary corruption, overcrowding, and vast wealth disparity have spiked social unrest and spooked elites, who are leaving with their billions.
Independence Lost
Sylvester Eijffinger and Edin Mujagic (Project Syndicate) Mar 6, 2013
Since 2008, advanced countries' central banks have broken a decades-old commandment: Thou shalt not engage in monetary financing of government spending. While many of these banks have never been truly independent, this shift threatens to end the era of low inflation.
Mexico Breaking Good?
Kenneth Rogoff (Project Syndicate) Mar 6, 2013
Mexico is enjoying a manufacturing boom that has boosted its exports to the US after a long secular decline. With China’s wages soaring and rising oil prices driving up shipping costs, production in Mexico is suddenly looking much more attractive, even taking security concerns into account.
A Global "New Deal"?
Yannos Papantoniou (Project Syndicate) Mar 6, 2013
For domestic demand to act as an engine of growth, policies should shift resources from investment to consumption. While the magnitudes involved are huge, they must be attained if an extended period of low growth, high unemployment, and declining living standards among the world’s poorest is to be avoided.
Transatlantic Trade’s Transformative Potential
Mohamed A. El-Erian (Project Syndicate) Mar 6, 2013
A "Transatlantic Trade and Investment Partnership" between the US and Europe has the potential to transform global trade and multilateral organizations to the benefit of all. But this opportunity could be squandered, owing to the short-term mindset that now encumbers the West and the multilateral organizations that it dominates.
Towards a more procyclical financial system
Jon Danielsson (VoxEU) Mar 6, 2013
Is the fact that different banks have different risk models problematic? Contrary to the Basel Committee and the European Banking Authority, this column argues that heterogeneity is a good thing. It leads to countercyclicality, and thereby reduces instances of procyclical price movements. Both the Basel Committee and the European Banking Authority have indicated that they are troubled by heterogeneity and are seeking to rectify the problem. Their conclusion is plainly wrong.
How Dollar Diplomacy Spelled Doom for the British Empire
Benn Steil (Bloomberg) Mar 6, 2013
“The British Empire seems to be running off almost as fast as the American loan,” Winston Churchill thundered before the House of Commons on Dec. 20, 1946. “The haste is appalling.”
US Trade Policy to Focus on TPP, EU Talks in 2013
Bridges Weekly Trade News Digest, Volume 17, Number 8 Mar 6, 2013
US President Barack Obama will direct his 2013 trade efforts toward moving the Trans-Pacific Partnership (TPP) talks toward a conclusion and launching trans-Atlantic negotiations aimed at establishing a trade and investment partnership with the EU, according to a report that was submitted to Congress last Friday.
WTO: Food Stockholding Talks Intensify as Unofficial Deadline Looms
Bridges Weekly Trade News Digest, Volume 17, Number 8 Mar 6, 2013
Countries have intensified informal consultations on a developing country proposal to ease WTO farm subsidy rules for food stockholding, trade sources say. The talks have shifted gear ahead of an unofficial Easter deadline for reviewing progress on measures to be adopted at the global trade body's ministerial conference in Bali, Indonesia, this December.
WTO Plurilaterals: GPA, ITA Aim for Possible Advances Ahead of Bali
Bridges Weekly Trade News Digest, Volume 17, Number 8 Mar 6, 2013
Parties to the WTO's plurilateral agreement on government procurement could aim to have the revised version of the pact enter into force in time for the Bali ministerial conference this December, sources told Bridges this week. Meanwhile, efforts to expand another plurilateral WTO deal – the Information Technology Agreement – continue underway, with the global trade body's ministerial also being seen as a tentative date for concluding the talks.
TRIPS Council: LDC Extension, Tobacco Plain Packaging Take Centre Stage
Bridges Weekly Trade News Digest, Volume 17, Number 8 Mar 6, 2013
WTO members this week discussed a proposal by least developed countries (LDCs) to extend their transition period for implementing the organisation's intellectual property rules, which is set to expire this July. Members at the 5-6 March meeting of the Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS) also debated a proposed New Zealand law that would require plain packaging for tobacco products; a similar Australian policy is already facing three separate challenges at the WTO's Dispute Settlement Body.
Dow should be consigned to history
John Authers (FT) Mar 6, 2013
The Dow Jones index hit a record high this week, but it is methodologically flawed and the attention it commands is largely attributable to inertia.
Venezuela: To the heir, a poisoned chalice
Benedict Mander (FT) Mar 6, 2013
Many forgave Hugo Chávez for his economic blunders but such generosity is unlikely to be shown towards the next leader.
Hold the Obituary on Manufacturing!
Caroline Baum (Bloomberg) Mar 6, 2013
U.S. manufacturing is well along in its self-help program and is retooling with impressive results.
Where Have China’s Workers Gone?
Yukon Huang and Clare Lynch (Bloomberg) Mar 6, 2013
Xi Jinping and Li Keqiang are taking over China’s leadership at a time when growth has slackened and labor issues have become more complex.
Readying Europe for This Global Age
Carl Bildt (Globalist) Mar 6, 2013
Is Europe ready to do its part to contribute to global prosperity and stability?
Reflections on Doing Business in India and China
Nicolas Berggruen (Globalist) Mar 7, 2013
How do the realities of doing business in India and China reflect centuries-old traditions in governance and attitudes toward embracing change?
The sordid history of Congressional acceptance and rejection of cap-and-trade: Implications for climate policy
Richard Schmalensee & Robert N. Stavins (VoxEU) Mar 7, 2013
Not so long ago, cap-and-trade mechanisms for environmental protection were popular in Congress. Now, such mechanisms are denigrated. What happened? This column tells the sordid tale of how conservatives in Congress who once supported cap and trade now lambast climate change legislation as ‘cap-and-tax’. Ironically, conservatives are choosing to demonise their own market-based creation. The successful conservative campaign that disparaged cap-and-trade means it may now be politically impossible to promote it in the US. The good news? Elsewhere, cap and trade is now a proven, viable option for tackling large-scale environmental problems.
The trend reversal in income inequality and returns to education: How bad is this good news for Latin America?
Augusto de la Torre & Julián Messina (VoxEU) Mar 7, 2013
The last decade has seen unprecedented economic and social achievements in Latin America. This column investigates the relationship between changes in the labour market and the drop in income inequality across the continent. There is certainly room for more research to help us better understand Latin America’s spectacular decline in income inequality, but what is clear is that the good news is tempered by the fact that the specialisation of the region’s economies are relatively low in skill intensity and therefore productivity.
China's rising labour costs: opportunity as well as challenge
Hannah Levinger (DB Research) Mar 7, 2013
Rising wages and slowing productivity, coupled with a declining demographic dividend, have stirred concerns that China’s competitiveness in manufacturing is eroding. Indeed, structural changes are taking place, notably in the cheap labour segment, shifting dynamics along the value chain and across provinces. These changes are actually positive in terms of the strived-for shift in China’s growth model.
The Promise and Peril of India's Youth Bulge
Danielle Rajendram (Diplomat) Mar 7, 2013
India's young population could propel the nation to new economic heights -- or tear it apart from the inside.
The Way They Live Now
Michael Lewis (NYRB) Mar 7, 2013
In London, circa 1980, the American investment banker had going against him not just widespread commercial lassitude but the locals’ near-constant state of irony. Wherever it traveled, American high finance required an irony-free zone, in which otherwise intelligent people might take seriously inherently absurd events: young people with no experience in finance being paid fortunes to give financial advice, bankers who had never run a business orchestrating takeovers of entire industries, and so on.
China must seize rare chance for reform
Zhang Weiying (FT) Mar 7, 2013
Because of rare historical circumstances, the new leadership is more talented, more zealous and more entrepreneurial.
US judges are jeopardising global finance
David Martinez (FT) Mar 7, 2013
A US federal court ruling punishes twice those who contributed to Argentina’s restructuring in favour of the free riders.
Davos Man’s faith in globalisation is shaken
(FT)Gillian Tett Mar 7, 2013
Localisation in financial flows and a greater state involvement in markets are flying in the face of the elite’s expectations.
Why we give foreign aid
Charles Krauthammer (WP) Mar 7, 2013
Despite the unfriendly nature of Egypt’s regime, we should not cut off its aid.
India squeezed by financial repression
Kunal Kumar Kundu (AT) Mar 8, 2013
India's recent budget showed the extent to which the government resorts to financial repression of its citizens, companies and financial corporations, distorting savings and investment and damaging growth. Yet its extortion and profligacy leaves health and education spending trailing that of many poorer countries.
Anti-Poverty 2.0
Jomo Kwame Sundaram (Project Syndicate) Mar 8, 2013
Global leaders have touted the apparent success of achieving in 2010 – well ahead of the 2015 target – the Millennium Development Goal of halving global poverty relative to 1990. But, amid enduring poverty, rising inequality, and weak growth in many developing countries, the success of past anti-poverty policies appears dubious.
The Dow’s new high: Rally drivers
Economist Mar 9, 2013
There’s froth in the equity markets, but not a bubble.
European imbalances
Hans-Werner Sinn & Akos Valentinyi (VoxEU) Mar 9, 2013
Will addressing large internal imbalances lead us out of the Eurozone crisis? This column argues that it might. Periphery countries should devalue in order to regain competitiveness and reduce imbalances. As to whether they should pursue internal or external devaluation, the answer remains unclear. Overall, given that policymakers have excluded the option of exit, economic policymaking must focus on the possibilities for internal devaluations, despite some of the difficulties it may bring.
Foreign-currency returns and systemic risks
Victoria Galsband & Thomas Nitschka (VoxEU) Mar 10, 2013
Violations of the uncovered interest-rate parity – a zero-profit equilibrium condition in foreign-exchange markets – seems to consistently give rise to profitable currency trading. This column highlights the risky nature of this phenomenon, arguing that it is the exposure to stock-market cash flows that is the key secret to making money from global currency portfolio investments. High returns from currency trading compensate investors for taking on severe stock-market risks.
To Understand Finance, Embrace Complexity
Mark Buchanan (Bloomberg) Mar 10, 2013
A highly unusual collaboration between economists and scientists offers an important insight for those who want to fix the world’s crisis-prone financial system: There’s no simple way to understand a complex network.
Theories of financial crises
Itay Goldstein & Assaf Razin (VoxEU) Mar 11, 2013
Broadly speaking, there are three types of economic crisis: banking crises and panics, credit frictions and market freezes, and currency crises. This column argues that features from these types of crises have been at work and interacted with each other to shape the events of the last few years. From an extensive review of literature on these issues, it’s clear that the biggest challenge policymakers and economists face is in developing integrative models that better describing contemporary economic realities.
The Great Disconnect
Kemal Dervis (Project Syndicate) Mar 11, 2013
Since the second half of 2012, financial markets have recovered strongly worldwide. But this financial market buoyancy is at odds with political events and real economic indicators, which augur slow growth at best in Europe and the US, coupled with high unemployment.
Networked Development
Hans Vestberg (Project Syndicate) Mar 11, 2013
Connectivity is a basic enabler of economic growth and improved quality of life. So there is a strong business case for investing in broadband to optimize the delivery of essential services in education, health care, safety, and security, and to redefine urban landscapes through smart electricity grids and more efficient transportation.
‘Asian Century’ means shared prosperity, responsibility and multilateral agreements
Pascal Lamy (WTO) Mar 11, 2013
Asia has enjoyed a surge in trade in proportion to its economic size, is increasingly involved in global supply chains and has turned to free trade agreements to pursue its trade agenda. The time has come to “multilateralize” those agreements.
Shale Oil: A Deep Dive Into Implications for the Global Economy and Commodity Investors
Greg Sharenow and Mihir Worah (PIMCO) Mar 11, 2013
A revolution in shale oil production could have a significant impact on the global economy, oil futures and commodity investing. The shale oil revolution in the U.S. is a classic example of high prices and improving technology spurring methods of commodity production that may have been historically unimaginable. Although growth in U.S. shale production has not yet been sufficient to meaningfully weaken oil prices, it has had a notable impact on long-term price expectations, on both the upside and downside. After acting as a significant brake on economic activity during the run-up in prices during the last decade, greater energy availability will at the very least be a positive for global growth.
Europe’s Accounting Rules Are Destroying Its Banks
Gordon Kerr (Bloomberg) Mar 11, 2013
Late last year, a group of institutional investors sent a letter to officials in Brussels, warning that European Union accounting standards are “destabilizing banks” and “damaging national economies.”
Cut Global Red Tape to Promote Economic Growth
Cass R. Sunstein (Bloomberg) Mar 11, 2013
Imagine that you own a small but rapidly growing company in Vermont, and that your products are starting to sell in Maine, New Hampshire and Massachusetts. You would probably hate it if those states forced you to comply with inconsistent and redundant regulatory requirements.
High vaultage
Alice Ross and Claire Jones (FT) Mar 11, 2013
Central banks have become crucial participants in currency markets but traders say their activities are too opaque.
Africa must get real about Chinese ties
Lamido Sanusi (FT) Mar 11, 2013
A relationship that carries with it a whiff of colonialism amounts to little more than a missed opportunity on both sides.
Applaud central banks ‘soft’ on inflation
Sushil Wadhwani (FT) Mar 11, 2013
Fears that central banks are going soft on inflation are overdone, when history shows rising prices can be consistent with higher stock markets.
Bank leverage cycles
Galo Nuño & Carlos Thomas (VoxEU) Mar 12, 2013
Economists tend to agree that explosive deleveraging in the banking sector was a central element of the 2008 global financial crisis. This column argues that such deleveraging is far from unique. In fact, there is a ‘bank leverage cycle’ in which bank leverage, assets and GDP ramp up and down together; and this is true across financial subsectors. Such procyclicality strengthens the case for macroprudential regulations.
National Governments, Global Citizens
Dani Rodrik (Project Syndicate) Mar 12, 2013
National governments are accountable to their citizens, at least in principle. So the more global these citizens’ sense of their interests becomes, the more globally responsible national policy will be.
Currency War and Peace
Otaviano Canuto (Project Syndicate) Mar 12, 2013
The discussions at last month’s G-20 meeting of finance ministers were dominated by anxiety over so-called “currency wars.” But, to escape the crisis, global leaders must shift their focus to channeling the massive liquidity that advanced countries' controversial monetary policies have generated toward long-term investment financing.
East India Company: The Original Too-Big-to-Fail Firm
Nick Robins (Bloomberg) Mar 12, 2013
For an institution that has been defunct for almost 150 years, the East India Company still evokes powerful reactions across the world.
Trans-Pacific Talks Advance, Amid Speculation over Japan Entry
Bridges Weekly Trade News Digest, Volume 17, Number 9 Mar 13, 2013
Talks for a proposed Trans-Pacific Partnership (TPP) Agreement have "intensified," negotiators announced today after a ten-day session in Singapore, ahead of the impending end-year deadline that members have set for clinching a deal. Japan, meanwhile, is expected to soon state its intention to join the 11-country group, with an announcement possible as early as this Friday.
EU Parliamentarians Approve Farm Policy Reforms
Bridges Weekly Trade News Digest, Volume 17, Number 9 Mar 13, 2013
In a plenary session earlier today, European parliamentarians voted on proposals for reform of the EU's controversial Common Agricultural Policy, in the latest step towards defining the shape of the post-2013 farm subsidy framework.
Preparations Underway for Launching Trans-Atlantic Trade Talks
Bridges Weekly Trade News Digest, Volume 17, Number 9 Mar 13, 2013
A month after announcing that they would be pursuing a bilateral trade and investment agreement, the EU and US have begun preparations for the formal launch of trade talks, which many expect by summer. While the European Commission announced yesterday that it now has an agreed draft mandate for the negotiations, US officials – including President Barack Obama – have similarly continued working over the past few weeks to shore up domestic support for the trans-Atlantic pact.
The Return of the Tobin Tax?
Edwin M. Truman (PIIE) Mar 12, 2013
Algirdas Semeta, EU Commissioner for Taxation, recently toured Washington touting the decision by eleven of the 17 members of the euro area to adopt a common financial transactions tax (FTT). In his public remarks, Commissioner Semeta invoked the name of Nobel-prize-winning, Yale economist James Tobin, who advocated such a tax in the 1970s to discourage foreign exchange market speculation. The rationale for the EU-proposed FTT is much broader than that for the Tobin tax, and it is an intellectual distortion to suggest otherwise.
Latin America: Mexican stand-off
John Paul Rathbone and Adam Thomson (FT) Mar 12, 2013
Strengthened by an unusual cross-party consensus, Enrique Peña Nieto is challenging the tycoons and duopolies that dominate the corporate landscape.
Growth comes with side effects for Singapore
Jeremy Grant (FT) Mar 12, 2013
Opaque business brings unwanted attention for the Lion City, which has discreetly built itself up as a financial hub to rival Switzerland in wealth management.
East’s ‘transition backlash’ alerts core EU
Neil Buckley (FT) Mar 12, 2013
Taken together with similar problems in Romania and Hungary, Bulgaria’s troubles show something deeper is going on beyond the union’s core
Dollar is the only serious reserve player
John Plender (FT) Mar 12, 2013
With the advantage of deep markets and recovering growth, the dollar’s pre-eminent position as the world’s main reserve currency remains.
Emerging markets: Who is vulnerable to overheating?
Maria Laura Lanzeni and Christian Weistroffer (DB Research) Mar 12, 2013
In an environment of large capital inflows to emerging markets (EMs) we try to provide a framework for detecting possible vulnerabilities in EMs emanating from excess growth in credit-to-GDP, the real effective exchange rate and/or the stock market. We find that for the EMs overall there is little reason for immediate concern. Of the individual regions, Asia seems to be the one to watch for a possible build-up of overheating pressures.
Lee Buchheit, fairy godmother to finance ministers in distress
Josephine Moulds (Guardian) Mar 12, 2013
Go-to expert for debt-ridden nations on why Spain is the euro's biggest problem, and why he prefers working for debtors
The Economist’s Stone
Jeffrey Frankel (Project Syndicate) Mar 13, 2013
This year marks the 100th anniversaries of two distinct institutional innovations in American economic policy: the introduction of the federal income tax and the establishment of the Federal Reserve. They are worth commemorating, if only because we are at risk of forgetting what we have learned since then.
The leaderless global economy: Can economic history suggest lessons?
Peter Temin & David Vines (VoxEU) Mar 13, 2013
Although policymakers want to help foster a global recovery, they are not sure how. Presenting lessons from the last two centuries, this column argues that we need to reduce unemployment first and deal with debt second if we are to see the back of this recession. Ultimately, the problems we face necessitate international cooperation. History shows us that international leadership is possible, and our current circumstances also show us that it is urgently necessary.
China seizes the day for market forces
Francesco Sisci (AT) Mar 13, 2013
A roll-back of the state by restructuring the functions and philosophy of ministries in China and a strong push, ostensibly the opposite direction, to hand control of vital concerns such as energy policy back to the center, are the deep and long-term changes emanating from this month's National People's Congress. Together they suggest real urgency to give space to market forces.
Commodities on the Rise
Dambisa Moyo (Project Syndicate) Mar 13, 2013
The commodity super-cycle – in which commodity prices reach ever-higher highs, but fall only to higher lows – is not over. Despite euphoria around shale gas (indeed, despite weak global growth), commodity prices have risen by as much as 150% since 2008 – a trend that will continue to threaten living standards worldwide.
Blinded by the Light
Bjørn Lomborg (Project Syndicate) Mar 13, 2013
On March 23, a billion or more people will participate in “Earth Hour” by turning off their lights from 8:30-9:30 in the evening. The organizers say that they are providing a way to demonstrate one’s desire to “do something” about global warming, but the stark reality is that Earth Hour will increase carbon emissions.
Singing Them 1% Blues
Robert B. Zoellick (WSJ) Mar 14, 2013
Insurgent political movements, such as the Tea Party, make it easy to disrupt traditional hierarchies in government and business.
The interaction between monetary and macroprudential policies
Stijn Claessens & Fabian Valencia (VoxEU) Mar 14, 2013
Inflation targeting once seemed sufficient, but the Global Crisis showed that maintaining financial stability and price stability requires more than the monetary-policy tool. We are witnessing the rise of macroprudential policy. This column discusses how monetary and macroprudential policies interact and what it means for policy and institutional design. Regardless of whether both policies are assigned to the same authority or to two authorities; separate decision-making, accountability and communication structures are required.
India: Cash in hand
Amy Kazmin (FT) Mar 13, 2013
A bold experiment by New Delhi to crack down on corruption by replacing subsidies with direct cash transfers is struggling.
Beware monetary experimentation
Martin Taylor (FT) Mar 13, 2013
Countries are being enrolled in the economic equivalent of clinical trials, but fiscal relaxation feels less risky.
Long-term battle to drive out short-term risk
Paul Woolley (FT) Mar 13, 2013
Risk metrics should be based on the cash flows of assets, not on their market prices, and the use of derivatives should be limited.
Mexico's Moment
Tim Harcourt (Globalist) Mar 13, 2013
Why is Mexico concerned that Brazil might be stealing its spotlight as a Latin American economic success story?
China must push for economic change
Henry Paulson (FT) Mar 14, 2013
No nation that has competitive capital markets yet does not allow global financial institutions to compete.
Remember lessons of 2007 in rush for junk
Gillian Tett (FT) Mar 14, 2013
While tumbling bond yields have sparked debate, what has received significantly less attention is the issue of maturity transformation.
China’s Billionaire Bubble Stands in Xi Jinping’s Way
William Pesek (Bloomberg) Mar 14, 2013
Now that Xi Jinping officially holds the reins in Beijing, the world is asking this question: Can China’s new leader revamp an economy that may become the world’s largest during his 10-year term? Here’s an even better one: Will Beijing let him?
The Inflation of Hugo Chávez
Jorge G. Castañeda (Project Syndicate) Mar 14, 2013
Hugo Chávez, the recently deceased Venezuelan president, oversaw a sharp drop in poverty and included millions of marginalized citizens in politics for the first time. But poverty has plummeted in almost every country in the region since the start of the century – and at a far lower cost.
Bullying India’s Central Bank Won’t Help Its Economy
Rajrishi Singhal (Bloomberg) Mar 14, 2013
After a brief lull, the strain in the fractious relationship between India’s Finance Ministry and its central bank, the Reserve Bank of India, is back. India’s annual budget ritual last month, in which Finance Minister Palaniappan Chidambaram presented the country’s economic and fiscal policy, provided a brief respite.
For America, Decline is a Choice
William C. Martel (Globalist) Mar 15, 2013
In reality, decline is not a foregone conclusion but a deliberate political choice that builds from a failure to define what matters most to the nation.
Migration Is Development
Peter Sutherland (Project Syndicate) Mar 15, 2013
It is perhaps understandable that the original Millennium Development Goals did not mention either internal or international migration. But migration is the original strategy for people seeking to escape poverty, mitigate risk, and build a better life, and its economic impact today is massive.
Inequality and Democratic Capitalism
Branko Milanovic (Globalist) Mar 15, 2013
Was the second half of the 20th century an unusual interlude, when capitalism became entwined with democracy, the welfare state and liberalism?
The 'Good Global Citizen' remit for the international community: A novel responsibility for the IMF
Biagio Bossone & Roberta Marra (VoxEU) Mar 16, 2013
Since 2008, we have learned that the root causes of global economic instability are more than the sum of domestic instabilities. This column calls for a broad reconsideration of the principles underpinning current global economic governance; arguing that in a globalised world, isolated domestic economic policymaking is not enough. The international community needs to adhere to a ‘Good Global Citizen’ remit – housed by the IMF – if we are to tackle global economic policy under collective responsibility.
Trade costs in the developing world: 1995-2010
Jean-François Arvis, Yann Duval, Ben Shepherd & Chorthip Utoktham (VoxEU) Mar 17, 2013
The world ain’t flat. Distance has massive effects on all manner of international flows, but measuring its empirical impact has been hindered by poor measurement of bilateral trade costs. This column introduces a new global dataset of bilateral trade costs prepared by UNESCAP and the World Bank. The data stress the importance of supply chains and connectivity constraints in explaining the higher costs and lower levels of trade integration observed in developing countries.
The Insupportable Equilibrium of Economic Thought
Mark Buchanan (Bloomberg) Mar 17, 2013
Conjure an image in your mind: a pencil resting on a small table, perhaps next to a notebook. In what position did you imagine the pencil? Lying on its side, right? Why not upright, with either the eraser or the graphite tip touching the table and the rest pointing into the air?
Regulation must not curb innovation
John Authers (FT) Mar 17, 2013
Research reveals that innovation can stoke economic growth, and lead to greater fragility in the financial system – but R&D still has its place.
Why bankers are intellectually naked
Martin Wolf (FT) Mar 17, 2013
‘The Bankers’ New Clothes’ by Anat Admati and Martin Hellwig warns that the causes of the financial crisis will return.
Reforming Europe
Lawrence Summers (WP) Mar 17, 2013
Policymakers shouldn’t relax just yet.
Cyprus: The next blunder
Charles Wyplosz (VoxEU) Mar 18, 2013
The Cyprus bailout package contains a tax on bank deposits. This column argues that the tax is a deeply dangerous policy that creates a new situation, more perilous than ever. It is a radical change that potentially undermines a perfectly reasonable deposit guarantee and the euro itself. Historians will one day explore the dark political motives behind this move. Meanwhile, we can only hope that the bad equilibrium that has just been created will not be chosen by anguished depositors in Spain and Italy.
Delhi needs to sell the idea of the market
Gurcharan Das (FT) Mar 18, 2013
Reflecting on the nation’s poor governance, Indians like to say their country ‘grows at night while the government sleeps’.
Rising dollar marks big investment shift
George Magnus (FT) Mar 18, 2013
US currency should be expected to trend higher, and put industrial commodities and emerging market currencies and local debt under pressure.
Falling Out of Love With China
David Shambaugh (NYT) Mar 18, 2013s
Why Beijing's declining global prestige matters, and how to get it back.
Professor Monti and the bubble
Paolo Manasse, Giulio Trigilia & Luca Zavalloni (VoxEU) Mar 19, 2013
Who saved Italy? This column argues that the crisis began with Silvio Berlusconi and ended with Mario Monti. Evidence suggests that restoring a sense of credibility to Italian policymaking was difficult to earn but may be very easy to lose (as the recent run on Italian debt suggests). New and old Italian politicians cannot afford to underestimate the formidable challenge ahead: getting Italy out of this depression without jeopardising its credibility.
Democratic legitimacy of the Eurozone
Jasper Blom & Geoffrey R D Underhill (VoxEU) Mar 19, 2013
David Cameron’s promise of a referendum on British participation in the EU has re-ignited the debate about the EU’s democratic legitimacy, just as the struggle to overcome the crisis continues. This column argues that in order to both successfully resolve the crisis and maintain states’ ability to sustain liberal finance, a substantial shift in policy is required. Enhancing the democratic legitimacy of crisis resolution measures and wider financial reforms is essential. Without diffuse support for reforms, crisis resolution is likely to collapse under centrifugal populist pressures.
Europe, Italian-Style
Michael Spence (Project Syndicate) Mar 19, 2013
The outcome of Italy’s election will most likely leave the country – the eurozone’s third-largest economy and the world’s third-largest sovereign-debt market – without a stable government. As a result, it will be difficult to sustain a reform program that is vigorous enough to satisfy the ECB and the eurozone core.
Crumbling BRICS
Jaswant Singh (Project Syndicate) Mar 19, 2013
At this month's BRICS summit in Durban, the leaders of Brazil, Russia, India, China, and South Africa will set ambitious goals. But, given the obstacles to cooperation – from mutual distrust to disparate interests – that exist among them, they are more likely to achieve their goals individually.
Europe’s Lost-and-Found Decade
Barry Eichengreen (Project Syndicate) Mar 19, 2013
It is unlikely that Europe’s economy will follow the pattern of emerging-market crises and rise, phoenix-like, from the ashes. But, for better or worse, the fact that the most severe political and social turbulence is yet to come at least means that Europe will be unable to afford the dithering that produced Japan’s lost decade.
Russia’s Cyprus Reaction Smacks of Hypocrisy
Leonid Bershidsky (Bloomberg) Mar 19, 2013
For a country whose government and banks reneged on tens of billions of dollars in foreign obligations during its own financial crisis in 1998, Russia has responded with incongruous fury to the prospect of a similar event in Cyprus.
Yes, Cyprus Is Different
Marc Champion (Bloomberg) Mar 19, 2013
One lesson from the Cyprus bailout debacle is that in the eyes of its fellow European Union members, Cyprus really is different.
Today’s Forecast: Sunny With a Chance of a Housing Bubble
Mark Buchanan (Bloomberg) Mar 19, 2013
At the time of World War I, many meteorologists had all but given up on the idea of accurate and scientific weather forecasting. Then a physicist and ambulance driver by the name of Lewis Richardson, in spare moments between terrifying bouts rescuing the injured, undertook a momentous project.
Markets: The ghosts of ’94
Michael Mackenzie, Robin Wigglesworth and Stephen Foley (FT) Mar 19, 2013
With US interest rates close to zero, veteran bond traders fear the omens point to a repeat of the catastrophic collapse of the mid-nineties.
Cyprus reveals chinks in ECB armour
Ralph Atkins (FT) Mar 19, 2013
European sovereign bond markets have largely shrugged off the threat to financial stability but it is a reminder of the limits of central banks’ powers
Chinese seek change as continuity rules
Henny Sender (FT) Mar 19, 2013
The wave of money finding its way to Silicon Valley is part of a general surge of capital leaving China.
A Cypriot contagion?
Robert J. Samuelson (WP) Mar 19, 2013
Will island’s woes infect the rest of Europe?
The Chávez Way
Robert Skidelsky (Project Syndicate) Mar 20, 2013
The debate over Hugo Chávez’s political legacy is a posthumous re-enactment of the ideological battles that were fought while he was alive. The battle for his economic legacy is more straightforward: it comes down to how he managed Venezuela’s oil wealth.
Debt-Friendly Stimulus
Robert J. Shiller (Project Syndicate) Mar 20, 2013
With much of the global economy apparently trapped in a long and painful austerity-induced slump, it is time to admit that the trap is entirely of our own making. We have constructed it from unfortunate habits of thought about how to handle spiraling public debt.
China’s Hidden Debt Risk
Zhang Monan (Project Syndicate) Mar 20, 2013
China’s national balance sheet, which boasts positive net assets, has garnered significant attention in recent years. But, to assess China’s debt risk accurately, policymakers and economists must consider the risks that lie in the country's asset structure, as well as liabilities that are not included on its balance sheet.
Cyprus’s Four Options to Avoid Banking Collapse
Megan Greene Bloomberg) Mar 20, 2013
The only thing worse than Cyprus accepting the rotten bailout program that European policy makers agreed on late last week was Cyprus rejecting it. Yesterday, the parliament voted decisively against the terms of the bailout, with 36 members opposing it, the ruling party abstaining and not a single vote in favor.
Japan Announces Goal of Joining Trans-Pacific Trade Talks
Bridges Weekly Trade News Digest, Volume 17, Number 10 Mar 20, 2013
In a highly-anticipated announcement made last Friday, Japanese Prime Minister Shinzo Abe confirmed that his country will seek to join the eleven others that are negotiating the so-called Trans-Pacific Partnership (TPP) Agreement. If successful, Japan would be one of the largest economies involved in the talks, second only to the US.
Trade and Currency in the Spotlight as Chinese President, US Treasury Secretary Meet
Bridges Weekly Trade News Digest, Volume 17, Number 10 Mar 20, 2013
Washington and Beijing's oft-contentious trade relationship came to the fore this Tuesday, as newly-instated Chinese President Xi Jinping met with recently-appointed US Treasury Secretary Jack Lew. The high-profile event – which also addressed issues such as currency and intellectual property – marked both Xi's first meeting as president with a senior foreign official, and the first major trip for the new US Treasury Secretary.
Why Global Economies Face an Age of Deflation
A. Gary Shilling (Bloomberg) Mar 20, 2013
In recent years, monetary and fiscal stimulus across the world have led to the assumption that serious inflation, if not hyperinflation, is on its way. I believe chronic deflation is more likely.
Three steps to stop financial collapse
Howard Davies and Susan Lund (FT) Mar 20, 2013
Closer co-operation, reform and integration are needed to restore capital mobility.
Japan is setting course for hyperinflation
Scott Minerd (FT) Mar 20, 2013
Price increases that result from rapid expansion of money supply can cause insidious cycle that requires creation of ever-larger amounts of new money.
Scandinavia: Model management
Richard Milne (FT) Mar 20, 2013
Swedish business is being cast as a model for long-term stability and growth but critics fear this approach might not work elsewhere. By Richard Milne
The Peru Kids Left Behind by the Boom
Marie Arana (NYT) Mar 20, 2013
Latin America's growth hasn't closed the rift between rich and poor.
Europe's Phony War: Austerians Vs. Deficitarians
Marc De Vos (Globalist) Mar 20, 2013
Are European nations really well-advised to follow the alluring policy prescriptions of U.S.-based deficit boosters?
The transatlantic trade talks and economic policy research: Time to re-tool
Simon J Evenett & Robert M. Stern (VoxEU) Mar 21, 2013
The US and the EU have announced their intentions to launch trade talks – the Transatlantic Trade and Investment Partnership. This column argues that this should not be thought of as a standard tariff-lowering deal with a few extras thrown in for good measure. Rather, we don’t really know what it will do because trade economists have failed to develop the necessary tools for understanding its impact. It is time for policy analysts to re-tool.
Global Markets' Time Factor
Mohamed A. El-Erian (Project Syndicate) Mar 21, 2013
In recent months, the dichotomy between booming financial markets and sluggish economies (and dysfunctional politics) has loomed large. The critical element of time – and who controls it – could well mean the difference between an orderly global resolution of today’s ongoing financial problems and a return to serious trouble.
Rolling the Dice in Cyprus
Ashoka Mody (Project Syndicate) Mar 21, 2013
The task was never going to be an easy one: impose losses worth about €5.8 billion on lenders to the Cypriot government and depositors with the country’s banks. And now the rejection of that effort has led Europe to its latest impasse.
How Franklin Roosevelt Secretly Ended the Gold Standard
Eric Rauchway (Bloomberg) Mar 21, 2013
On March 4, 1933, Franklin D. Roosevelt became president for the first time, promising an “adequate but sound” currency. The next day, a Sunday, he closed the nation’s banks. “We are now off the gold standard,” he privately declared to a group of advisers. Goldbugs in the president’s circle immediately began prophesying doom. One of his aides, Lewis Douglas, proclaimed “the end of Western civilization.”
Berlin is right to say no gain without pain
Josef Joffe (FT) Mar 21, 2013
Insisting on financial discipline in the rescue of profligate countries such as Cyprus puts Germany in a tough position.
A call to reverse urbanisation in Asia
Chandran Nair (FT) Mar 21, 2013
Governments must make the villages and townships that still house most Asians places that offer decently paid work.
Effect of Cyprus Exit From Euro Seen as Limited
Landon Thomas Jr (NYT) Mar 21, 2013
A messy departure from the euro would have a devastating effect on Cyprus's citizens, but Europe's losses from a Cypriot banking collapse would be minimal compared with the havoc that a Greek exit would have created.
Cyprus: What are the alternatives?
Thorsten Beck (VoxEU) Mar 22, 2013
Cypriot banks urgently need restructuring and downsizing, but a functioning financial system is necessary to handle Cyprus’s transformation to an economic model not based on an oversized banking sector. This column argues that splitting the Cypriot banking system into a bad ‘legacy’ part and a good forward-looking part seems the only feasible and effective solution to resolve the current crisis and restore trust. The Eurozone's resources would be most useful in this bank-resolution process.
Public investments for long-term economic growth: the case of health
Michael Stolpe (VoxEU) Mar 22, 2013
The crisis has shot holes in government budgets devoted to pro-growth public goods. This column argues that health-related public goods support long-term economic growth. Governments may be more inclined to focus on spending related directly to jobs, such as education and welfare-to-work programmes, but health should not be forgotten.
Quitting the Quota
Andrew Sheng and Xiao Geng (Project Syndicate) Mar 22, 2013
Rather than rely on unsustainable quotas to curb exorbitant demand for property and cheap credit, China’s leaders must address its root cause – the low cost of capital. This will require China to raise interest rates to market-clearing levels, while maintaining some capital-account control.
BRICS Not That Sturdy
Harsh V. Pant (YaleGlobal) Mar 22, 2013
China dominates BRICS with an economy larger than that of four other members combined
Mario Draghi’s Opiate of the Markets
Luigi Zingales (Project Syndicate) Mar 22, 2013
The “outright monetary transactions” scheme announced by ECB President Mario Draghi last July has served as the proverbial “bazooka” – a gun so powerful that it does not need to be used to deter speculative attacks on the euro. In other words, Draghi’s bazooka has anesthetized markets, impairing their ability to assess risk.
Demographic shift and implicit liabilities in the Big 4
Markus Jaeger (DB Research) Mar 22, 2013
China, Germany, Japan and the US are the world’s four largest economies. Together, they make up 45% of global GDP (at market exchange rates). The world’s third and fourth-largest economies, Germany and Japan, have already entered a phase of demographic stagnation and decline. So, amazingly, has China, whose working-age population peaked in 2011.
Fiscal policy and consumption
Tullio Jappelli & Luigi Pistaferri (VoxEU) Mar 23, 2013
Crisis-stricken governments have enacted large stimulus packages to counteract the recent recession. But how are these financed, and are consumers responding? This column argues that we must understand marginal propensity to consume in order to optimally design fiscal policy, outlining new research on how to get the best measurements. Through several policy simulations, it’s clear how important it is to truly understand the relationship between stimulus packages and marginal propensities to consume.
India’s Five Thoughts on China
Sanjaya Baru (Project Syndicate) Mar 24, 2013
India should welcome Chinese President Xi Jinping's “five-point proposal” for Sino-Indian relations, for it recognizes the two countries’ growing economic relationship and global cooperation. This would be a good starting point for Indian Prime Minister Manmohan Singh’s conversation with Xi at this week’s BRICS summit.
Finance: Cut down to size
Daniel Schäfer (FT) Mar 24, 2013
Since the 1980s, bankers’ pay has dramatically outstripped that of other professionals but experts believe that the days of vast bonuses, particularly in Europe, are numbered.
London Whale is the cost of too big to fail
Mark Roe (FT) Mar 24, 2013
The subsidy from the taxpayer that keeps a badly run, dysfunctional behemoth in business creates much of the value the shareholder enjoys.
Asian currency moves misunderstood
John Authers (FT) Mar 24, 2013
For the longer term, companies that offer some play on the Chinese consumer make eminent sense. And oddly, the same is true for Japan.
Europe’s Cyprus blunder and its consequences
Nicolas Véron (VoxEU) Mar 25, 2013
The Monday morning Eurozone Cyprus bailout is now public, although details are scant. This column argues that this package cancels out some of the mistakes in last week’s package. Last week, the Troika should have vetoed the small-deposit tax and prepared a plan B for the Cypriot parliament’s rejection. Avoiding the risky scenario of a Cyprus exit will require further fiscal commitments from Eurozone partners. One possibility is a temporary, but EZ-wide, 'deposit reinsurance', or backing of national deposit-guarantee schemes by the ESM.
Eurozone: Looking for growth
Laurence Boone, Céline Renucci & Ruben Segura-Cayuela (VoxEU) Mar 25, 2013
What happens after the crisis ends? This column estimates the long-term effects of the current cyclical downturn on Eurozone economies. In the absence of any real impetus for bold reform, estimates show that the damage will indeed be long lasting, permanently impairing growth for an ageing population that requires higher growth capacity more than ever before.
Austerity’s Children
Simon Johnson (Project Syndicate) Mar 25, 2013
Economists typically frame “fiscal adjustment” as an abstract and complex goal, though the issue boils down to deciding who will bear the brunt of measures to reduce the budget deficit. In America, that distributional choice has now been made: poor children must pay.
A New Business Model for Cyprus
Javier Solana (Project Syndicate) Mar 25, 2013
Today, the small, divided island of Cyprus is facing yet another economic storm. But there is light on the horizon: economic hope in the form of huge offshore gas reserves, which promise not only to transform the island’s economy, but also to improve regional cooperation and revive reunification efforts.
Investing in Latin America’s Future
IMF Survey Mar 25, 2013
Economic growth in Latin America is expected to remain strong in 2013, but the region needs more growth-enhancing and employment-generating policies to reduce poverty and income inequality, said Alejandro Werner, the IMF’s new Director of the Western Hemisphere Department.
On the Reliability of Chinese Output Figures
John Fernald, Israel Malkin, and Mark Spiegel (FRBSF) Mar 25, 2013
Some commentators have questioned whether China’s economy slowed more in 2012 than official gross domestic product figures indicate. However, the 2012 reported output and industrial production figures are consistent both with alternative Chinese indicators of the country’s economic activity, such as electricity production, and trade volume measures reported by non-Chinese sources. These alternative domestic and foreign sources provide no evidence that China’s economic growth was slower than official data indicate.
New Chinese Leader Offers Africa Assurance and Aid
Chris Buckley (NYT) Mar 25, 2013
President Xi Jinping defended China's economic stake in many African countries during a speech on Monday in Tanzania, and promised aid in a bid to counter fears over competitive Chinese companies.
How to Make America a Global Tax Haven
Ramesh Ponnuru (Bloomberg) Mar 25, 2013
“It’s just far-fetched to believe that Congress would lower corporate rates at the expense of small business,” says Representative Devin Nunes, a California Republican.
The Benefits of Chronic Deflation
A. Gary Shilling (Bloomberg) Mar 25, 2013
There is an important distinction between good deflation caused by excess supply and bad deflation created by deficient demand.
BRICS go over the wall
Pepe Escobar (AT) Mar 26, 2013
Atlanticist, Washington-consensus fanatics who say the BRICS grouping is on its deathbed are blind to the reality that its members - while protecting the global economy from casino capitalism - will increasingly take a political role in a multipolar world. As the North is overtaken by the global South at a dizzying speed, all stagnant and bankrupt Western elites can do is cling on for grim life.
Capital controls will put the euro at risk
Guntram Wolff (FT) Mar 25, 2013
With the measures, the currency in Cyprus is no longer worth the same as the currency held by any other bank in the eurozone.
Forget Cyprus and enjoy the risk rally
Erik Nielsen (FT) Mar 25, 2013
The party is far from over for equities and other risk assets, with money leaving havens in pursuit of positive yield.
Why the world needs reckless bankers
Michael Pettis (FT) Mar 25, 2013
Long-term wealth creation accrues to societies in which the financial system willingly funds risk-taking entrepreneurs.
Brazil: Humbled heavyweight
Joe Leahy (FT) Mar 25, 2013
The growth that made the nation Latin America’s economic champion has stalled and the government is searching for revival measures.
Brazil and the Global Battle to Eliminate Extreme Poverty
Rogerio Studart (Globalist) Mar 26, 2013
Has Latin America's largest country built a model for how to reduce poverty in lean budgetary times?
Fire-sale FDI: All smoke and no fire?
Ron Alquist, Rahul Mukherjee & Linda Tesar (VoxEU) Mar 26, 2013
Is foreign direct investment different in times of crisis? This column tests the ‘fire-sale foreign direct investment hypothesis’, finding that acquisitions undertaken during crisis periods do not fundamentally differ from those undertaken during non-crisis periods. The fire-sale foreign direct investment notion may well be ‘all smoke, and no fire’.
India must do more to open up banking
James Crabtree (FT) Mar 26, 2013
The problem with the central bank is not that it is mistaken to issue new licences, but that it is likely to issue too few, and to do so too slowly
China’s route to ‘responsibility’
Yukon Huang (FT) Mar 26, 2013
The country’s economic success is raising expectations over its behaviour and granting it more say in the trade system will help.
Cyprus capital controls threaten eurozone
John Plender (FT) Mar 26, 2013
The longer such controls remain, the more uncertain the effects of unwinding them and the more dangerous, politically, it will become to alter course.
Cyprus Bends With the German Wind
Raymond Zhong (WSJ) Mar 26, 2013
It says something about a country when the archbishop is also the most visible financial pundit.
Valuing the United Nations
Gareth Evans (Project Syndicate) Mar 26, 2013
The entire UN system and related entities, together with current peacekeepers, adds up to around 215,000 people worldwide, at an annual cost of around $30 billion. That is less than one-eighth of the 1.8 million staff employed by McDonald's and its franchisees worldwide, and also less than Wall Street employees received in bonuses in 2007.
The Dirge of Cyprus
Harold James (Project Syndicate) Mar 26, 2013
A state, especially in the modern form of the European welfare state, depends on effective mechanisms for arbitrating and resolving social disputes. It is these mechanisms that, as the turmoil surrounding Cyprus has shown, the EU lacks.
Great Depression Hit One Country Hardest of All
Joe Martin (Bloomberg) Mar 26, 2013
The Great Depression devastated many economies. But one country arguably suffered more than any other: Canada. By the time its economy reached bottom in 1932, Canada had suffered a staggering decline of 34.8 percent in per- capita gross domestic product. No other developed nation was as hard-hit.
The Five Ways Deflation Has Already Taken Hold
A. Gary Shilling (Bloomberg) Mar 26, 2013
Of the seven varieties of deflation, five are already at work in the U.S. economy.
Cyprus finds not all nations are equal
Christopher Pissarides (FT) Mar 27, 2013
The treatment of the island shows that the eurozone is a group where the interests of the big nations stand highest.
South Africa should forget the Brics era
Ruchir Sharma (FT) Mar 27, 2013
The ANC’s liberation dividend is running out and the economy needs investment and a more business-friendly environment.
Personal banking, the eurozone way
Robert Shrimsley (FT) Mar 27, 2013
As the Eurozone’s banks deal with the fallout from Cyprus, it is managers as well as customers who are feeling the pressure.
A modern history of fiscal prudence and profligacy
Ariel Binder, Paolo Mauro, Rafael Romeu & Asad Zaman (VoxEU) Mar 27, 2013
How confident are we that major developed countries remain fiscally prudent? Having developed a new dataset, this column gauges the degree of fiscal prudence or profligacy for major economies over the past several decades. From the evidence, it’s clear that the global financial crisis has posed the biggest policy challenge in living memory, with varying responses. How these responses turn out very much depends on whether the slowdown in growth is long-lasting or not.
Love the Bank, Hate the Banker
Raghuram Rajan (Project Syndicate) Mar 27, 2013
Public discourse is rarely nuanced: the public's attention span is short, and subtleties tend to confuse. Nowhere is this more obvious than in current debates about bank regulation, in which bankers and their critics have staked out positions that are sharp, shrill, and almost certainly wrong.
The Temptation of China’s Capital Account
Yu Yongding (Project Syndicate) Mar 27, 2013
The People's Bank of China has been pursuing capital-account liberalization at an increasing rate since 2009. But Chinese policymakers should recognize the significant risks inherent in relaxing capital controls – risks that imply the need for a more cautious approach.
The New Delhi Consensus
Shashi Tharoor (Project Syndicate) Mar 27, 2013
Like many developing countries, “self-reliance” and economic self-sufficiency were India’s national mantras long after independence. Indeed, one of the more remarkable (though largely unremarked) developments in recent Indian politics has been the startling shift in the country’s discourse about capitalist economics.
Escape From the Euro Zone: A Tragedy in Three Acts
Caroline Baum (Bloomberg) Mar 27, 2013
What if Cyprus said no?
Toward a New Consensus on Monetary Policy
Bloomberg Mar 27, 2013
If you’ve ever experienced high inflation, you’re unlikely to forget it. In the decades between the end of World War II and the creation of Europe’s new currency, Germany’s central bank set the global standard for sound finance and monetary conservatism. Germany’s folk-memory tied the hyperinflation of the 1920s to the destruction of German society and the rise of Adolf Hitler. “Never again” was the idea that motivated, and to some degree still motivates, German monetary policy.
Central Banks Must Master Their Fear of Inflation
Bloomberg Mar 27, 2013
Sometimes you can learn the lessons of history too well. Today’s top central bankers formed their ideas about monetary policy from the inflation of the 1970s and the recessions that followed. The slump that began in 2008 is different, and calls those ideas into doubt.
When a Euro Isn't a Euro
WSJ Mar 27, 2013
Capital controls are easier to impose than to remove.
Regime Change Comes to Euro Policy
IMG SRC="wsj.gif" ALT="Wall Street Journal Subscription Required">
Donald Luskin and Lorcan Roche Kelly (WSJ) Mar 27, 2013
The banking crisis in Cyprus prompted an overdue financial reckoning that, with luck, will spell the end of 'too big to fail.'
Philippines Gets Investment-Grade Credit Rating
Bettina Wassener and Floyd Whaley (NYT) Mar 27, 2013
The upgrade by Fitch gives the country, for the first time in its history, an investment-grade rating to go along with a fast-growing economy.
But Germans Do Consume
Holger Schmieding (Globalist) Mar 27, 2013
Is there any truth to the idea that German austerity is harming Europe's economic recovery?
India’s Agriculture on the Brink
Deepak Gopinath (YaleGlobal) Mar 27, 2013
Misguided policies boost short-term output, yet may transform India into a food importer.
The Truth About Geoengineering
David G. Victor, M. Granger Morgan, Jay Apt, John Steinbruner & Katharine Ricke (FA) Mar 27, 2013
With predictions about climate change growing direr every week, geoengineering (which includes everything from fertilizing the oceans in an attempt to cajole great blooms of carbon-sucking zooplankton to spraying particles into the upper atmosphere to make the earth more reflective) is starting to look more attractive. But the science still lags behind the ambitions. To understand how such schemes would work in practice -- and what their consequences would be -- it is time to start small-scale field tests.
The capital controls in Cyprus and the Icelandic experience
Jon Danielsson (VoxEU) Mar 28, 2013
Cyprus has imposed temporary capital controls. This column sheds light on how temporary and how damaging they are likely to be, based on Iceland’s experience. The longer controls exist, the harder they are to abolish. Icelandic capital controls, which have been ‘temporary’ for half a decade, deeply damage the economy by discouraging investment. We can only hope the authorities that created the chaos in the first place realise that temporary really needs to mean temporary.
International capital flows during crises: Gross matters
Fernando A Broner, Tatiana Didier, Aitor Erce & Sergio Schmukler (VoxEU) Mar 28, 2013
How much do we really know about net capital flows? Presenting new research, this column lays out a number of new stylised facts on the dynamics of gross capital flows and their implications for policymaking. Interestingly, if we’re to learn from relatively crisis-resilient middle-income countries, policymakers may well need to monitor and perhaps regulate the separate behaviour of domestic and foreign investors to weather future crises.
Europe risks going too far on moral hazard
Nicolas Véron (FT) Mar 28, 2013
A better path must be chartered between an untenable taxpayer backing of lenders and the unrealistic punishing of their creditors.
Can Income Inequality Destabilize the U.S. Economy?
Uri Dadush, Kemal Dervis, Sarah P. Milsom and Bennett Stancil (Globalist) Mar 28, 2013
Income inequality is doing a lot more damage than just fraying the political culture.
China's Glass Ceiling
Geoff Dyer (FP) Mar 28, 2013
Sure, the Middle Kingdom is becoming a superpower, but it's always going to be No. 2.
Rubles in the Sun
Anna Nemtsova (FP) Mar 28, 2013
Is Vladimir Putin the big winner of the Cypriot banking crisis?
Paths to Sustainable Power
Jeffrey D. Sachs Mar 28, 2013
The surest bet on the future of energy is the need for low-carbon energy supplies. Early movers may pay a slightly higher price today for these strategies, but they and the world will reap long-term economic and environmental benefits.
The BRICS Expose the West’s Hypocrisy
William Pesek (Bloomberg) Mar 28, 2013
Who do they think they are, these upstart economies, Brazil, Russia, India, China and South Africa?
Break Up the BRICS
Bloomberg View Mar 28, 2013
If this week’s BRICS summit in Durban, South Africa, passed you by, we don’t blame you. The leaders of Brazil, Russia, India, China and South Africa met, as they do once a year, to advance their common interests. They found, as they do once a year, that they don’t have many, so not much happened.
The decoupling of the US and European economies: Evidence from nowcasting
Lucrezia Reichlin (VoxEU) Mar 29, 2013
The Eurozone and US business cycles seems to have decoupled, but is Germany on the US or Eurozone side of the divide? This column presents recent results from the Now-Casting model on whether this US-Eurozone decoupling also applies to Germany. If this is right, the German stock market – which seems to predict Germany’s convergence to the US path – is due for a correction.
The Federal Reserve and the Financial Crisis
Jeffrey R. Hummel (WSJ) Mar 28, 2013
he Fed exacerbated the Depression with an inept response and caused the Great Inflation of the 1970s with an expansionary policy.
Cyprus Capital Controls Come Years After They Were Needed
Floyd Norris (NYT) Mar 28, 2013
Cyprus would be better off now had huge amounts of money not flowed into its banks in 2008 and 2009.
China on the Move
Stephen S. Roach (Project Syndicate) Mar 29, 2013
After six years of weighing the options, China is now firmly committed to implementing a new growth strategy. But it will take courage and sheer determination to tackle the biggest obstacle of all – deeply entrenched local and provincial power blocs.
Argentina: What the Pope Left Behind
Tim Harcourt (Globalist) Mar 29, 2013
Now is the time for Argentina to stop gaming its economic statistics and focus on real economic reforms.
Strengthening the I.M.F.
NYT Mar 29, 2013
It is in America's interest that Congress ratify proposed changes to the fund.
Infrastructure: The governance failures
Nicklas Garemo & Jan Mischke (VoxEU) Mar 30, 2013
Investment in infrastructure can bring growth and social benefits. This column highlights the infrastructure opportunities open to depressed economies, stressing that the main obstacles are governance-related. To bring opportunities to life will require an overhaul of infrastructure governance – a root cause of infrastructure projects’ poor productivity.
Strengthening Resilience in Developing Countries
J. Eric Smith (Globalist) Mar 30, 2013
Can giant insurance companies help small customers in developing countries bounce back from environmental catastrophes?
When Interest Rates Rise
Martin Feldstein (Project Syndicate) Mar 30, 2013
Long-term interest rates are now unsustainably low, implying bubbles in the prices of bonds and other securities. When interest rates rise, as they surely will, the bubbles will burst, the prices of those securities will fall, and anyone holding them – including banks and other financial institutions – will be hurt.
The Politics of Moral Hazard
Jean Pisani-Ferry (Project Syndicate) Mar 30, 2013
The crisis in Cyprus has shown that the true contest in Europe is less between moral hazard and financial stability than it is between financially sensible and politically acceptable solutions. But politics in Europe is national, so what one parliament regards as the only possible solution another regards as entirely unacceptable.
Why the Euro Is Doomed in 4 Steps
Matthew O'Brien (Atlantic) Mar 30, 2013
It's the gold standard, minus the shiny rocks.
Fiscal consolidation and implications of social spending for long-term fiscal sustainability
Rossana Merola & Douglas Sutherland (VoxEU) Mar 31, 2013
During the economic and financial crisis, fiscal positions across OECD countries deteriorated sharply. This column agues that population ageing and trends in social spending will further challenge the sustainability of fiscal balances. Research suggests that the scale of fiscal consolidation that will be needed to ensure long-term sustainability is large, but policymakers can look at the potential benefits of policy reform in mitigating budget pressures.
Economics will catch up with the euro
Wolfgang Münchau (FT) Mar 31, 2013
With creditor nations refusing a genuine banking union, the hurdle for a case in favour of eurozone exit is shockingly low.
Confessions of a Keynesian heretic
Roger Farmer (FT) Mar 31, 2013
A way to get people back to work is to reflate the asset markets. Central banks and treasuries should intervene to reflate the bubble.
Trade deals show power politics is back
Zaki Laïdi (FT) Mar 31, 2013
The American strategic objective in its negotiations is to contain China’s rise by setting a high regulatory bar.
Bargain basement banks not such a bargain
John Authers (FT) Mar 31, 2013
The Cyprus crisis has produced what optimists might call a nice buying opportunity but it has also set important precedents which cannot be reversed.
America the Innovative?
Eamonn Fingleton (NYT) Mar 31, 2013
As China becomes richer, is it destined to pass the United States as the world's most inventive nation?
Trade’s bad rap
Robert J. Samuelson (WP) Mar 31, 2013
Its virtues are underrated; its vices overstated.