Crisis Stalls Globalization: Reshaping the World Economy
Finance and Development Mar/May 2009
This issue examines the multiple facets of the recession--from the impact on individual economies to the effect on the external accounts of the world's lenders and borrowers--and offers a variety of suggestions for supporting a recovery and averting future crises. Several IMF studies shed light on the depth of the crisis--including a survey of the sharp drop in trade finance, along with quantitative findings about the direct and indirect costs of the financial turbulence--and debate what is to be done from several angles, including the redesign of the regulatory framework and ways to plug large data gaps to prevent future crises and aid in the creation of early warning systems. Opinion pieces discuss the shifting boundaries between the state and markets, the agenda for financial sector reform, and the governance of global financial markets. The issue also includes a historical perspective to see when restructuring the global financial architecture actually succeeds. 'People in Economics' profiles Nouriel Roubini; 'Back to Basics' looks at what makes a recession; and 'Data Spotlight' examines Latin America's debt.
The G-2 Mirage
Elizabeth C. Economy and Adam Segal (Foreign Affairs) May/Jun 2009
A heightened bilateral relationship may not be possible for China and the United States, as the two countries have mismatched interests and values. Washington should embrace a more flexible and multilateral approach.
Deng Undone
Derek Scissors (Foreign Affairs) May/Jun 2009
Driven by a near obsession with economic growth, Beijing has extended the state’s reach into the economy. Instead of urging the Chinese government to resume extensive market reforms, Washington should encourage it to focus on a narrow range of feasible measures.
Will Hedge Funds Survive?
Martin J. Gross (Foreign Affairs) May/Jun 2009
Hedge funds did not cause the crash. But they need to get over what the markets did to them and what they did to themselves.
The Dollar’s Last Days?
Onno Wijnholds (Project Syndicate) May 2009
Zhou Xiaochuan, the governor of the People’s Bank of China, recently suggested that replacing the dollar with the International Monetary Fund’s Special Drawing Rights as the dominant reserve currency would bring greater stability to the global financial system. The idea of reforming the system by introducing a supranational reserve currency is also, it appears, supported by Russia and other emerging markets. And a United Nations advisory committee chaired by the Nobel laureate Joseph Stiglitz has argued for a new global reserve currency, possibly one based on the SDR.
The False Promise of Global Governance Standards
Lucian Bebchuk (Project Syndicate) May 2009
In the wake of last year’s global financial meltdown, there is now widespread recognition that inadequate investor protection can significantly affect how stock markets and economies develop, as well as how individual firms perform. The increased focus on improving corporate governance has produced a demand for reliable standards for evaluating governance in publicly traded companies worldwide. World Bank officials, shareholder advisers, and financial economists have all made considerable efforts to develop such standards.
Reserve Reform
Jose Antonio Ocampo (Project Syndicate) May 2009
Both China and the United Nations Commission on Reforms of the International Monetary and Financial System have called for a new global reserve system. That issue should be at the top of the agenda when the IMF’s International Monetary and Financial Committee next meet.
Commercialize the SDR
Barry Eichengreen (Project Syndicate) May 2009
Zhou Xiaochuan, the governor of the People’s Bank of China, made a splash prior to the recent G-20 summit by arguing that the International Monetary Fund’s Special Drawing Rights should replace the dollar as the world’s reserve currency. His reflections elicited nothing if not mixed reactions.
The Price of Inaction
J. Bradford DeLong (Project Syndicate) May 2009
Are the world’s governments capable of keeping the world economy out of a deep and long depression? Three months ago, I would have said yes, without question. Now, I am not so certain.
Secular Outlook: A New Normal
Mohamed El-Erian (PIMCO) May 2009
Recent months have been dominated by unprecedented volatility in factors that have conventionally anchored market relationships. PIMCO has argued that the world is traveling on a bumpy road to a new destination, the “new normal.”
The Great Depression Analogy
Harold James (Project Syndicate) May 2009
Whenever today’s economic crisis is discussed, analogies to the Great Depression are never far away. In its latest “World Economic Outlook,” the IMF examines the analogy explicitly, in terms not only of the collapse of financial confidence, but also of the rapid decline in global trade and industrial activity. In general, history, rather than economic theory, seems to offer a guide to interpreting wildly surprising and inherently unpredictable events.
The “New Normal” for Growth
Kenneth Rogoff (Project Syndicate) May 2009
Markets are bubbling over signs of “green shoots” in the global economy. An increasing number of investors see a strong rebound coming, first in China, then in the United States, and then in Europe and the rest of the world. Even the horrible growth numbers of the last couple quarters don’t seem to discourage this optimistic thinking. The deeper the plunge, the stronger the rebound, some analysts say.
Story Time for the World Economy
Robert J. Shiller (Project Syndicate) May 2009
Since hitting bottom in early March, the world’s major stock markets have all risen dramatically. Some, notably in China and Brazil, reached lows last fall and again in March, before rebounding sharply, with Brazil’s Bovespa up 75% in May compared to late October 2008, and the Shanghai Composite up 54% in roughly the same period. But the stock market news just about everywhere has been very good since March.
A De-Globalized World?
Dani Rodrik (Project Syndicate) May 2009
It may take a few months or a couple of years, but one way or another the United States and other advanced economies will eventually recover from today’s crisis. The world economy, however, is unlikely to look the same.
The World Economy, Still Waiting
NYT May 1, 2009
Economic stimulus alone will not stop global indicators from sinking; there must be stronger regulation of financial markets.
Lessons from banking profits in the Great Depression
Daniel Gros (VoxEU) May 1, 2009
Today’s general consensus is that a key factor behind the Great Depression was the breakdown of the US banking system and that we must avoid large-scale bank failures this time around at all costs. However, this column shows that commercial banks actually do relatively well during recessions. It is the financial sector outside banking – in other words, investment banking – that suffers huge losses.
An illusion of global governance
Jonas Parello-Plesner (AT) May 2, 2009
Visions of a United States-China Group of Two are tempting as Beijing and Washington have perhaps the world's most important bilateral relationship. But China is still focused on its own economic progress, a G-2 would antagonize the rest of the world, and the nations have wildly divergent approaches to the world's many crises.
Too connected to fail is too connected
Jorge A. Chan-Lau, Marco A. Espinosa-Vega, Kay Giesecke & Juan Solé (VoxEU) May 2, 2009
The current financial crisis has underscored the problem of institutions that are too connected to be allowed to fail. This column suggests new methodologies that could form the basis for policies and regulation to address the too-connected-to-fail problem.
The big drop: Trade and the Great Recession
Joseph Francois & Julia Woerz (VoxEU) May 2, 2009
Is the current collapse in trade unprecedented, inconsistent with the general level of economic downturn, and indicative of a trade-related set of problems calling for trade-specific solutions? This column, by carefully comparing real and nominal trade trends, finds that trade seems to be a victim of non-trade weaknesses in credit and demand. While we should maintain a rearguard action on the protectionism front, the cure for the symptoms lies in curing the underlying illness.
Reflections on the chronology of the financial crisis
Roger M. Kubarych (VoxEU) May 4, 2009
The financial crisis is not over but it seems less scary since the US stock market decided that most big banks will survive. This column provides a current scoreboard of the crisis game and reminds everybody that the underlying problems are hardly resolved. A lot of banks sorely needed capital and need to raise it relatively cheaply.
China cashes in on crisis
Antoaneta Bezlova (AT) May 5, 2009
China is taking advantage of the global financial crisis to strengthen ties with its Southeast Asian neighbors, helping out with credit, investment funds and other forms of support. It is also strengthening the role of its southwest provinces in the region's economy.
If China loses faith the dollar will collapse
Andy Xie (FT) May 4, 2009
America's short-term economic policy is pushing Beijing towards developing an alternative financial system.
Two Views on the Cause of the Global Crisis - Part I
Branko Milanovic (YaleGlobal) May 4, 2009
Income inequality and speculative investment by the rich and poor in America led to the financial meltdown
We Can't Subsidize the Banks Forever
Matthew Richardson & Nouriel Roubini (WSJ) May 5, 2009
Government has to show it can handle major insolvencies.
Don't Forget About Foreign Aid
Madeleine K. Albright & Colin L. Powell (WSJ) May 5, 2009
Prosperity depends on stability.
Pandemics and Depressions
Robert J. Barro & Jose F. Ursua (WSJ) May 5, 2009
History shows the swine flu could take an economic toll.
IMF recession research: Unusually severe, followed by a weaker-than-average recovery
Prakash Kannan, Alasdair Scott & Marco E. Terrones (VoxEU) May 6, 2009
Two features of the current recession – its association with a deep financial crisis and its highly synchronised nature – suggest that it is likely to be unusually severe and followed by a weaker-than-average recovery. Current and near- term policy responses are the key to understand how the recession will involve this time.
Central banks must target more than just inflation
Martin Wolf (FT) May 5, 2009
Over almost three decades, policymakers became ever more confident they had found, in inflation targeting, the holy grail of fiat (or man-made) money. Today, they are struggling with the deepest recession since the 1930s and the danger of deflation. How can it have gone so wrong.
How tax havens helped to create a crisis
Sol Picciotto (FT) May 5, 2009
Unitary taxation of multinationals, which most tax specialists recognise is long overdue, would be preferable to the new US proposals to tinker with rules on tax deferral.
Free Trade, Green Trade
Daniel M. Price (NYT) May 5, 2009
Fighting protectionism and climate change can be done at the same time by unilaterally eliminating tariffs on clean technology products.
Obama's Global Tax Raid
WSJ May 6, 2009
President Obama revealed Monday that he's half a supply-sider. If only someone could explain to him the other half. We have a tax code, the President said, "that says you should pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York." That sounds like a great argument for lowering taxes on the guy creating jobs in Buffalo. Alas, that's not what he has in mind.
Sovereign Funds Set Up Permanent Representative Forum
IMF Survey May 6, 2009
Sovereign wealth funds establish a standing global forum to discuss issues central to sovereign funds and the broader international financial community. The forum will also keep under review issues relating to the application of Santiago Principles, designed to ensure an open international investment environment.
New Doha Approach Floated as Delegates Consider Late-Autumn Ministerial
Bridges Weekly Trade News Digest, Volume 13, Number 16 May 6, 2009
Geneva-based WTO delegates are considering a new approach to the Doha Round that would bypass the negotiation of modalities - the broad outlines of a deal that Members have been struggling to forge for more than seven years - and move directly into scheduling countries' specific commitments on cutting tariffs and reducing subsidy levels.
WIPO Committee Sees Movement on Development Agenda Implementation
Bridges Weekly Trade News Digest, Volume 13, Number 16 May 6, 2009
Discussions on the implementation of the WIPO Development Agenda concluded on a positive note last week as delegates succeeded in adopting a new thematic approach to implementing proposed activities that are meant to integrate development concerns into the organisation's work.
The world melts, China grows
Dilip Hiro (AT) May 6, 2009
As Western economies shrink under the impact of the global financial crisis, China's continues to grow, its currency is becoming more international, and the confidence of the government is strengthening. Leaders in Washington will soon have to concede that financial power is shifting towards the world's thriving regions, the foremost of which is China.
The world melts, China grows
Dilip Hiro (AT) May 6, 2009
As Western economies shrink under the impact of the global financial crisis, China's continues to grow, its currency is becoming more international, and the confidence of the government is strengthening. Leaders in Washington will soon have to concede that financial power is shifting towards the world's thriving regions, the foremost of which is China.
How We Tested the Big Banks
Timothy Geithner (NYT) May 6, 2009
The strategy of the stress tests was to lift the fog of uncertainty over bank balance sheets and to help ensure that the major banks had the capital to continue lending.
Two Views on the Cause of the Global Crisis - Part II
Ashok Bardhan (YaleGlobal) May 6, 2009
The twin excesses - financialization and globalization - caused the crash.
How Useful Were Recent Financial Innovations? There is a Reason to be Skeptical
Adam S. Posen & Marc Hinterschweiger Mar 7, 2009
Who could be against innovation? That is the argument used by industries that wish to avoid regulation, that excessive government oversight will diminish incentives to innovate, or erode property rights to innovations, and we all will be worse off for it. And in the broad, this is a valid concern.
Africa has to find its own road to prosperity
Paul Kagame (FT) May 7, 2009
The cycle is durable: as long as poor nations are focused on receiving aid they will not work to improve their economies.
China and Britain need to join hands over crisis
Wang Qishan (FT) May 7, 2009
Our two countries have a lot to offer each other and great potential for co-operation in the financial sector. We should make full and best use of the dialogue between us.
Who's in charge here?
Economist May 7, 2009
Stress tests will gauge the government’s resolve to take on Wall Street.
Lessons of the Financial Crisis for Banking Supervision
Ben S. Bernanke (FRB) May 7, 2009
After more than a year and a half of financial crisis, both bankers and policymakers must contend with two questions: What have we learned from this extraordinary episode? And how can we apply those lessons to strengthen our banking system and to avoid or mitigate future crises? Getting the answers to these questions right is critical for our future financial and economic health.
The merits of imports v exports
Economist May 7, 2009
Imports can be as useful to developing countries as exports are.
SDR vs $: What it takes to be an international reserve currency
Owen F. Humpage (VoxEU) May 8, 2009
China recently called for SDRs to replace the dollar as the international reserve currency and diminish the US economic supremacy. This column argues that because of the huge network benefits associated with using dollars, SDRs are not likely to supplant the dollar anytime soon as an international reserve unit, especially with the euro as a more viable competitor.
Of Pigs, Planes and Protectionism
NYT May 9, 2009
Countries' bans on the import of pork products as a reaction to swine flu are an example of the rapid rise in protectionism since the start of the financial crisis.
Developing countries' exports in a time of crisis
Gary Clyde Hufbauer & Sherry Stephenson (VoxEU) May 11, 2009
The crisis has delivered a particularly strong blow to export revenues of small developing countries. These nations have limited room for deploying anti-cyclical packages and, as a group, do not account for a significant amount of total world trade. They should thus be temporarily awarded policy space to adopt trade measures to counter the impact of the current economic crisis.
Monsters, Inc.
James Surowiecki (New Yorker) May 11, 2009
Amid the blizzard of economic data that the government puts out every week, last Tuesday’s report analyzing G.D.P. industry by industry got little notice. But it contained one very interesting piece of data: in 2008, for the first time in sixteen years, the finance and insurance industry shrank. Since 1980, this sector’s share of the economy has grown by almost half. Now, apparently, the worm has turned.
Hungarian lessons for a world crisis
Gideon Rachman (FT) May 11, 2009
The unfolding of the Hungarian crisis now looks like a microcosm of the world crisis. Fear of financial collapse is gradually giving way to worries about an unprecedented contraction in the economy – with all the social and political consequences that could imply.
How to protect emerging markets’ dollar reserves
Domingo Cavallo & Joaquín Cottani (VoxEU) May 12, 2009
Economists’ opionions diverge greatly on how to resolve China’s “dollar trap”. This column suggests all US creditors need to do is demand that the US government swap nominal US Treasury bills, notes, and bonds for inflation-adjusted instruments. This will reduce the incentive of the US government to “inflate its way out of debt”, protect the value of emerging market reserves and redcue the risk of a resurgence in world inflation.
Geithner's Revelation
WSJ May 12, 2009
He concedes that monetary policy was 'too loose too long."
America's triple A rating is at risk
David Walker (FT) May 12, 2009
The public supports the creation of a fiscal commission by a two-to-one margin. Yet Washington still sleeps.
Global: Money Talks
Joachim Fels & Manoj Pradhan (MS GEF) May 12, 2009
Despite a further (though smaller) tightening of credit conditions and a continued decline in home prices in major countries, several indicators suggest that a bottom for the global economy is near. This supports our view that even with the credit channel impaired, there are many ways for expansionary monetary policy to affect the real economy.
Cargo Ships Treading Water Off Singapore, Waiting for Work
NYT May 12, 2009
To go out in a small boat along Singapore’s coast now is to feel like a mouse tiptoeing through an endless herd of slumbering elephants.
Inflationary musketeers
Hossein Askari and Noureddine Krichene (AT) May 13, 2009
Central bankers, led by Ben Bernanke in the United States, Mervyn King of the United Kingdom and Europe's Jean-Claude Trichet, are injecting trillions of dollars of fake money into the global economy, yet they have no ability to inject even one barrel of oil or a pound of rice. Their money printing is pure taxation, pure wealth redistribution, with the inevitable inflationary result.
The credit crunch of 1294: Causes, consequences and the aftermath
Adrian R. Bell, Chris Brooks & Tony Moore (VoxEU) May 13, 2009
It is widely believed that the current credit squeeze, leading to bank failures, is a modern phenomenon arising from the interplay of a historically unique set of circumstances that could not have been foreseen. But a team of academics – a finance professor and two medieval historians – at the University of Reading’s ICMA Centre has documented a medieval credit crunch that bears remarkable parallels with the current crisis.
Aid and the financial crisis
Emmanuel Frot (VoxEU) May 13, 2009
Developing countries are expected to be severely hit by the recent financial crisis. This column says that, relying on passed crisis experiences, aid flows to developing countries should be down by 13%. However, donor countries’ pledges may soften the shock this time around.
China syndrome
Max Fraad Wolff (AT) May 14, 2009
There is no doubting either the scale of China's triumphant economic transformation over the past decades or its emergence as a global power. But China has not triumphed over the business cycle. The country's shares now leading a global rally will more than likely lead the way back down.
Crouching tigers
Economist May 13, 2009
Asian economies are likely to be the first to pull out of the global recession.
IMF leeway
Economist May 13, 2009
The IMF is increasingly keen to provide aid to Ukraine.
Kirk’s Geneva Visit Signals US Engagement on Doha
Bridges Weekly Trade News Digest, Volume 13, Number 17 May 13, 2009
The United States government is re-engaging in the Doha Round trade talks at the WTO, a move that has been warmly received by Geneva-based trade negotiators. But it remains to be seen whether the US and its trading partners will be able to overcome the significant substantive differences that have thus far prevented the negotiations from coming to a successful close.
EU, US Strike Provisional Deal to End 13-Year-Old Beef Dispute
Bridges Weekly Trade News Digest, Volume 13, Number 17 May 13, 2009
Trade officials from the US and the EU arrived at a provisional agreement last week that could mark the beginning of the end of a trade dispute over hormone-treated beef that dates back to 1996.
How to Understand the Disaster
Robert M. Solow (NYRB) May 14, 2009
No one can possibly know how long the current recession will last or how deep it will go. Whenever the US economy returns to some sort of normality, or preferably before then, it will be necessary to improve and extend the oversight and regulation of the financial system. The main goal should be to make another such episode much less likely, and to limit the damage if one occurs. To make progress in that direction requires some understanding of the origins of the current mess.
This has not been a pure failure of markets
Leszek Balcerowicz (FT) May 13, 2009
There is a risk that empirically dubious but emotionally attractive interpretations of the financial crisis, which condemn markets and call for more statism, could gain ground.
Mixed signals from Asia's animal spirits
David Pilling (FT) May 13, 2009
For many, things are likely to get better from here. But we should grasp how much has already been lost.
Thriving Norway Provides an Economics Lesson
NYT May 13, 2009
Instead of spending its oil riches, Norway saved, and it is now growing in the midst of the global recession.
The Almighty Renminbi?
Nouriel Roubini (NYT) May 13, 2009
The dollar may be challenged by other currencies, most likely the Chinese renminbi, sooner than we think if we do not get our financial house in order.
China's Heart of Gold
Victor Zhikai Gao (NYT) May 13, 2009
Holding American dollars was once a status symbol in China. No one knows for sure when the tide started to turn, but the currency is irreversibly losing its appeal.
The Doha Round: A safety net in stormy weather
David Laborde Debucquet (VoxEU) May 14, 2009
The current financial crisis has fostered a demand for protectionism and put the Doha Round at the back of the agenda. This column argues that a failed Doha Development Agenda would send the wrong signal in terms of global governance and could lead to an unravelling of the past 15 years of trade liberalisation.
How to Ensure Financial Stability After the Crisis
IMF Survey May 14, 2009
An IMF-sponsored systemic risk symposium explores issues such as which financial institutions should be regulated, what policies are needed to mitigate systemic risk, whether there should be a single systemic risk regulator, and, if so, whether this should be the central bank.
Rebuilding the banks
Economist Mar 14, 2009
A tamer banking industry is already emerging from the debris of the old, failed one.
Green shoots and dud forecasts
Samuel Brittan (FT) May 14, 2009
New mathematical theories provide insights but no alternatives. We just have to accept that the future cannot be foreseen in the way many governments and businessmen would like.
Geithner could do worse than emulate Japan
Peter Tasker (FT) May 14, 2009
How did Japan emerge from its banking crisis? Not by cleaning up the banks but by offering them unlimited support.
The future of banking
Economist May 14, 2009
Banks will still make money, just less of it.
Swedish lessons for banks
Economist May 14, 2009
More Swedish lessons for the banking industry.
Gaining from the crisis
Economist May 14, 2009
Who will gain from the crisis?
Banking and risk
Economist May 14, 2009
The way banks manage risk—including how they reward managers for taking it—will change greatly.
The future of securitisation
Economist May 14, 2009
The future of securitisation is the industry's most pressing question.
Banks and society
Economist May 14, 2009
The contract between society and banks will get stricter
The new world economic order
Economist May 14, 2009
A new global system is coming into existence.
India, China lead global anti-dumping dance
Raja Murthy (AT) May 15, 2009
India has filed a record number of anti-dumping complaints against China with the World Trade Organization. Whether these are genuine grievances or merely reflect growing Indian concern over its trade deficit, New Delhi can have little ground for complaint if the issues are unresolved years down the line.
Diminished Returns
Niall Ferguson (NYT Magazine) May 15, 2009
If financial crises were distributed along a bell curve — like traffic accidents or people’s heights — really big ones wouldn’t happen very often.
Trade Wars Launched With Ruses, End Runs
Anthony Faiola and Lori Montgomery (WP) May 15, 2009
Is this what the first trade war of the global economic crisis looks like?
Derivatives Trades Should All Be Transparent
Viral V. Acharya & Robert Engle (WSJ) May 15, 2009
Disclosure would go a long way toward preventing future AIGs.
South Africa: Revised USD/ZAR Outlook
Michael Kafe & Andrea Masia (MS GEF) May 15, 2009
In our opinion, prospects of a ‘sudden-stop’ currency crisis in South Africa have receded. We are therefore moderating our year-end USD/ZAR target from 10.80 to 9.80. In the short term, however, we believe that USD/ZAR is some 12-15% overvalued.
Policymakers Need to Address Systemic Risk, says IMF
IMF Survey May 15, 2009
Global cooperation in financial sector supervision needs to improve to address systemic risks, says IMF Managing Director Dominique Strauss-Kahn in Vienna. He anticipated a recovery in the global economy next year, with the turning point later in 2009.
G-2 too simple for reality
David Gosset (AT) May 16, 2009
Advocates of a "G-2" partnership between the United States and China to shape the post-financial crisis world overlook its more complex reality. The inclusion of Europe, for one, would help to achieve a more appropriate equilibrium.
Bankers Bounce Back
NYT May 16, 2009
Bankers have an uncanny ability to keep landing in finance's glittering fold while regular mortals are still suffering from the economic fallout they unleashed.
This is no time for complacency in the fight against protectionism
Simon J Evenett (VoxEU) May 16, 2009
Policymakers on both sides of the Atlantic have pointed to what they see as the "green shoots" of economic recovery. However, this column shows that the people who undertake international trade aren't taking a sanguine view about trade protectionism. Governments need to eschew all forms of beggar-thy-neighbour policy and follow the five steps described below. This is no time for premature self-congratulation on a victory over protectionism.
Europe's classic exercise in closet protectionism
Paul Marshall (FT) May 17, 2009
The European Commission's proposal, aimed at imposing new regulation on hedge funds and private equity, is an effort to penalise an industry based in the US and the UK.
Notes From Another Credit Card Crisis
Suki Kim (NYT) May 17, 2009
Americans' credit card debt has risen to the point where it now tops $960 billion. If it's any consolation, South Koreans have been there, done that and come out alive -- if just barely.
What's Another $108 Billion?
WSJ May 18, 2009
Your latest donation to the IMF.
Derivatives and the Wisdom of Crowds
L. Gordon Crovitz (WSJ) May 18, 2009
Smart reform yields more information, not more regulation.
Why did the bankers behave so badly?
Anne Sibert (VoxEU) May 18, 2009
Greedy bankers are getting most of the blame for the current financial crisis. This column explains bankers did behave badly for mainly three reasons. They committed cognitive errors involving biases towards their own prior beliefs; too many male bankers high on testosterone took too much risk, and a flawed compensation structure rewarded perceived short-term competency rather than long-run results.
Goldman China Forecast Is Too Rosy for Investors
John F. Wasik (Bloomberg) May 18, 2009
This, of course, isn'ta risk-free approach since a few sick countries can always spread an economic pandemic in an interconnected world.
IMF using crisis for own ends
AT May 19, 2009
The International Monetary Fund is taking advantage of the global financial crisis to force expensive contractionary policies on countries in need in order to rejuvenate its own existence.
$100 Billion for IMF Helps Americans, Birdsall Tells Congress
Nancy Birdsall (CGD) May 19, 2009
Supporting IMF efforts to stabilize the global economy, including through the injection of $100 billion proposed by the Obama administration, is in America's own best interest.
The Irish financial system in crisis
John Cotter (VoxEU) May 19, 2009
Each economy has suffered a unique variant of the global financial crisis. This column details the perilous situation facing Ireland’s banking and property sectors. It says that the government responded poorly, particularly early in the crisis. Most indicators remain quite negative, though there are glimmers of evidence that the economy may begin to improve.
This crisis is a moment, but is it a defining one?
Martin Wolf (FT) May 19, 2009
Is the current crisis a watershed, with market-led globalisation, financial capitalism and western domination on the one side and protectionism, regulation and Asian predominance on the other? Or will historians judge it, instead, as an event caused by fools, signifying little.
Asia needs to ditch its growth model
Michael Pettis (FT) May 19, 2009
The basic assumption that implicitly underlay Asian development – that American households had an infinite ability to borrow and spend – has been seen as false.
US free trade promises must be honoured
Gary Hufbauer and Jeffrey Schott (FT) May 19, 2009
The greatest danger is not that governments will retaliate against US misdeeds but that they will emulate them.
NGOs Cry Foul over Rich-Country ‘Land Grab’ in Developing World
Bridges Weekly Trade News Digest, Volume 13, Number 18 May 20, 2009
A recent jump in rich country land purchases in the developing world has caught the attention of analysts in trade and human rights circles. In many cases, governments and private sector parties to such deals have remained mum on the details of the acquisitions, a fact that has caused some concern among NGOs, who worry that the scale of the acquisitions could potentially undermine development and food security objectives.
EU, Canada Kick off Trade Talks
Bridges Weekly Trade News Digest, Volume 13, Number 18 May 20, 2009
The EU and Canada have launched negotiations toward a free trade agreement that would cut tariffs, liberalise trade in services, and ease rules on labour mobility. But the negotiators of the deal, which would be the EU’s first with a developed country, will have to navigate an ongoing spat over seal imports that has already threatened to derail the talks.
The wreck of modern finance
Martin Hutchinson (AT) May 20, 2009
Wall Street's economists and hired "mathematicians" caused global havoc through creating risk-management models claiming mastery of an assumed "randomness" - where only chaos existed. Where Enron's Jeff Skilling got a 24-year jail term for inventing an unsound trading platform, what sentence is due the Nobel prize winners who created these fictions?
A market solution to secure banks' future
William Poole (FT) May 20, 2009
Would bankers rather face the discipline of subordinated debt or much heavier Washington regulation, including opaque and changing rules?
How many monies does Africa need?
Thorvaldur Gylfason (VoxEU) May 21, 2009
Does every country in Africa need a currency of its own? No. This column describes the monetary zones in-the-making in Africa and how a further reduction of the number of currencies in Africa would likely encourage trade and growth and attract investors who are understandably wary of weak and volatile currencies.
Global: QExit
Manoj Pradhan & Joachim Fels (VoxEU) May 21, 2009
We expect central banks to raise policy rates and unwind QE simultaneously. In fact, central banks could use another unconventional measure to prevent markets from pricing in excess policy rate hikes or pushing yields too far up – a commitment to raise policy rates and sell assets in stages or tranches, punctuated by pauses.
The world's least bad banks
Economist May 21, 2009
A few winners from the crisis.
Decoupling is back
Economist May 21, 2009
Some of the world's biggest emerging countries will recover quicker than Europe and America.
May the good China preserve us
Economist May 21, 2009
China is enjoying its new prestige as a global economic helmsman, but it still has problems at home
SWF ISO Bailout
Daniel Gross (Slate) May 22, 2009
What explains the rapid decline of sovereign-wealth funds?
Bust and boom
Economist May 22, 2009
The price of oil has leapt to nearly $62 a barrel. Another spike may be on the way
Recession 'shape' points down
W Joseph Stroupe (AT) May 22, 2009
Economists who see a "V" shape to the recovery from recession, or less hopefully an "L" shape, share a misguided optimism. The shape of this crisis, at least for the United States and the United Kingdom, is a series of downward steps into the gloom. This provides a tremendous opportunity for the rest of the world, especially for the increasingly wealthy East.
Financial de-globalisation, savings drain, and the US dollar
Christian Broda, Piero Ghezzi & Eduardo Levy-Yeyati (VoxEU) May 22, 2009
In a new financial landscape in which leverage is limited by worldwide regulation and the gradual digestion of toxic assets will weigh on bank’s balance sheets, the US will face tougher terms to finance its external imbalance. Perfectly at odds with the global imbalance premonitions of the early 2000s, the dollar’s weakness will likely be the best gauge of the turnaround of the global crisis.
Creditless recoveries: What do we know?
Stijn Claessens, M. Ayhan Kose & Marco E. Terrones (VoxEU) May 22, 2009
Many analysts suggest the economic recovery may have started but others worry that the sorry state of developed countries’ financial systems will prolong the recession. Can economic activity revive absent a recovery in credit and housing markets? This column presents new research suggesting that a “creditless recovery” is possible, but it would likely be slow and shallow.
As Dollars Pile Up, Uneasy Traders Lower the Currency's Value
NYT May 22, 2009
The dollar fell to its lowest point in five months on concerns that stimulus efforts may set off inflation.
A Handle on Derivatives
WP May 23, 2009
A sensible start to regulating a complex market.
The Hidden Hunger
Nicholas D. Kristoff (NYT) May 23, 2009
The Western misconception is that severe malnutrition in the developing world is caused by lack of food, when often it's about lack of the right micronutrients.
Argentina: The superpower that never was
Alan Beattie (FT) May 23, 2009
China stuck in 'dollar trap'
FT May 24, 2009
China's official foreign exchange manager is still buying record amounts of US government bonds, in spite of Beijing's fear of a dollar collapse, say officials and analysts
Tainted data hide the cost of Africa's upheavals
Michael Holman and Greg Mills (FT) May 24, 2009
A count of lives lost in war or famine is little more than guesswork when basic population figures are in dispute.
Aid Ironies
Jeffrey Sachs (Huffington Post) May 24, 2009
The debate about foreign aid has become farcical. The big opponents of aid today are Dambisa Moyo, an African-born economist who reportedly received scholarships so that she could go to Harvard and Oxford but sees nothing wrong with denying $10 in aid to an African child for an anti-malaria bed net.
William Easterly
(Huffington Post) May 25, 2009
Official foreign aid agencies delivering aid to Africa are used to operating with nobody holding them accountable for aid dollars actually reaching poor people. Now that establishment is running scared with the emergence of independent African voices critical of aid, such as that of Dambisa Moyo.
Bonus incensed
Jon Danielsson & Con Keating (VoxEU) May 25, 2009
Bank bonuses have been blamed for contributing to the crisis, and regulators and politicians are now demanding changes in compensation arrangements. Most of these calls are based on a misconception of the nature of financial risk, an inflated view of the efficacy of risk models, and an incorrect view of the incentive issues facing financial institutions. This column proposes reforms that would discipline senior managers by exposing them to the dangers of junior managers’ risk taking.
Trade and Hard Times
NYT May 25, 2009
The drop in trade is spreading economic weakness across the world. Protectionism would only create more barriers to global trade and prolong the recession.
Of the two great hopes of the western hemisphere in the late 19th century, one succeeded and the other stalled in the 20th. It was history and choice, not fate, that determined which became which. It is history and choice that will determine which is which in a century’s time.
Malaria, Politics and DDT
WSJ May 26, 2009
The U.N. bows to the anti-insecticide lobby.
A US trade policy for development
Kimberly A. Elliott (VoxEU) May 27, 2009
The economic crisis is hitting the world’s poorest countries through falling trade and commodity prices. This column argues that the US should respond by further opening its market to exports from small, poor economies. That would not only provide an additional stimulus to those economies but also strengthen US global leadership, give a boost to the Doha Round, and serve broader US national interests by helping to promote political stability in some very shaky parts of the world.
Lamy Calls for Two-Track Approach to Wrap up Doha
Bridges Weekly Trade News Digest, Volume 13, Number 19 May 27, 2009
WTO Director-General Pascal Lamy has called for a new approach to bringing the nearly eight-year-old Doha Round of world trade talks to a close. The two-track negotiations that Lamy outlined at a meeting of the WTO's General Council on Tuesday appear to represent a compromise between two competing views of how the talks should proceed.
EU-Andean Talks Inch forward, but Ecuador Threatens to Pull out
Bridges Weekly Trade News Digest, Volume 13, Number 19 May 27, 2009
Negotiations toward a trade-opening deal between the EU and a group of Andean countries hit another snag this week when Ecuador’s president publicly denounced the talks, calling them ‘biased’.
WHO Tackles Intellectual Property, R&D Treaty
Bridges Weekly Trade News Digest, Volume 13, Number 19 May 27, 2009
Members of the World Health Organization gathered for their 62nd annual assembly at WHO headquarters in Geneva last week. The meeting was held from 18-22 May, but did not extend into a second week as originally planned, due to the recent outbreak of the H1N1 flu virus. But members still found time for intense discussions on intellectual property, innovation and public health. A proposal for a treaty on biomedical research and development emerged as a particularly controversial issue.
In defence of foreign banks
Ralph De Haas (VoxEU) May 28, 2009
In recent months, foreign-owned banks have been accused of abandoning the emerging markets that have contributed so much to their profitability over the last decade. This column analyses a large bank-level dataset of foreign bank subsidiaries across the world, to compare lending by foreign bank subsidiaries with lending by domestic banks. Importantly, it finds that as a result of parental support, foreign bank subsidiaries do not typically rein in their lending during a financial crisis.
Don't Go Wobbly on Trade
Gordon Brown (WSJ) May 28, 2009
Barriers to commerce are a surefire way to prolong the recession.
Why Beijing Wants a Strong Dollar
Zachary Karabell (WSJ) May 28, 2009
China won't torpedo the economy by dumping our bonds.
http://www.forbes.com/2009/05/27/recession-depression-global-economy-growth-opinions-columnists-nouriel-roubini.html
Nouriel Roubini (Forbes) May 28, 2009
An analysis of medium-term economic prospects.
The Chains Around the Zombie: Gold is Too Tempting
David Goldman (AT) May 29, 2009
The World Bank warned of a possible US$700 billion reversal out of emerging markets to finance the US Treasury's requirements. No such thing will happen.
Yuan in the ascendancy
Pieter Bottelier (AT) May 29, 2009
International agreement on proposals by People's Bank of China governor Zhou Xiaochuan for reform of the international monetary system is remote, despite the non- provocative language he used. Yet while the US dollar will remain the reserve currency, increased use of China's currency is also certain.
Insight: Recovery not as easy as V, U, W
Gillian Tett (FT) May 28, 2009
If a government bond crisis is avoided, my best prognosis for the global economy is a stagnant line.
Good governance will bolster African aid
Mo Ibrahim (FT) May 28, 2009
We need a holistic approach to improve the accountability and transparency of donors, the private sector and African governments.
Africa's economies in the downturn
Economist May 28, 2009
The IMF says some African countries can spend their way out of recession.
The fragile web of foreign trade
Economist May 28, 2009
The recession makes globalisation more necessary, but more precarious.
The regulatory rumble begins
Economist May 28, 2009
In America and Europe, new rules are already running into stiff resistance—mostly from regulators themselves.
Crisis and opportunity
Economist May 28, 2009
A market for Islamic and conventional bonds is stirring.
Moyo's confused attack on aid for Africa
Jeffrey Sachs (VoxEU) May 29, 2009
Aid critics have recently been blaming aid as the source of Africa’s poverty. This column explains how Africa has long been struggling with rural poverty, tropical diseases, illiteracy, and lack of infrastructure and that the right solution is to help address these critical needs through transparent and targeted public and private investments. This includes both more aid and more market financing.
The Global Liquidity Cycle Revisited
Joachim Fels & Manoj Pradhan (MS GEF) May 29, 2009
One of our key macro themes for 2009 has been the emergence of a new global liquidity cycle powered by massive monetary stimulus, which should help to support asset markets, end the recession and prevent lasting deflation (see "A New Global Liquidity Cycle", The Global Monetary Analyst, January 14, 2009). A little more than four months later, it is time to review the evidence that has accumulated since then and discuss whether the theme is likely to have staying power for 2H09. In short, our conclusion is - yes, it is.
Preventable Deaths
NYT May 29, 2009
Though the global economy is contracting, developed countries must not be tempted to cut aid to help the world's poor.
Professor Sir Clive Granger
UK Telegraph May 29, 2009
Professor Sir Clive Granger, who died on May 27 aged 74, was a Nobel prize-winning economist whose work on analysing economic data was credited with improving the forecasting performance of the Treasury and the Bank of England.
Will international accounting standards pass the test of the crisis?
Nicolas Véron (VoxEU) May 30, 2009
Some blame poor accounting standards for the crisis, and many now place accounting reform atop the global agenda. But the International Accounting Standards Board suffers significant institutional weaknesses, this column argues. While the International Financial Reporting Standards are not doomed to failure, there is significant risk of globally fragmented and divergent accounting standards, which would be a loss for everyone.
Afghans need aid not bureaucracy
Clive Crook (FT) May 31, 2009
Among Afghans, the perception is that the western aid effort – with its civilian workers, armoured compounds, endless meetings and red tape – is feeding mainly itself, not the country it is there to help.
We must be open about our banking problems
George Osborne (FT) May 31, 2009
By reducing uncertainty about the quality of banks' balance sheets, the US stress tests have helped to bring some confidence back to the markets there, though risks remain.