News & Commentary:

May 2011 Archives


The Black Swan of Cairo Foreign Affairs Subscription Required Recommended!
Nassim Nicholas Taleb and Mark Blyth (FA) May 1, 2011
How suppressing volatility makes the world less predictable and more dangerous.

Does the WTO matter?
Pushan Dutt, Ilian Mihov & Timothy Van Zandt (VoxEU) May 1, 2011
The WTO ‘dodged the bullet’ last week when members agreed to continue working on the deadlock holding up the Doha Round of multilateral trade negotiations. This column surveys the existing econometric evidence on the trade effect of WTO membership. It also presents new evidence that membership raises the range of goods that members export – increasing it by an estimated 42%. The authors conjecture that the WTO boosts trade by reducing uncertainty in the mind of potential exporters regarding the evolution of international trade rules.

Why China Overheats
John H. Makin (AEI) May 1, 2011
Despite efforts to rein it in, China's inflation rate has reached a point where it is sparking social unrest. Chinese premier Wen Jiabao's recent comment that inflation is a tiger that "once set free is very difficult to put back in its cage" aptly characterizes the current inflation in his country. The world's second-largest economy faces some fundamental choices if it is to restore stability.

More Than 1 Billion People Are Hungry in the World Recommended!
Abhijit Banerjee & Esther Duflo (FP) May 1, 2011
But what if the experts are wrong?

Half a Miracle
Francis Fukuyama & Seth Colby (FP) May 1, 2011
Medellín's rebirth is nothing short of astonishing. But have the drug lords really been vanquished?

The New Geopolitics of Food
Lester R. Brown (FP) May 1, 2011
Welcome to the 21st-century food wars.

Steering a course through the eurozone’s squalls Financial Times Subscription Required
David Marsh (FT) May 1, 2011
The changing of the guard at the Bundesbank is an event of practical significance as well as ritual solemnity but the transfer of authority takes place at a sensitive time.

Time to limit the Doha damage Financial Times Subscription Required
Alan Beattie (FT) May 2, 2011
The lesson of this round of trade talks, since its launch in 2001, is that it needs political will – and not yet another technocratic fix.

Time to work out real odds in the weighting game Financial Times Subscription Required
Patrick Jenkins (FT) May 2, 2011
Mortgages and corporate loans, which have been at the root of most financial crises in history, should be regulated in an objective way that reflected their real risks

Is Growth Incomplete without Social Progress?
Ejaz Ghani (Project Syndicate) May 3, 2011
More than 70% of the world’s poor now live in middle-income countries. This pattern, likely to continue into the next decade, raises an important question: Have poverty reduction and human development kept up with income growth?

Bond Vigilantes Ignore Next Stage of Euro Mess
Matthew Lynn (Bloomberg) May 2, 2011
When you look around for the next candidate, France has what it takes to be the next blowup.

Managing the eurozone’s fragility Financial Times Subscription Required
Martin Wolf (FT) May 3, 2011
The monetary union must move forward, or go backwards. Either people and politicians believe they share a common destiny, or they do not. But the choice has to be made.

China risks credit-fuelled Minsky moment Financial Times Subscription Required
George Magnus (FT) May 3, 2011
A reluctance to compromise growth or alienate workers, and political interests in rising property prices could lead to a premature call of victory over inflation.

Time to rethink fashionable finance ideas Financial Times Subscription Required
John Plender (FT) May 3, 2011
A shift to a higher interest-rate environment will pose a micro-level challenge to the business sector on which debt-encumbered economies are relying to offset weakness in the household sector.

As China Invests, U.S. Could Lose Financial Times Subscription Required
NYT May 4, 2011
For three decades, wealthy nations have invested hundreds of billions of dollars in China, helping drive one of the most remarkable economic booms in history. Now, China is poised to return the investment favor.

WTO Members Exploring Options for Doha 'Plan B'
Bridges Weekly Trade News Digest Volume 15, Number 16 May 4, 2011
After years of insisting that "there is no Plan B" for what to do if governments prove unable to strike a deal in the long-running Doha Round of global trade talks, trade negotiators and WTO officials have begun to explore what such a fallback might look like. WTO Director-General Pascal Lamy has started quiet consultations with member delegations to explore possible options for trying to salvage something from the wreckage in case a comprehensive Doha accord proves impossible, so as to limit the damage of a failed round to the global trade body.

Doha: EU Bid to Break NAMA Sectoral Deadlock Receiving Cool Initial Response
Bridges Weekly Trade News Digest Volume 15, Number 16 May 4, 2011
The EU has tabled a proposal seeking to break the deadlock on what has emerged as the single most divisive issue in the WTO’s long-running Doha Round negotiations: participation by large developing countries like China, Brazil, and India in initiatives that would eliminate or deeply cut tariffs across entire industrial sectors. But preliminary responses from trade officials suggest that the informal ‘non-paper’ will fail to narrow gaps that WTO Director-General Pascal Lamy recently described as “unbridgeable.”

TNC: WTO Chief Lamy Calls for 'Serious, Active Reflection' on How to Save Doha
Bridges Weekly Trade News Digest Volume 15, Number 16 May 4, 2011
Trade diplomats at the WTO are finally saying openly what they have privately acknowledged for years: that serious gaps of substance and political perception stand between governments and an accord in the long-running Doha Round of trade negotiations.

WHO Reaches Virus Sharing Agreement After Four-Year Debate
Bridges Weekly Trade News Digest Volume 15, Number 16 May 4, 2011
Members of the World Health Organization (WHO) reached agreement in principle on a framework that, if ratified by the World Health Assembly this month, would create a unified mechanism for the sharing of pandemic influenza viruses

Africa's Low-income Countries Lead Growth Forecast
IMF Survey May 3, 2011
Another year of strong growth is in prospect for most of the 29 low-income countries in sub-Saharan Africa. The IMF’s latest Regional Economic Outlook projects that these countries’ output will expand on average by 6 percent in 2011, compared with last year’s 5 ½ percent pace.

Watching Out for Overheating in Latin America
IMF Survey May 3, 2011
Economic growth in much of Latin America remains strong, propelled by rising commodity prices, easy financing conditions, and stimulative policies. Growth exceeded 6 percent in 2010, and while it is projected to moderate to about 4¾ percent in 2011, the IMF says countries should remove the policy stimulus on a timely basis.

The Seven-Year Ditch
Harold James (Project Syndicate) May 4, 2011
The most obvious parallel to Europe’s current woes is the Latin American debt crisis of the 1980’s. Unfortunately, there appears to be no way for southern European debtors to avoid the seven years of misery that Latin American countries suffered before returning to economic vigor and dynamism.

Bernanke Meets the Press
Kenneth Rogoff (Project Syndicate) May 4, 2011
At the US Federal Reserve’s recent and first-ever public press conference, Chairman Ben Bernanke gave a spirited defense of the Fed’s much-criticized policy of mass purchases of US government bonds, also known as “quantitative easing.” But was his justification persuasive?

The Road to Arab Democracy
Shlomo Avineri (Project Syndicate) May 4, 2011
What is now happening in the Arab world is without historical precedent: for the first time, Arab authoritarian regimes have been toppled, and others are threatened, by mass demonstrations calling for freedom and democracy. But knocking down an oppressive regime is easier than building and consolidating democracy.

Service with a smile: A new growth engine for poor countries
Ejaz Ghani, Arti Grover & Homi Kharas (VoxEU) May 4, 2011
Services have long been the main source of growth in rich countries. This column argues that services are now the main source of growth in poor countries as well. It presents evidence that services may provide the easiest and fastest route out of poverty for many poor countries.

Does Foreign Exchange Intervention Slow the Pace of Currency Appreciation?
Gustavo Adler and Camilo E. Tovar (iMFdirect) May 4, 2011
Abundant global liquidity and high exposure to capital movements have put foreign exchange intervention at center stage of the policy debate in Latin America.

Portugal delays pain it knows is inevitable Financial Times Subscription Required
Daniel Gros (FT) May 4, 2011
It’s a mistake to believe Lisbon’s path to solvency comes only through fiscal adjustment – a reduction in consumption is needed.

Greek restructuring needn't mean big fat haircuts Financial Times Subscription Required
Komal Sri-Kumar (FT) May 4, 2011
Any debt makeover must be carefully structured to keep attracting long-term investors.

High-speed Ben
Axel Merk (AT) May 5, 2011
The cheapest Federal Reserve policy is one where a central banker utters a few words. Chairman Ben Bernanke's move further into the public arena is therefore worrying, as is the determination of this ivory tower adviser to continue driving the economy at high speed. Debasing the US dollar may only be the start.

Recovery and beyond: Lessons for trade adjustment and competitiveness
Filippo di Mauro & Benjamin R. Mandel (VoxEU) May 5, 2011
Has the global crisis changed international trade forever? This column presents a Q&A on global trade taken from a new eBook from the European Central Bank: “Recovery and Beyond”.

The IMF’s Switch in Time
Joseph E. Stiglitz (Project Syndicate) May 5, 2011
The annual spring meeting of the IMF was notable in marking the Fund’s effort to distance itself from its own long-standing tenets on capital controls and labor-market flexibility. It appears that a new IMF has gradually emerged under the leadership of Dominique Strauss-Kahn, who may soon be leaving to seek the presidency of France.

The Silver Rout Wall Street Journal Subscription Required
WSJ May 5, 2011
Commodity boom and bust in a weak-dollar world.

China's population: The most surprising demographic crisis Economist Subscription Required
Economist May 5, 2011
A new census raises questions about the future of China’s one-child policy.

When others are grabbing their land Economist Subscription Required
Economist May 5, 2011
Evidence is piling up against acquisitions of farmland in poor countries.

Europe is running a giant Ponzi scheme Financial Times Subscription Required
Mario Blejer (FT) May 5, 2011
This is Greece, not Chad: Does anyone imagine the IMF will stop disbursing loans?

Why ETFs give an uneasy sense of déjà vu Financial Times Subscription Required
Gillian Tett (FT) May 5, 2011
Will fervour for exchange traded funds prove toxic?

WTO Doha Round: Do or Die
Richard Baldwin & Simon Evenett (YaleGlobal) May 5, 2011
World leaders must resist the false promise of another delay in the Doha negotiations.

Global: Policy Challenges for the EM-DM Convergence
Manoj Pradhan & Alan Taylor (MS GEF) May 6, 2011
The challenges to EM policy-makers depend on how far along EM economies are in their quest to become the new DMs.

Global: Are EMs the New DMs?
Manoj Pradhan & Alan Taylor (MS GEF) May 6, 2011
Are EMs the New DMs? Our short answer: Yes…but the transformation is not yet complete.

Friedrich A. Hayek, Big-Government Skeptic
Francis Fukuyama (NYT) May 8, 2011
The definitive edition of the economist Friedrich A. Hayek's monumental work, which argues that no central government can know enough to organize society as efficiently as the market.

Why are reserves so big? And who is to blame?
Uri Dadush & Bennett Stancil (VoxEU) May , 2011
Between 2000 and 2009, developing countries added almost $5 trillion to their foreign-exchange reserves – a number deemed too high by many, prompting accusations of protectionism. But this column argues that developed countries are equally to blame – as well as failures in international coordination. It concludes that remedies therefore require action by both groups.

How shale gas will transform the markets Financial Times Subscription Required
Nick Butler (FT) May 8, 2011
Lasting changes are unlikely to flow from political conflicts in north Africa or the nuclear sector in Japan. It is geology and technology that could transform global energy.

The political causes of a not-so-secret meeting Financial Times Subscription Required
Wolfgang Münchau (FT) May 8, 2011
If European finance ministers cannot even organise a private meeting. How can they then solve a debt crisis.

Opinion: The Unwisdom of Elites New York Times Subscription Required
Paul Krugman (NYT) May 8, 2011
The anatomy of a top-down disaster.

China Imposes Price Controls, Informally
Gordon G. Chang (Forbes) May 8, 2011
Unwilling to allow the yuan to appreciate significantly, Chinese officials are "asking" producers to forgo price increases.

Global colonisers stage retreat to corporate banking Financial Times Subscription Required
Patrick Jenkins (FT) May 9, 2011
The heads of so-called universal banks are deliberately shifting their focus away from foreign adventures in retail branches and on to corporate business instead.

What Rebalancing?
Willem Thorbecke (Project Syndicate) May 9, 2011
The American economist Herbert Stein once said that if something cannot continue forever, it will not. In the case of imbalances between China and the West, however, the cut-off point still looks to be a long time in the future.

Food Fears Return
Jomo Kwame Sundaram (Project Syndicate) May 9, 2011
Lack of food is rarely the reason that people go hungry: the world today produces enough food to feed everyone. The problem is that more and more people simply cannot afford to buy the food they need.

Taxpayers and Money Market Funds Wall Street Journal Subscription Required
WSJ May 9, 2011
If asset values floated, investors would better understand the risks.

Policymakers learn a new and alarming catchphrase
Gillian Tett (FT) May 9, 2011
The term ‘financial repression’ is starting to generate a buzz among the US policy elite.

Why Greece Should Say No to the Euro
Mark Weisbrot (NYT) May 9, 2011
A threat by Greece to jettison the euro is long overdue. It might cost the Greek economy in the short term, but not as much as the years of recession, stagnation and high unemployment.

Greece's Unsustainable Burden Wall Street Journal Subscription Required
WSJ May 10, 2011
A debt restructuring, by whatever name, looks inevitable.

Why I Don't Support Europe's Bailouts Wall Street Journal Subscription Required
Timo Soini (WSJ) May 10, 2011
Our political leaders borrow ever more money to pay off the banks, which return the favor by lending ever more money back to our governments.

Debt and Taxes in the Eurozone
Daniel Gros (Project Syndicate) May 10, 2011
The current crisis in the eurozone is known around the world as the “euro sovereign-debt crisis.” But the crisis is really about foreign debt, not sovereign debt, because countries with large net foreign liabilities cannot tax holders of government bonds in order to meet debt-service costs.

The Full Brady
Barry Eichengreen (Project Syndicate) May 10, 2011
Financial markets are increasingly certain that a Greek debt restructuring is coming. Fortunately, there is a way to avoid the worst: emulate the Brady Plan, under which commercial banks, together with official creditors, restructured and took haircuts on the debt of Latin American and Eastern European governments in the 1980’s.

Salvaging Doha: A way forward
Ujal Singh Bhatia (VoxEU) May 10, 2011
Multilateral trade talks known as the Doha Round are on the edge of a failure that would have unpredictable but potentially dire consequences for global cooperation. This column – written by India’s ex-WTO Ambassador – suggests a way out of the crisis. World leaders should turn their attention to salvaging Doha by segregating the most contentious issues for continuing consultation, finalising stand-alone agreements in the less contentious areas, and initiating a work programme on WTO institutional reform.

Managing a fragile Eurozone
Paul De Grauwe (VoxEU) May 10, 2011
Why does the Spanish government pay significantly more to borrow than the UK government – despite having a smaller deficit and lower overall debt? This column argues that the reason lies in the Eurozone’s fragility. Its members lose their ability to issue debt in a currency over which they have full control. The column discusses ways to deal with this weakness.

The Latest Euro Area Rumors One Year After
Jacob Funk Kirkegaard (PIIE) May 10, 2011
The timing seems almost fitting. Precisely one year after the Greek bailout in early May 2010, an action intended to help Greece but also to keep the euro area intact, international media celebrated the anniversary with headlines once again proclaiming Greece's departure from the euro area. Fortunately, however, an unscheduled and not so secret meeting of the most important euro area member states' finance ministers in the first week of May was representative of the progress made in the last year – and of how much remains to be done.

The eurozone’s journey to defaults Financial Times Subscription Required
Martin Wolf (FT) May 10, 2011
A pre-emptive restructuring of Greek debt could not come as a shock to markets, and if agreed with eurozone partners it should raise the country’s creditworthiness and increase incentives to carry out a programme of stabilisation and reform.

Dollar's glow undimmed for risk-averse investors Financial Times Subscription Required
Mansoor Mohi-uddin (FT) May 10, 2011
Greenback's outlook appears constructive for the rest of 2011 and its status will only serve to enhance its appeal during any further bouts of risk aversion

From "Made in the USA" to "Made in China"
Joseph P. Quinlan (Globalist) May 10, 2011
Why "the West" should get used to competing with "the Rest" for resources and capital.

Debt crisis: More denial
Economist May 11, 2011
Muddling through and hoping for the best is the strategy but it ain't going to work. The Greeks won't wear it (there's another national strike today); the markets won't wear it (three year Greek bond yields are nearly 25%); and German voters won't wear it either.

Commodities Trading Is Banking's New Battleground
Matthew Lynn (Bloomberg) May 11, 2011
Forget bonuses. Don’t worry about bailouts. That’s all history. The battleground that matters most for the banking and finance industry right now is the profits it is making from commodities trading.

Economists and Democracy
Dani Rodrik (Project Syndicate) May 11, 2011
Raised on textbooks that obscure the role of institutions, economists often imagine that markets arise on their own, with no help from purposeful, collective action. And, once we recognize that markets require rules, we must next ask who writes those rules.

A race to the bottom: Understanding the US housing boom
Viral Acharya, Matthew Richardson, Stijn Van Nieuwerburgh & Lawrence J. White (VoxEU) May 11, 2011
At the centre of the global financial crisis was a housing boom and bust. A New York University team has produced an excellent book on the flaws in the design of US housing finance that opened the door for the mayhem that followed. This column, the first of a series of two, describes the race to the bottom that occurred among Fannie Mae, Freddie Mac, and the too-big-to-fail private financial institutions.

Free trade agreements and the consolidation of democracy
Xuepeng Liu & Emanuel Ornelas (VoxEU) May 11, 2011
The economic effects of free trade agreements are widely studied, but what about their political impact? Using data from over 125 countries over the past 60 years, this column argues that by removing protectionism, free trade can lower the government’s power and hence the incentives of autocrats to hold office. All this can help strengthen democracy.

Sources of the WTO’s impasse
Ujal Singh Bhatia (VoxEU) May 11, 2011
Is the Doha Round dead? This column argues that it is perilously close and that the biggest reason for this is one large member, i.e. the US. But it adds that emerging economies could do more to save the trade discussions.

Leaked Report Urges G-20 Action on Food Price Volatility
Bridges Weekly Trade News Digest, Volume 15, Number 17 May 11, 2011
A leaked report by top international food security experts urges the Group of 20 leading economies to tackle food price volatility by reforming biofuel policies, curbing the use of agricultural export restrictions, and rebuilding emergency food reserves.

WIPO Development Ctte Suspended Amidst Discord, Putting Projects on Hold
Bridges Weekly Trade News Digest, Volume 15, Number 17 May 11, 2011
Talks on integrating development considerations into every aspect of World Intellectual Property Organisation’s work came to an abrupt halt last week, as the negotiating committee’s session was suspended when governments failed to agree on a South-South cooperation project.

Food Price Swings Prompt Calls for Biofuel Reform; Brazilian Ethanol Imports Surge
Bridges Weekly Trade News Digest, Volume 15, Number 17 May 11, 2011
Several farm commodities, particularly sugar, began a sharp downward price correction last week, surprising analysts. Wheat, corn and soy, also witnessed modest declines. Nevertheless, prices remain at levels that are high by historical standards. Swings in the prices of agricultural commodities have had some topsy-turvy effects, such as helping to turn Brazil, the world’s leading ethanol producer, into a major importer of the fuel.

China’s spending spree deserves three cheers Financial Times Subscription Required
David Pilling (FT) May 11, 2011
Chinese groups have concentrated on getting commodities where opportunities are greatest in Africa and Latin America. When it comes to buying up America, China is in the little league with New Zealand and Austria.

Dollar in graver danger than the euro Financial Times Subscription Required
Axel Merk (FT) May 11, 2011
Unlike the eurozone, where consumers started saving a decade ago, the heavily indebted US consumer may not be able to stomach higher interest rates.

Inflation and Economic Hooliganism New York Times Subscription Required
Paul Krugman (NYT Magazine) May 11, 2011
Not happy with the U.S. exporting inflation to the rest of the world? Tough.

Greece's Date With the Taxman
Elena Panaritis (Globalist) May 11, 2011
As it attempts to repair its reputation with international creditors, Greece is undertaking long-overdue fiscal reforms, including cracking down on tax evaders.

A proposal to reform the US mortgage finance
Viral Acharya, Matthew Richardson, Stijn Van Nieuwerburgh & Lawrence J. White (VoxEU) May 12, 2011
At the centre of the global financial crisis was a housing boom and bust. This column continues the description of how flaws in the US housing finance sector made the crisis inevitable. Here the authors outline a reform plan to avoid this outcome and contrast it to the US Treasury proposals.

Greece and Portugal should both go gracefully Financial Times Subscription Required
Simon Tilford (FT) May 12, 2011
Even restructuring Greek and Portuguese debt will not guarantee their staying in the eurozone.

Now Is Not the Time To Bet Against Greece
Elena Panaritis (Globalist) May 12, 2011
Talk of a Greek default on its debt is premature. EU and IMF programs will work, if given time.

The Historical Roots of Greece's Debt Crisis
Elena Panaritis (Globalist) May 13, 2011
The debate over how how to fix Greece's fiscal crisis is missing an important factor — the historical context behind the events. Why this is important.

Global: Resilience, Rebalancing and Repression
Joachim Fels (MS GEF) May 13, 2011
Despite heightened financial market concerns about the economic outlook, we think that global growth will remain resilient.

Iceland’s Big Thaw New York Times Subscription Required
Jake Halpern (NYT Magazine) May 13, 2011
Yes, the country is recovering — by forgetting about banking and rediscovering its essential weirdness. Ever try cod sperm?

Europe’s policymakers should target the trade and the income balance deficits
Ricardo Cabral (VoxEU) May 15, 2011
Greece, Ireland, and more recently Portugal have applied for EU and IMF financial aid. This column argues the accompanying adjustment programmes should be modified to reflect the balance of payments and external debt crises these countries face. It suggests that these countries’ public and private debt should be restructured and their tax structure should be rebalanced to replicate the effect of currency devaluation and so improve these countries’ external competitiveness.

A Loan and a Prayer
Nouriel Roubini & Stephen Mihm (Project Syndicate) May 16, 2011
Europe cannot afford to continue throwing money at insolvent eurozone members and pray that growth and time will bring salvation. The creditors and bondholders who lent the money in the first place must carry their share of the burden – not least for the sake of their own bottom lines.

Secular Outlook: Navigating the Multi-Speed World
Mohamed A. El-Erian (PIMCO) May 16, 2011
We see a hobble through scenario for the foreseeable future. It is a world that heals slowly and unevenly, and remains structurally impaired. Balance sheets, both across and within economies, are still out of equilibrium. We expect advanced economies will face sluggish growth and persistently high unemployment over the secular horizon. Emerging economies will achieve higher growth but face recurrent inflationary concerns. We do not expect policymakers to boldly address structural problems. By targeting negative real interest rates, they will pursue financial repression that undermines the “real return” contract that savers expect. Secular baseline portfolio positioning should minimize exposure to the negative impact of financial repression, hedge against higher inflation and currency depreciation and exploit the heightened differentiation in balance sheets and growth potentials.

Latin America’s new shining path Financial Times Subscription Required
Gideon Rachman (FT) May 16, 2011
One reassuring aspect of next month’s Peruvian election is the way that both candidates have talked of Brazil, rather than Venezuela, as a model.

The IMF needs another European head Financial Times Subscription Required
Wolfgang Münchau (FT) May 16, 2011
IMF’s most important programmes are European. The eurozone’s contagious crisis constitutes the biggest threat to global stability.

How to ease the eurozone’s solvency crisis Financial Times Subscription Required
Paul Achleitner (FT) May 16, 2011
Establishing a European bond insurer could unlock significant private sector funds for the region’s struggling sovereign debtors.

China's central bank is new key player Financial Times Subscription Required
George Magnus (FT) May 16, 2011
The People's Bank cannot risk a material slowdown in economic growth as the policy drama unfurls.

IMF's Crisis-Management Challenge
Steven Dunaway (CFR) May 16, 2011
The arrest of IMF chief Dominique Strauss-Kahn on charges of sexual assault could hamper the fund's short-term ability to help manage the eurozone crisis but is not likely to harm the IMF over the long term.

Your Money Market Funds Are Safe Wall Street Journal Subscription Required
Edward C. Johnson and F. William McNabb III (WSJ) May 16, 2011
The banking system is significantly larger today than it was prior to the start of the financial crisis, and funneling trillions of dollars into this one sector will only increase risks to our economy.

The Greek debt crisis: The ECB’s three big mistakes
Jeffrey Frankel (VoxEU) May 16, 2011
It is a year since Greece was bailed out by EU and IMF and there are many who label it a failure. This column says that while there is plenty of blame to go around, there were three big mistakes made by the European Central Bank. Number one: Letting Greece join the euro in the first place

Is America mis-thinking its 21st century trade strategy? Part 1
Richard Baldwin (VoxEU) May 16, 2011
Two decades of spectacular growth and industrialisation in emerging economies has transformed the world economy, presenting US trade policy with new challenges. This is the first of two columns that consider one aspect of the new challenges – the ways in which the Obama Administration can secure better access for American exporters.

Is America mis-thinking its 21st century trade strategy? Part 2
Richard Baldwin (VoxEU) May 17, 2011
Most observers in Geneva expect the Doha round to fail. If that happens, this column argues that the prospects for US market-access policy will be grim. New multilateral tariff cutting is unlikely before 2020 and special interest groups in the US will hold back free trade agreements, leaving the country to fall behind in the bilateral market-access game.

Strauss-Kahn Downfall Is Time for IMF Renewal
Matthew Lynn (Bloomberg) May 17, 2011
The IMF needs a different kind of leader, and he will have done his colleagues in Washington an unexpected service.

Will The US Have A “Debt Crisis”?
Simon Johnson (Project Syndicate) May 17, 2011
John Boehner, Speaker of the US House of Representatives, is leading the Republican Party’s charge on fiscal policy, arguing that his side needs to see “trillions of dollars” in spending cuts in order for Congress to approve an increase in the US government’s debt ceiling. No one should believe him.

The IMF after DSK
Harold James (Project Syndicate) May 17, 2011
One unanticipated result of the lurid sex scandal involving IMF ex-Managing Director Dominique Strauss-Kahn is that the question of his successor is attracting considerable public interest and concern. Indeed, the scandal has exposed some fundamental problems about the IMF’s governance, and even about its existence.

Self-limited international migration: Insights from the pre-1914 North Atlantic
Drew Keeling (VoxEU) May 17, 2011
Mass international migration is inherently controversial. This column looks at how the US immigration policies before 1914 sought to manage mass migration across the North Atlantic. It suggests that, with migration today seemingly neither well-controlled nor well-managed, the managed laissez-faire approach of a century ago is regaining relevance.

Emerging Markets Might Name Strauss-Kahn Heir
Simon Johnson (Bloomberg) May 17, 2011
Even before the shocking events of the past few days, the international policy community had been contemplating a successor to Dominique Strauss-Kahn at the International Monetary Fund.

A Quick Guide to the Upcoming Contest for the Next MD of the IMF
Arvind Subramanian and Nicolas Véron (PIIE) May 17, 2011
This note provides a quick guide—in the form of a table—to the likely candidates to succeed Dominique Strauss-Kahn as next Managing Director (MD) of the IMF, assuming that he resigns shortly. It also highlights some key points that must guide the process of selecting the next MD.

What Asian Century?
Philip Bowring (NYT/IHT) May 17, 2011
The nations of Asia, be they rich or poor, all face problems that may keep the continent from fulfilling its promise.

The Dollar, Long Down, May Be Poised to Rise
Landon Thomas Jr (NYT) May 17, 2011
For the better part of the past decade, and particularly in the past few months, the dollar has been the weakling of the foreign exchange world. That may be starting to change.

The eurozone after Strauss-Kahn Financial Times Subscription Required
Martin Wolf (FT) May 17, 2011
When the decisions ahead for Europe are so complex and fraught, Dominique Strauss-Kahn’s absence will be keenly felt.

Tokyo has no option but to cleave to China Financial Times Subscription Required
Yoichi Funabashi (FT) May 17, 2011
The road to deepening mutual trust will not be smooth, and could engender an anti-China backlash in Japan.

Feudal IMF job process must change Financial Times Subscription Required
Mohamed El-Erian (FT) May 17, 2011
I don’t want the job, but the process must be open and fair.

Two Trends in Global Poverty
Laurence Chandy & Geoffrey Gertz (Brookings) May 17, 2011
We are living through a period of rapid global poverty reduction. According to recent estimates, high, sustained growth across most of the developing world has helped nearly half a billion people escape $1.25-a-day poverty between 2005 and 2010. Never before have so many people been lifted out of poverty over such a brief period.

The Elusive Quest for Energy Security Recommended!
Prakash Loungani (Globalist) May 17, 2011
Why the world's countries need to take a global approach to securing future energy supplies.

Freedom and Corruption
Bernard Wasow (Globalist) May 18, 2011
As democracy attempts to take root throughout the Arab world, will greater freedom in the region result in more corruption — or less corruption?

Cruel Summer? Recommended!
ECRI (IBD) May 18, 2011
A global summer slowdown looms as a leading indicator of factory activity has turned down, according to a well-respected independent research firm.

The Hidden State Financial Crisis
Meredith Whitney (WSJ) May 18, 2011
My latest research into opaque state financial statements suggests taxpayers will be surprised by how much pensions are underfunded.

Latin America’s Glossed Decade
Andres Velasco (Project Syndicate) May 18, 2011
The Inter-American Development Bank declared last July that this would be “Latin America’s Decade,” an idea subsequently endorsed by The Economist and repeated by countless apologists and experts. But, as in the past, the basis of the current wave of giddiness does not withstand scrutiny.

The Derivatives Market’s Helpful Enemies
Luigi Zingales (Project Syndicate) May 18, 2011
The launch of two European antitrust investigations into the market for credit default swaps might appear to be no more than a political vendetta against an alleged culprit behind the 2010 European sovereign-debt crisis. But the existence of political motivations does not undermine the legitimacy of the new inquiries.

US trade policy and the Doha Round: An alternative view
Fred Bergsten (VoxEU) May 18, 2011
US trade policy is moving again as major decisions are being made this month on both bilateral FTAs and multilateral negotiations at the WTO known as the Doha Round. This column argues a conclusion of the Doha Round would be useful but notes that if Doha comes off the rail, the US has other options. In particular, the bilateral FTAs and the Trans-Pacific Partnership talks with Asia-Pacific nations. These non-WTO agreements enjoy very strong US constituencies whereas Doha enjoys very few.

Geography and offshoring to China
Alyson C Ma & Ari Van Assche (VoxEU) May 18, 2011
Why do firms offshore manufacturing to China? This column uses data from China’s processing trade regime to argue that a hidden driver is the country’s geographic proximity to its East Asian neighbours.

Eurozone design and management failures
Guillermo de la Dehesa (VoxEU) May 18, 2011
Europe’s sovereign debt crisis is a defining moment for the Eurozone. This Vox column argues that the crisis exposes weaknesses in the monetary union’s design, governance, and management – many of which were pointed out long before the euro existed. But, despite this, it adds that the Eurozone still has the ability to make good.

UN LDC Conference Endorses 10-Year Plan, But Criticised for Lack of Accountability Mechanisms
Bridges Weekly Trade News Digest, Volume 15, Number 18 May 18, 2011
After several months of negotiations and five days of talks in Istanbul last week, the UN conference on Least Developed Countries (LDCs) adopted a plan of action on 13 May aimed at helping the world’s poorest countries combat poverty during the upcoming decade.

Govts Divided over Disclosure at WIPO Talks on Genetic Resources, Traditional Knowledge
Bridges Weekly Trade News Digest, Volume 15, Number 18 May 18, 2011
Intergovernmental negotiations on protecting traditional knowledge, traditional cultural expressions (TCEs), and genetic resources from misappropriation hit a roadblock last week, when talks at the World Intellectual Property Organisation were marred by considerable disagreement over the negotiating process and the contribution of indigenous peoples.

Why Beijing must end inflation - or else Financial Times Subscription Required
David Pilling (FT) May 18, 2011
It is only natural that the Communist Party should worry. After all, rising prices stirred protests in the run-up to Tiananmen Square.

Fund must turn away from DSK’s economic mistakes Financial Times Subscription Required
Desmond Lachman (FT) May 18, 2011
The poor economic performance in Europe risks blackening the IMF’s reputation in the same way as its programmes in the 1990s rendered the Fund a pariah.

There will be more monetary elixir after the end of QE2 Financial Times Subscription Required
Scott Minerd (FT) May 18, 2011
Quantitative easing isn't dead but merely slumbering, and we may yet get a sequel to QE2.

DSK and the Rikers Redemption Financial Times Subscription Required
Robert Shrimsley (FT) May 18, 2011
An imaginary scenario where the beleaguered IMF managing director is imprisoned but is able to break out, as in the Morgan Freeman movie.

India's Anti-Poverty Programs Are Big but Troubled
Heather Timmons (NYT) May 18, 2011
India spends more on programs for the poor than most developing countries, but it has failed to eradicate poverty because of widespread corruption, the World Bank said.

Is This the China that Can't?
John Berthelsen (Asia Sentinel) May 18, 2011
Lurking behind the facade are frightening structural problems.

G-8 Support for a Tunisian Plan
Various (NYT/IHT) May 18, 2011
Economists offer a road map for prosperity for Tunisia and the broader region.

Revving up the pace Economist Subscription Required
Economist May 19, 2011
The last in our series on "petri dish economies" asks how Kenya can boost its growth rate.

Good news on free trade agreements
James Anderson & Yoto V Yotov (VoxEU) May 19, 2011
Free trade agreements are controversial. While they promote trade between the member countries, they may also divert trade away from non-member countries, potentially reducing welfare. This column provides evidence that, even when trade diversion is taken into account, the overall effects are still strongly positive.

The meddling father
Daisy Sindelar (AT) May 19, 2011
Dominique Strauss-Kahn's arrest has reignited resentment about the paternalistic role of the International Monetary Fund, an organization its critics - from Ukraine to Pakistan - say has little concern for the hardships of ordinary people.

How to Make Money in Microseconds
Donald MacKenzie (LRB) May 19, 2011
The deals that used to be struck on trading floors now take place via “matching engines,” computer systems that process buy and sell orders and execute a trade if they find a buy order and a sell order that match. Some of the orders are sent to the matching engines by people, but more than half the trading is carried out by computer programs according to a variety of different algorithms. There are even algorithms that effectively prey on other algorithms, detecting and pre-empting their trades, to considerable profit. This all happens incredibly quickly. Three or four years ago, the salient unit of trading time was still the millisecond, but that’s now beginning to seem almost leisurely: time is often now measured in microseconds. And by and large, automated trading reduces both volatility and costs. On the other hand, it was also almost certainly responsible for the ‘flash crash’ of 6 May 2010, when Accenture’s share price fell from $40 to 1 cent in 20 minutes, and Sotheby’s soared from $34 to $99,999.99. The market had entered a potentially catastrophic self-feeding downward spiral.

Sex Scandal Is Another Travesty at IMF's Door
William Pesek (Bloomberg) May 19, 2011
In the annals of career suicide, Dominique Strauss-Kahn may warrant his own chapter. The sex charges against him in New York are a matter for the courts. Yet we do know this: The International Monetary Fund lost a capable leader after Strauss-Kahn bowed to the inevitable and resigned today.

Strauss-Kahn Quits IMF, Kicking Off Succession Contest
Sandrine Rastello (Bloomberg) May 19, 2011
Dominique Strauss-Kahn resigned as the 10th leader of the International Monetary Fund, kicking off a contest for his successor as Europeans seek to retain the job amid a lack of unity among emerging-market nations.

Technological progress also requires efficient capital markets
Thomas Meyer (DB Research) May 19, 2011
New research shows that efficient financial systems play a very important role in promoting the innovative capacity of the real economy. The leaders in this respect are the Anglo-American capital markets, whereas not only southern Europe but also Germany and Japan have some catching-up to do.

Stuck in Transition
Erik Berglof (Project Syndicate) May 19, 2011
The G-8 has asked the European Bank for Reconstruction and Development, created to support the post-communist transitions to democracy and market economies, to put its experience to use in Egypt. But which lessons from the Eastern European transition experience are relevant for countries in North Africa and the Middle East?

Don’t let another politician run the IMF Financial Times Subscription Required
Raghuram Rajan (FT) May 19, 2011
The fund plays its role better when it becomes the scapegoat politicians blame, rather than when it wants to be loved.

Watch out for tail risks hanging over Treasuries Financial Times Subscription Required
Gillian Tett (FT) May 19, 2011
Funding long-term obligations with short-term debt makes for a potentially dangerous strategy for the US.

A Truly International Monetary Fund or a Continuing North-Atlantic Monetary Fund?
Arvind Subramanian and Nicolas Véron (PIIE) May 19, 2011
This post follows up on, updates, and responds to a number of comments we received on, our previous post on the succession to Dominique Strauss-Kahn as Managing Director of the IMF. Why not a meritorious European this time? Some have argued that the key principle to introduce is merit not nationality. And if that results in a European candidate—for example Christine Lagarde—that should be fine. We agree. But this time is special. The process must be, and must be believed to be, merit-based. If the process throws up a European candidate, doubts will linger: was the candidate truly meritorious or will the presumption be that the result was a stitch-up—once again—between the Europeans and Americans. Signaling a decisive change from the past requires an outcome that is different.

Why is the Doha Round Failing? Lessons for the Future
Arvind Subramanian and Aaditya Mattoo (PIIE) May 19, 2011
At least some of Doha's cheerleaders of yesterday—with the zeal of the newly disenchanted—are becoming today's executioners. In a new and widely discussed essay in Foreign Affairs, for example, Susan Schwab, the former United States Trade Representative in the last Bush administration, argued that it was time to perform last rites (although she was not explicit on this and she even suggested the possibility of harvesting some gains from the round in a smaller agreement) on the Doha Round, and she blamed the larger emerging market countries—Brazil, China and India—for that failure.

Lagarde in lead for top IMF job as Dervis loses ground
Taimur Ahmad and Phil Thornton (Emerging Markets) May 19, 2011
French finance minister Christine Lagarde has emerged as the frontrunner to succeed Dominique Strauss-Kahn as IMF managing director as the chances of former Turkish politician Kemal Dervis receded

Giscard d’Estaing speaks out on eurozone debt crisis as Greek default fears mount
Taimur Ahmad and Phil Thornton (Emerging Markets) May 20, 2011
The private sector must play an equal role in cleaning up the eurozone debt crisis, former French president and architect of the European project Valéry Giscard d’Estaing, says.

The world according to LPs
Vyvyan Tenorio (The Deal) May 20, 2011
Institutional investors in alternative assets are adapting to a new era post-crisis, reassessing where and why things went wrong, and where to go from here.

How Lagarde Should Be Appointed at the IMF
Mohamed A. El-Erian (PIMCO/Bloomberg) May 20, 2011
While Lagarde is well qualified, it is also apparent that European politicians are trying to extend a feudalistic tradition that is both outmoded and harmful. The appointment of a woman to lead the IMF at this time could send an important message: it does not tolerate inappropriate behavior. Arguments about the urgency of an appointment and the current focus on the crisis in the European periphery are both ineffectual. Instead of a new five-year term, Lagarde should be appointed to complete Strauss-Kahn’s term, which runs until 2012.

Moving towards an Asian Monetary Fund
Pradumna B. Rana (VoxEU) May 20, 2011
Macroeconomic cooperation in Asia has taken huge strides forward over the last 18 months, including the Chiang Mai Initiative and the more recent establishment of the ASEAN+3 Macroeconomic Research Office. But this column argues that while the road towards an Asian Monetary Fund is now shorter, we shouldn’t expect to see a new fund for at least another five years.

The missed debt lesson
Reuven Brenner (AT) May 20, 2011
As the United States and Europe debate what they should do in the face of debt, deficits and uncontrolled spending, they might also consider that they have seen it all before across the US border in Canada - and why they learned nothing from that experience.

Europe should keep top job
Peter Morici (AT) May 20, 2011
Demands that a non-European should be the next head of the International Monetary Fund too easily overlook the tendency of Asian governments to flaunt the system of market-determined exchange rates and violate World Trade Organization rules.

Global: Cut the Slack
Joachim Fels (MS GEF) May 20, 2011
Uncertainty about the output gap translates into uncertainty about the inflation outlook.

Hobble and Muddle
Mohamed A. El-Erian (Project Syndicate) May 20, 2011
The world economy will remain unusually fluid – systemically interconnected, but increasingly fragmented cognitively over the next 3-5 years, and thus plagued by weak global governance and policy coordination. In this environment, those who seek to benefit from change could easily fall victim to it.

Trade: An Opportunity about to Be Lost?
Greg Mastel and Howard Rosen (PIIE) May 20, 2011
After a few quiet years for trade policy, the Obama administration and Congress are on the brink of a major breakthrough. Three new free trade agreements (FTAs) and an extension of Trade Adjustment Assistance (TAA) are logically and politically linked and are ready to move through Congress together. Unfortunately, shortsighted thinking threatens to grasp defeat from the jaws of victory.

This Week in the Euro Area
Jacob Funk Kirkegaard (PIIE) May 20, 2011
While much of the financial world has focused recently on the upheaval at the International Monetary Fund, a series of other events in Europe this week brought additional uncertainty to the circumstances surrounding the continuation of the Greek bailout program after 2012. A cacophony of opposing public statements is inevitable when multiple democratically elected policymakers and a genuinely independent central bank are engaged in a zero-sum game. But recent events have marked a low point in the European Union's ability to manage even minimum message discipline. It is increasingly evident that the euro-group ought to find a new leader and public spokesman who masters the art of keeping quiet when there is obvious deep-seated disagreement among the key policymakers about how to proceed.

Economic Policy Cooperation Vital to Global Recovery
IMF Survey May 20, 2011
Advanced and emerging market economies stand to benefit from a stronger economic recovery if they coordinate policies as they did during the height of the global economic crisis in 2008, said John Lipsky, acting managing director of the International Monetary Fund.

Leveraged buyback: How to deal with the Greek debt overhang
Angelo Baglioni (VoxEU) May 21, 2011
Should Greece's creditors tackle its mountain of debt by writing some of it off or stretching out the repayment period? This column argues that both approaches are likely to have profound negative repercussions for Greece and the rest of Europe. Instead, it suggests a “market-based solution.”

Arab uprising: More oil, less democracy
Kevin K. Tsui (VoxEU) May 21, 2011
It has been widely argued that natural-resource wealth is a curse that leads to corrupt politicians, closed and illiberal societies, and defunct economies. This column presents new evidence on the political impacts of oil wealth. It argues that the effects depend on geology and history, shedding light on the recent uprisings in the Middle East and North Africa.

America’s deepening default chasm Financial Times Subscription Required
Clive Crook (FT) May 22, 2011
Attending to the insane discussions in Congress over different kinds of default, one wonders why the US has not lost its triple-A credit rating already.

Cosmetic surgery will not save the eurozone Financial Times Subscription Required
Wolfgang Münchau (FT) May 22, 2011
Do we really want a situation where the ECB must choose between a reputational disaster and a factual disaster?

Needed: Plain Talk About the Dollar New York Times Subscription Required Recommended!
Christina D. Romer (NYT) May 21, 2011
It’s standard Washingtonspeak: The United States favors a strong dollar. But sometimes that’s not the right answer.

When Austerity Fails New York Times Subscription Required
Paul Krugman (NYT) May 22, 2011
Can European leaders handle the truth?

Is the Chinese Economy Slowing?
Gordon G. Chang (Forbes) May 22, 2011
The Chinese government may soon face the worst of all possible worlds: low growth coupled with high inflation.

The Economics of Unhappiness
John Quiggin (Chronicle) May 22, 2011
For at least the past decade, there has been a boom in work on the economics of happiness. But recalling Tolstoy's famous opening lines in Anna Karenina, I've always wondered why we don't study the economics of unhappiness instead. After all, we have so much more data.

A Fourth Wave or False Start? Recommended!
Larry Diamond (FA) May 22, 2011
Democracy after the Arab Spring.

21st century regionalism and global trade governance
Richard Baldwin (VoxEU) May 23, 2011
How will global trade evolve in the 21st century? This column introduces a new CEPR Policy Insight arguing that 1) trade today is radically more complex than last century 2) 21st century trade demands are currently being met by “21st century regionalism”, not the WTO, and 3) this regionalism has quite different implications for world trade than the traditional thinking suggests.

The era of corporate split personalities
Nicolas Véron (VoxEU) May 23, 2011
The quip that “cross-border banks are international in life, but national in death” resonates loudly amongst the empty shells of international banks that have since been bailed out by their home countries. This column argues that such tensions will intensify in the coming years.

Monetary and macroprudential policies
Paolo Angelini, Stefano Neri & Fabio Panetta (VoxEU) May 23, 2011
The global financial crisis has prompted an intense debate on the role of macroprudential policies in limiting the accumulation of risks and imbalances. Major economies have recently established new institutions, or strengthened existing ones, with a mandate to pursue financial stability. This column examines the effectiveness and consequences of macroprudential policies with a focus on their interaction with monetary policy.

Capital Controls or Protectionism
Hector R. Torres (Project Syndicate) May 23, 2011
In its recent World Economic Outlook, the IMF recommends monetary tightening in emerging markets and continued monetary accommodation in the advanced economies. Alas, both pieces of advice could breed protectionism if not accompanied by effective capital controls.

The Tragedy of Trade Blindness
Peter Sutherland (Project Syndicate) May 23, 2011
The Doha Round of global free-trade negotiations is on the brink of collapse after ten years of talks. That amounts to a tragedy in the making, because the gains available from what has already been agreed are considerable, and would provide a major boost to the global economy.

Keynesians are complacent about the dollar Financial Times Subscription Required
Benn Steil and Manuel Hinds (FT) May 23, 2011
Consider what would happen if its special status were to be taken by another currency.

Japan equities set to rally back to pre-crisis highs Financial Times Subscription Required
Kathy Matsui (FT) May 23, 2011
Disaster will accelerate Japan's exit from deflation as reconstruction demand drives GDP at an above trend pace.

Has the surge in capital inflows rendered Brazil vulnerable to a “sudden stop”?
Markus Jaeger (DB Research) May 23, 2011
Emerging economies with open capital accounts, liquid domestic financial markets and high interest rates have attracted very large amounts of foreign investment. A change in G3 monetary conditions is bound to have a significant impact on non-FDI inflows. In Brazil, potentially “fickle” foreign investment in Brazil has risen very tangibly, reaching USD 500 bn in Q1. Significant official reserves and a favourable foreign liability structure in terms of currency denomination would allow Brazil to ride out a “sudden stop” in capital inflows via currency depreciation.

Mundell: Deflation Risk for the Dollar Wall Street Journal Subscription Required
Sean Rushton (WSJ) May 23, 2011
The Nobel winner says a stable dollar-euro rate is the best economic medicine.

The IMF Should Not Be Held Hostage to Europe
Edwin M. Truman (PIIE) May 23, 2011
The International Monetary Fund (IMF) needs a managing director to replace Dominique Strauss-Kahn. Reaching a decision will not be as neat and tidy as some of my think-tank colleagues would like it to be. But the process promises to be open with several prominent, plausible candidates, including one from Europe who is expected to be the French finance minister, Christine Lagarde. The issue for the non-European members of the IMF is whether the next managing director will be held hostage to the near-term interests of Europe. The correct answer should be no. The successful candidate must convince the broad membership of the IMF that future decisions with respect to the euro area crises will be made in the interests of the system as a whole—not just those of Europe.

Europe should not control the IMF Financial Times Subscription Required
Martin Wolf (FT) May 24, 2011
Regimes that do not bow to the winds of change get blown away. The Europeans need to recognise that truth in time. They will not do so. But it will prove a big mistake.

Learn AIG’s lessons to avoid another Lehman Financial Times Subscription Required
Jim Millstein (FT) May 24, 2011
Dodd Frank’s orderly liquidation prescription may accelerate an incipient financial crisis.

Derivatives reform will not prevent next AIG Financial Times Subscription Required
Andrew Feldstein (FT) May 24, 2011
It makes more sense to upgrade accounting rules and improve public disclosure of derivatives than enforce damaging reforms.

The G-8's Self-Serving Math New York Times Subscription Required
NYT May 24, 2011
The G-8 seems determined to fudge the numbers rather than admit to a broken promise.

Arab Democracy Needs More Than Markets
Amity Shlaes (Bloomberg) May 24, 2011
The old equation of Resources + Free Markets = Institutions won't work. In the Middle East, especially, the institutions have to come first.

Here's How We Can Solve US Debt Crisis. Really.
Tom Coburn (Bloomberg) May 24, 2011
If our leaders fail to make these choices before the next election, voters will have no choice but to replace them with leaders who will. (Tom Coburn

Securitisation: Let’s not throw the baby out with the bathwater
Ugo Albertazzi, Leonardo Gambacorta & Carmelo Salleo (VoxEU) May 25, 2011
Before the global crisis, securitisation was hailed as a major breakthrough for the safe functioning of financial markets. Now it is suffering from seriously bad public relations. This column presents evidence from 50 Italian banks between 1995 and 2006 and argues that securitisation, by itself, does not deserve such a nasty reputation.

The Return of Stagflation Wall Street Journal Subscription Required
Ronald McKinnon (WSJ) May 24, 2011
We enter the summer of 2011 facing an ugly combination of inflation and high unemployment. Blame the Federal Reserve.

Greece, the unbearable heaviness of debt
Paolo Manasse (VoxEU) May 24, 2011
For a long time analysts have been arguing about whether Greece will default on part of its debt – leaving its creditors to take a “haircut”. This column argues that this prospect is becoming more and more likely.

External versus domestic debt in the euro crisis
Daniel Gros (VoxEU) May 24, 2011
As EU leaders muddle through the Eurozone crisis, the debate about its root causes continues. The debate is important if we are to understand how to prevent future crises. This column argues that the focus on total public debt is misleading – external debt is the key to the turmoil in European economies.

The global crisis in low-income countries
Andrew Berg & Nikola Spatafora (VoxEU) May 24, 2011
What effect did the global financial crisis have on low-income countries? This column examines data from the last forty years to help place 2007–2009 in perspective. It finds that the global crisis was largely transmitted to low-income countries through external demand shocks that were not tremendously large relative to historical volatility. Such demand shocks are usually bad for growth in the short to medium run, but they may not have damaged poor economies' long-run growth prospects.

China's Growth Risks Wall Street Journal Subscription Required
WSJ May 25, 2011
Rising inflation and an opaque financial system, among others.

The finance-trade-growth nexus and lessons from the past
Michael Bordo & Peter L Rousseau (VoxEU) May 26, 2011
How interconnected are finance, trade, and economic growth? This column looks to the past in search of an answer. Examining economies that traded across the Atlantic, it finds that finance and trade reinforced one another between 1880 and 1914 but these links were absent in the post-war period. Financial development has been strongly related to growth throughout the last 130 years, whereas trade had a direct effect on growth only after 1945.

Brics must put up a fight for IMF top job Financial Times Subscription Required
Eswar Prasad (FT) May 25, 2011
Time for emerging markets to get down to the bare-knuckled politics that Europe is now engaged in.

Germany owes more to prodigal periphery Financial Times Subscription Required
Olivier Jeanne, Arvind Subramanian and John Williamson (FT) May 25, 2011
If the euro’s benefits are recognised, it will allow for a bigger contribution to resolving the crisis

China Passed The U.S. In Information Technology. What’s Next?
Matthew Herper (Forbes) May 25, 2011
No other country comes close to the U.S. in research output in biology and medicine, but China is now No. 1 in IT and breathing down America's neck in alternative energy.

Measuring the Net’s growth dividend Recommended!
McKinsey Global Institute May 25, 2011
The Internet now accounts for a significant share of global GDP and plays an increasingly important role in economic growth. Why it matters--as well as who benefits--and what can be done to nurture it.

Making Aid Work
Marcus Noland (DailyNK/PIIE) May 25, 2011
A recent US State Department announcement of an official mission to Pyongyang has revived speculation that the Obama administration is preparing to resume large-scale food aid to North Korea. That report raises the question of whether those organizing such a mission will learn the lessons of past mistakes.

The IMF---Keynes' Non-Candidate
Arvind Subramanian (Business Standard/PIIE) May 25, 2011
Let us suppose that it were John Maynard Keynes rather than Angela Merkel, Timothy Geithner, and their ilk deciding on Dominique Strauss-Kahn's successor to head the International Monetary Fund (IMF). Who would the Great Man have chosen? Though an exercise in fantasy, this is actually a question that Keynes addressed seriously if not directly.

A World of Regions
Jeffrey D. Sachs (Project Syndicate) May 25, 2011
In almost every part of the world, long-festering problems can be solved through closer cooperation among neighboring countries. So why do most regional groupings remain too weak to address their members’ pressing needs?

Contemplating Doha Failure, WTO Members Look to Paris Meeting for Way Forward
Bridges Weekly Trade News Digest, Volume 15, Number 19 May 25, 2011
As WTO members contemplate the real prospect of failure in the decade-long Doha Round of global trade talks, they are looking to a meeting of trade ministers in Paris on Thursday for signs of a way forward.Ambassadors to the WTO in Geneva have been exploring - thus far without success - potential options for salvaging agreements on individual issues within the wide-ranging negotiations, instead of the comprehensive accord that had originally been planned for. The woes of the Doha Round featured prominently in discussions last week among trade ministers from Asia-Pacific Economic Cooperation (APEC) countries in the US state of Montana last week.

Protectionist Pressures Rising Among G-20 Members, Says New WTO Report
Bridges Weekly Trade News Digest, Volume 15, Number 19 May 25, 2011
Protectionist pressures are increasing in the world’s leading economies, as members of the Group of 20 introduced more trade-restricting policies over the past six months than in any comparable period since April 2009, according to a new report from the WTO.

WIPO Patent Committee Looks at Public Health, Tech Transfer
Bridges Weekly Trade News Digest, Volume 15, Number 19 May 25, 2011
Intergovernmental talks at the World Intellectual Property Organisation (WIPO) plodded forward last week as countries debated patents and public health, technology transfer, and exceptions and limitations to patents. The 16-20 May meeting of WIPO’s Standing Committee on the Law of Patents (SCP) often saw developed countries and developing countries at odds; nevertheless, some compromise was reached and most countries felt “optimistic about the way forward”.

World Health Assembly Kicks Off WHO Reform Process, Moves Forward on IP-related Issues
Bridges Weekly Trade News Digest, Volume 15, Number 19 May 25, 2011
The World Health Organisation’s annual assembly kicked off last week with discussions on the organization’s work over the past year, the challenges it faces in a changing global economy, and a spirited debate on the future shape and finances of the institution itself.The meeting also addressed issues such as pandemic influenza preparedness, vaccines, fake medicines, communicable and non-communicable diseases and HIV/AIDS, among others.

After the Greek Default
Martin Feldstein (Project Syndicate) May 26, 2011
The Greek government, the European Commission, and the IMF are all denying what markets perceive clearly: Greece will eventually default on its debts to its private and public creditors. But even a default will provide no guarantee of a return to fiscal sustainability – and it will not fix Greece's equally unsustainable trade deficit.

A Marshall Plan for the Arab World
Franco Frattini (Project Syndicate) May 26, 2011
US President Barack Obama’s major speech on the consequences of the Arab Spring is also a challenge for Europe. Only if the trans-Atlantic partnership proves effective, as it did to meet the demands of the Cold War and the end of Europe’s division, can the West contribute to realizing the hopes engendered by the Arab uprisings.

Forget the debt ceiling and focus on debt Financial Times Subscription Required
Glenn Hubbard (FT) May 26, 2011
Using the bully pulpit to provide information for the public has given way to misleading claims about solutions.

The follies and fallacies of our forecasters Financial Times Subscription Required
Samuel Brittan (FT) May 26, 2011
Imagine someone who keeps adding sand to a pile until it crumbles. The foolish and common error is to blame the collapse on the last grain rather than on the structure of the pile.

Index trackers offer clues to herd behaviour Financial Times Subscription Required
Gillian Tett (TF) May 26, 2011
After latest allegations of oil price manipulation, it may be time to look beyond the speculators to the fast-growing world of commodity index funds.

IMF plans Active Agenda to Support Global Recovery
IMF Survey May 26, 2011
The IMF publishes its new work program at a time when the global economy is being buffeted by continued uncertainty in Europe, uprisings in the Middle East, and signs of overheating in some fast-growing emerging market economies.

Managing Capital Flows in Emerging Markets
Min Zhu (IMF) May 26, 2011
This is, of course, a very topical subject—not least here in Brazil which, like many other emerging market economies (EMEs), has been contending with large capital inflows over the past couple of years. While the subject is topical, it is by no means ephemeral or new. Investors worldwide have woken up to the exciting growth opportunities in emerging market countries, and despite fluctuations from time to time, robust capital flows to EMEs will likely be a structural characteristic of the global financial markets for many years to come.

Crosstown traffic Economist Subscription Required
Economist May 26, 2011
The global economy is slowing. For one of its biggest members, that is good news.

World's worst menu Economist Subscription Required
Economist May 26, 2011
Greece has no good options left.

Time for a change Economist Subscription Required
Economist May 26, 2011
Why a euro-zone finance minister, even a talented one, should not lead the IMF.

Drain or gain? Economist Subscription Required
Economist May 26, 2011
Poor countries can end up benefiting when their brightest citizens emigrate.

The China syndrome and Strauss-Kahn's fate
Francesco Sisci (AT) May 26, 2011
The fate of Dominique Strauss-Kahn (innocent until proven guilty, remember) is globally relevant. If Strauss-Kahn was put away, any belief in China that it was through conspiracy to eliminate a possible political scenario for Europe and the world would push Beijing further away from the West - and at a critical juncture when China would be deciding its strategic course for the next 10 years.

Ten Reasons Why China is Different
Stephen S. Roach (Project Syndicate) May 27, 2011
The China doubters are back in force. They seem to come in waves – every few years, or so. Yet, year in and year out, China has defied the naysayers and stayed the course, perpetuating the most spectacular development miracle of modern times. That seems likely to continue. Today’s feverish hand-wringing reflects a confluence of worries – especially concerns about inflation, excess investment, soaring wages, and bad bank loans. Prominent academics warn that China could fall victim to the dreaded “middle-income trap,” which has derailed many a developing nation.

This time is the same: Do banks learn from crises?
Ruediger Fahlenbrach, Robert Prilmeier & René M. Stulz (VoxEU) May 27, 2011
Crises are a regular event in financial markets. But do banks that have been hit particularly hard in one crisis learn from the experience and suffer less in future crises? This column suggests not. It shows that banks particularly hard hit by the 1998 financial crisis were also badly affected by the recent financial crisis. It blames the high-risk business models on which these banks rely.

Who Should Lead the IMF?
Jeffrey Frankel (Project Syndicate) May 27, 2011
Every time the IMF awaits a new managing director, critics complain that it is past time for the appointee to come from an emerging-market country. But only if emerging-market countries unite behind a single candidate will they have a shot at securing the post.

The Renminbi’s Journey to the World
Yu Yongding (Project Syndicate) May 27, 2011
Though few have noticed, the Chinese renminbi is poised to become one of the three global settlement currencies, alongside the dollar and the euro. But there are serious risks in the renminbi's internationalization – especially for China itself.

Economy, Insure Thyself
Robert J. Shiller (Project Syndicate) May 27, 2011
If countries covered their risks by issuing a different kind of national debt, tied to their own GDP or a similar measure of economic success, many would have a much debt burden today. Just ask Japan.

Global: Is There an EM Credit Bubble?
Manoj Pradhan & Alan Taylor (MS GEF) May 27, 2011
The EM world under our coverage shows credit growth broadly in line with the economic recovery and suggests no immediate reason for concern.

Oil And Democracy, Continued
Katherine Brown and Ilan Kolet (Bloomberg) May 27, 2011
Most of the world's oil is produced in states that are undemocratic. The U.S., Canada and Norway are the exceptions.

Revitalizing the Export-Import Bank
Gary Clyde Hufbauer, Meera Fickling, and Woan Foong Wong (PIIE) May 27, 2011 Adobe Acrobat Required
Trade finance will play a crucial role in President Barack Obama's goal of doubling US exports by 2015. Almost 90 percent of exports depend on trade finance in some form—direct credit, credit insurance, or loan guarantees. Even though official export credit agencies (ECAs), including the US Export-Import Bank (Ex-Im Bank), play a small part in the whole scheme of export finance, they occupy a crucial niche. They are "lenders of last resort," taking risks shunned by the private market. Ex-Im Bank is up for reauthorization in 2011, so this is a good time to review its prospects and mandate. As new authorization legislation is drafted, the authors recommend that Congress address seven policy issues: (1) enlarge the Ex-Im Bank's funding level to the point where it can finance 5 percent of US exports of goods and services; (2) draw private banks to play a more active role in financing exports of small and medium-sized enterprises; (3) cut the local content requirement from the bank's current level of 85 percent to a maximum of 50 percent; (4) authorize the Ex-Im Bank to support both service components of merchandise exports and stand-alone services exports in a manner similar to the approach of other ECAs; (5) repeal the cargo preference requirement; (6) move the determination of "adverse economic impact" to the US International Trade Commission and limit the review to countries that are subject to antidumping duties, countervailing duties, and safeguard orders; and (7) use concerted pressure to bring China into the OECD Arrangement on Officially Supported Export Credits.

Next steps for the Doha Round: Introducing a new eBook
Richard Baldwin & Simon J Evenett (VoxEU) May 28, 2011
The Doha Round poses a dilemma for world leaders; the talks cannot be completed this year, but there is no agreement among WTO members on either suspending or killing the Round. This column introduces the latest VoxEU eBook, which gathers the thoughts of some of the world’s most experienced trade negotiators on what comes next. Indonesia's trade minister and former WTO Ambassadors from the US, China, India, Canada and Hong Kong each provide a plan for getting past the Doha crisis.

The Weak Foundations of Arab Democracy New York Times Subscription Required
Timur Kuran (NYT) May 28, 2011
The chronic weakness of civil society suggests that viable Arab democracies will not emerge anytime soon.

Slums Into Malls New York Times Subscription Required
Nicholas D. Kristof (NYT) May 28, 2011
Watch out, China: With its liberated news media and booming economy, India could nibble your lunch.

Why Are Investors Still Lining Up for Bonds? New York Times Subscription Required
Jeff Sommer (NYT) May 28, 2011
All the signs say investors should be avoiding Treasuries, but they're not. One investment manager says bond markets have become complacent.

Financial protectionism: New evidence from bank bailouts
Andrew K Rose & Tomasz Wieladek (VoxEU) May 29, 2011
During the global crisis governments made substantial interventions in financial markets, particularly in the banking sector. This column argues that one unintended consequence of bank nationalisations has been to reduce cross-border lending. After nationalisation, foreign banks reduced British lending as a share of total lending by about 11 percentage points and increased interest rates to UK residents by 70 basis points. This suggests foreign nationalised banks have engaged in financial protectionism.

Eurozone debt crisis: Reckless debtors or misguided rescuers?
Stefano Micossi (VoxEU) May 29, 2011
The Eurozone crisis has exposed serious flaws in the single currency’s ability to manage a crisis. This column outlines three ways that Europe’s financial assistance programmes should be changed to rectify this.

Soft options are no longer viable options Financial Times Subscription Required
Wolfgang Münchau (FT) May 29, 2011
Either the EU/IMF continues to bankroll Greece for as long as it takes, or Greece will be forced into a hard default.

European integration is unravelling Financial Times Subscription Required
Peter Spiegel (FT) May 30, 2011
The euro and visa-free travel zone are under such serious assault that officials openly speculate about their demise.

A manifesto for the fund’s new supremo Financial Times Subscription Required
Jeffrey Sachs (FT) May 30, 2011
There is plenty to do at IMF headquarters. The world is rife with lawlessness and recklessness, with tax havens and regulation-free zones catering to the avarice of globally mobile capital.

Partial debt restructuring will not work Financial Times Subscription Required
Desmond Lachmann (FT) May 30, 2011
Policymakers should ask whether they really want to force Greece into a major debt restructuring.

Life without Doha
Jagdish Bhagwati (Project Syndicate) May 30, 2011
If the Doha Round fails, the global free-trade agenda would shift from the WTO to preferential trade agreements (PTAs), which are already spreading like an epidemic. That, in turn, would mean the end of non-discriminatory trade liberalization and uniform rule-making and enforcement.

Why privatisation is not the panacea for Greece
Paolo Manasse (VoxEU) May 30, 2011
How should Greece try to reduce its debt? Some say Greece should privatise some of its ports and tourist hotspots. While on paper such a move might significantly reduce the debt, this column argues that these calculations rely on some shaky assumptions. Such a sale could make Greece worse off overall.

The Anglo-Saxon Budget Laboratories
Jean Pisani-Ferry (Project Syndicate) May 31, 2011
The recent threat of a downgrade of US public debt by the rating agency Standard and Poor’s was a bolt from the blue. Once confined to a few delinquent countries, worries about public debt are now bearing down on the world’s biggest and richest economies.

The Corporatist Threat to the Arab Spring
Edmund S. Phelps (Project Syndicate) May 31, 2011
Tunisia and Egypt face serious hazards as they rely on democratic mechanisms to mitigate the oppressive features of the rightist corporatism under which they suffered. One hazard is leftist corporatism, in which labor unions and cronies replace the ruling families and army officials, but political control of the economy is maintained.

The Habsburg Empire and the long half-life of economic institutions
Sascha O Becker & Ludger Woessmann (VoxEU) May 31, 2011
For centuries, Europe was ruled by empires wielding global influence. This column shows that these empires can leave behind a long-lasting legacy through cultural norms. Comparing individuals on opposite sides of the long-gone Habsburg Empire border within five countries, it shows that firms and people living in what used to be the empire have higher trust in courts and police.

Setting Inflation Target Remains an Effective Tool
IMF Survey May 31, 2011
Adopting an inflation-forecast targeting regime can help reduce economic uncertainty and the severity of boom-and-bust cycles—two benefits that were borne out in several countries during the recent crisis and the subsequent rise in food and fuel prices, economists said at a seminar in Armenia.

Intolerable choices for the eurozone Financial Times Subscription Required
Martin Wolf (FT) May 31, 2011
The options to go forwards towards a closer union or backwards towards partial dissolution proves that an enduring union will at the very least need deeper financial integration

Emerging economies are ready to lead Financial Times Subscription Required
Agustín Carstens (FT) May 31, 2011
European countries should not overestimate the role of the IMF in solving their current sovereign debt crises.

End the party before Brazil’s bubble bursts Financial Times Subscription Required
Moisés Naím (FT) May 31, 2011
The danger is that Dilma Rousseff does not act now and financial markets will in time impose the necessary corrections in a more brutal way.

Muddle along for now, but Greek default inevitable Financial Times Subscription Required
John Plender (FT) May 31, 2011
As European policymakers inch their painful way towards another stopgap bail-out for Greece, a high-level debate is taking place on the nature of the country's plight.

The Danger of Emerging Market Inflation
Mohamed A. El-Erian (PIMCO) May 31, 2011
If left unchecked, high and accelerating inflation in emerging markets will have growing adverse economic, social and political effects. In addition to undermining overall growth and resource allocation, emerging market inflation imposes a very heavy burden on the poor and erodes political unity. Emerging economies will tap multiple policy brakes as they seek to counter mounting inflationary pressures. And they will continue to grow, but not enough to pull up decisively the sluggish advanced countries.

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