Does Debt Matter?
Various (TIE) May 1, 2013
The global consensus on debt is in disarray. Can a realistic guide be fashioned for determining whether a nation's debt has reached a danger zone?
The West’s Dismal Future
Paul Craig Roberts and Johannes Maruschzik (TIE) May 1, 2013
Bubbles, bubbles, and more bubbles.
Currency War Scorecard
Martin Kessler (TIE) May 1, 2013
Charting potential winners and losers.
The Rise of Big Data
Kenneth Neil Cukier and Viktor Mayer-Schoenberger (FA) May 1, 2013
The Internet changed how businesses operate, governments function, and people live. Now the race is on to master the next transformation: big data. Get the definitive overview of what’s happening from two leading experts on the subject.
The Austerity Delusion
Mark Blyth (FA) May 1, 2013
Europe’s dismal recent economic performance is only the latest example of economically stagnant countries failing to cut their way to prosperity. So why is austerity still so popular -- and getting a new lease on life in the United States, to boot? This biting critique explains all.
Africa’s Economic Boom
Shantayanan Devarajan and Wolfgang Fengler (FA) May 1, 2013
Is African growth a miracle or a mirage? A bit of both, argue two World Bank economists. The progress to date is real and spectacular, but future success will depend as much on politics as on economics.
Controlling China’s Currency
Zhang Monan (Project Syndicate) May 1, 2013
China is stuck in a currency-creating cycle: GDP growth encourages investment, which boosts demand for capital, creates liquidity, and stimulates further GDP growth. The key to controlling the money supply is to prevent the government from becoming a second currency-creating body.
A New World’s New Development Bank
Nicholas Stern, Amar Bhattacharya, Mattia Romani, Joseph E. Stiglitz (Project Syndicate) May 1, 2013
The significance of the decision by the BRICS to create a new development bank that they will fund cannot be overemphasized. Emerging markets and developing countries are taking the future into their own hands – at a time when rich countries are muddling through their own self-inflicted problems.
A Fateful Mistake
Jean Pisani-Ferry (Project Syndicate) May 1, 2013
Adjustment fatigue is setting in, and governments risk losing support if they go much further in the effort to achieve fiscal consolidation. But the recent discrediting of the evidence on which hasty austerity has relied risks undermining the case for fiscal responsibility in the long run.
Six Ways to Separate Lies From Statistics
Betsey Stevenson & Justin Wolfers (Bloomberg) May 1, 2013
The discovery of a spreadsheet error in an influential study by Harvard University economists Carmen Reinhart and Kenneth Rogoff inevitably raises a troubling question: To what extent can we trust what any researcher claims to be true?
Reinhart-Rogoff Uproar Settles Nothing
Caroline Baum (Bloomberg) May 1, 2013
By now, you’re probably tired of all the back-and-forth on Reinhart and Rogoff. That would be Harvard University’s Carmen Reinhart and Kenneth Rogoff, the economists who co-authored the 2009 best-seller, “This Time Is Different: Eight Centuries of Financial Folly,” and who are now on the firing line because of minor data errors in a 2010 working paper.
Bangladesh’s tragedies must stop
John Gapper (FT) May 1, 2013
Western companies should not withdraw from the country but help to raise both safety standards and living standards.
Austerity is not the only answer to debt
Kenneth Rogoff and Carmen Reinhart (FT) May 1, 2013
The choice for economic policy makers is not just between fiscal tightening and freewheeling spending.
Lebanon squanders its finest assets
David Gardner (FT) May 1, 2013
The country wastes the resilience and resourcefulness of its people, and its most valuable asset now is its diaspora.
Part I: China and the End of Extrapolation
George Magnus (Globalist) May 1, 2013
China's economy has grown rapidly under the investment and direction of the state, which put workers and resources to productive use compared to pre-industrial China. But sooner or later, the state is going to hit a wall and growth will slow to a more typical pace — or the state will have to make major reforms and get out of the way.
State-owned enterprises in the global economy: Reason for concern?
Max Büge, Matias Egeland, Przemyslaw Kowalski & Monika Sztajerowska (VoxEU) May 2, 2013
State-owned enterprises have become global players and the subject of much policymaking concern. There is a widespread perception that they may be acting differently when competing with private firms in the global market place. This column introduces a new database on state-owned firms that shows that more than one in ten of the world’s largest firms are state-owned. These new data should help governments formulate informed and balanced policy responses.
Why do emerging markets liberalise capital-outflow controls? Fiscal versus net capital flow concerns
Joshua Aizenman & Gurnain Kaur Pasricha (VoxEU) May 2, 2013
Recent years have seen a return to the capital controls policy debate. Presenting new data, this column argues that liberalisation of capital-outflow controls can allow emerging-market economies to reduce net capital inflow pressures, but may cost emerging economies the fiscal revenues that external financial repression generates.
WTO: Ag Talks Chair Seeks to Reconcile Conflicting Visions for Bali
Bridges Weekly Trade News Digest, Volume 17, Number 15 May 2, 2013
Governments should explore "alternative approaches" to a developing country proposal for more flexible WTO rules on subsidised food stockholding, the chair of the organisation's farm talks said this week.
The New Economy of Fealty
Harold James (Project Syndicate) May 2, 2013
Since the late twentieth century, most employment growth has come in services, particularly personal services – a pattern that looks like a reversal of a previous historical trend. Indeed, the element of personal dependence that many of the new service jobs imply is a throwback to the preindustrial world.
ECB Sugar Hit Doesn’t Change Euro’s Long-Term Challenges
Bloomberg View May 2, 2013
The European Central Bank has given the euro a boost with its moves to lower interest rates and get credit flowing throughout the monetary union. We hope Europe’s leaders won’t let the sugar high distort their view of the monumental changes still required to ensure the currency’s longer-term survival.
Europe has no exit
Robert J. Samuelson (WP) May 2, 2013
The continent cannot escape a reckoning.
Threats to Asia’s fragile power balance
Philip Stephens (FT) May 2, 2013
The world’s most vibrant region is also potentially its most combustible, and then there is North Korea.
Beware the spell of magic numbers
Samuel Brittan (FT) May 2, 2013
Economic policy and analysis would benefit from a less credulous acceptance of each purported research finding.
Bernanke Should Follow His Own Advice to Japan
Benn Steil and Dinah Walker (WSJ) May 2, 2013
The Fed can protect its balance sheet from losses by swapping mortgage-backed securities for Treasurys.
Rescuing the European Model
Joergen Oerstroem Moeller (YaleGlobal) May 2, 2013
Despite the debt crisis, Europe has chosen to modify, not end, social welfare.
Part II: Is Asia's Miracle Over?
George Magnus (Globalist) May 2, 2013
If China's growth permanently slows down in the coming years, Chinese foreign investments and trade will likely decline somewhat as well. What will happen to the other developing Asian economies as China pulls back on trade and direct investments in the region? What political and economic reforms must be made to cushion the transition?
Part III: Hitting a BRIC Wall
George Magnus (Globalist) May 3, 2013
Emerging economies will stall on a development plateau until they switch to more advanced economic models. If a nation does not shift from basic mobilization models, it remains stuck in the wrong gear for a new terrain. How can a stalled emerging economy break out?
The Japanese Experiment
Mohamed A. El-Erian (Project Syndicate) May 3, 2013
Weeks into Japan's paradigm shift in economic policy, optimism that the country may end a quarter-century of economic stagnation is balanced by fears that the authorities' new approach may make things worse. And, while debate naturally focuses on Japan's internal maneuvers, the tipping point may lie abroad.
Measuring the 'reach for yield'
Bo Becker & Victoria Ivashina (VoxEU) May 3, 2013
Fixed-income investors that have targets based on imperfect risk measures are tempted to take on additional risk to raise their portfolio yields. This column argues that when yields are low such ‘reaching for yield’ may be especially attractive. New research that quantifies reaching-for-yield for corporate-bond investors shows that insurance companies, which are regulated based on broad ratings categories, assume additional risk by selectively overweighting risker bonds within categories. There is evidence that this distorts pricing and issuance.
Fiscal consolidation: At what speed?
Olivier Blanchard & Daniel Leigh (VoxEU) May 3, 2013
The debate about fiscal consolidation reduces too often to shouting matches about the value of fiscal multipliers, or about the existence of a critical debt-to-GDP ratio. This does not do justice to what is a complex choice, depending on many factors. Our purpose in this article is to review the relevant factors at play and allow for a richer discussion.
India's retail FDI bid fails to sell
Kunal Kumar Kundu (AT) May 3, 2013
The Indian government late last year ended a long and agonizing debate and allowed foreign companies such as Walmart and Carrefour access to the country's huge retail sector, yet the lure of a large and growing middle class has signally failed to attract a single big-ticket investor.
Civilizing the City
Rajeev Chandrasekhar (Project Syndicate) May 4, 2013
Half of humanity – 3.5 billion people – live in urban areas today, and the movement of the rural poor to large cities is one of the exemplary narratives of the modern era. But cities in India and other major emerging countries are simply unable to cope with the influx of migrants on the current scale.
Congressional influence as a determinant of subprime lending
Stuart A Gabriel, Matthew E. Kahn & Ryan K Vaughn (VoxEU) May 5, 2013
A relatively unforeseen implosion in housing markets figured prominently in the 2007 meltdown in capital markets and the subsequent downturn in the global economy. This column presents new research on the political geography of subprime lending. Congressional leaders – as well as other recipients of campaign contributions – may have benefited from gains to trade in the direction, pricing, and sizing of subprime mortgage loans.
Europe’s Tax on Financial Trades Is a Risky Bet
Mark Buchanan (Bloomberg) May 5, 2013
Millions of Europeans are about to become the subjects of a vast social experiment. What’s troubling is how little anyone understands about where it might lead.
The Oil and Gold Booms Are Over
Ruchir Sharma (Bloomberg) May 5, 2013
The wreckage caused by China’s great, juddering slowdown continues to spread far beyond the country’s shores. Although most commodities enjoyed a bounce on May 3, after better-than-expected U.S. employment data, the plunge in their prices over the past few months suggests the past decade’s rally is truly broken.
A sermon from an urban missionary
Ed Hammond (FT) May 5, 2013
An advocate for cities urges us to embrace the century’s defining trend.
A better debt debate
Lawrence Summers (WP) May 5, 2013
Lessons from Reinhart-Rogoff’s errors.
China Needs Justice, Not Equality
Martin King Whyte (FA) May 5, 2013
China's new leaders have interpreted recent unrest as being fueled by anger about inequality. But most Chinese find the gap between rich and poor relatively unproblematic. If the Xi administration hopes to settle the country, it needs to starts focusing on the real reasons citizens are taking to the streets: injustice and corruption.
Finance and growth in China and India: Have firms benefited from the capital-market expansion?
Tatiana Didier & Sergio Schmukler (VoxEU) May 6, 2013
The growth of China and India’s financial sectors is hard to ignore. This column presents a new dataset on domestic and international capital raising activity and performance of the publicly listed firms in China and India. The data suggest that expanding capital markets might tend to directly benefit the largest firms – those able to reach some minimum threshold size for issuance. More widespread direct and indirect effects are more difficult to elucidate.
The Problem with Poor Countries’ GDP
Bill Gates (Project Syndicate) May 6, 2013
Traditionally, one of the guiding factors for development aid has been per capita GDP – the value of goods and services produced by a country in a year divided by the country’s population. Yet GDP may be a very inaccurate indicator in the poorest countries, particularly in Sub-Saharan Africa.
Crises Before and After the Creation of the Fed
Early Elias and Òscar Jordà (FRBSF) May 6, 2013
The Federal Reserve was created 100 years ago in response to the harsh recession associated with the Panic of 1907. Comparing that recession with the Great Recession of 2007–09 suggests the Fed can mitigate downturns to some extent. A statistical analysis suggests that if a central bank had lowered interest rates during the 1907 panic the same way the Fed did during the 2008 financial crisis, gross domestic product would have contracted two percentage points less than it actually did.
Soros versus Sinn: The German Question
George Soros & Hans-Werner Sinn (Project Syndicate) May 6, 2013
The ongoing euro crisis has been a source of increasingly heated debate worldwide. Now, George Soros and Hans-Werner Sinn, two regular Project Syndicate contributors and leading figures in the discussion, debate the cause of Europe’s crisis and how to overcome it.
Reinhart-Rogoff’s Lesson for Economists
Betsey Stevenson & Justin Wolfers (Bloomberg) May 5, 2013
What lesson can economists draw from the ruckus over a flaw found in an influential study by two Harvard University scholars? Our suggestion: Do a better job of checking one another’s work.
Hard grind begins for Asia’s baby tiger
Kurt Campbell (FT) May 6, 2013
Myanmar is moving into the taxing phase of implementing reform, and ministers and citizens are asking when western investment will begin to flow.
Banish threat of Europe’s zombie banks
Harald Benink and Harry Huizinga (FT) May 6, 2013
A sector kept alive by implicit state guarantees of all its liabilities needs new and thorough stress tests.
South Africa: New power generation
Pilita Clark and Andrew England (FT) May 6, 2013
Investment in renewables is surging in one of the world’s most coal-dependent countries. But will wind and solar be enough to meet its needs?
The political economy of structural reform in the BRIC
Markus Jaeger (DB Research) May 7, 2013
The BRIC economies, like most other economies in the world, experienced a slowdown in 2011-12. The bears are worrying that this slowdown might contain a significant structural component. These concerns seem somewhat overdone.
Policy preferences of central bankers and the design of a monetary-policy committee
Sylvester Eijffinger, Ronald Mahieu & Louis Raes (VoxEU) May 7, 2013
Debate about who should be on central-bank committees has resurfaced in recent years. Is it better to appoint experienced central bankers, financiers, NGO workers or civil servants? This column argues that variations in voting patterns change with career background. Evidence suggests that if central banks want a wide range of policy preferences, then getting more academics on committees might be a reasonable strategy for better policy
Rapid current-account rebalancing in the southern Eurozone
Raphael Auer (VoxEU) May 7, 2013
Recent data show that the current-account deficits of Greece, Italy, Spain, and Portugal have improved at a rapid pace and are actually close to being balanced. This column reviews recent research that shows this adjustment has been remarkably fast. Compared to mid-2008, these four nations have switched expenditures at a rate that is much higher than the typical rate observed during large rebalancing episodes. A key requirement for a return to a post-crisis Eurozone is thus on its way to being met.
No Bailout for Slovenia
Martin Hüfner (Globalist) May 7, 2013
Is the prospect of a bailout for Slovenia the time for the eurozone to learn to say "no"?
Indian economy: An unfinished project
James Crabtree and Victor Mallet (FT) May 7, 2013
Faced with a slowdown a year before an election, New Delhi has introduced reforms to revitalise business. But many disillusioned investors are not convinced.
The German model is not for export
Martin Wolf (FT) May 7, 2013
Forcing the eurozone to mimic Germany’s path to adjustment makes prolonged stagnation, particularly in crisis-hit countries, highly likely.
Support for higher bank capital ratios
John Plender (FT) May 7, 2013
Banks’ argument that equity capital is expensive and increasing it would force them to pass up attractive lending opportunities has been systematically demolished.
Doing In Business at the World Bank
WSJ May 7, 2013
An annual survey on free enterprise is under attack.
WTO Members Choose Brazil's Azevêdo as Next Director-General
Bridges Weekly Trade News Digest, Volume 17, Number 16 May 8, 2013
Roberto Carvalho de Azevêdo has won the position of WTO Director-General, officials announced earlier today, beating out Mexico's Herminio Blanco for the high-profile role. Azevêdo will be the organisation's first chief from Latin America and only the second in its short history from a developing country.
Europe’s Irrelevant Austerity Debate
Daniel Gros (Project Syndicate) May 8, 2013
The debate about austerity and the cost of high public-debt levels misses a key point: public debt owed to foreigners is different from debt owed to residents. And that distinction is particularly important in the context of the euro crisis, which the evidence confirms is not really about sovereign debt, but about foreign debt.
Is France a 'Peripheral' Country?
Jacob Funk Kirkegaard (PIIE) May 8, 2013
A few weeks ago Reuters reported that the French finance Minister, Pierre Moscovici, fell asleep during the final late night negotiations over the Cypriot bank bailout on March 24. It apparently fell to the International Monetary Fund (IMF) managing director, Christine Lagarde--a former French finance minister herself--to wake him up. No doubt the grueling round-the-clock schedule of the Cyprus negotiations would have taxed the most vigorous participant, but that should not stop speculation about the meaning of what happened.
Democracy is not to blame for populism
Philip Stephens (FT) May 9, 2013
The anger does reflect a failure of governments. Presidents and prime ministers are discovering that the old levers of power no longer work
Americans ahead in paying down debt
Gillian Tett (FT) May 9, 2013
Historically, Europeans always had a lower debt ratio than Americans, but those two lines have now crossed.
The cat in the tree and further observations: Rethinking macroeconomic policy
George A. Akerlof (VoxEU) May 9, 2013
Economists did very badly in predicting the crisis. But in this column, Nobelist George Akerlof argues that the economic policies post-crisis have been close to what a sensible ‘economist-doctor’ would have ordered. The lesson for the future is that good economics and common sense have worked well. We have had trial and success. We must keep this in mind with policy going forward.
Rethinking macroeconomic policy
Olivier Blanchard (VoxEU) May 9, 2013
Macroeconomics was challenged by the Global Crisis. In this column, one of the world’s leading macroeconomists provides his take on the highlights of the IMF’s recent conference. He concludes by noting that the conference set a clear research agenda for the future.
Preventing the next catastrophe: Where do we stand?
David Romer (VoxEU) May 9, 2013
Pre-2008 macroeconomic thinking largely ignored the financial sector as a source of shocks. This column argues that such shocks are not rare, so we need a fundamental rethink of the financial system and macroeconomic policy frameworks. We must think about strong measures that would minimise the chances of anything similar happening again. The reforms considered to date are too small and too meek.
The lessons of the North Atlantic crisis for economic theory and policy
Joseph Stiglitz (VoxEU) May 9, 2013
The world has seen a hundred financial crises in the past three decades. In this column, Nobelist Joe Stiglitz argues that we could have done much more to prevent this crisis and to mitigate its effects. Looking ahead, we can do much more to prevent the next one. This is a chance to revolutionise flawed economic models, and perhaps exit from an interminable cycle of crises.
Debt Without Drowning
Paul De Grauwe (Project Syndicate) May 9, 2013
Given that dismantling the eurozone would trigger profound economic, social, and political upheaval throughout Europe, its leaders really have only one option: develop strategies aimed at bringing the eurozone closer to a fiscal union. They should begin with a debt-pooling scheme that satisfies three crucial requirements.
Vietnam’s Star Is Dimming
William Pesek (Bloomberg) May 9, 2013
Like other would-be tiger economies, Vietnam faces a trifecta of new threats: a crisis-paralyzed Europe, a faltering America, and a newly spendthrift Japan. Yet the biggest risk to the nation’s future may be old-fashioned nostalgia.
Stop the Plunder of Africa
Kofi Annan (NYT) May 9, 2013
Africa has the wealth to combat poverty, but it needs help holding on to it.
Blame markets for austerity
Roger Altman (FT) May 9, 2013
It was not Germany that pushed austerity on to eurozone states – it was private lenders who declined to finance their further borrowing.
Brazil diplomacy wins – now the hard part
John Paul Rathbone (FT) May 9, 2013
If Roberto Azevêdo, the next WTO chief, cannot get the Doha trade round going again, his job may shrink to delegating disputes to technical panels
Asia-Pacific Nations Push to Rein In Rising Currencies
Bettina Wassener (NYT) May 9, 2013
Policy makers across the region have deployed a range of tools to try to dampen the adverse effects that can come when too much money flows into an economy.
Cyprus’s Depositor Haircut
James Meek (LRB) May 9, 2013
Before I went to Cyprus it seemed to me that ordinary people hadn’t done too badly in the rescue of the Cypriot financial system. Ordinary people with up to 100,000 euros in the two biggest banks got to keep their money; surely only the rich would suffer when the government confiscated the rest? But once in Cyprus I saw that I hadn’t, in fact, been thinking about ordinary people. I’d been thinking about a mythological individual, the hero of modern democracy, Ordinary Person. More
How the Banks Do It
Donald MacKenzie (LRB) May 9, 2013
Three years ago, the Bank of England set out to calculate a figure that does more than any other to shatter banking’s preferred image of itself: the size of the subsidy that taxpayers give to British banking just by virtue of being available to bail out banks if things go badly wrong. The Bank put the figure for 2009 at £107 billion. It didn’t attract much attention, but it should have. It’s more than the government spent that year on social security or education, and almost as much as it spent on health.
Banking crises and political survival over the long run
Jeffrey Chwieroth & Andrew Walter (VoxEU) May 10, 2013
The economic consequences of financial crises have been systematically explored. Their political consequences haven’t. This column argues that without paying attention to politics, crises will remain poorly understood. After all, politics shapes policy choices, market sentiment and, ultimately, economic outcomes. Evidence from the effects of banking crises over the past century show that crises have a dramatic impact on the survival prospects of governments.
Balancing the Technocrats
Kemal Dervis (Project Syndicate) May 10, 2013
Electoral cycles are such that monetary policy, banking, and many other areas must be regulated by those with professional competence and a much longer time horizon than that of politicians. But, if technocrats are allowed to determine long-term policy and set objectives, democracy itself is in serious jeopardy.
What Use Are Economists?
Dani Rodrik (Project Syndicate) May 10, 2013
Despite their protests to the contrary, Carmen Reinhart and Kenneth Rogoff have been accused of providing scholarly cover for a set of policies for which there was, in fact, limited supporting evidence. One clear lesson is that we need better rules of engagement between economic researchers and policymakers.
The Mismeasure of Poverty
Jomo Kwame Sundaram (Project Syndicate) May 10, 2013
In 2012, outgoing World Bank President Robert Zoellick announced that the goal of halving global poverty relative to its 1990 level had been achieved in 2010 – five years ahead of schedule. But three problems – insufficient survey data, flawed survey execution, and faulty price conversions – undermine the accuracy of such estimates.
A pro-growth economic plan
Richard Wood (VoxEU) May 11, 2013
The world economy seems to be acting in unexpected ways. This column argues that austerity and quantitative easing do not seem to be working out as advertised. There is an urgent need to review the effectiveness of alternative macroeconomic policy approaches, and prepare an internationally agreed pro-growth plan to reflate distressed economies. The outlines of one such plan are presented.
Recovering stolen assets: Making a hash of finding the cash
Economist May 11, 2013
Why have Arab countries recovered so little of the money thought to have been nabbed by their former regimes?
China's Evolving 'Core Interests'
NYT May 11, 2013
China and Japan are critical to regional stability, but impolitic words can make it harder to resolve their disputes.
European bank deleveraging and global credit conditions
Erik Feyen & Ines Gonzalez del Mazo (VoxEU) May 12, 2013
Before the global financial crisis, European banks had rapidly expanded their foreign-lending activities. However, this column argues that financial stress in Europe has put this process into reverse and negatively affected credit conditions in developed and emerging markets alike. As European banks repair their balance sheets and rethink their business models in a context of stricter regulatory requirements, financial fragmentation, and a deteriorating European economy, they continue to retrench to home markets.
Why America and Europe can’t agree
Philip Stephens (FT) May 12, 2013
The gulf between the two sides is not just a matter of economic analysis. It reflects a difference of culture.
Banking union needs firm foundations
Wolfgang Schäuble (FT) May 12, 2013
Carrying out a needed clean-up swiftly and without burdening taxpayers will take more than cross-border supervision.
How Africa can extract fair value
Paul Collier (FT) May 12, 2013
The west has a duty to ensure the region benefits from its resource wealth and surging demand for commodities.
A British-American Tax and Trade Agenda
David Cameron (WSJ) May 12, 2013
The Europe-U.S. trade talks are a precious opportunity, but they must include fairer taxes and more transparency.
The Decline of the WTO
WSJ May 12, 2013
The trade body picks a Brazilian who helped to scuttle the Doha talks.
Financial reform’s yields
Robert J. Samuelson (WP) May 12, 2013
The next crisis could be harder to fix.
How Ben Bernanke Saved Europe's Banks
Neil Irwin (Globalist) May 12, 2013
The story of an unprecedented effort by the U.S. central bank to serve as the lender of last resort to the world.
Somalia: Oil thrown on the fire
Katrina Manson (FT) May 13, 2013
Energy companies scrambling for reserves risk opening up dangerous faultlines in the war-shattered nation.
American investors should think local
Richard Bernstein (FT) May 13, 2013
Data increasingly refute the popular belief that they offer the best growth – earnings predictions are too optimistic.
EM turns sour for global banks
Patrick Jenkins (FT) May 13, 2013
StanChart is not alone. Other global banks with big operations in Asia and Latin America have also suffered a disappointing first quarter.
Green Sovereign Wealth
Emmanuel Guerin (Project Syndicate) May 13, 2013
Despite the need for increased transparency in sovereign-wealth funds' operations, their value as long-term investors should not be underestimated. By shifting investment toward low-carbon, environmentally friendly infrastructure projects, SWFs could achieve their primary objective: the transfer of wealth to future generations.
Effects of the Euro Crisis on Reserve Currency Holdings
Allie E. Bagnall (PIIE) May 13, 2013
The International Monetary Fund (IMF) released the latest update of its data on the Currency Composition of Official Foreign Exchange Reserves (COFER) at the end of March, with data through the end of 2012. From the end of 2010 through the end of 2012, the quantity share (adjusted for the effects of changes in exchange [...]
Three Reasons Why 100 Yen Is Bad News for World
William Pesek (Bloomberg) May 13, 2013
The smile on Kazuo Hirai’s face shows why the yen’s drop below 100-to-the-dollar is as much a curse for Japan as a blessing.
Can FTAs support ‘Factory Asia’?
Jayant Menon (VoxEU) May 14, 2013
Are free trade agreements good for ‘Factory Asia’? This column argues that rather than supporting ‘Factory Asia’, it is more likely that fragmentation trade has prospered despite the noodle bowl of overlapping FTAs in the region. Inter-regional FTAs, on the other hand, may have been able to indirectly support the growth of production networks among existing members, if they led to increased demand for the final goods that the networks produce.
East-West divide starts here
Francesco Sisci (AT) May 14, 2013
Capitalism, as a new theory that stressed the importance of individual knowledge and contribution while undercutting the role of the state, represented something that bureaucracy-obsessed, ultra-efficient imperial China found impossible to impose. Adam Smith's free thought - not free trade - pushed the West ahead. China only caught up due to the industriousness of individuals and Beijing giving them free rein.
Into a protectionist world
Martin Hutchinson (AT) May 14, 2013
The choice of Brazil's Roberto Azevedo to lead the World Trade Organization over the reported opposition of both the European Union and the United States is an indication that protectionism is now a major global danger. The long-term outlook for the world economy has just grown much darker.
China growth to halve
Michael Pettis (AT) May 14, 2013
China's economic growth, down to 7.7% in the first quarter, will decline to an average in the long term of around 3-4% annually, as rebalancing of the economy sees household consumption rise to around 50% of GDP, forecasts noted China-based economist Michael Pettis. The key is whether it is possible to maintain current levels of consumption growth once investment growth is sharply reduced.
How 3-D Printing Could Disrupt the Economy of the Future
Bloomberg View May 14, 2013
In its next generation of jet engines, General Electric Co. plans to use a new, and possibly revolutionary, technology.
Save Europe: Split the Euro
Brigitte Granville, Hans-Olaf Henkel and Stefan Kawalec (Bloomberg) May 14, 2013
On the eve of the American Civil War, Abraham Lincoln famously said that “a house divided cannot stand.” Today, the European Union -- committed for decades to the quest for “ever closer union” -- must confront an agonizing truth. Lincoln’s maxim must be inverted. For the EU to survive, the euro must divide.
China: High and dry
Leslie Hook (FT) May 14, 2013
Water shortages are putting a brake on economic growth and are stirring political discontent, but high-spending responses are triggering criticism.
Iceland’s election is a signal to Europe
Steingrímur Sigfússon (FT) May 14, 2013
Taking tough measures to save the economy does not always win votes. So can any politician meet voters’ expectations?
Why business loves capital markets
John Kay (FT) May 14, 2013
The business-finance paradox is that companies never had so little need for capital nor so much engagement with capital markets.
Vietnam must ditch its crony capitalism
David Pilling (FT) May 15, 2013
For a country in its demographic sweetspot, with a highly motivated and entrepreneurial population, the economy is not growing fast enough.
Central banks will keep equities afloat
Michael Heise (FT) May 15, 2013
Continued monetary easing means there are no reasons why stock markets should see a steep slide, and current valuations on most look attractive.
India: Patents and precedents
Amy Kazmin (FT) May 15, 2013
Pharmaceutical companies fear that the battle raging in India over generic medicines will inspire emerging economies to change their patent laws.
The Resistible Fall of Europe: An Interview with George Soros
George Soros (Project Syndicate) May 15, 2013
The politics of the eurozone countries is European politics, and European politics is not serving these countries well. In an extended interview, George Soros explains why – and what should be done about it.
Why reforms fail: Political-economy forces and agriculture in Africa
M. Ataman Aksoy & Bernard Hoekman (VoxEU) May 15, 2013
Increasing agricultural productivity and expanding the agribusiness industry in sub-Saharan Africa is critical for poverty reduction, food security and economic growth. Numerous recent national, regional and G20-level programmes have been initiated to that effect. This column discusses new research showing that political economy forces have a major bearing on the success or failure of agricultural reform programmes. To be successful, policymakers must bear in mind the extent to which existing elites are affected by the redistribution associated with increasing returns for rural producers.
Europe's Economies and Markets Have Divorced
Megan Greene (Bloomberg) May 15, 2013
The disconnect between Europe's real economy and markets.
France Must Lead Breakup of Euro
Brigitte Granville, Hans-Olaf Henkel and Stefan Kawalec (Bloomberg) May 15, 2013
France played a decisive role in shaping not only the euro system but the entire European project. This history has predisposed French leaders to the goal of preserving the euro at all costs. Those costs, as we explained in Part 1 of this article, have become quite insupportable. A new strategy is needed, and France’s role in shaping it will once again be pivotal.
How to Let Too-Big-To-Fail Banks Fail
Kenneth Scott and John Taylor (WSJ) May 15, 2013
Dodd-Frank does not end the threat of taxpayer bailouts. A reform to the bankruptcy code will do the trick.
Europe's Sinking Feeling
WSJ May 15, 2013
The recession drags on as countries fail to pass pro-growth reforms.
Myanmar: An uneasy alliance
Gwen Robinson and Lionel Barber (FT) May 15, 2013
Aung San Suu Kyi and the ex-generals must overcome their fractious past to help the country push ahead with social and economic reforms.
Phoney QE peace masks markets’ fragility
Gillian Tett (FT) May 16, 2013
Quantitative easing helps the system absorb small shocks, as easy credit did pre-2007, but masks contradictions that may provoke crisis in a big shock.
The Economics of a $6.75 Shirt
Rubana Huq (WSJ) May 16, 2013
In Bangladesh's factories, a delicate financial balance may be wrecked by hasty 'solutions' to their troubles.
Looking for Capitalism's Tipping Point
Chrystia Freeland (NYT) May 16, 2013
One of the most urgent questions in economics today is the connection between inequality and growth. That is because one of the big economic facts of our time is the surge in income disparity.
UK Prime Minister Calls for “No Exceptions” in EU-US Trade Talks
Bridges Weekly Trade News Digest, Volume 17, Number 17 May 16, 2013
All items should be on the negotiating table when the EU and US kick off their highly-anticipated trade talks this summer, UK Prime Minister David Cameron said this week following a meeting with US President Barack Obama, in comments that highlighted the growing debate within the EU bloc over how certain trade topics should be treated in the upcoming discussions with Washington. The negotiations, Cameron urged, should be ready to begin ahead of the Group of 8 Summit this June.
The Importance of Doing Business
Ana Palacio (Project Syndicate) May 16, 2013
There is much speculation that an independent panel currently reviewing the World Bank’s Doing Business project will recommend outsourcing it, removing its country rankings, or even eliminating it altogether. But gutting or cutting the annual report would be a serious mistake.
Learning to Love Inflation (Thanks To Quantitative Easing)
Richard Phillips (Globalist) May 16, 2013
Why should real capitalists and long-term investors love the Federal Reserve's policy of quantitative easing?
Barry Eichengreen (Project Syndicate) May 17, 2013
The brouhaha over Carmen Reinhart’s and Kenneth Rogoff’s article “Growth in a Time of Debt” has raised troubling questions not only about the efficacy of austerity, but also about the reliability of economic analysis. If a flawed study could appear in a prestigious working-paper series, why should anyone trust economic research?
Stress Points: What High Frequency Data Tell us About Hidden Tail Risks
Vineer Bhansali & Qingxi Wang (PIMCO) May 17, 2013
Whereas rare events that occur over lower frequency, longer horizons are much harder to find (and hence much harder to derive statistics from), intraday events create a larger, more accessible data set that can be used to supplement data on tail events. Analyzing the reactions of different markets to intraday tail events can provide valuable information for investors looking for effective tail risk hedges for their portfolios. Markets that show high and positive correlation to equities are also likely the ones that are held by levered investors, who are quick to abandon these markets in adverse shocks.
Helping India's Poorest Farmers, One Acre at a Time
Chandrahas Choudhury (Bloomberg) May 17, 2013
Development comes to India's subsistence farmers.
Unleashing growth: The decline of innovation-blocking institutions
Klaus Desmet & Stephen L. Parente (VoxEU) May 18, 2013
Innovation is the beating heart of modern growth. This column argues that innovation-blocking institutions weaken when markets expand and competition intensifies. The rise and decline of medieval Italian crafts guilds offer valuable insights into this process. Policies that promote greater market integration and stronger competition are key steps in lowering the barriers to innovation.
Learning About Growth from Austerity
Michael Spence (Project Syndicate( May 18, 2013
All countries face complex choices with respect to the timing of austerity, perceived sovereign credit risk, and growth-oriented reforms. Today, advanced countries' previous emphasis on austerity may be giving way to a more balanced approach to boosting economic growth and employment.
Harnessing the Remittance Boom
Kanayo F. Nwanze (Project Syndicate) May 17, 2013
In Asia’s developing countries, the importance of remittances – the money that migrant workers send home to their families (many of whom live in poor and remote areas) – is immense. But, while remittances to these countries are five times higher than official aid, their potential economic-development benefits have not been realized.
Free exchange: The humble hero
Economist May 18, 2013
Containers have been more important for globalisation than freer trade.
Greece Isn’t Turning the Corner
Megan Greene (Bloomberg) May 19, 2013
Judging from the markets and English- speaking news media this week, Greece’s damaged economy has finally turned the corner. I doubt it.
Why China’s Riches Won’t Bring It Freedom
Pankaj Mishra (Bloomberg) May 19, 2013
Modern history is the story of how liberal democracy, originating in the U.K. and America, spread around the world. This may sound like an absurd fantasy. In actuality, this Whiggish narrative of progress underpins most newspaper editorials, political commentary and speeches in the West, and frames larger views of political developments in the non-West.
For the Euro, Against the EU
Alexander Kazam (WSJ) May 19, 2013
A poll released Monday from the Pew Research Center finds that Europeans increasingly embrace the euro while rejecting the European integration that the euro was supposed to facilitate.
It makes little sense but I’m a eurofanatic
Wolfgang Münchau (FT) May 19, 2013
If you want to make a rational case for the EU, it is better to make it on the basis of geopolitics rather than economic efficiency.
China’s national problems start locally
George Magnus (FT) May 19, 2013
Local governments and state enterprises have become the agents of both the downswing in growth and increased concerns about financial risk.
A robust defence of India’s growth story
James Crabtree (FT) May 19, 2013
This combative but welcome contribution helps to address the need for a much deeper debate about the future direction of the country’s economy.
The Changing Nature of Power in Asia
Martin Jacques (Globalist) May 19, 2013
The highly distinctive characteristics of East Asian societies have shaped politics. But is modernization forcing them to change?
Reinvigorating Egypt’s Economy
Mohamed A. El-Erian (Project Syndicate) May 20, 2013
While blaming the revolution is not a persuasive explanation for Egypt’s current economic woes, its appeal to many Egyptians is understandable. Over the last few months, their economic situation has gone from bad to worse.
America by Proxy?
Dominique Moisi (Project Syndicate) May 20, 2013
The demise of the Roman Empire resulted from a combination of strategic overreach and excessive delegation of security responsibilities to newcomers. The question for the US today is whether it can remain the world’s leading power while delegating to others or to technological tools the task of protecting its global influence.
The Flawed Origins of Expansionary Austerity
Jeffrey Frankel (Project Syndicate) May 20, 2013
As the case for austerity in a time of recession has weakened under the continuing onslaught of facts (most notably the recessions in Europe), advocates of fiscal stimulus have found the missteps of their opponents Carmen Reinhart, Ken Rogoff, and Niall Ferguson to be convenient weapons. But they are the wrong weapons.
Japan’s New Optimism Has Name: Abenomics
Martin Fackler (NYT) May 20, 2013
Prime Minister Shinzo Abe’s economic shock therapy, which combines a flood of cheap cash, fiscal stimulus and deregulation, is getting early results.
Robin Hood tax: A long shot
Ralph Atkins and Alex Barker (FT) May 20, 2013
European plans for a financial transaction levy are facing such fierce opposition that they are unlikely to survive without being watered down.
Markets are at risk of a ‘big data’ crash
Maureen O’Hara and David Easley (FT) May 20, 2013
The use of huge sets of computerised information is transforming financial trading and it now needs to change the regulation of this sector.
Cheap money is still scarce in the Brics
Ruchir Sharma (FT) May 20, 2013
Far from fighting off foreign capital, leaders from India to South Africa are struggling to attract a greater share of global capital flows.
Listen to what gold is really telling us
Mohamed El-Erian (FT) May 20, 2013
Gold is like Apple or Facebook – a powerful brand whose valuation has become completely divorced from its intrinsic attributes.
Iceland’s post-Crisis economy: A myth or a miracle?
Jon Danielsson (VoxEU) May 21, 2013
Icelandic voters recently ejected its post-Crisis government – a government that successfully avoided economic collapse when the odds were stacked against it. The new government comprises the same parties that were originally responsible for the Crisis. What’s going on? This column argues that this switch is, in fact, logical given the outgoing government’s mishandling of the economy and their deference towards foreign creditors.
Africa’s French Roadblock
Sanou Mbaye (Project Syndicate) May 21, 2013
While some African countries now rank among the world's fastest-growing economies, others – including the 14 countries that form the franc zone – remain mired in poverty. To break out of it, franc-zone leaders must pursue complete emancipation from France, abandon the CFA franc, and build relations with China.
China’s Interest-Rate Challenge
Pingfan Hong (Project Syndicate) May 21, 2013
China’s successful transformation from a middle-income country to a modern, high-income country will depend largely on the reforms that the government undertakes over the next decade. But, because the most pressing reform – interest-rate liberalization – carries both risks and rewards, officials should be prudent in their approach.
Central bankers turn deaf ear to warnings
John Plender (FT) May 21, 2013
Despite poor progress on reducing big deficits and debt, the yields on US and UK government bonds fell and their currencies appreciated. But price moves in markets now show a different story.
China’s banks face no-win situation
Henny Sender (FT) May 21, 2013
Given the continued downgrading of Chinese prospects, there may well be worse to come
A Keynesian Victory, but Austerity Stands Firm
Eduardo Porter (NYT) May 21, 2013
Fiscal stimulus appears to have won the intellectual argument among economists, but governments and voters still favor austerity.
Underperforming Even in Good Times
Arvind Subramanian (PIIE/Business Standard) May 21, 2013
The late Professor Raj Krishna's term "Hindu growth rate" was an aptly pejorative description of India's economic performance. But he was referring to the pre-take-off period, the first three decades after Independence.
The Debt-Growth Controversy
Michael Boskin (Project Syndicate) May 22, 2013
The recent controversy over errors in a 2010 paper by the economists Carmen Reinhart and Ken Rogoff is a sad commentary on the politically toxic atmosphere surrounding fiscal policy in the US, Europe, and Japan. The Reinhart/Rogoff paper is just a small part of a large literature that shows high debt levels to be economically risky.
The Night-Watchman State’s Last Shift
Andrew Sheng and Xiao Geng (Project Syndicate) May 22, 2013
Too often, debate about the relationship between the state and the market casts them as opposing forces locked in a zero-sum struggle. But this simplistic approach quickly renders constructive discussion a casualty of the ideological battle between advocates of state and market capitalism.
How Nations Tried to Keep Striving Migrants In
Edward Tenner (Bloomberg) May 22, 2013
Most developed nations try to limit the inflow of people from less developed ones. Yet, until the early 1800s, migration policy worked in the opposite direction, and was aimed at preventing skilled people in relatively advanced economies from seeking opportunity elsewhere.
Asian debt: Beware of bubbles
Paul J Davies (FT) May 22, 2013
Southeast Asia’s booming bond market has sparked fears of a bubble but the region is in more robust shape to withstand shocks than in the late 1990s.
Hard to build an ‘anyone but China’ club
David Pilling (FT) May 22, 2013
No one will say it, but the unstated aim of the TPP is to create a ‘high level’ trade agreement excluding the world’s second-largest economy.
Fed QE exit must avoid collateral damage
Manmohan Singh (FT) May 22, 2013
Scarcity has disrupted repo market, harming the ability to set rates for non-bank institutions, and so Federal Reserve should steer collateral to them.
The Fed Squeezes the Shadow-Banking System
Andy Kessler (WSJ) May 22, 2013
The central bank's purchases of Treasurys are leading to collateral shortages in the vital, $4-trillion repo market.
The banking crisis as a giant carry trade gone wrong
Viral Acharya & Sascha Steffen (VoxEU) May 23, 2013
A pernicious aspect of the Eurozone crisis is the ‘doom loop’ linking European banks and governments. This column argues that poor European policy choices in the wake of the 2008 Global Crisis worsened the problem. Rather than being forcefully recapitalised as in the US and UK, many Eurozone banks were left undercapitalised and free to gamble for redemption. In what may be the greatest carry trade ever, they borrowed cheap, first in short-term debt markets and then from the ECB, to invest in high-yield but risky sovereign debt. Substantial bank recapitalisations against sovereign-bond losses is the way forward.
What Happened to Haiti
Pooja Bhatia (LRB) May 23, 2013
Of the $2.43 billion in aid disbursed to Haiti in 2010, 6 per cent couldn’t be accounted for. One per cent, $24 million, went to the Haitian government. The rest went to agencies and organisations based in donor countries and to the United Nations. Nearly half a billion went to the US Department of Defense, which spent a million dollars a day maintaining a nuclear supercarrier in the bay of Port-au-Prince; $3.6 million of it was spent on repairs to navy helicopters and the rest on many assorted, bizarre sundries: $194,000 for audiovisual equipment from a store in Manhattan, $18,000 on a jungle gym that cost less than $6000 online and thousands on kitchen implements.
A Deadlier Disaster for the Third World: Unemployment
George Reisman (Mises Daily) May 23, 2013
The recent collapse of a garment factory building in Bangladesh, resulting in the death, at latest count, of more than 1,100 workers who were employed there, has led to international outrage not only against the building’s owner but also against the various retailers in the United States and Europe, many of them prominent, that have sold clothing produced in that building. It is demanded that they assume responsibility for working conditions in the factories that supply them and not deal with factories that do not provide safe and humane conditions and pay fair wages.
Kenyans Find the Unintended Consequences of Mobile Money
Brendan Greeley (Bloomberg Businessweek) May 23, 2013
In Western Kenya, “Sambaza” is both a marketing slogan and means for despair. It means “to spread.” Vodafone-owned Safaricom, the dominant mobile provider in Kenya, uses it as a brand name for a service that allows customers to transfer airtime to each other. According to a new study (pdf) funded by the Institute for Money, Technology and Financial Inclusion (IMFTI), the word has also come to refer to the way money in a mobile account slips away, drip by drip, as friends and family ask for favors.
Europe’s Lost Keynesians
Kenneth Rogoff (Project Syndicate) May 23, 2013
There is no magic Keynesian bullet for the eurozone’s woes, despite what many commentators and much of the public seem to believe. The eurozone’s difficulties stem from European financial and monetary integration having gotten too far ahead of actual political, fiscal, and banking union – not exactly a problem that Keynes tried to address.
EU-China Solar Row Escalates, Amid Rumours of Potential Negotiations
Bridges Weekly Trade News Digest, Volume 17, Number 18 May 23, 2013
The Sino-European spat over trade in solar panels has continued to escalate in recent weeks, with officials in Beijing warning that Brussels' planned anti-dumping duties could have severe implications for their bilateral relationship. Meanwhile, conflicting news reports have also emerged over the past few days regarding whether a negotiated settlement aimed at defusing the row may soon be on the horizon.
US Senate Debates Potential for WTO Challenge to 2013 Farm Bill
Bridges Weekly Trade News Digest, Volume 17, Number 18 May 23, 2013
Agriculture committees in the US Senate and the House of Representatives cleared their respective versions of a potential 2013 Farm Bill last week, marking the first major advance in a process that had stalled last year. However, with the full Senate now in the midst of debating the legislation, some members of the chamber are raising questions on the impact of the new bill on trade and whether its provisions will indeed be WTO-compatible.
Misreading the Global Economy
Ashoka Mody (Project Syndicate) May 23, 2013
Over the last three years, the IMF's economic forecasts have repeatedly proved to be overly optimistic. The problem is rooted in a misdiagnosis of the global economy's problems, including the impact of the eurozone crisis and slowing GDP growth in emerging economies.
Japan Is Back
Shinzo Abe (FA) May 23, 2013
Japan's prime minister speaks openly about the mistakes he made in his first term, Abenomics, Japan's wartime record (and his own controversial statements on that history), and the bitter Senkaku/Diaoyu Island dispute with China.
Investors seem to ignore the real world
Stephen King (FT) May 23, 2013
Hopes that the world economy would rebound thanks to the use of monetary drugs, recovery in the US and strength in China look hallucinatory.
Venture capital misses out on bull run
Gillian Tett (FT) May 23, 2013
In the first three months of 2013 a mere 35 US venture capital funds raised just $4bn – 12% lower than a lousy performance the year before.
Japan the Model
Paul Krugman (NYT) May 23, 2013
Japan appears to be turning around its economy. Could its economic experiment be the last, best hope for recovery for the rest of the world?
The Promise of Africa
Ian Shapiro (YaleGlobal) May 23, 2013
Energetic and talented leaders, intent on contributing to Africa’s rise, gathered for the World Economic Forum on Africa 2013 in early May. The WEF is an independent international organization committed to engaging business, political, academic and other leaders of society to shape global, regional and industry agendas. Africa has its share of failed or near failing states, but others are peaceful and flourishing. Africa’s population is young, the median age just 20, and organizations like the WEF and the African Leadership Network look for sustainable development, education and employment to end poverty and curtail corruption and inequality. On balance, an entrepreneurial spirit thriving in Africa promises a better future.
Are Germans poorer than other Europeans? The principal Eurozone differences in wealth and income
Giovanni D'Alessio, Romina Gambacorta & Giuseppe Ilardi (VoxEU) May 24, 2013
The ECB’s recent survey on household finances and consumption threw up some unexpected results – counter-intuitively, the average German household has less wealth than the average Mediterranean household. In line with a recent VoxEU.org contribution from De Grauwe and Ji, this article analyses the principal differences in wealth and income between the main Eurozone countries.
ASEAN Economies Aim to Avoid the Mistakes of European Integration
Aaron Timms (II) May 24, 2013
The Association of Southeast Asian Nations is determined to push toward greater integration while avoiding Europe’s pitfalls.
German savings, crisis in Europe, and China
Michael Pettis (AT) May 24, 2013
Confusion between national and household savings can make even trained economists struggle to understand the imbalances and role of German savings at the heart of the current European crisis. China's "monumental savings" are subject to similar miscomprehension.
Indian growth model unsustainable at best
Kunal Kumar Kundu (AT) May 24, 2013
India managed growth of a mere 5% last year. That there is expansion at all is thanks to the services sector, one part of the economy able to operate outside government control. As a growth model, that's unsustainable.
Kishore Mahbubani (Project Syndicate) May 24, 2013
While most of the world is preparing for the end of the era of US global dominance, Americans are not even entertaining the possibility. Worse, public intellectuals, who are supposed to think the unthinkable, challenge accepted views, and prepare people for crucial developments, are shirking their responsibility.
The Sino-American Decade
Michael Spence (Project Syndicate) May 24, 2013
The next ten years will be characterized by major structural shifts in individual economies and a huge reconfiguration of the global economy as a whole. Above all, much depends on the two largest economies, China and the US, and their leadership in creating global public goods and maintaining a stable and open economic environment.
East Africa is in danger of throwing away part of its new-found oil wealth
Economist May 25, 2013
Building a normal relationship with India should be Nawaz Sharif’s priority.
Can Young People Rebuild Colombia's Social Capital?
Tim Harcourt (Globalist) May 25, 2013
Can a new generation of Colombians build a brighter future for their country?
Effective aid in conflict zones
Eli Berman, Joe Felter, Jacob N. Shapiro & Erin Troland (VoxEU) May 26, 2013
Can foreign aid help countries emerge from civil war? This paper presents new research that suggests that injecting lots of money into conflict zones may in fact encourage corruption and violence. The aid community should focus on what it can do well: working closely with communities to target small-scale, modest improvements that can be implemented in conflict zones. If accompanied by a gradual improvement in the quality of governance, current aid recipients can aspire to a long-run improvement in both security and prosperity.
Portugal: Waiting it out
Peter Wise (FT) May 26, 2013
As tough austerity policies bite, family-run businesses are failing at an alarming rate, stretching the country’s safety net and threatening social stability.
EU’s future looks Japanese, not German
Wolfgang Munchau (FT) May 26, 2013
To resolve the crisis, we are looking at financial and regulatory forbearance, small-scale recapitalisations and deleveraging, which will take years.
EU should end trade dispute with China
Wu Hailong (FT) May 26, 2013
Protectionist measures are counterproductive, as they will not help resolve the difficulties facing Europe’s industries.
The curse of the dollar?
Robert J. Samuelson (WP) May 26, 2013
For years, the dollar’s role as the major global currency has been termed an “exorbitant privilege.” Now it may be turning into an extravagant curse.
Preparing to export
Danielken Molina & Marc Muendler (VoxEU) May 27, 2013
Exporting is essential for economic development. But can firms move from local sales to export sales? How do firms prepare for exporting? This column presents new research showing that worker mobility is an important mechanism by which exporter knowledge spreads through the economy.
Why Turkey is Thriving
Jeffrey D. Sachs (Project Syndicate) May 27, 2013
Turkey's economy grew by 5% per year on average from 2002 to 2012. But there is nothing flashy about the country's rise, which has been based on fundamentals, like rebuilding the banking sector, getting the budget under control, and investing heavily where it counts: infrastructure, education, health, and technology.
Europe’s Troika Should Grow Up
Jean Pisani-Ferry (Project Syndicate) May 27, 2013
In early 2010, the IMF, the ECB, and the European Commission formed the "troika" to coordinate financial assistance to distressed eurozone members. Three years later, the results are mixed at best.
What to Do with Doing Business?
Ricardo Hausmann (Project Syndicate) May 27, 2013
Under pressure from China and other governments, the World Bank is considering discontinuing its Doing Business report. While that would be a mistake, it would be equally mistaken to view the report's indicators and rankings as a framework for policy.
Killing the Currency
Chris Casey (Mises Daily) May 27, 2013
The phrase “not worth a continental” may be vaguely familiar to Americans as an old and quirky saying, but to Revolutionary War–era Americans it would have been a harsh reminder of a recent nightmare. In order to finance the war, the Continental Congress authorized the issuance of money without rights of redemption in coin or precious metals (unlike other currencies in circulation). In short order, over $225 million Continentals were issued on top of an existing money supply of only $25 million. Initially traded on a one-for-one ratio with paper dollars backed by coin or precious metals, within a mere five years Continental currency had depreciated to worthlessness. It was America’s first major experiment with a fiat currency, and it cost many newly free Americans their livelihood and savings.
Regulator for the World
WSJ May 27, 2013
The CFTC wants to concentrate global derivatives risk in U.S. clearinghouses.
Russia: Can the Gas Empire Strike Back?
Gabe Collins (Diplomat) May 27, 2013
Intransigence on pricing may cost Moscow dearly in the huge Asian gas market.
EU should drop financial transaction tax
Elizabeth Corley (FT) May 27, 2013
The FTT seems incapable of discriminating between desirable and undesirable trading activity, and risks unintended consequences for market quality.
Libor looms even if mortgage case ends
Tom Braithwaite (FT) May 27, 2013
US banks’ attempts to rig Libor could spark another rash of private lawsuits in a similar – potentially more explosive – manner to the mortgage mess.
Regulator for the World
WSJ May 27, 2013
The CFTC wants to concentrate global derivatives risk in U.S. clearinghouses.
Technology and income dynamics: 1800-2000
Diego Comin & Martí Mestieri (VoxEU) May 28, 2013
Cross-country inequality is persistent. This column draws on economic history to explain the mechanisms by which dramatic cross-country differences in income emerge. We can reduce inequality through policies that facilitate the penetration of new technologies in poor and middle-income countries. Such policies can go a long way towards reducing existing cross-country income disparities.
Financial Secrets and Lies
Gavin Hayman (Project Syndicate) May 28, 2013
A recent investigation by the International Consortium of Investigative Journalists showed the pervasiveness of financial secrecy, which facilitates tax evasion, money laundering, corruption, and crime. Now, the international community – starting with the G-8 countries – must commit to enhancing financial transparency worldwide.
Managing International Capital Flows: The IMF’s “Institutional View” Falls Short
Edwin M. Truman (PIIE) May 28, 2013
Members of the International Monetary Fund (IMF) and the staff and management of the Fund should be congratulated for taking up the complex and vexed topic of international capital flows and reaching consensus on an "institutional view" to help guide their discussions and advice. They have taken an important step toward an improved understanding of and dialogue about the policy issues. For some time, I have urged that these issues be addressed, and I am gratified with the results.
Japan’s bumpy road to a recovery
Martin Wolf (FT) May 28, 2013
Ultimately Abe cannot rely on monetary manipulation and a weaker exchange rate alone, and must tackle the entrenched corporate establishment.
Europe should embrace a financial transaction tax
Avinash Persaud (FT) May 28, 2013
This small levy on churning would help to refocus the financial system on to its purpose of the safe financing of real economic activity.
Harsh trading lessons are legacy of HKMEx saga
Jeremy Grant (FT) May 28, 2013
A lesson from the HKMEx saga is that it is virtually impossible to launch an exchange with products that are similar to another exchange’s.
Europe’s trading tax risks bond backfire
Ralph Atkins (FT) May 28, 2013
Increasing secondary market trading costs would be like governments shooting themselves in the foot.
Central Banks Act With a New Boldness to Revitalize Economies
Binyamin Appelbaum, Jack Ewing, Hiroko Tabuchi and Landon Thomas Jr. (NYT) May 28, 2013
With governments unable to revive economies, central bankers are taking increasingly aggressive action.
The Red-Tape 'Spaghetti Bowl' Hurts Trade
Razeen Sally (WSJ) May 28, 2013
One country producing a good from start to finish for export? That idea is obsolete.
Swiss path questions need for QE unwinding
Robert Jenkins (FT) May 29, 2013
In building up euro reserves exceeding $550bn the SNB has laid the foundation for a Swiss sovereign wealth fund.
Saudi Arabia: Spending power
Michael Peel (FT) May 29, 2013
Aware of the role economic discontent played in the Arab spring, Riyadh is channelling money into reforms but a cultural shift is also needed.
Why Can't America Be Sweden?
Thomas B. Edsall (NYT) May 29, 2013
Economists disagree, to put it politely, about what would happen to global economic innovation if the Unites States adopted the liberal social welfare policies of Scandinavian countries.
China Brings Home the U.S. Bacon
WSJ May 29, 2013
The Smithfield pork takeover could help both countries.
Public and private saving and the long shadow of macroeconomic shocks
Joshua Aizenman & Ilan Noy (VoxEU) May 29, 2013
What do macroeconomic shocks do to public and private saving? This column argues that it is only truly dramatic shocks that have a long-lasting effect on saving behaviour. Past crises tend to increase savings among households, but they also lead to decreased public-sector saving. However, the evidence suggests that this decrease in public saving is about a third of the magnitude than the corresponding increase in household saving.
How Pirates Led Struggle for Free Markets and Open Trade
Jean-Philippe Vergne (Bloomberg) May 29, 2013
Kim Dotcom, the accused online pirate who founded the cloud-storage service Megaupload.com, recently made a surprising statement to the Guardian newspaper: “I respect copyright. What I don’t respect is copyright extremism. And what I don’t respect is a business model that encourages piracy.”
The Challenge of Feeding 9 Billion People
Greg Page (Bloomberg) May 29, 2013
America’s breadbasket, on the heels of last year’s severe drought, abounds with predictions of record corn and soybean harvests. The juxtaposition of the hope for this growing season against the reality of last year should give us reason to consider the lessons learned in 2012.
A race between growth and populism
Philip Stephens (FT) May 30, 2013
Italy’s prime minister is right to warn that the biggest winners in next year’s European elections could be anti-Europeans of left and right
Greece’s good news goes largely unreported
Maria Paola Toschi (FT) May 30, 2013
Many problems remain, but the Greek economy is starting to recover - and the stock market is responding.
Hyundai: Changing the mould
Simon Mundy (FT) May 30, 2013
The South Korean carmaker has shaken off its reputation for shoddiness and is now reining back its breakneck expansion to focus on forging a premium brand.
The Romantic Advantage
David Brooks (NYT) May 30, 2013
China may be the world’s second-largest economy, but when it comes to branding, the United States still wins.
The Transaction-Tax Climbdown
WSJ May 30, 2013
Europe discovers the costs of its latest financial levy.
The paradox of Brazil
Anne Applebaum (WP) May 30, 2013
The ‘developing’ country defies stereotypes.
The Rise and Fall of the Dollar
Mark Thornton (Mises Daily) May 30, 2013
Over the last century America’s money—the dollar—has come to dominate the global monetary system. It is used not just by Americans, but in other countries, in the global black market, and by importers and exporters. And it is the primary reserve currency for central banks. This status is what Barry Eichengreen calls an “exorbitant privilege,” because it confers numerous benefits to individuals, companies, and governments. Collectively, it also confers the ability for Americans to consume beyond our ability to produce.
Draft Bali Decision on Ag Export Subsidy Cuts Tabled
Bridges Weekly Trade News Digest, Volume 17, Number 19 May 30, 2013
Developed countries should halve ceilings for budgetary spending on farm export subsidies in a decision at the WTO's ministerial meeting in the Indonesian resort of Bali this December, the G-20 group of developing countries has said..
EU Parliament Signs Off on US Trade Talks, With Caveats
Bridges Weekly Trade News Digest, Volume 17, Number 19 May 30, 2013
The European Parliament overwhelmingly signed off on Brussels' plans to begin trade talks with Washington, with 460 lawmakers in favour, 105 against, and 28 abstentions. However, EU lawmakers also passed a separate amendment urging the exclusion of the controversial "cultural exception" from the talks, in a move that some observers warn might be indicative of future hurdles for the negotiations.
'The world will be manufacturing for China'
Antonia Oprita (EM) May 30, 2013
Over the next three decades, the roles will be reversed and Western companies will be manufacturing for China, the author of upcoming book 'Brand Breakout' predicts
The Hedge-Fund Investment Puzzle
Bob Rice (WSJ) May 31, 2013
If hedge funds are as bad as the headlines would have us believe, why do sophisticated institutions keep investing in them?
Gains from trade: Firms and productivity
Marc J. Melitz & Stephen Redding (VoxEU) May 30, 2013
Trade theory is ten years into the ‘new new trade theory’ revolution. This column reviews the new thinking and how it shifted thinking from why nations trade to why firms trade. This opened the door to documenting the impact of firm-level changes on industry productivity and national welfare.
Rethinking macroeconomic policy: Getting granular
Olivier Blanchard, Giovanni Dell'Ariccia & Paolo Mauro (VoxEU) May 31, 2013
The Global Crisis has shaken the consensus on how to run macroeconomic policy. Three years ago, the authors discussed this issue on VoxEU.org. This column takes a more granular look at new efforts to rethink macroeconomic policy. It takes stock of early results and provides a more detailed agenda for the key issues that should keep policymakers and academic macroeconomists busy in the next few years.
Conflict Management and Economic Growth
Raghuram Rajan (Project Syndicate) May 31, 2013
One of the most interesting aspects of the prolonged economic crisis in Europe, and of the even longer crisis in Japan, is the absence of serious social conflict – at least thus far. Yes, there have been strikes, marches, and growing anger at political leaders, but protests have been largely peaceful and constitutional.
Austerity and Demoralization
Robert J. Shiller (Project Syndicate) May 31, 2013
Austerity, according to some of its promoters, is supposed to improve morale. But the kind of fiscal austerity that is being practiced now has the immediate effect of rendering people jobless and filling their lives with nothing but a sense of rejection and exclusion.
China’s Flawed Balance-of-Payments Position
Yu Yongding (Project Syndicate) May 31, 2013
The balance-of-payments figures that Chinese authorities released in April should have caused widespread alarm. The data adjusted China’s 2011 investment-income deficit from $26.8 billion to $85.3 billion – a massive revision that casts doubt on the reliability of official statistics and exposes the economy's flawed growth path.
The American Consumer is Not Okay
Stephen S. Roach (Project Syndicate) May 31, 2013
The spin-doctors are hard at work arguing that falling unemployment, rising home values, and record stock prices mean that the American consumer – the major drag on the economy in the post-crisis period – is finally back. The facts say otherwise.