News & Commentary:

July 2010 Archives


Alphabet Soup
Bill Gross (PIMCO) Jul 2010
The lack of global aggregate demand – resulting from too much debt in parts of the global economy and not enough in others – is the essence of the problem.

Early warning indicators and the global crisis: New evidence
Jeffrey Frankel & George Saravelos (VoxEU) Jul 1, 2010
Can “early warning indicators” predict which countries are most vulnerable to a crisis? This column examines more than 80 contributions to the pre-2008 literature on crisis indicators. It finds that the level of central bank currency reserves can help identify economies worst affected by crises. Other useful early warning indicators include real effective exchange rate overvaluation, current accounts, and national savings.

The Global Jobs Competition Heats Up
Martin N. Baily, Metthew J. Slaughter & Laura D'Andrea Tyson (WSJ) Jul 1, 2010
In a new study, corporate leaders say the U.S. business environment is losing its edge when compared countries like China, India and Brazil.

How to build a winner
WP Jul 1, 2010
Germany and China won the recession battle. Here is how they did it.

Asia: Launching Pad for Tomorrow's Emerging Markets
IMF Survey Jul 1, 2010
Following in the footsteps of Asia's dynamic emerging markets, low-income countries in the region are poised to become tomorrow's emerging markets. This will help to propel Asia's global economic leadership as it becomes the world's largest economic region in about 20 years.

Splintered solidarity has put global governance in a spin
Philip Stephens (FT) Jul 1, 2010
The financial crisis saw unity forged in adversity. Now, the crisis has passed, and with it the push to co-operate and co-ordinate. Politics has turned local again, and markets remain the masters.

What comes after inflation targets
Samuel Brittan (FT) Jul 1, 2010
The great virtue of nominal GDP is it approximates closely to the widely accepted goal of macroeconomic policy, namely sustainable growth with minimal inflation.

Football lessons for Africa’s exiles
Petina Gappah (FT) Jul 1, 2010
Football is one of the most visible signs of Africa’s skills exodus: the players represent just a tiny proportion of the skilled Africans of all trades and professions who leave the continent.

Eurozone woes leave Swiss with a sore head
Gillian Tett (FT) Jul 1, 2010
Zurich's successes – high growth rate, reduced debt – are attracting investors and creating huge pressure for Swiss franc appreciation against the euro.

Myths of Austerity
Paul Krugman (NYT) Jul 1, 2010
Somehow it has become conventional wisdom that now is the time to slash spending, despite the fact that the world's major economies remain deeply depressed.

Asia’s Dueling Duopoly
Heizo Takenaka (Project Syndicate) Jul 1, 2010
In today’s Asia, there are two economic powers of global standing, Japan and China. But the balance of economic power between the two is changing, and fast: sometime this year, China’s GDP will exceed that of Japan, and its economic footprint will continue to spread rapidly across Asia and the rest of the world.

The effects of e-commerce: The click and the dead
Economist Jul 1, 2010
E-commerce favours large companies but only because that is what people want.

Global economic policy: Austerity alarm
Economist Jul 1, 2010
Both sides in the row over stimulus v austerity exaggerate, but the austerity lobby is the more dangerous.

International trade in services: A portrait of importers and exporters
Holger Breinlich & Chiara Criscuolo (VoxEU) Jul 2, 2010
Services trade accounts for a large and growing share of international trade - but we know very little about the firms carrying out this trade. Using firm-level data from the UK between 2000 and 2005, this column paints a detailed picture of importers and exporters of services, and discusses some of the resulting implications for economic policy.

Is Speculating on Food Dangerous?
Denis Drechsler, George Rapsomanikis & Alexander Sarris (Project Syndicate) Jul 2, 2010
Some believe that the food-price crisis in 2007-2008 was amplified by speculative trading in commodity futures, which have become an integral part of food markets. But futures markets have evolved in response to market participants’ need to manage price risks, and they are an indispensable marketing tool for many commodities.

Can Good Emerge From the BP Oil Spill?
Kenneth Rogoff (Project Syndicate) Jul 2, 2010
Perhaps it is a pipe dream, but it is just possible that the ongoing BP oil-spill catastrophe in the Gulf of Mexico will finally catalyze support for a US environmental policy with teeth. If so, the starting point should be a renewed push for a carbon tax.

Afghanistan and the 'Resource Curse'
Stephen Haber and Victor Menaldo (WSJ) Jul 2, 2010
With its newly discovered mineral wealth, it could end up like Nigeria. Or like Mexico.

Economists Who Did Their Homework (800 Years of It)
Catherine Rampell (NYT) Jul 2, 2010
Many economists build careers on only a few decades' worth of data. Kenneth Rogoff and Carmen Reinhart researched eight centuries of financial crises for "This Time Is Different."

Protectionist Myths
Jagdish Bhagwati (Project Syndicate) Jul 3, 2010
The pessimism and despair that often overwhelms free traders today is unwarranted. The arguments of protectionists, new and old, are just so many myths that can be successfully challenged.

Europe risks failing the real test on banks
Wolfgang Münchau (FT) Jul 4, 2010
It is official EU policy to deny that Greece might default – a genuine stress test might expose that as indefensible.

China builds bridges to fuel its engine room
Hongyi Lai (FT) Jul 4, 2010
To succeed, Beijing must diversify both its oil sources and the ways in which oil crosses its borders.

Russia will struggle to join the fold on trade
Peter Rutland (FT) Jul 4, 2010
Some of the gains from Moscow’s WTO entry would be reaped by foreign investors – at the expense of local businesses.

We need institutions to profit from prudence
Martin Jacomb (FT) Jul 4, 2010
There is an important difference between telling banks what they cannot do by regulation and encouraging them to revert to sound management.

Regulate short-funding to make banking safe
Enrico Perotti (VoxEU) Jul 5, 2010
This column argues that government measures to restore confidence in the financial system have achieved a “pause in the panic”, but this is not enough. Governments still need to reverse the dramatic slide of the financial system towards unstable funding – a trend which holds a gun to the heads of governments and central banks.

Reforming China’s Healthcare System necessary for growth rebalancing
Sarah Huelser & Syetarn Hansakul (DB Research) Jul 5, 2010
China’s healthcare system has been underfunded in the past years. 2009, the government announced a “big bang” reform. The changes are not only meant to cover 90% of the Chinese population with healthcare insurance schemes by 2011 but also to boost domestic demand and thereby rebalance China’s growth path. Even though reforms are a step into the right direction, many challenges remain.

China Has a Yuan Asset to Sell You Wall Street Journal Subscription Required
WSJ Jul 5, 2010
Beijing takes steps to make the renminbi an international currency.

Euroland: Contagion, Exposure and the Policy Response
Daniele Antonucci (MS GEF) Jul 5, 2010
Developments in the periphery can affect the rest of the euro area through various channels, ranging from the bond market to exports, confidence and bank lending. Contagion risks can be considerable, and we look at this theme of from four different angles.

Freedom in retreat
Fred Hiatt (WP) Jul 5, 2010
Around the world, freedom is in peril.

Reform or revenge?
Robert Samuelson (WP) Jul 5, 2010
If basic ingredients of financial panics never change, how helpful is new legislation?

Equities to swoon in the heat of austerity plans
Trevor Greetham (FT) Jul 5, 2010
"Fiscal masochism" will force central banks to print money as deflationary forces intensify.

Waiting for a Trade Policy
NYT Jul 5, 2010
At a time when protectionism is rising around the world, the United States must become a leading voice for open international trade.

China, the Sweatshop
NYT Jul 5, 2010
China's exploited workers don't need an extra parent. They need higher wages, better working conditions and a chance to form independent unions.

Capital controls and the crisis in emerging markets
Kavaljit Singh (VoxEU) Jul 5, 2010
Despite recovering faster than developed countries, many emerging markets are struggling to cope with large capital inflows. This column discusses the recent capital controls imposed by Indonesia and South Korea. It argues that while the international community is warming to these policies, it would be wrong to view capital controls as a panacea.

China Bashing Over Yuan Needs a Long Rest
Ronald McKinnon (Bloomberg) Jul 5, 2010
I’ll say it at the outset: Focusing on the yuan-dollar rate is a serious distraction, and it’s time for the U.S. to back off from bashing China over problems that are born mostly at home.

BRICs' Stepchild Is Cheap at Half the Price
Julian Rimmer (Bloomberg) Jul 6, 2010
When strategists appraise the Russian stock market, they cheep “It’s cheap!” without fail. In this new world order, investors are meant to prize inexpensive emerging markets with flexible exchange rates, political predictability, current account surpluses and reassuring reserves. Markets like Russia’s, for instance.

Let’s do a Doha deal
Gary Clyde Hufbauer & Robert Z. Lawrence (VoxEU) Jul 6, 2010
Originally scheduled to end in 2005, Doha negotiations have dragged into their ninth year. This column argues that, while many observers assign blame to the complexity of 153 members reaching a consensus, the heart of the matter is far simpler. It says that if the US and China come up with new offers, the momentum for a speedy agreement will be unstoppable.

Demand shortfall casts doubt on early austerity
Martin Wolf (FT) Jul 6, 2010
Rapid cuts in fiscal support make sense if, and only if, monetary policy can be effective on its own and expanding the interest-elastic parts of the economy is the best way to climb out of the hole.

Finance spread its own risks but left ours alone
John Kay (FT) Jul 6, 2010
The risks that the financial sector has devised techniques to manage are not the everyday risks of an uncertain world: they are risks almost entirely created within the financial sector itself.

Welcome to the Latin American decade
Luis Alberto Moreno (FT) Jul 6, 2010
Having weathered the financial crisis, Latin America now has the opportunity to join Asia in leading a global economic recovery – if its governments tackle long-neglected problems.

We have yet to address the cause of the crisis
Conrad Voldstad (FT) Jul 6, 2010
Given the list of casualties inflicted by real estate exposure, surely regulation of risk should be the goal of any financial reform.

Will abandoning the dollar peg help China rebalance its economy?
Willem Thorbecke (VoxEU) Jul 6, 2010
Will China’s decision to ditch the dollar peg help rebalance the global economy? This column argues that China’s action may facilitate a concerted appreciation in Factory Asia, helping the region redirect production away from western markets and towards domestic consumers.

A Wall Street Rocket Scientist in King Arthur's Court
Aaron Brown (Wilmott) Jul 6, 2010 What if Hank Morgan had been a quant?

Central Banking Deflowered
Harold James (Project Syndicate) Jul 7, 2010
After the ECB announced on May 9 that it would buy the government bonds of Mediterranean countries experiencing severe fiscal strains, critics complained that the Bank had “lost its virginity.” But, whether they like it or not, central banks' responsibility has always extended far beyond merely ensuring price stability.

Europe’s Banks, Europe’s crisis
Daniel Gros (Project Syndicate) Jul 7, 2010
Europe’s policy makers have let themselves been misled by politically convenient views of the crisis, first believing that all problems came from the US, and now blaming reckless fiscal policy by the eurozone's southern members. But the real problem is the EU's weakly capitalized banks, which are so interconnected that problems in one country quickly jeopardize the entire system.

Fiscal consolidation as a policy strategy to exit the global crisis
Giancarlo Corsetti (VoxEU) Jul 7, 2010
Are governments right to start cutting their deficits? This column presents good news and bad news. It supports a strongly precautionary approach to fiscal consolidation, but warns of the macroeconomic costs that come with each additional cut in the deficit. The financial crisis is not over yet.

Trade accounting in the recent recession
Jonathan Eaton, Samuel S. Kortum, Brent Neiman & John Romalis (VoxEU) Jul 7, 2010
The great trade collapse during the global crisis has reignited interest in the relationship between trade and GDP over the business cycle. This column argues that trade patterns in the recent recession largely reflected the shift away from demand for durable goods, although increasing trade frictions did play a moderate role in some countries.

Political Paralysis Poisons WTO Agriculture Talks
Bridges Weekly Trade News Digest, Volume 14, Number 25 Jul 7, 2010
Paralysis at the political level continues to stymie attempts to move forward in the WTO Doha talks on farm trade, sources said this week, after a meeting on the controversial "special safeguard mechanism" for developing countries produced no further progress.

Officials Seek to Ease Fears of Privacy Violations under ACTA
Bridges Weekly Trade News Digest, Volume 14, Number 25 Jul 7, 2010
Although controversy continues to dog a potential multi-country agreement on strengthening intellectual property enforcement, government negotiators made progress towards an accord during talks in Lucerne, Switzerland last week, and reaffirmed their commitment to work to conclude a deal as soon as possible in 2010.

Keynes vs. Hayek: The Great Debate Continues Wall Street Journal Subscription Required
Gerald O'Driscoll (WSJ) Jul 7, 2010
Newly discovered letters from two great economists shed light on today's discussion of economic 'stimulus.'

Austerity is not the only option
Michael Hudson (FT) Jul 7, 2010
Tax reform is the best option to help countries regain their competitiveness. In Latvia, for example, high taxes on labour leave open the possibility of shifting taxes to other areas, in particular land.

China’s little emperors demand their due
Geoff Dyer (FT) Jul 7, 2010
Modernisation has unleashed powerful forces – pride and confidence in China’s achievements but also high expectations about the life that can be lived.

The Swiss franc is the new German mark
Mansoor Mohi-uddin (FT) Jul 7, 2010
Switzerland's central bank has the potential to influence markets.

World Recovery Continues, But Risks Increase, Says IMF
IMF Survey Jul 8, 2010
Balancing the strong growth numbers for the first half of 2010 and the adverse impact of renewed financial turbulence, the IMF forecasts world growth to rise 4 ½ percent this year, but new uncertainties pose risks to financial stability and cast a cloud over the outlook

Joseph E. Stiglitz (Project Syndicate) Jul 8, 2010
Finance is supposed to serve the interests of the rest of society, not the other way around. Having gotten the world into its current economic mess, financial markets are now dictating fiscal austerity to countries that have no choice but to go along - and then betting against these countries when they do.

Collaborating with Corruption
Fron Nahzi (Project Syndicate) Jul 8, 2010
Too often, the US, the EU, and the UN choose to look the other way in ethnic Albanian areas of the Balkans, giving free rein to corrupt officials in the vain hope of gaining local support for international efforts to strengthen “regional stability.” But this policy has yielded little stability, while keeping Kosovo, Albania, and Macedonia on the crumbling edge of the “failed state” abyss.

Disasters, recoveries, and the equity premium
Robert Barro, Emi Nakamura, Jón Steinsson & Jose F. Ursua (VoxEU) Jul 8, 2010
Previous research suggests that the potential for rare, but large, economic disasters helps explain the equity-premium and related asset-pricing puzzles. This column presents evidence from a new empirical model of consumption disasters and discusses a range of assumptions required for the model to predict the observed long-run average equity premium.

Can real exchange rate undervaluation boost exports?
Mona Haddad & Cosimo Pancaro (VoxEU) Jul 8, 2010
Current discussions over the value of China’s currency demonstrate the controversy that exchange-rate policy is capable of igniting. This column suggests that while a managed real undervaluation can enhance domestic competitiveness, it is difficult to sustain in the post-crisis environment – both economically and politically. It says that a real undervaluation works only for low-income countries, and only in the medium term.

A safer world financial system
Stijn Claessens, Richard J. Herring & Dirk Schoenmaker (VoxEU) Jul 8, 2010
The major economies' financial reforms come up short on one crucial aspect – the resolution of systematically important cross-border financial institutions. This column introduces the latest Geneva Report on the World Economy, which advocates a two-tier solution to this problem – a universal approach for closely integrated countries such as EU members and a modified universal approach for other countries. It explicitly rejects the territorial or go-it-alone approach.

The euro-area economy: Lemon aid
Economist Jul 8, 2010
Germany's exporting prowess is leaving the rest of the euro area behind.

America needs a growth strategy
Michael Spence (FT) Jul 8, 2010
A bold move is needed: the US must create new capital-intensive jobs where labour productivity levels are consistent with advanced nation incomes.

Why we must halt the land cycle
Martin Wolf (FT) Jul 8, 2010
Ruinous trust in land speculation as the route to wealth has led to expensive houses and inefficient taxes but, far worse, it ended up destabilising the entire global economy.

China's time to draw the line
Antal E Fekete (AT) Jul 9, 2010
The United States, backed by Milton Friedman's theory of floating exchange rates, has long played the role of the bully-boy of international trade. Too many countries - with Japan to the fore - have suffered huge losses on their foreign exchange reserves as a consequence. Maybe this time China will draw the line.

The G-20's Dead Ideas
Mark Blyth and Neil K. Shenai (Foreign Affairs) Jul 9, 2010
The recent G-20 meeting in Toronto ended with the world's largest economies promising to cut deficit spending. But such a course is unwise and unlikely to lead to growth -- it is time for finance ministers to take on the speculators who are calling for retrenchment.

The dollar question: Where are we?
Kati Suominen (VoxEU) Jul 9, 2010
The global crisis has led some to question the dollar’s place as the dominant currency. This column discusses three camps in the literature: those advocating a new synthetic global currency, those arguing that a new reserve currency will emerge, and those suggesting a return to sharing the role. It concludes that talk of the dollar’s death – or even its decline – are exaggerated.

Is Europe Doing Everything Wrong? Recommended!
Mario I. Blejer & Eduardo Levy Yeyati (Project Syndicate) Jul 9, 2010
Reviving the EU's peripheral economies - Greece, Ireland, Portugal, and Spain - requires euro depreciation, closing the inflation differential between the eurozone's periphery and core, and, in some cases, orderly debt restructuring. But EU policymakers have chosen to do precisely the opposite on each front.

Europe, the United States and Their Common Challenges
Lorenzo Bini Smaghi (Globalist) Jul 9, 2010
How could the current economic difficulties faced by Europe and the United States strengthen the transatlantic alliance?

ASEAN: The Leverage Lesson, Double Dip and the Rebalancing Game
Deyi Tan, Chetan Ahya & Shweta Singh (MS GEF) Jul 9, 2010
The 1998 financial crisis taught ASEAN a lesson on leverage, and the ASEAN economies learned it well. Yet past deleveraging as domestic demand excesses were corrected have left it to the export machine to fill the growth void. With double-dip concerns, the other lesson of macro rebalancing is yet to be mastered.

Global: How I Stopped Worrying and Learned to Love the Double-Dip Scare
Manoj Pradhan (MS GEF) Jul 9, 2010
Markets are clearly worried about a double-dip recession that could wipe out the gains of the past year. A second recession doesn’t seem to be anywhere in sight. As long as a recession doesn’t materialise, policy rates on hold for longer, moderating inflation expectations and lower bond yields have likely set the stage for AAA liquidity to be provided for longer.

How Inequality Fueled the Crisis
Raghuram Rajan (Project Syndicate) Jul 9, 2010
Before the recent financial crisis, politicians from both political parties in the US egged on Fannie Mae and Freddie Mac, the giant government-backed mortgage agencies, to support low-income lending in their constituencies. There was a deeper concern behind this newly discovered passion for housing for the poor: growing income inequality.

Life expectancy around the world
Ryan D Edwards (VoxEU) Jul 10, 2010
In the least 30 years, the difference in life expectancy at birth across the globe has fallen dramatically. This column presents new data on life expectancy within and between countries for the period 1970 to 2000. Controlling for infant mortality, it finds that while within-country inequality in life expectancy fell, between-country inequality rose, leaving total inequality unchanged.

The political economy of the subprime crisis
Atif Mian, Amir Sufi & Francesco Trebbi (VoxEU) Jul 11, 2010
Is the US government to blame for the subprime crisis and by extension the global crisis? This column presents a unique study of how vested interests, measured by campaign contributions from the mortgage industry and the share of subprime borrowers in a congressional district, influenced US government policy during in the build up to the subprime crisis and subsequent global crisis.

The Trilemma of International Finance
N. Gregory Mankiw (NYT) Jul 11, 2010
Economic policy makers around the world have a trio of goals, but they can never accomplish them all.

Why the west faces a harsher future
Martin Wolf (FT) Jul 11, 2010
There is much to admire in the hard realism of Stephen King, HSBC's chief economist, but relative decline should not mean diminished prosperity.

Even eurozone optimists are not optimistic
Wolfgang Münchau (FT) Jul 11, 2010
What kind of recovery, if any, are we going to get? My fear is that the eurozone may end up in a low-growth equilibrium for quite a long time, similar to Japan in the 1990s.

Europe’s banks need a recovery fund
Alessandro Profumo (FT) Jul 11, 2010
Dysfunction in the capital markets should never again be allowed to threaten existence of solvent banks.

The World Isn't Waiting on Free Trade Wall Street Journal Subscription Required
Mike Johanns (WSJ) Jul 12, 2010
Our exporters are losing ground. The president should act on the trade agreements with Colombia and others.

What Safeway Can Teach Us About Economics
John Tamny (Forbes) Jul 12, 2010
Embrace tariffs and free trade, and let markets correct themselves.

The Dollar and the Dragon
Joseph S. Nye (Project Syndicate) Jul 12, 2010
A "balance of financial terror" has settled over US-China economic relations. China could bring the US to its knees by selling off its massive holdings of dollar-denominated reserves, but it would bring itself to its ankles in the process.

Ending the scourge of dual labour markets in Europe
Samuel Bentolila, Tito Boeri & Pierre Cahuc (VoxEU) Jul 12, 2010
Many economists across Europe agree on the need for labour market reform. In this column economists from France, Italy, and Spain argue that while the reforms of the 1980s increased flexibility, they also led to a two-tier system with ultra-secure permanent workers and vulnerable temporary workers – increasing unemployment in the downturn. In order to complete the reform path, governments should fight dualism by making job security provisions increase smoothly as workers acquire tenure.

The Market Confidence Bugaboo
Dani Rodrik (Project Syndicate) Jul 12, 2010
Governments around the world are now cowering in fear of "market confidence" – that ineffable object of desire that makes officials impement policies they don't really believe in. Indeed, if the current crisis gets worse, it will be political leaders that bear primary responsibility – not because they ignored markets, but because they took them too seriously.

Sagging Global Growth Requires Us to Act
Nouriel Roubini and Ian Bremmer (FT) Jul 12, 2010
The most realistic scenario for global growth is painful, even if we avoid a double dip. US growth in the second half of this year and into 2011 will feel like a recession.

Debt shuffling will be a self-defeating exercise
Satyajit Das (FT) Jul 12, 2010
European Financial Stability Facility must not repeat the mistakes that led to the financial crisis.

In the shadow of the dragon
John Downs (AT) Jul 13, 2010
With the two export markets - the United States and European Union - that in large part fueled China's remarkable growth now very short of cash, Chinese industry will have little choice but to look elsewhere for trade partners and low-cost bases for new plants. That should be good news for neighbors to the south.

New thinking on executive compensation: Pay CEOs with debt
Alex Edmans (VoxEU) Jul 13, 2010
Recovering US insurance giant AIG recently announced that 80% of their executives’ bonuses will depend on the price of their firm’s bonds and only 20% will depend on the price of their equity. This column argues that such moves will better align CEO fortunes with those of all investors – both shareholders and bondholders – and help prevent future financial crises.

Fiscal Fibs and Follies
Barry Eichengreen (Project Syndicate) Jul 13, 2010
Across the globe, the debate over fiscal consolidation has the distinct sound of two sides talking past one another. Whereas severely distressed southern European states may well benefit from cutting their budget deficits, those arguing for fiscal consolidation in the major G-20 economies are playing a dangerous game.

Trade Deficits As Far As The Eye Can See
Brian S. Wesbury and Robert Stein (Forbes) Jul 13, 2010
Why you shouldn't worry too much about the U.S. trade deficit.

Dodd-Frank, Meet William Jennings Bryan
Eugene N. White (WSJ) Jul 13, 2010
Why a 'Financial Crisis Fund' was rejected over a century ago.

A cure that could do more harm than good
Masayuki Oku (FT) Jul 13, 2010
There is a danger that the pursuit of regulatory perfection will merely have the effect of transferring risks from banks to customer.

Mr Market should sometimes get his way
John Kay (FT) Jul 13, 2010
Speculators command authority from the money they put behind the views they express. Talk is cheap, but short selling is not.

Leverage crises nature's way of saying "slow down"
Jamil Baz (FT) Jul 13, 2010
Debt crises are nature's way of telling us to slow down, and policymakers should ignore the signs at their own peril.

Three years and new fault lines threaten
Martin Wolf (FT) Jul 13, 2010
Leaders of the world’s principal economies – both advanced and emerging – will need to reform co-operatively and deeply if the world economy is not to suffer further earthquakes.

Germany's Euro Advantage
Simon Tilford (NYT) Jul 13, 2010
Competitive devaluations within the eurozone pose a threat to the future of the euro.

Reconstructing the World Economy
IMF Survey Jul 13, 2010
As the world emerges from the worst crisis in decades, a new IMF book presents a number of proposals for improving the stability of the global economy.

How Serious Is the Chinese Challenge? Part I
Bruce Stokes (YaleGlobal) Jul 13, 2010
China displays new willingness to exert global leverage.

Youth Without Work
Edoardo Campanella (Project Syndicate) Jul 14, 2010
Among the many devastating effects of the current global financial crisis, one of the most pernicious in the developed world is the upward trajectory of youth unemployment. When young people cease to be the engine of an economy, long-run economic growth is endangered, and social unrest becomes a real threat to the democratic political order.

The changing face of emergence
Martin Hutchinson (AT) Jul 14, 2010
Goldman Sachs' chief economist Jim O'Neill tips Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa as the next favored emerging markets. But the rules of the game have changed since O'Neill's near-decade old, and now famous, forecast of BRIC emergence.

A Roosevelt Moment for America’s Megabanks?
Simon Johnson (Project Syndicate) Jul 14, 2010
Just over a hundred years ago, the US led the world in terms of rethinking how big business worked – and when the power of such firms should be constrained - by enacting the Sherman Antitrust Act. The Dodd-Frank financial-reform bill, which is about to pass the US Senate, does something similar – and long overdue – for banking.

Affordable Green Energy
Bjørn Lomborg (Project Syndicate) Jul 14, 2010
The dominant approach to addressing climate change – subsidizing inefficient technologies or making fossil fuels too expensive to use - cannot possibly achieve the goal of reducing greenhouse-gas emissions by 50% by mid-century. Instead, we should fund the basic research that will make green energy too cheap and easy to resist.

A Dangerous Dynamic In Emerging Asia Markets
Arpitha Bykere and Adam Wolfe (Forbes) Jul 14, 2010
Hong Kong, Singapore and others must prevent volatility from blunting growth.

Economics Behaving Badly
George Loewenstein & Peter Ubel (NYT) Jul 14, 2010
The limits of what psychology can tell us about choices.

Lessons from the "Lords of Finance"
Edwin M. Truman (PIIE) Jul 14, 2010
I am not able these days to make as much time as I would like to read whole books, but during a recent vacation I was able to finish Lords of Finance by Liaquat Ahamed. I recommend it to anyone interested in the interwar period of the 1920s and 1930s, both before and after, and how that experience may relate to the recent economic and financial crisis. It is a good and easy read, even at 500 pages. Some personal thoughts and reactions:

European Commission Looks to Loosen Hold on GMO Regulations
Bridges Weekly Trade News Digest, Volume 14, Number 26 Jul 14, 2010
The European Commission recommended sweeping new changes to the European Union's policy on the cultivation of genetically modified organisms (GMOs) on Tuesday, unveiling a proposal to grant individual member states the right to decide for themselves whether to allow their domestic farmers to grow the altered crops.

The Uses and Abuses of Economic Ideology
Adair Turner (Project Syndicate) Jul 15, 2010
John Maynard Keyenes once wrote that, "Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.” But today the greater danger is that practical men and women gravitate to vulgar versions of the dominant beliefs of economists who are very much alive.

Immigrants and US Innovation
William Kerr & William Lincoln (VoxEU) Jul 15, 2010
How does high-skilled immigration affect innovation in receiving countries? This column examines how large fluctuations in the admissions levels of H-1B visa holders between 1995 and 2008 influenced US patenting. It suggests higher H-1B admissions increased US innovation through the direct contributions of the immigrants without crowding out those of natives.

Why Germany should not listen to the US
Hans-Werner Sinn (VoxEU) Jul 15, 2010
Some Americans are calling on Germany to pursue expansionary fiscal policy. This column says that the German government should ignore US criticism of its savings measures.

Bank stress tests: Don't flunk this one
Economist Jul 15, 2010
The stress tests of Europe’s banks have been chaotic. But it is too soon to write them off.

The value of finance: A mirage, not a miracle
Economist Jul 15, 2010
The banks' contribution to the economy has been overstated.

Global monetary policy: The central bankers' burden
Economist Jul 15, 2010
Deflation is not imminent but the rich world's central banks must be ready to do what they can to fend it off.

How and when to fsoc it to the hedge funds
Sebastian Mallaby (FT) Jul 15, 2010
When it comes to hedge funds the FSOC may be tempted to cast a wide net. But it needs to resist populist cop-outs.

It is time to face down the threat of deflation
John Makin (FT) Jul 15, 2010
Central banks, led by the Federal Reserve, will have to announce firm price level targets that imply rapid money creation.

Europe’s stress test is no short cut to stability
Mohamed El-Erian (FT) Jul 15, 2010
Next week sees the announcement of stress test results for 91 European banks. A similar test in the US last year is believed by many to have contributed to the normalisation of financial markets. Regrettably, in Europe such a transformation is a far bigger challenge.

How Serious Is the Chinese Challenge? Part II
Markus Jaeger (YaleGlobal) Jul 15, 2010
Despite its rise, China has lopsided financial interdependence with the US.

'Bail-in' will save the taxpayer from the bail-out
Gillian Tett(FT) Jul 15, 2010
A workable solution to the 'Too Big To Fail' conundrum.

Global: Appetite for Restriction
Manoj Pradhan (MS GEF) Jul 16, 2010
Central banks appear to have very little sympathy for market concerns of a double-dip. EM central banks, in particular, have shown a good deal of confidence in the sustainability of the global recovery by making a start to normalising policy.

Yuan as a reserve currency: Likely prospects & possible implications Adobe Acrobat Required
Markus Jaeger (DB Research) Jul 16, 2010
Rising US indebtedness combined with China’s rising economic and financial prowess have led some analysts to forecast the decline of the dollar and the rise of the yuan as the dominant reserve currency. It will take China 15-20 years to put in place the conditions necessary for the yuan to emerge as an important reserve currency and even longer to rival the dollar as the dominant reserve currency. The emergence of the yuan as a reserve currency would confer moderate financial and significant non-financial benefits on China.

Chinese foreign direct investment: What's happening behind the headlines?
Lucian Cernat & Kay Parplies (VoxEU) Jul 16, 2010
While China is recognised as one of the world's leading destinations for inward foreign direct investment, outward investment by Chinese companies has also taken off in recent years. This column presents survey data suggesting that, similar to western firms, Chinese companies tend to invest in well-developed countries with a large market size and a favourable institutional environment.

In Finance We Distrust
Michael Spence (Project Syndicate) Jul 16, 2010
It now seems universally accepted that government should establish the structure and rules for the financial system, with participants then pursuing their self-interest within that framework. But in a complex system in which expertise, insight, and real-time information are widely dispersed – and trust is lacking – reliance on such a framework seems deficient and unwise.

The folly of common currencies
Henry CK Liu (AT) Jul 16, 2010
Europe should not be surprised at the difficulty it faces in maintaining a common currency across widely divergent economies. The examples of Argentina and Hong Kong in their efforts to peg their currencies to that of another country should have been lesson enough.

Double-Dip Days
Nouriel Roubini (Project Syndicate) Jul 16, 2010
With the world economy set to slow, a scenario in which US growth slumps to 1.5%, the eurozone and Japan stagnate, and China’s growth rate falls below 8% may not imply a global contraction, but it will feel like one. And any additional shock – a highly plausible concern – could tip the global economy back into full-fledged recession.

Meanwhile in Basel
NYT Jul 17, 2010
The Basel committee should do its job and come up with tough rules needed to prevent another financial meltdown.

Calling recessions in real time
James D. Hamilton (VoxEU) Jul 18, 2010
Is the world economy about to experience a "double-dip" recession? This column argues that, while there may be a recession on the way, the current recession ended in the summer of 2009. Any subsequent downturn should thus be labelled a new recession.

One fix for the US mortgage default problem
Alex Edmans (VoxEU) Jul 17, 2010
Foreclosure is often seen as a lose-lose situation. This column describes a new incentive scheme aimed at reducing strategic defaults. The Responsible Homeowner Reward, a debt-like security that only pays off if the lender is repaid in full, is being implemented in the US.

The Next Financial Crisis (the Stamp Bubble?)
Eduardo Porter (NYT) Jul 18, 2010
The Postal Service plans to sell Forever Stamps at their current rate until it raises the price in January. That is as close as one gets to a free lunch.

America’s sensible stance on recovery
Lawrence Summers (FT) Jul 18, 2010
The combination of measures that prevent sharp declines in demand in the short run, and measures that add to confidence by controlling the factors that drive deficits, offers the best prospect for moving the economy forward.

Why the battle is joined over tightening
Martin Wolf (FT) Jul 18, 2010
To tighten or not to tighten – that is the question. It is one to which policymakers have started changing their answers. Are they right to do so?

The failed-state conundrum
Fareed Zakaria (WP) Jul 19, 2010
Trying to fix places like Somalia comes with a high risk of unintended consequences.

The low-interest-rate trap
Francesco Giavazzi & Alberto Giovannini (VoxEU) Jul 19, 2010
Should the crisis spur central banks to change how they conduct monetary policy? This column argues that strict inflation targeting, which ignores financial fragility, can produce interest rates that push the economy into a “low-interest-rate trap” and increase the likelihood of a financial crisis.

Risk panics: When markets crash for no apparent reason
Philippe Bacchetta, Cédric Tille & Eric van Wincoop (VoxEU) Jul 19, 2010
Why did the world economy plunge into the worst recession since the Great Depression? This column argues that economic fundamentals do not explain the global crisis. But they did play a role. Events such as the fall of Lehman Brothers can become focal points for investors’ risk perceptions, changing the way the fundamentals are interpreted. This can lead to “risk panics” – self-fulfilling spikes in risk and a collapse in asset prices.

Today’s Keynesians have learnt nothing
Niall Ferguson (FT) Jul 19, 2010
The austerity debate: Supersized deficits are denting business confidence, not least by implying higher future taxes. Those who liken confidence to an imaginary ‘fairy’ have failed to learn from decades of economic research.

It is far too soon to end expansion
Brad DeLong (FT) Jul 19, 2010
The austerity debate: We will know when the time comes to stop expansion. Financial markets will tell us. And not by whispering in a still, small voice.

Investor reaction to market stress set to change
Robert Parker (FT) Jul 19, 2010
G3 Government bonds are making way for the emerging markets as the safe haven in times of market crisis.

Running in Place on Trade
Jagdish Bhagwati (Project Syndicate) Jul 20, 2010
G-20 meetings regularly affirm the importance of maintaining and strengthening openness in trade, and June’s summit in Toronto was no different. Yet talk is cheap, and the open-mouth policy of (generally pro-trade) pronouncements has not been matched by action.

Monetary theory from a Chinese historical perspective
John Whalley, Yaguang Zhang & Zheng Xueyi (VoxEU) Jul 20, 2010
While many commentators focus on China’s future, this column draws economic theory insights from its past. It argues that Chinese monetary theory preceded Western thought and influenced the likes of Adam Smith and Karl Marx. Moreover, it says the Eastern emphasis on the pursuit of wisdom, as opposed to knowledge, has a role to play in today’s economic debate.

Global: An Exercise in Debt Sustainability
Chuan Lim & Pasquale Diana (MS GEF) Jul 20, 2010
We delve into the topic of debt sustainability and provide the simulation results of the future trajectory of debt to GDP for various EM countries, with specific concentration on Central Europe.

A sunlit Keynesian paradise awaits our grandchildren
Tim Harford (FT) Jul 20, 2010
I hope that when the crisis is over we will remember to come back to Keynes’s advance forecast, that the long-run trend was towards inexorable growth.

No need for a panicked fiscal surge
Kenneth Rogoff (FT) Jul 20, 2010
The austerity debate: It is folly to ignore the risks of debt accumulation. The debt burden will ultimately weigh on growth.

Europe requires end of Merkel and Sarkozy
Wolfgang Münchau (FT) Jul 20, 2010
The simple truth is that this crisis is global and requires leaders with a global and European mindset to solve them. In other words, it requires politicians other than the French and German leaders.

Derivatives reform to punish property industry
John Rathbone (FT) Jul 20, 2010
It is becoming clear that the European property industry risks being one of the biggest victims of regulatory overreach.

Leaving the euro: Lessons from Argentina
Mario I. Blejer & Eduardo Levy-Yeyati (VoxEU) Jul 21, 2010
Rumours of Eurozone break-up are mounting. This column argues that exiting a strong currency for a weak one poses almost unthinkable challenges, from the redenomination of contracts and the imposition of bank restrictions to the restructuring of external debt and limiting of capital mobility. Lessons from Argentina illustrate just how radical the changes would need to be.

Boom and bust in the Baltics
Uwe Böwer, Julia Lendvai & Alessandro Turrini (VoxEU) Jul 21, 2010
In 2009 the Baltic countries were hit by record recessions. Growth rates fell to -14% in Estonia, -18% in Latvia, and -15% in Lithuania. This column argues that structural adjustment towards the tradable sector is needed not only for a durable adjustment of their external position, but also for sustained growth in the long run – and sooner, rather than later.

WTO Industrial Goods Talks Inch Forward on NTBs
Bridges Weekly Trade News Digest, Volume 14, Number 27 Jul 21, 2010
Negotiators working to reduce barriers to trade in manufactured goods as part of the troubled Doha Round talks took some more baby steps last week towards agreeing on how to address non-tariff measures as part of an eventual WTO accord.

PIIGS to the slaughter
Spengler (AT) Jul 21, 2010
The next time European nations in the south-sweeping arc from Ireland to Greece - aka PIIGS - sink under the weight of their debt, the Germans will not come to the rescue. The hard-working northerners have other priorities, and other friends, and aim to survive when a Latin American-style crisis breaks out in the profligate south.

Sow the seeds of long-term growth
Jeffrey Sachs (FT) Jul 21, 2010
The striking feature in the current debate about has been the lack of attention to investment. Consumers will not provide the engine of recovery, nor should they after overspending for a decade. Instead, the US and Europe should be using the recent corrective boost in saving rates to promote long-term investments in physical and human capital as the proper way back to sustained growth

Asia’s Keynesians take pride in prudence
David Pilling (FT) Jul 21, 2010
Unlike in the west, there is little debate in Asia about how well the stimulus worked. It has been spectacular. Asian output is well above pre-crisis levels. HSBC is predicting growth for Asia ex-Japan of 8.6 per cent this year.

Policymakers need new commodities roadmap
Javier Blas (FT) Jul 21, 2010
Our understanding of raw commodities is deteriorating, not improving, and this ignorance and lack of oversight must end.

Who Should Safeguard Financial Stability?
Robert J. Shiller (Project Syndicate) Jul 22, 2010
Central bankers around the world failed to see the current financial crisis coming before its beginnings in 2007, and thus did not act to relieve the pressures that led to it. But central bankers are still the people who are in the best political and institutional position to ensure financial stability.

A new measure of national “opportunities” for development
Arnelyn Abdon, Jesus Felipe & Utsav Kumar (VoxEU) Jul 22, 2010
This column introduces the Index of Opportunities – a ranking of countries by their capacity to undergo structural transformation and develop. It suggests countries at the bottom are in urgent need of implementing policies that lead to higher diversification and sophistication of exports.

Global: Inflation Targeting: The Trial
Spyros Andreopoulos (MS GEF) Jul 22, 2010
One of the many victims of the financial crisis and the Great Recession has been confidence in monetary policy and policymakers – the dominant policy framework of Inflation Targeting in particular. We put Inflation Targeting on trial.

A double dip is a price worth paying
Martin Feldstein (FT) Jul 22, 2010
The austerity debate: If bitter deficit reduction medicine may push economically weak countries into recession, so be it.

More stimulus won’t stop Asia’s rise
Andy Xie (FT) Jul 22, 2010
The austerity debate: Stimulus or not, the west will see growth pattern like Japan’s for a decade.

Stimulate no more – it is now time for all to tighten
Jean-Claude Trichet (FT) Jul 22, 2010
Without the swift action of central banks, we would have experienced a major depression. But now is the time to restore fiscal sustainability.

The banks' funding dilemma: Banks on methadone
Economist Jul 22, 2010
An unhealthy addiction to cheap government money.

The failure of conventional economic models: Agents of change
Economist Jul 22, 2010
Conventional economic models failed to foresee the financial crisis. Could agent-based modelling do better?

Gold and the dollar: Losing confidence
Economist Jul 22, 2010
Looking at the dollar in the old-fashioned way.

The Big Mac index: When the chips are down
Economist Jul 22, 2010
The latest Big Mac index suggests the euro is still overvalued.

Europe's dark secret
Economist Jul 22, 2010
They might not like to admit it, but Europeans don’t mind a bit of capitalism.

The Chinese Challenge
Asia Sentinel Jul 23, 2010
Despite its rise, China has lopsided financial interdependence with the US.

The rating agencies are no longer rating
Eurointelligence Jul 23, 2010
A new US law makes rating agencies liable for the quality of their ratings; panicked rating agencies now advise their clients not to use their ratings; Structured bonds, which are obliged to have a rating, can no longer be issued; EU banks may give breakdown of their sovereign debt holdings with stress test results later today; Eurozone PMI rises stronger than expected, driven by strong performance of services; Spanish government cancels or postpones 231 infrastructure projects as part of their austerity programme; Jean Claude Trichet presents some tough arguments in favour of immanent fiscal consolidation; Martin Feldstein argues also in favour, but says that this does not avoid a double dip; German banknotes, meanwhile, will soon be printed abroad.

Emerging Markets: The End of an Artificial Category?
Globalist Jul 23, 2010
Once considered to be volatile, developing economies are now the main drivers of global economic growth. Will this reality change the way we think about the global economy? Javier Santiso takes a closer look.

Send lawyers, guns, and money: Deals versus rules in Africa
Mary Hallward-Driemeier & Lant Pritchett (VoxEU) Jul 23, 2010
Does government policy make any difference? This column argues that, in many developing countries, firms often make decisions based not on the policy itself, but what it implies in terms of “deals” they may have to make with middle men and corrupt officials. This “policy uncertainty” is a major concern for firms and can help explain some of the puzzles of development.

What, Them Worry About the Euro?
NYT Jul 23, 2010
European leaders have gone from panic to complacency regarding the future of the euro. The complacency is dangerous. The fundamental issues must be dealt with.

Budget cuts across Europe: Coordination or diktat?
Paolo Manasse (VoxEU) Jul 24, 2010
Despite the lack of formal mechanisms for fiscal coordination across Europe, this column suggests that the planned exit strategy seems to support convergence among European countries aiming to cut deficits. Yet it argues that the budget cuts do not reflect the unemployment situation of member countries and appear inspired by Germany's fiscal orthodoxy.

Leveling the Playing Field, in Soccer and Finance
Richard H. Thaler (NYT) Jul 24, 2010
In updating their rules, the financial world and the World Cup could use some of the same principles.

Level Playing Fields, in Soccer and Finance
Richard H. Thaler (NYT) Jul 24, 2010
In updating their rules, the financial world and the World Cup could use some of the same principles.

A test cynically calibrated to fix the result
Wolfgang Münchau (FT) Jul 25, 2010
Sovereign default in the case of Greece is not such a far-fetched scenario. It is irresponsible for the stress testers to ignore that sort of event. That is like a car crash tester failing to consider the possibility of an oncoming vehicle.

Uncle Sam has worse woes than Greece
Laurence Kotlikoff (FT) Jul 25, 2010
During the past half-century, the US has sold tens of trillions of unofficial IOUs, leaving it with liabilities to pay Social Security, Medicare and Medicaid benefits that total 40 times official debt.

Thriving China is ever more open for business
Chen Deming (FT) Jul 25, 2010
Foreign companies drive economic growth abroad through their Chinese operations, and create jobs in developed countries by buying capital goods and services.

The I.M.F. We Need
NYT Jul 25, 2010
A strong, credible and well-financed International Monetary Fund is absolutely essential for global economic stability.

The Volcker Rule
John Cassidy (New Yorker) Jul 26, 2010
Obama’s economic adviser and his battles over the financial-reform bill.

Now let us stress-test the central banks
Terrence Keeley (FT) Jul 26, 2010
In a worst-case scenario, hundreds of billions in additional capital from taxpayers may be needed to restore their credibility.

European tests may not calm capital markets
Jim McCaughan (FT) Jul 26, 2010
The refinancing calendar will get stressful again by mid 2011, and at some point in the next few years Greece will probably have to reschedule

The Middle Kingdom’s Middle Class
Wellington K.K. Chan (Project Syndicate) Jul 26, 2010
There are compelling demographic, geographic, and broadly cultural reasons for China's spectacular success in the three decades since the lauch of Deng Xiaoping's economic reforms. But surely China’s success has depended on that of its entrepreneurs – and their deeply rooted patterns of activity.

Free Trade and the Fight Against Malaria Wall Street Journal Subscription Required
Jakaya Mrisho Kikwete and Yoweri Museveni (WSJ) Jul 27, 2010
Tariffs block medicines and bed nets at African ports. That's crazy.

The More Expensive Steel Caucus Wall Street Journal Subscription Required
WSJ Jul 27, 2010
Protectionism again masquerades as security.

The Foreign Investment Solution for American Jobs Wall Street Journal Subscription Required
Robert M. Kimmitt and Matthew J. Slaughter (WSJ) Jul 27, 2010
You know that battery plant in Michigan the president visited the other day? It's Korean-owned.

Europe's Federalism Debate Revived
Jean Pisani-Ferry (Project Syndicate) Jul 27, 2010
It is an old debate, but tensions within the euro area have revived it: can a monetary union survive without some form of fiscal federalism? If not, what kind of federalism is right for Europe?

How to Pay a Banker
Lucian Bebchuk (Project Syndicate) Jul 27, 2010
It is now widely accepted that it is important to reward bankers for long-term results, because tying their compensation to short-term returns encourages them to take excessive risks. But tying executive payoffs to long-term results does not provide a complete answer to the challenge facing financial firms and regulators.

Convicts for Export
Brahma Chellaney (Project Syndicate) Jul 27, 2010
China has devised a novel strategy to relieve pressure on its overcrowded prisons: employ convicts as laborers on overseas projects. The practice has exposed another facet of China’s egregious human-rights record, which, when it comes to Chinese overseas companies’ overseas, includes the government’s failure to enforce its own regulations.

The EU Bank Stress Tests--What Have We Learned?
Jacob Funk Kirkegaard (PIIE) Jul 27, 2010
On Friday, July 23, the Committee of European Banking Supervisors (CEBS), along with national EU bank regulators and—crucially—most of the affected individual banks, finally released new data to the public regarding the stress testing of the European banking system. What have we learned? Appearances matter—especially for bank stress tests. So first it is clear that whoever has been in charge of media relations and communication at CEBS, the EU Commission, and elsewhere must immediately be fired (and denied any EU pension)! Despite the still fresh memory of what happened at the publication of the US Supervisory Capital Assessment Program (SCAP) tests in May 2009, which were roundly (but erroneously) criticized in the financial media and by pundits as too lenient toward the 19 banks tested, CEBS and other EU authorities carried out an inadequate and incoherent media strategy that condemned the EU stress tests to a similar fate. This is very unfortunate, as there is a lot of new value in the new data.

ECB interest rate policy and the “zero lower bound
Stefan Gerlach & John Lewis (VoxEU) Jul 27, 2010
Monetary policy during the global crisis entered unchartered territory. This column suggests that fear of a global recession may have led policymakers to cut rates more aggressively in order to prevent the need for negative interest rates.

West has much to learn from east's policy toolkit
Gerard Lyons (FT) Jul 27, 2010
As regulators rush to impose controls on financial institutions, it is easy to lose sight of simple but effective ways to ensure greater financial stability.

The era of global oil giants is over
Nick Butler (FT) Jul 27, 2010
A new model is emerging in which smaller national and larger international oil companies must work in new partnerships.

Just how risky are China’s housing markets?
Yongheng Deng, Joseph Gyourko & Jing Wu (VoxEU) Jul 28, 2010
Reinhart and Rogoff’s recent influential study of financial crises finds a recurring root – the country’s property markets. This column argues that a similar housing bubble may be developing in China. Urgent research is needed to determine the risk of a full blown crisis.

Lamy Reports 'New Dynamic' in Doha Talks
Bridges Weekly Trade News Digest, Volume 14, Number 28 Jul 28, 2010
A "new dynamic" has emerged in the Doha Round negotiations, the head of the WTO told trade delegates on Tuesday, delivering a rare piece of good news for the beleaguered nine-year-old talks.

Three years on, the markets are masters again
Philip Stephens (FT) Jul 29, 2010
Policymakers will tell you they have acted to remedy the mistakes that led the financial system to the brink. Yet their measures look like tinkering when set against the capacity of capital markets to wreak economic havoc.

Take central banks down a notch
Samuel Brittan (FT) Jul 29, 2010
Monetary independence became associated with – but did not necessarily cause – what was known as the Great Moderation.

Forget Jesus and ask the hedge funds
Sebastian Mallaby (FT) Jul 29, 2010
The odds of a double-dip or a bond-market rout may be equal, but bond-market trouble would have larger consequences.

Developing nations need to 'inhale' global capital
Joseph Quinlan (FT) Jul 29, 2010
Never have so many emerging markets been as flush as they are today, so investors with a long-term horizon should add selectively to their exposure.

Europe's bank stress tests: Judgment daze
Economist Jul 29, 2010
Europe's stress tests were a mixed affair. Many banks still face an uphill struggle to finance themselves.

Give the poor money
Economist Jul 29, 2010
Conditional-cash transfers are good. They could be even better.

Not entirely free, your honour
Economist Jul 29, 2010
The legal profession, like the clients it serves, is well on the way to going global—but especially in India, obstacles to its spread remain.

The rising power of the Chinese worker
Economist Jul 29, 2010
In China’s factories, pay and protest are on the rise. That is good for China, and for the world economy

Balancing China’s High Savings
Fan Gang (Project Syndicate) Jul 29, 2010
When a developing country has a high savings rate as a result of structural factors, as China does, the best strategy is not to reduce savings through dramatic exchange-rate appreciation, which may kill export industries overnight. Rather, savings should be channeled even more – and more efficiently – to domestic investment in order to avoid large external imbalances.

Africa’s Economic House Divided
Sanou Mbaye (Project Syndicate) Jul 29, 2010
Across Africa, almost all governments praise economic modernization as the cornerstone of prosperity and the yardstick by which their effectiveness should be measured. But too many African leaders have been willing to spend a fortune to equip their countries with state-of-the-art settlement systems, only then to proceed to exclude their citizens from using them.

Is the current account or the capital account driving global imbalances?
Ha Nguyen & Luis Servén (VoxEU) Jul 29, 2010
Global imbalances have taken centre stage in the debate on the global economic outlook. This column surveys the debate over the roots of global imbalances and argues that asymmetries in the supply and demand for assets, rather than goods, are responsible. With this interpretation, global imbalances are unlikely to go away any time soon.

India’s tortoise must turn on the speed
David Pilling (FT) Jul 29, 2010
Foreign direct investment, though not yet at China’s ear-popping heights, has quadrupled since 2005 to a very handy $40bn but could be more.

Bernanke must end era of ultra-low rates
Raghuram Rajan (FT) Jul 29, 2010
The market now thinks that whenever the financial sector’s actions result in unemployment, the Fed will respond with ultra-low rates and easy liquidity.

What Is a Bank Stress Test?
IMF Survey Jul 29, 2010
Unlikely but plausible scenarios identify risks; IMF stress tests countries’ banking systems; and new techniques being developed.

The Scarecrow of State Capitalism
Stephan Richter (Globalist) Jul 30, 2010
The Richter Scale examines whether state capitalism is really a scheme to paralyze free-market democracies, as some prominent analysts argue.

Global: The Big Easy
Joachim Fels (MS GEF) Jul 30, 2010
Central bankers and investors seem to believe that an accommodative stance is exactly what the doctor ordered, given the widespread fears of a triple whammy consisting of a double-dip, deflation and massive fiscal tightening. If these fears don’t materialise, as we suspect, central banks and investors are in for a rude awakening.

Fetters of gold and paper
Barry Eichengreen & Peter Temin (VoxEU) Jul 30, 2010
The world economy is experiencing tensions arising from inflexible exchange rates – particularly the dollar-renminbi peg and the Eurozone. Drawing on lessons from the gold standard, this column points out that an international monetary system is a system – nations’ policies have spillovers. Now, as in the 1930s, surplus nations’ refusals to increase spending force deficit countries to contract. Keynes drew this lesson from the Great Depression, which is why he wanted measures to deal with chronic surplus countries. Sixty-plus years later, we seem to have forgotten his point.

A Richter Scale for Markets
Eric Dash (NYT) Jul 31, 2010
Earthquakes are a better metaphor for financial crises than you think.

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