News & Commentary:

July 2012 Archives


How India Stumbled Foreign Affairs Subscription Required
Pratap Bhanu Mehta (FA) Jul 1, 2012
Just a few years ago, India seemed on the brink of becoming the world's next great power. Today, its future appears less certain. Although some have blamed the global economic recession, the real problem is domestic -- namely, the centralized, secretive, and arbitrary political culture that pervades New Delhi. Read

Europe’s Optional Catastrophe Foreign Affairs Subscription Required
Sebastian Mallaby (FA) Jul 1, 2012
If the eurozone splinters, it will have been an avoidable disaster. After all, the European Central Bank has already gone to great lengths to shore up the continent’s financial system. Now, the choice lies with Germany, which can save the monetary union if it allows for policies aimed at debt relief and growth, not just slashing deficits.

The Idea of Europe Needs to Catch Up With Reality
Pankaj Mishra (Bloomberg) Jul 1, 2012
Recently, against the sound of dominoes falling across the euro zone, I participated in a BBC radio discussion about the “Idea of Europe”: Specifically, could the notion of the continent as the home of democracy and reason survive the economic crises convulsing one country after another?

ANC urged to tackle basics Financial Times Subscription Required
Andrew England (FT) Jul 1, 2012
A lack of textbooks in one of South Africa’s provinces has raised questions about Africa’s wealthiest and most developed nation.

Financial crises in emerging markets: The impact of private sector risk
Betty C. Daniel (VoxEU) Jul 1, 2012
What causes financial crises in emerging markets? This column looks at the effect of risky investments in South Korea on the Asian financial crisis of the late 1990s.

Merkel---Just Say Nein to Eurobonds Wall Street Journal Subscription Required
Matt Will (WSJ) Jul 1, 2012
If Germany pays for the financial profligacy of other nations, Europe's government bubble will only grow.

The Return of the Protectionist Illusion Wall Street Journal Subscription Required
Douglas Irwin (WSJ) Jul 1, 2012
Trade barriers once again threaten the global economy, and the U.S. isn't helping.

Africa on the Rise New York Times Subscription Required
Nicholas D. Kristof (NYT) Jul 1, 2012
This year's win-a-trip voyage with a Rice University student begins in Lesotho, a nation symbolic of a continent's promise.

Europe's Great Illusion New York Times Subscription Required
Paul Krugman (NYT) Jul 1, 2012
One scenario says that European leaders will, in the end, do whatever it takes to prevent disaster. But that's been said before.

How Busted Is Brazil?
Shannon K. O'Neil, Richard Lapper, Larry Rohter, Ronaldo Lemos and Ruchir Sharma (FA) Jul 1, 2012
Brazil's rise never depended on the sale of commodities, and thanks to recent reforms, the country will continue to prosper, write Shannon O'Neil, Richard Lapper, and Larry Rohter. Ronaldo Lemos, meanwhile, claims that those reforms have not gone far enough. Ruchir Sharma responds that Brazil is indeed headed for trouble.

Why the EU summit decisions may destabilise government bond markets
Paul De Grauwe (VoxEU) Jul 2, 2012
Among the questions still remaining since last week’s summit of European leaders is whether the new measures will stabilise government bond markets. This column’s answer is ‘no’.

The (other) deleveraging: What economists need to know about the modern money creation process
Manmohan Singh & Peter Stella (VoxEU) Jul 2, 2012
The world of credit creation has shifted over recent years. This column argues this shift is more profound than is commonly understood. It describes the private credit creation process, explains how the ‘money multiplier’ depends upon inter-bank trust, and discusses the implications for monetary policy.

The Other Mexico
Andres Velasco (Project Syndicate) Jul 2, 2012
With the Partido Revolucionario Institucional (PRI), which governed Mexico for seven decades, set to return to power, one might be tempted to conclude that little has changed in Mexico. In fact, Mexico today is a vastly different country from what it was under the PRI old guard.

A Banking Union Baby Step
Daniel Gros (Project Syndicate) Jul 2, 2012
Europe’s leaders finally recognized the need to centralize banking supervision, with the ECB taking over responsibility. But, while putting the ECB in charge of banking supervision solves one problem, it creates another: can national authorities still be held responsible for saving banks that they no longer supervise?

Will Europe Be Willing but Disabled?
Mohamed A. El-Erian (Project Syndicate) Jul 2, 2012
The eurozone crisis might break European leaders’ inherent resistance to compromise, collaboration, and common action. But the longer they bicker and dither, the greater the risk that what they gain in willingness will be lost to incapacity.

From Physical BRICS to Digital CHIIPs
John McArthur (Brookings) Jul 2, 2012
Since 2008, the number of Internet users around the world has grown by 40 percent, with the CHIIPs (China, India, Indonesia and the Philippines) accounting for more than half of these 663 million new users. This increase in global Internet usage is radically transforming today’s global economy.

Monti must choose tunnel or crossroads Financial Times Subscription Required
Guy Dinmore (FT) Jul 2, 2012
With politicians already manoeuvring for general elections, Mario Monti has a tough task to secure the backing he needs in parliament.

Slouching Toward Debt Union Wall Street Journal Subscription Required
WSJ Jul 2, 2012
Germans commit more money for less economic reform.

The Mexican Miracle Wall Street Journal Subscription Required
Brett Stephens (WSJ) Jul 2, 2012
Never mind the drug war. Sunday's election shows how far the country has come.

The Euro's Last Chance? New York Times Subscription Required
NYT Jul 2, 2012
What if those countries that continue to be run on nonsensical fiscal principles need yet another bailout and Germany isn't there?

To Secede or Not to Secede: The Case of Europe
Pankaj Ghemawat (Globalist) Jul 2, 2012
According to one analyst, Europe could see as many as ten new countries formed during the 21st century. These independence movements are banking on the idea that globalization means that national borders are no longer an impediment to trade — thereby minimizing the economic cost of secession. These would-be secessionists should look again at the economic data.

What Greece Makes, the World Might Take New York Times Subscription Required
Adam Davidson (NYT) Jul 3, 2012
Olive oil and feta cheese could be transformational export industries.

Cumulative innovation and market value: Evidence from patent citations
Sharon Belenzon (VoxEU) Jul 3, 2012
According to the received wisdom, innovation is the heart-and-soul of modern growth but incentives to innovate are prone to the free-rider problem. This column partly supports that view. Looking at over 1,000 US companies it shows that internal citations of a firm's patents have a positive effect on market value while external citations have a negative effect.

The Terrible Cost of Inaction in Europe
Edwin M. Truman (PIIE) Jul 2, 2012
European leaders met on June 28-29 for the 19th time since the euro area debt crisis broke in early 2010. Once again, the leaders took decisions to do what is necessary to prevent a full-scale collapse of the euro area economy and financial system.

The Euro’s Latest Reprieve
Joseph E. Stiglitz (Project Syndicate) Jul 3, 2012
Like an inmate on death row, the euro has received another last-minute stay of execution. The markets are celebrating, as they have after each of the many “euro crisis” summits – until they come to understand that the fundamental problems have yet to be addressed.

Russia: Eyes on the prize Financial Times Subscription Required
Catherine Belton (FT) Jul 3, 2012
In the run-up to a state sell-off that could prove the biggest since the 1990s, a once obscure trading group’s appetite for assets raises questions, writes Catherine Belton

A step at last in the right direction Financial Times Subscription Required
Martin Wolf (FT) Jul 3, 2012
The most important positive element is the movement towards breaking the mutually destructive links between banks and sovereigns.

China's Numbers Game New York Times Subscription Required
Qiao Yu (NYT) Jul 3, 2012
Chinese officials must give honest accounts of their official expenses.

Eurozone Heaves Sigh of Relief – For How Long?
Jean-Pierre Lehmann (YaleGlobal) Jul 3, 2012
Existential danger remains as no leader offers a vision for a united Europe.

Eurozone meltdown: IMF providing "political cover"
Bretton Woods Update No. 81 Jul 3, 2012
As European elections show the public increasingly rejecting austerity, critics call on the IMF to focus on the flaws of the eurozone rather than austerity in country programmes.

IMF contribution without representation?
Bretton Woods Update No. 81 Jul 3, 2012
While the IMF has been promised another $456 billion to add to its coffers, large emerging markets are conditioning their contributions on governance reforms. Meanwhile, activists are calling for deeper changes in the way international institutions are governed

Access for the poor? World Bank's infrastructure approach under increased scrutiny
Bretton Woods Update No. 81 Jul 3, 2012
As the G20 and the World Bank continue their push for increased investment in large-scale public-private led infrastructure projects, further scrutiny of the Bank's track record puts its strategy in question.

Europe's Abysmal Crisis Management
Clive Crook (Bloomberg) Jul 4, 2012
I don’t share financial markets’ enthusiasm for the European Union’s latest moves to stabilize the euro area, and I don’t expect the thrill to last long. Sure, last week’s summit made some progress: It wasn’t quite stasis as usual. Yet one thing hasn’t changed: EU governments keep making the same basic error.

Deep integration in free trade agreements in China and India
Ganeshan Wignaraja (VoxEU) Jul 4, 2012
With little end in sight for the Doha Round of trade talks, this column argues that China and India are only going to pursue more free trade agreements. It asks what can be done to make sure these agreements lead to deeper integration between these countries and the rest of the world.

Europe’s Winners and Losers
Joschka Fischer (Project Syndicate) Jul 4, 2012
Rarely is a high-flying country brought back down to earth in a single night, but that is precisely what happened to Germany recently. In both football and politics, the country had come to embody an unseemly mixture of arrogance and denial – a product of national self-deception that could not be sustained.

Will Governmental Folly Now Allow for a Cyber Crisis?
Kenneth Rogoff (Project Syndicate) Jul 4, 2012
When the financial crisis of 2008 hit, many shocked critics asked why markets, regulators, and financial experts failed to see it coming. Today, one might ask the same question about the global economy’s vulnerability to cyber-attack; indeed, the parallels between financial crises and the threat of cyber meltdowns are striking.

The Crises of Summer
Harold James (Project Syndicate) Jul 4, 2012
Summer crises are a familiar feature of European history – and of financial history. Often, addressing some technical issue was not enough to resolve a major political problem, which is true today as well, with Europe’s current crisis reflecting exactly the same mixture of elements, each requiring a very different type of solution.

European Parliament Rejects Anti-Counterfeiting Pact
Bridges Weekly Trade News Digest, Volume 16, Number 26 Jul 4, 2012
In a landmark decision earlier today, the European Parliament rejected the controversial Anti-Counterfeiting Trade Agreement (ACTA) by a vast majority, with 478 votes against the deal, 39 in favour, and 165 abstentions.

WTO Appellate Body Confirms US Country of Origin Label Illegal
Bridges Weekly Trade News Digest, Volume 16, Number 26 Jul 4, 2012
The US' country-of-origin labelling (COOL) requirements for livestock and meat imports are inconsistent with international trade rules, the WTO's highest court said on Friday (DS384, 386). The highly-anticipated ruling, which stemmed from a dispute launched by Canada and Mexico in 2008, found that the US measure put foreign products at a disadvantage by making the processing of imported livestock prohibitively costly. The judges, however, disagreed that the measure was also more trade restrictive than necessary to achieve the legitimate objective of consumer information.

WTO Sub-Committee Clinches Preliminary Deal on Accession Guidelines for Poorest Countries
Bridges Weekly Trade News Digest, Volume 16, Number 26 Jul 4, 2012
WTO members have reached a preliminary agreement updating the accession guidelines for least developed countries (LDCs), according to Geneva-based delegates. The 29 June draft recommendations, prepared by the LDC Sub-Committee, were reportedly still awaiting formal approval from some member capitals as Bridges went to press on Wednesday evening; if and when the confirmation is received, the guidelines will be forwarded to the General Council - the WTO's highest decision-making body outside of the ministerial conference - for adoption later this month.

Political Controversy in Paraguay Prompts Reshuffling of Mercosur Membership
Bridges Weekly Trade News Digest, Volume 16, Number 26 Jul 4, 2012
South American customs bloc Mercosur will see Venezuela join as a full member by the end of this month, and has temporarily suspended current member Paraguay from the grouping in the wake of President Fernando Lugo's impeachment in late June. During their presidential summit last week, the bloc also decided against raising its common external tariff, while declaring - together with Beijing - a goal to double Mercosur-China trade by 2016.

Build-up of Trade Restrictions "A Matter of Concern," Lamy Warn
Bridges Weekly Trade News Digest, Volume 16, Number 26 Jul 4, 2012
The imposition of trade-restrictive measures by WTO members has continued virtually unabated over the last seven months, according to a new report issued last week by WTO Director-General Pascal Lamy, prompting concern that governments are continuing to look toward protectionist measures as a means of strengthening domestic economies.

Trading floor culture no longer acceptable Financial Times Subscription Required
John Gapper (FT) Jul 4, 2012
Trading is now being subjected to higher capital standards. But it would take a fierce assault to have much impact.

Enough is enough of the age of consumption Financial Times Subscription Required
Robert and Edward Skidelsky (FT) Jul 4, 2012
There is something called the good life – and there are policies we can take to nudge us off the consumption treadmill.

Libor, the universe and everything Financial Times Subscription Required
Robert Shrimsley (FT) Jul 4, 2012
The Barclays affair, the god particle and the eurozone crisis – a handy guide to the complex issues dominating the news.

It’s time to bring ‘dark pools’ into the daylight Financial Times Subscription Required
Duncan L. Niederauer (FT) Jul 4, 2012
There should be more market transparency and that fairly implemented regulation need not be burdensome.

Monetary Policy and the Next Crisis Wall Street Journal Subscription Required
John B. Taylor (WSJ) Jul 4, 2012
Low interest rates and international capital flows, not a 'saving glut,' were to blame for the 2008 crash.

Europe's Morass, America's Fiscal Cliff New York Times Subscription Required
David Gordon (NYT) Jul 4, 2012
Both are in bad shape, but the euro zone's financial risks are exponentially higher than America's political ones.

Doughnuts Defeating Poverty New York Times Subscription Required
Nicholas D. Kristof (NYT) Jul 4, 2012
A family in Malawi is a great example of how a little structured saving and entrepreneurship can change lives. Just look at what Biti Rose did with fritters.

Power sharing and institutional stability
Bernardo Guimaraes & Kevin D Sheedy (VoxEU) Jul 5, 2012
Institutions are a key determinant of economic development and indeed many developing institutions are deeply dysfunctional. This column presents a new model suggesting that those in power may prefer to keep bad institutions despite their anti-development effects since they alllow the elite to grab a bigger slice of a smaller pie.

Devaluing the Pound Isn't a Solution, It's Default
Gordon Kerr (Bloomberg) Jul 5, 2012
The opinions expressed are his own.) Read more opinion online from Bloomberg View. Subscribe to receive a daily e-mail highlighting new View editorials, columns and op-ed articles. Today's highlights: the editors on U.S. funding for Unesco and on states' ...

What Euro Crisis?
Norbert Walter (Project Syndicate) Jul 5, 2012
Crises are usually defined by sustained economic decline, high and long-term unemployment, poverty, rampant inflation, a precipitous fall in the exchange rate, fiscal deficits, high borrowing costs, and political dysfunction. But only a handful of "misery indices" are present in Europe today, and in only a few eurozone countries.

Global Health Solidarity at a Crossroads
Agnes Binagwaho (Project Syndicate) Jul 5, 2012
Since its launch in 2002, the Global Fund to Fight AIDS, Tuberculosis, and Malaria has quite literally changed the course of history, helping to save nearly eight million lives. But much more remains to be done – and the Fund needs at least $2 billion to reverse a funding freeze in place through 2014.

The fight against crony capitalism Financial Times Subscription Required
Samuel Brittan (FT) Jul 5, 2012
The biggest obstacle to financial and political reform is that insiders can devote time and energy to maintaining their position.

American history lessons for the eurozone Financial Times Subscription Required
Michael Lind (FT) Jul 5, 2012
The US example suggests that the largest EU economies might act as both lender and consumer of last resort.

Five reasons the summer curse may strike Financial Times Subscription Required
Gillian Tett (FT) Jul 5, 2012
Though all seems calm in the financial markets, the hot months often bring problems and this year several thorny issues are threatening to collide.

Barclays Corrupts Libor and Maybe a Lot More
Jonathan Weil (Bloomberg) Jul 6, 2012
A proper reckoning for the industry has been a long time coming.

Internal adjustment of the real exchange rate: Does it work?
Zsolt Darvas (VoxEU) Jul 6, 2012
The forefathers of Europe’s single currency argued that rather than devalue their currencies to restore competitiveness, countries could devalue ‘internally’. Against the current of bad press, this column presents a novel way of recording competitiveness and argues that Ireland, Spain, Latvia, and Lithuania have all managed these adjustments – but not without paying a huge toll in jobs lost.

Euro Zone Nations Wrestle With a 'Trilemma' New York Times Subscription Required
Stephen Castle (NYT) Jul 6, 2012
The trilemma theory says that in addressing a crisis, member states can have only two of three things: deep economic integration, democratic politics and autonomy as nation-states.

Lies, Damn Lies and Libor Wall Street Journal Subscription Required
Holman W. Jenkins (WSJ) Jul 6, 2012
Call it one more improvisation in 'too big to fail' crisis management.

The Bell Tolls for India’s Congress Party
Jagdish Bhagwati & Arvind Panagariya (Project Syndicate) Jul 8, 2012
There is widespread belief in India today that one of the country's two main political parties, the Indian National Congress, has now run its course and will sink into oblivion. Unlike past predictions of the Congress's inevitable demise, this time the forecast of fatal decline is probably right.

EZ Banking Union: Who pays for past mistakes?
Daniel Gros (VoxEU) Jul 7, 2012
The EZ crisis – born as a debt crisis (Greece) – has grown up into a banking crisis (Ireland, Cyprus, Spain, …). This column argues that Spain is symptomatic of larger banking problems, so the EU Summit decisions on banking union are welcome and critical to any long-term solution. Yet someone must pay for Spanish bank losses. Spanish politics is shielding Spanish creditors, European politics is shielding EZ taxpayers, so the Spanish government will pay – and in doing so may go the way of Ireland. This crisis is far from over.

Banks' Living Wills Don't Defuse Systemic Risk
Simon Johnson (Bloomberg) Jul 8, 2012
On July 3, the Federal Deposit Insurance Corp. and the Federal Reserve made public portions of the “living wills” developed recently by major U.S. financial institutions. The documents are the first suggestions from those organizations of what they believe should happen when insolvency looms.

Asian Values Offer No Special Sauce for Europe
Pankaj Mishra (Bloomberg) Jul 8, 2012
The economic misfortunes of Europe and America have inspired glee among some Asian leaders and commentators, especially those who champion “Asian values.” Exhorting Myanmar’s Aung San Suu Kyi to learn from resurgent Asia rather than decrepit Europe, Kishore Mahbubani, the Singaporean diplomat-turned-pundit, pointed out recently how “quiet Asian pragmatism continues to deliver steady economic growth while Europe languishes.”

Companies must join the eurozone debate Financial Times Subscription Required
Nick Butler (FT) Jul 8, 2012
Perhaps now, as the consequences of disintegration start to become clearer, businesses will rediscover their political voice.

Correlation will lead to opportunities Financial Times Subscription Required
John Authers (FT) Jul 8, 2012
Less equities diversification implies markets are ignoring fundamentals, but there are gains once economic risks recede.

Policies to harness the power of natural resources
Rabah Arezki, Thorvaldur Gylfason & Amadou Sy (VoxEU) Jul 8, 2012
The presence of natural resources poses a number of potential economic challenges, especially for developing countries. This column argues resource-rich countries need to look beyond the so-called resource curse and put into action innovative policies and institutions to confront their many challenges and reap the benefits of widely shared natural-resource wealth.

The curse of advanced economies in resolving banking crises
Luc Laeven & Fabian Valencia (VoxEU) Jul 9, 2012
Do advanced economies have an edge in resolving financial crises? This column shows that the record thus far supports the opposite view, with the average crisis lasting about twice as long as in developing and emerging market economies. It argues that macroeconomic stabilisation policies in advanced countries often delay the necessary financial restructuring.

Free Trade: The Litmus Test of Economics
Gary North (Mises Daily) Jul 9, 2012
Free trade is the litmus test of economic reasoning. It has been ever since David Hume wrote his 1752 essay on commerce:

Understanding the LIBOR Scandal
Juan Carlos Martinez Oliva (PIIE) Jul 9, 2012
The Barclays scandal over manipulation of the LIBOR (an acronym which stands for London InterBank Offered Rate) has put this important monetary indicator in the spotlight in recent days. The LIBOR rate may not be well known to people outside the financial sector, but it affects most people’s lives directly or indirectly, underpinning hundreds of trillions of dollars in transactions across the globe. It represents the primary benchmark index for pricing a large variety of consumer and corporate loans, debt instruments, and debt securities. It also represents the reference indicator for settlement of interest rate contracts on many of the world’s major futures and options exchanges. It is mentioned in standard derivative and loan documentation, and is used for an increasing range of such retail products as mortgages and college loans. More broadly it can also be viewed as an indicator of banking conditions, and of market expectations for central banks’ monetary stance. Following the Barclays revelations, it is therefore imperative that a review be undertaken aimed at fixing the mechanism of LIBOR and protecting it from manipulation. A thorough study of regulatory issues associated with LIBOR is also important to prevent future failures in the regulatory supervision of wholesale conduct.

The End Of China’s Economic Miracle
Minxin Pei (Newsweek) Jul 9, 2012
China has prospered From double-digit growth—but the bubble is about to burst.

Brazil: After the carnival Financial Times Subscription Required
Joe Leahy (FT) Jul 9, 2012
South America’s biggest economy has slowed to a crawl, pushing Brazilians into a debate on whether to embrace a state-led economic model.

Vickers is not enough to stop another Libor scandal Financial Times Subscription Required
Laurence Kotlikoff (FT) Jul 9, 2012
The report fails to identify the root causes of the financial crisis, which were opacity and leverage.

Beware the cries of the revolutionaries Financial Times Subscription Required
Martin Jacomb (FT) Jul 9, 2012
The fact is that all banking involves risk. The real problem with contemporary banking is moral hazard – not size.

Reporting agencies should accept oversight Financial Times Subscription Required
Tom Braithwaite (FT) Jul 9, 2012
The numbers published by agencies which report commodity prices are just as subject to manipulation as Libor.

Why the SNB will keep its grip on the franc Financial Times Subscription Required
Mansoor Mohi-uddin (FT) Jul 9, 2012
The Swiss central bank will face major losses on its SFr300bn of foreign asset holdings if it abandons its target for the currency.

EU banking union disunites German economists
Urs Birchler & Monika Bütler (VoxEU) Jul 10, 2012
Plans for an EZ banking union have been subjected to ‘dueling open letters’ by German-speaking economists. This column, by two Swiss-based economists, views the letters as closer than one thinks. The difference rests, not on economics, but on a judgement – will the the EU Summit’s promises be fulfilled, or is this one more instance of ever-larger dollops of euros and ever-emptier buzzwords?

Quantifying the ‘new’ gains from trade: Evidence from the EU
Gregory Corcos, Massimo Del Gatto, Giordano Mion &Gianmarco I.P. Ottaviano (VoxEU) Jul 10, 2012
As protectionist pressures mount worldwide, it is important to continue to shore up the case for open trade policy. This column presents new evidence from Europe on an old gain from trade – the weeding out effect – namely the way increased cross-border competition selects and favours the most productive firms. It argues that this mechanism brings about large gains.

Rise of the global tax collectors
Richard Rahn (WT) Jul 9, 2012
The Constitution gives Congress the exclusive right to tax Americans at the federal level. Yet Congress continues to give away this most fundamental responsibility to international organizations, the most dangerous of which is the Paris-based Organization for Economic Cooperation and Development (OECD).

Europe’s Divided Visionaries
Barry Eichengreen (Project Syndicate) Jul 10, 2012
Europe’s leaders now agree on a vision of what the EU should become: an economic and monetary union complemented by a banking union, a fiscal union, and a political union. The trouble starts as soon as the discussion moves on to how – and especially when – the last three should be established.

Is Inequality Inhibiting Growth?
Raghuram Rajan (Project Syndicate) Jul 10, 2012
As a reformed Europe starts growing, parts of it might experience US-style inequality. But Europe would be far worse off if it were to avoid serious reform and lapse, Japan-like, into egalitarian and genteel decline.
Europe’s leaders now agree on a vision of what the EU should become: an economic and monetary union complemented by a banking union, a fiscal union, and a political union. The trouble starts as soon as the discussion moves on to how – and especially when – the last three should be established.

Lies, Damn Lies and LIBOR
London Banker Jul 10, 2012
I've been hesitant to write about the LIBOR scandal because what I want to say goes so much further. We now know that Barclays and other major global banks have been manipulating the calculation of LIBOR through the quotation data they provided to the British Bankers Association. What I suspect is that this is not a flaw but a feature of modern financial markets. And if it was happening in LIBOR for between 5 and 15 years, then the business model has been profitably replicated to many other quotation-based reference prices.
Europe’s leaders now agree on a vision of what the EU should become: an economic and monetary union complemented by a banking union, a fiscal union, and a political union. The trouble starts as soon as the discussion moves on to how – and especially when – the last three should be established.

Libor Demystified Wall Street Journal Subscription Required
WSJ Jul 10, 2012
The Bank of England's No. 2 puts the minor scandal in context.

China's Coming Economic Transformation Wall Street Journal Subscription Required
Andrew Batson (WSJ) Jul 10, 2012
Consumer spending will play a bigger role as growth in fixed capital formation slows.

Living Cells Show How to Fix the Financial System
Mark Buchanan (Bloomberg) Jul 10, 2012
Over the past three decades, the global financial system has become more dynamic and interconnected, more concentrated and complicated than ever before. Financial engineering seems to know no limits to creating new instruments that link institutions in new ways. Is that a good thing? Or could the resulting financial network be too complex? Or, perhaps, complex in the wrong way?

We still have that sinking feeling Financial Times Subscription Required
Martin Wolf (FT) Jul 10, 2012
Far too much policy making and advice neither recognises the post-crisis challenges nor crafts effective answers.

Unleash the power of equity finance Financial Times Subscription Required
Xavier Rolet (FT) Jul 10, 2012
Recently this funding ladder has been undermined by an over-reliance on debt, a tool that is heavily subsidised and more lightly regulated than equity

Structural reforms and regional convergence: Pointers for the Eurozone
Natasha Xingyuan Che & Antonio Spilimbergo (VoxEU) Jul 11, 2012
A major cause of the Eurozone crisis is the difference in income and productivity between the core and the periphery. This column presents evidence suggesting that structural reforms can be instrumental in fostering the development of lagging regions within a country. It argues that this in turn can accelerate the rate of convergence across countries within a currency union.

Obama’s China Card?
Malcolm Fraser (Project Syndicate) Jul 11, 2012
With America's economy sputtering, Obama and others in his administration might well be seeking non-economic issues to energize his campaign. National-security problems in general, and the challenge posed by China in particular, may be shaping up as just such issues.

The New Global Economy’s (Relative) Winners
Dani Rodrik (Project Syndicate) Jul 11, 2012
The world economy faces considerable uncertainty in the short term. But, regardless of how the immediate challenges are resolved, a difficult longer-term phase is at hand, and it will be substantially less hospitable to economic growth than possibly any other period since the end of World War II.

Energy Independence in an Interdependent World
Joseph S. Nye (Project Syndicate) Jul 11, 2012
By the end of this decade, nearly half of the crude oil that the US consumes will be produced at home, while 82% will come from its side of the Atlantic. Pure independence is a chimera, but a balance of energy imports and exports does promise to alter the power relations involved in energy interdependence.

Why Europeans should love banking union Financial Times Subscription Required
Martin Sandbu (FT) Jul 11, 2012
Berlin’s ‘concession’ is the victory of having the eurozone bail out the savers of its most powerful member.

The irony of the BoE’s role in Libor mess Financial Times Subscription Required
Chris Giles (FT) Jul 11, 2012
Had ministers attempted to strong-arm banks into falsifying their interest rate quotes, it would have been understandable.

Current debt crisis merely a warm-up act Financial Times Subscription Required
Jamil Baz (FT) Jul 11, 2012
Politicians fail to acknowledge the elephant in the room, namely leverage, introducing instead a succession of policy gimmicks.

China's Optimistic Economy New York Times Subscription Required
Steven Rattner (NYT) Jul 11, 2012
China's economy still pulsates with the confidence of its growing entrepreneurial spirit.

Rio+20 Was a Bust
Yilmaz Arguden (Globalist) Jul 11, 2012
What really needs to be on the agendas of meetings such as the recently-concluded Rio+20 Earth Summit — if they are to result in credible, sustained action on pressing environmental and development issues.

Trans-Pacific Talks Push Forward in San Diego
Bridges Weekly Trade News Digest, Volume 16, Number 27 Jul 11, 2012
The thirteenth round of negotiations for the proposed Trans-Pacific Partnership (TPP) Agreement came to a close yesterday, with reports of “progress” in various negotiating areas; however, trade observers note that time is running short for members to meet their current year-end goal for concluding the talks. Meanwhile, Canada and Mexico continue to await their formal entry into the discussions, as the current nine members undertake the required domestic legal steps for bringing in new parties

China Blocks EU, US, Japan Request for WTO Dispute Panel on Rare Earths
Bridges Weekly Trade News Digest, Volume 16, Number 27 Jul 11, 2012
The EU, US, and Japan have taken the next step in their dispute with China over the latter’s export restrictions on rare earths, formally requesting the establishment of a dispute panel at Tuesday’s WTO Dispute Settlement Body (DSB) meeting. While the request was rejected by Beijing, trade experts expect a second panel request to be made later this month.

Services Liberalisation Talks Among Group of WTO Members to Enter "New Phase"
Bridges Weekly Trade News Digest, Volume 16, Number 27 Jul 11, 2012
A group of WTO members involved in talks on a potential services liberalisation agreement have announced that their discussions are ready to enter a “new phase,” according to a joint statement released last week, with work set to “intensify” once members return to Geneva following the August recess.

Russian Duma Ratifies WTO Accession Accord
Bridges Weekly Trade News Digest, Volume 16, Number 27 Jul 11, 2012
Russian lawmakers in the lower house of Parliament ratified Moscow’s WTO accession protocol on Tuesday, bringing the world’s largest economy outside the WTO one step closer toward becoming the global trade body’s 156th member.

A General Theory of the LIBOR Outrage Deficit
Noam Scheiber (New Republic) Jul 11, 2012
A number of commentators have wondered why the rigging of LIBOR—the most widely used interest-rate in the world—hasn’t caused the uproar in this country that it’s provoked in Britain. The easy answer is that no U.S. bank has fessed up or been outed over its role in manipulating LIBOR, unlike in Britain, where Barclays has agreed to pay nearly half a billion dollars in fines and fired its top three executives.

The East Asian Miracle Revisited
Andrew Sheng & Geng Xiao (Project Syndicate) Jul 12, 2012
Almost two decades ago, the World Bank published its landmark study “The East Asian Miracle,” analyzing why East Asian economies grew faster than emerging markets in Latin America, Africa, and elsewhere. But it is necessary to re-assess economists' focus on these countries' formal rules and governance structures.

Revolutionizing Arab Economies
Sinan Ulgen (Project Syndicate) Jul 12, 2012
The ongoing political standoff in Egypt between the country’s Islamists and its military rulers is a clear reminder of how difficult democratic transitions in the Arab world are likely to be. But the resulting economic inaction would be just as damaging to the consolidation of democratic rule.

The Predicaments of Chinese Power New York Times Subscription Required
Minghao Zhao (NYT) Jul 12, 2012
China and the world have to learn how to safely manage a powerful new player.

Foreigners vs. natives: Bank lending and loan pricing
Thorsten Beck, Vasso P. Ioannidou & Larissa Schäfer (VoxEU) Jul 13, 2012
Financial aspects of the global crisis and the rolling bank scandals have led many to think again about their reliance on foreign banks. This column presents evidence that foreign banks do act differently. Among other things, they charge lower interest rates, but provide loans for shorter maturities, and are more likely to demand collateral.

A global fight against unsafe drugs
Roger Bate (WP) Jul 12, 2012
Inferior medicines threaten the short-and long-term health of the world’s poor.

Emerging Economies – Rich And Confident
Bruce Stokes (YaleGlobal) Jul 12, 2012
Pew survey suggests that optimism of the emerging economies could help spur global growth.

Debunking The Global Savings Glut Theory
Richard Duncan (Globalist) Jul 12, 2012
Ben Bernanke's theory that the United States was the victim of an excess of foreign savings is wrong. It wasn't excess savings that caused the economic calamity of the 2000s, it was money printed by countries' central banks — with U.S. approval.

Orphan Ideas
Luigi Zingales (Project Syndicate) Jul 13, 2012
When it comes to political influence, money is not everything: ideas play a big role, too. But new ideas, like new drugs, have to pay their way, which means that how widely an idea is diffused depends to a large extent on how much money is at stake.

India’s Frugal Dynamism
Shashi Tharoor (Project Syndicate) Jul 13, 2012
India’s sliding economy has inspired gloom and doom far and wide, but increasingly bearish sentiment is misplaced. India still offers hope, but, to understand why, you have to leave macroeconomic indicators aside and go micro.

Green Domestic Product?
Bjørn Lomborg (Project Syndicate) Jul 13, 2012
One of the recurrent themes at the UN's spectacularly unsuccessful Rio+20 summit in June was the need to change how we measure wealth. But, while many argue that we must abandon our “obsession” with GDP and develop a new “green” accounting standard to replace it, doing so would be a serious mistake.

The LIBOR Mess
Robert Shapiro (Globalist) Jul 13, 2012
If U.S. financial regulatory policies were based on recent experience — such as the admission by Barclays Bank that it secretly manipulated LIBOR rates for years — the debate over government regulation versus self-regulation by Wall Street would be over by now. Yet a childlike faith that the big banks know best remains the default position of most conservatives and many policymakers.

Why so many financial crises?
John H. Makin (AEI) Jul 13, 2012
The global economy is facing three major challenges: US growth slowing to a near-zero rate, declining exports and a weakening economy in Europe, and sluggish Chinese growth. The current pattern of weak recoveries and rolling financial crises can be seen in economic meltdowns in China and Japan in the 1980s and '90s that led to overinvestment in risky assets and a transition from wealth enhancement to wealth preservation. These boom-and-bust examples from Asia show that suppressing currency adjustment can lead to asset bubbles and financial crises; we must find other ways to return the global economy to equilibrium.

The golden rules of banking Economist Subscription Required
Economist Jul 14, 2012
They make the rules, and get the gold.

Antidumping as cooperation
Chad P Bown & Meredith Crowley (VoxEU) Jul 14, 2012
Antidumping tends to get no respect from economists. Many view the most popular import restriction among industrialised and middle-income economies today as politically-biased protectionism hiding behind the rhetoric of fair trade. This column challenges long-held perceptions by reinterpreting antidumping import restrictions as the grease that keeps the wheels of the liberal world trading system turning.

Welcome to the new world of American energy Financial Times Subscription Required
Edward Luce (FT) Jul 15, 2012
From consumer to producer, analysts talk of the US turning into the world’s new Saudi Arabia by 2020.

Land of opportunity can fight inequality Financial Times Subscription Required
Lawrence Summers (FT) Jul 15, 2012
The leading universities must undertake the same commitment to economic diversity as they have towards racial diversity.

Make banks pay if they cheat on Libor Financial Times Subscription Required
Frank Partnoy (FT) Jul 15, 2012
A new rule should require the bank submitting the lowest Libor estimate to lend, say, $1bn at its submitted low rate.

How Europe Can Create Jobs Wall Street Journal Subscription Required
WSJ Jul 15, 2012
The case study of Spain's labor market.

In Mongolia's Boom Town, Hope and Fear New York Times Subscription Required
Dan Levin (NYT) Jul 15, 2012
Development of its mining sector has brought new wealth to this remote, landlocked country, but also concerns about corruption and materialism.

China: The road to nowhere Financial Times Subscription Required
Simon Rabinovitch (FT) Jul 16, 2012
Fears that excessive investment is heightening the danger of a sharp slowdown are fuelling debate about whether Beijing should apply the brakes to growth.

US dollar is no haven from the eurozone Financial Times Subscription Required
Axel Merk (FT) Jul 16, 2012
This crisis will not end as long as debt is merely shuffled around and a credible strategy must be in place for investors to regain confidence.

China's Version of 'Too Big to Fail'
Andy Xie (Caixin) Jul 16, 2012
Western-style finance has lost credibility in recent years, but some aspects of this country's financial system are cause for concern.

The shifting geography of global value chains: Implications for developing countries and trade policy
Peter Draper (VoxEU) Jul 16, 2012
Fundamental changes to global value chains are afoot. This column argues that over the next decade the underlying cost structures driving their location could change dramatically. It presents a recent report on the political economy of value chains and the implications for developing countries and trade policy.

The U.S. will be lost without LOST
Scott Borgerson, Vern Clark, Bill Cohen and Jim Loy and John Negroponte (WT) Jul 16, 2012
The 1982 Convention on the Law of the Sea — the instrument that created the overarching governance framework for nearly three-quarters of the Earth’s surface and what lies above and beneath it — has been signed and ratified by 161 countries, but not by the United States.

The first global services trade restrictions database
Ingo Borchert, Batshur Gootiiz & Aaditya Mattoo (VoxEU) Jul 17, 2012
Trade in services is a substantial yet poorly understand area of international trade. This column aims to fill part of the gap. It presents a new database on services trade across over 100 countries in nearly 20 sectors.

How Power Really Works in the 21st Century: Beyond Soft, Hard & Smart
Amy Zalman (Globalist) Jul 17, 2012
The now ubiquitous concept of "soft power" has outlived its usefulness in international affairs. It is time for a new understanding of political power that reflects 21st-century realities. Global thinkers must stop putting everything that happens in the world today into convenient, but misleading boxes.

Dr Frankenstein's LIBORatory
Spengler (AT) Jul 17, 2012
US Justice Department plans to prosecute banks for manipulating the London Interbank Offered Rate ignore that rigging the rate downward meant less income for the banks and lower interest payments for homeowners with adjustable-rate mortgages. By criminalizing rule-bending sanctioned during a crisis rather than tackling real fraud, Washington has indulged in pure political grandstanding.

How a Medieval Friar Forever Changed Finance
Jane Gleeson-White (Bloomberg) Jul 17, 2012
Consider some headlines from the past week. China announced its gross domestic product had slowed to a three-year low of 7.6 percent in the latest quarter. The International Monetary Fund cut its global growth forecasts to 3.9 percent for 2013. And Citigroup Inc. announced its net income was down 12 percent.

Tradable Prosperity
Michael Spence (Project Syndicate) Jul 17, 2012
All countries cannot gain a greater share of global aggregate demand at the same time. But what may look like a zero-sum game is not: if countries increase productivity with the aim of boosting their tradable sectors' relative productivity and growth potential, this will increase incomes and accelerate growth in global demand.

Privatizing the Gulf
Naël Shehadeh (Project Syndicate) Jul 17, 2012
As uncertainty about the Arab Spring persists, and with discontent rising at home, the Gulf states are taking measures to stem the tide of revolution. But, in order to achieve sustainable long-term growth, Gulf leaders must stop focusing on public-sector expansion and begin stimulating private-sector growth.

China’s financial slow boat speeding up Financial Times Subscription Required
Simon Rabinovitch (FT) Jul 17, 2012
Powerful market forces are propelling country towards a smaller banking sector more quickly than intended, creating new, dangerous risks in their wake.

Tricky lessons for the players in Liborgate Financial Times Subscription Required
John Plender (FT) Jul 17, 2012
Rigging rekindles governance questions, yet case offers tricky generalisations, with only certainty being that bank behemoths are uncontrollable.

Economic Gloom in Europe Barely Touches Poland New York Times Subscription Required
Nicholas Kulish (NYT) Jul 17, 2012
Poland's economy was the only one that did not shrink in 2009, the year the financial crisis hit hardest. Now, austerity measures in Europe threaten to crimp the country's growth.

The World as a Fishbowl
Li Congjun (NYT) Jul 17, 2012
It is crucial for the United States and China to strengthen cooperation with each other in trade, investment, finance, infrastructure, technology and other fields.

Finance’s Crisis of Legitimacy
Simon Johnson (Project Syndicate) Jul 18, 2012
The recent departure of Robert Diamond from Barclays marks a watershed: the big showdowns between democracy and big bankers are still to come – both in the US and in continental Europe. On the surface, the banks remain powerful, yet their legitimacy continues to crumble.

Growing Up in the Eurozone
Stefano Micossi (Project Syndicate) Jul 18, 2012
At their meeting at the end of June, European leaders acknowledged for the first time the multiple dimensions of the crisis, accepting that austerity – putting everyone’s house in order – will not suffice. What is still missing, however, is recognition of the need for greater flexibility on fiscal-consolidation efforts.

Trading 'highs' have a place
Martin Hutchinson (AT) Jul 18, 2012
Arguments that testosterone-fueled traders are behind much of our present financial crises and scandals are attractive, but such folk have their uses in the financial market place. Appropriate financial incentives could push them to where they can do least damage and most good.

Why trade policy matters for firms’ R&D investment
Esther Ann Bøler, Andreas Moxnes & Karen-Helene Ulltveit-Moe (VoxEU) Jul 18, 2012
With trade barriers rising, the time is right to refresh the evidence that openness to trade comes with substantial benefits. This column focuses on the complementarity between R&D and foreign sourcing. Looking at Norwegian firms from 1997 to 2005, it argues that one fifth of productivity growth came from sourcing more foreign products, while the remaining four fifths came from technical change.

US Presidential Candidates Zero in on China Trade Practices
Bridges Weekly Trade News Digest, Volume 16, Number 28 Jul 18, 2012
With November’s US presidential election drawing ever nearer, candidates have spent the last several weeks out on the campaign trail exchanging barbs over their respective approaches to the economy, with a particular focus on the country’s trade relationship with China. Back in Washington, some trade observers are questioning whether efforts to enact a new Farm Bill and remove decades-old trade restrictions on Russia will actually lead to a result before Congress adjourns for its annual August recess.

Laos Approaches Final Stages of WTO Accession Process
Bridges Weekly Trade News Digest, Volume 16, Number 28 Jul 18, 2012
Laos is on track to complete its WTO accession negotiations after this year’s summer break, officials announced last week, with the Asian country’s membership in the Geneva-based trade body widely expected to be formalised before 2012 comes to a close.

Rising Non-Tariff Measures Require Fresh Approach, WTO Says
Bridges Weekly Trade News Digest, Volume 16, Number 28 Jul 18, 2012
Achieving balance between fostering open trade and achieving public policy objectives requires a better understanding of non-tariff measures (NTMs), particularly during the current period of slowing trade growth and rising concerns over crisis-era protectionism, according to a new report released by the WTO on Monday.

Eurozone: In search of a driver Financial Times Subscription Required
Gerrit Wiesmann (FT) Jul 18, 2012
German demand is at last rising - but the question remains whether the country's cautious consumers will lead the rebalancing of the continent's economy.

Russia’s concern is to deny victory to the west Financial Times Subscription Required
Zaki Laidi (FT) Jul 18, 2012
Moscow does not seek to adapt to a changing world but to return to the old world by preserving what is left of it.

The First World’s Fiscal Follies
Jeffrey Frankel (Project Syndicate) Jul 18, 2012
The world’s advanced economies remain divided over whether to strengthen budget balances in the short term or to use fiscal policy to promote recovery. But the debate is akin to asking whether it is better for a driver to turn left or right: depending on where the car is, either choice might be appropriate.

Tradable sectors in the Eurozone periphery
Guillaume Gaulier, Daria Taglioni & Vincent Vicard (VoxEU) Jul 19, 2012
Some view uncompetitiveness in the Eurozone’s periphery as the fundamental cause of the region’s crisis. This column presents evidence that rising unit labour costs in the periphery were not a cause but rather a symptom of the local demand shocks triggered by large capital inflows in the 2000s.

Austerity is unavoidable after a bout of profligacy
Daniel Gros (VoxEU) Jul 19, 2012
Despite the EZ doom and gloom discussion, the US and EZ are at roughly the same point in their recovery from the global crisis. This column argues that the ‘austerity kills’ narrative of Krugman and Layard misses the basic point. Public debt ratios without retrenchment would become unsustainable. The fact that austerity is costly does not mean it should not be undertaken.

China’s strong domestic demand has reduced its trade surplus
Françoise Lemoine & Deniz Ünal (VoxEU) Jul 19, 2012
Since 2008 China’s trade surplus has fallen sharply. This column argues that China has since become a major source of international demand, thanks to its strong economic growth. China’s import demand has been aimed at resource-rich countries and at its Asian neighbours, but also at European exporters, especially in high-end consumer goods.

What’s Stopping Women?
Anne-Marie Slaughter (Project Syndicate) Jul 19, 2012
Women’s rights are a global issue of the highest importance, and it is necessary to focus on the worst violations. Still, if having a family remains a career barrier for women, but not for men, that, too, is a matter of women’s rights.

Clouds over eastern European banks clear Financial Times Subscription Required
Neil Buckley (FT) Jul 19, 2012
Now the deadline for banks to meet the European Banking Authority’s 9 per cent tier one capital target has passed, the region seems to have dodged the bullet again.

China is outgrowing its financial system Financial Times Subscription Required
Henny Sender (FT) Jul 19, 2012
Beijing is struggling to maintain the pace of reforms needed for it to keep ahead. And no matter what the degree of change, it is likely to be painful.

Global Rebalancing: Now or Never
Stephen S. Roach (YaleGlobal) Jul 19, 2012
For sustainability’s sake, the US must save more, China must spend more.

A no-further-bailouts principle
Tito Boeri (VoxEU) Jul 20, 2012
Solving the EZ crisis will almost certainly involve some financial transfers in exchange for some loss of sovereignty. This column suggests a guiding principle for which policies should be under EZ control. Transfers of authority to supranational bodies must make a no-further-bailout clause credible.

American Pie in the Sky
Nouriel Roubini (Project Syndicate) Jul 20, 2012
For the last three years, the consensus has been that the US economy was on the verge of a robust and self-sustaining recovery that would restore above-potential growth. That turned out to be wrong, as a painful process of balance-sheet deleveraging implies that the recovery will remain, at best, below-trend for many years to come.

Europe’s Immigration Challenge
Peter Sutherland and Cecilia Malmstrom (Project Syndicate) Jul 20, 2012
European countries must finally and honestly acknowledge that, like the US, Canada, and Australia, they are lands of immigrants. The issue is not how many new immigrants are accepted into the EU, but acknowledging the nature and composition of the societies in which we already live.

What Role for the State?
Kemal Dervis (Project Syndicate) Jul 20, 2012
The financial crisis of 2008 has spurred a global debate on how much government regulation of markets – and what kind – is appropriate. In the United States, it is a key theme in the upcoming presidential election, and it is shaping politics in Europe and emerging markets as well.

The Democratization of Banking
Robert J. Shiller (Globalist) Jul 20, 2012
New measures are needed to complete the process of making the full range of banking services available to the broadest possible cross section of society.

Libor: Three Scandals in One Foreign Affairs Subscription Required
Jonathan Macey (FA) Jul 20, 2012
The Libor scandal has sparked calls for stronger regulation of the world's most powerful banks. But such proposals miss a key point: price fixing and manipulation have been illegal for a long time. More laws will not fix the problem. Instead, banks need to realize that undermining the market is bad for business. Read

Tim Geithner and Libor Wall Street Journal Subscription Required
WSJ Jul 20, 2012
The Bank of England says the New York Fed raised little alarm.

Low rates are truly negative
Reuven Brenner (AT) Jul 21, 2012
Central bank policies that set very low real interest rates have potentially crippling consequences. Among them, governments will take over even more the role of financial intermediaries and the outlook for retiring Baby Boomers will get grimmer by the day.

Emerging markets: The great slowdown
Economist Jul 21, 2012
A sticky spell for the emerging world carries warnings for its long-term growth.

Brazil's Crisis---and Opportunity Wall Street Journal Subscription Required
Mary Anastasia O'Grady (WSJ) Jul 22, 2012
The breakdown of the customs union with Argentina could free it to seek better trade opportunities elsewhere.

Corporate Japan: Back on track Financial Times Subscription Required
David Gelles and Michiyo Nakamoto (FT) Jul 22, 2012
After decades of introspection the country’s dealmakers have returned to the global acquisition trail.

Is the crisis 'decoupling' the Greeks from Greece?
Maurizio Bovi (VoxEU) Jul 23, 2012
Is the crisis ‘decoupling’ the Greeks from Greece? Using EU survey data, this column shows that before the global crisis, Greeks’s assements of their own economic stance was in line with that of their country as a whole. But during the recent crisis years most Greeks thought they were doing better than average. This column explains this puzzle using insights from psychology.

The European ban on naked sovereign credit default swaps: A fake good idea
Anne-Laure Delatte (VoxEU) Jul 23, 2012
Uncovered sovereign credit default swaps will be permanently prohibited in the EU by November 2012. While empirical evidence on their destabilising role is mounting, this column argues that the EU regulation will have only a limited effect, as a number of inconsistencies create regulatory arbitrage and opportunities to circumvent the ban.

“Developing” Countries’ Arrested Development
Hector R. Torres (Project Syndicate) Jul 23, 2012
Most people accept the need to grant special treatment to developing countries in trade and climate-change talks. But, while many "developing" countries are ready to take on greater responsibilities for fighting climate change, global trade rules allow them to remain beneficiaries of "special and differential" treatment indefinitely.

Bubbles without Markets
Robert J. Shiller (Project Syndicate) Jul 23, 2012
The speculative bubbles in the housing, equity, and commodity markets that preceded and accompanied the current global financial crisis are also its ultimate cause. But, before we conclude that we should rein in the markets, we need to consider the alternative.

We have entered the world of disaster economics Financial Times Subscription Required
Gillian Tett (FT) Jul 23, 2012
The grab for safe assets may not be a short-term trend. The financial world may need to overhaul its investment frameworks.

A slowdown is good for China and the world Financial Times Subscription Required
Michael Pettis (FT) Jul 23, 2012
As the country rebalances, growth will slow and interest rates will rise. We should be relieved it is solving its problems.

Europe losing battle against debt crisis Financial Times Subscription Required
Komal Sri-Kumar (FT) Jul 23, 2012
It is time to try alternative measures. Governments must do less and trust free markets.

The Soviet Banking System---and Ours Wall Street Journal Subscription Required
Judy Shelton (WSJ) Jul 24, 2012
Capitalism depends on access to capital. It's a sad development that banks have turned away from the noble task of directing financial seed corn and instead make bets on interest rates.

A rapid fall in the euro can save Spain Financial Times Subscription Required
Martin Feldstein (FT) Jul 24, 2012
A rescued eurozone would still face the problem inherent in the single currency. But the euro’s other problems may end.

IMF struggles to find its crisis voice Financial Times Subscription Required
Alan Beattie (FT) Jul 24, 2012
The current phase of the eurozone crisis is a good moment for the International Monetary Fund to find its voice and articulate unpalatable truths.

Death of ‘risk on, risk off’ behaviour Financial Times Subscription Required
Robert Parker (FT) Jul 24, 2012
Investors are justified in being united in fear of recession and deflation.

Indonesia must not put good fortune to the test Financial Times Subscription Required
Henny Sender (FT) Jul 24, 2012
Investors continue to love the country while other emerging countries begin to look weak, but their optimism could be strained as commodity markets suffer.

Beyond LIBOR: Derivatives as WMD on the American People
Dennis Kelleher (Globalist) Jul 24, 2012
The financial industry often claims that it operates with full transparency, when it is doing anything but. Nowhere is this clearer, and riskier, than in the way derivatives have been traded in the United States. Why the U.S. Congress changed the law — and why those changes were badly needed — as a first step on the road to real financial market reform.

Europe’s Ambitious Muddling Through
Janis A. Emmanouilidis (Project Syndicate) Jul 24, 2012
Following the escalation of the euro crisis and the EU’s last summit, it is time to ask what comes next for Europe. The most likely scenario – and the most promising one – is ambitious muddling through, with intergovernmental agreements providing a stopgap for shortcomings in the current EU treaties.

How the West Was Re-Won
Dominique Moisi (Project Syndicate) Jul 24, 2012
At a time when the US economy remains fragile, Europe’s financial crisis is fueling an existential funk, and Japan’s deep structural malaise continues, the West's decline seems undeniable. But there are good reasons to doubt conventional wisdom, beginning with the West's growing awareness of its new, reduced position in the world.

When Governments Won't Govern, Central Banks Must
Clive Crook (Bloomberg) Jul 24, 2012
The alternative is worse.

A Redemption Pact for Europe: Time to act now
Peter Bofinger, Claudia M. Buch, Lars P Feld, Wolfgang Franz & Christoph M Schmidt (VoxEU) Jul 25, 2012
EZ leaders have failed to tame the crisis. This column presents the English language version of the new plan by the German Council of Experts to resolve the crisis via “redemption bonds” and accompanying institutional reforms.

Chiang Mai Initiative: Designed not to be used?
Hal Hill & Jayant Menon (VoxEU) Jul 25, 2012
Asia’s recent doubling of its financial safety net looks impressive. But this column argues it is more icing than cake. It is, in fact, unusable – there is no fund but a series of promises; the institutional mechanisms to replace IMF-type surveillance and conditionality have not been established; and there are no rapid-response procedures to handle a fast-developing financial crisis.

End of game? Don’t bet on it
Charles Wyplosz (VoxEU) Jul 25, 2012
The EZ crisis is once again on the march; Spain and Italy are under pressure. This column argues that policymakers are likely to fall back once again on a failed approach to avoid admitting past errors. Ultimately, however, EZ leaders will come around to the only way forward – the ECB underwriting both banks and sovereigns while additional controls on bad banking and bad fiscal governance are put in place.

California Bad Dreaming
Michael Boskin (Project Syndicate) Jul 25, 2012
While central governments’ fiscal problems plague many economies, a parallel crisis is enveloping many subnational governments around the world. From Spain to China to the US to Italy, these governments – regions, states, provinces, cities, and towns – face immense fiscal challenges.

One More Dance
Neel Kashkari (PIMCO) Jul 25, 2012
We are witnessing a synchronized slowdown worldwide that is beginning to affect corporate profits. The most likely right-tail event is the Federal Reserve launching another round of quantitative easing. We don’t believe liquidity alone can engineer sustainable, real economic growth in the context of a secular deleveraging cycle. But we acknowledge that equity portfolios would likely benefit should the Fed keep the music playing a little longer.

Challenging China
Matt Miller (WP) Jul 25, 2012
When will the U.S. get the guts?

Europe needs a bigger crisis firewall Financial Times Subscription Required
Gene Frieda (FT) Jul 25, 2012
The EU’s initial focus on bank recaps reflects a bad strategic choice: funding the ESM is a priority to break the negative feedback loop.

A cure for the eurozone’s Lehman syndrome Financial Times Subscription Required
Martin Sandbu (FT) Jul 25, 2012
Investors might return – and growth with them – if they need not fear being at the back of a line of existing claimants.

The IMF should heed this resignation Financial Times Subscription Required
Arvind Subramanian (FT) Jul 25, 2012
The fund has not provided leadership in Europe and it is unprepared to provide stability for the next global crisis.

Don’t count on enhanced global governance
Jeffry A. Frieden, Michael Pettis, Dani Rodrik & Ernesto Zedillo (VoxEU) Jul 26, 2012
Global economic cooperation can help mitigate many economic problems. But it is often difficult to justify, and even more difficult to achieve. This column argues that simple appeals to greater global governance are not likely to have much effect. It suggests that the future of the international economy does depend on the success of international cooperation; but this success in turn requires that governments have realistic expectations about how much can be accomplished at the global level.

Is China Losing the Diplomatic Plot?
Kishore Mahbubani (Project Syndicate) Jul 26, 2012
In 2016, China’s share of the global economy will be larger than America’s in purchasing-price-parity terms. And yet, after 30 years of geopolitical competence, the Chinese seem to be on the verge of losing it just when they need it most.

Don't Like Asian State Capitalism? Blame the West
Pankaj Mishra (Bloomberg) Jul 26, 2012
State capitalism, according to Bloomberg Businessweek, is a serious rival to U.S. and European businesses, which face being excluded from some markets.

Taking the LIE Out of Libor
Kim Schoenholtz and Lawrence White (Bloomberg) Jul 26, 2012
The recent revelations by Barclays Plc probably spell doom for the London interbank offered rate, at least in its present form.

Is India’s manufacturing sector moving out of the cities?
Ejaz Ghani, Arti Grover Goswami & William Kerr (VoxEU) Jul 27, 2012
India’s cities are growing at a growing rate – despite the slowdown in the pace of industrialisation. But beneath the overall trend, many companies are moving out of the city. This column looks at data on manufacturing firms and finds that while those in the formal sector are leaving the city, those in the informal sector are moving in.

Finance: A haven to defend Financial Times Subscription Required
Paul J. Davies (FT) Jul 26, 2012
Shanghai aims to challenge Hong Kong for the mantle of Asia’s leading financial centre but the mainland’s red tape and turbid legal system mean this shift could take decades.

My thwarted attempt to tell of Libor shenanigans Financial Times Subscription Required
Douglas Keenan (FT) Jul 26, 2012
I had been unaware of Libor misreporting, as I was new to trading. My naivety seemed humorous to colleagues.

Ebbing fortunes for Indian banks Financial Times Subscription Required
Henny Senders (FT) Jul 26, 2012
Investment is falling and savings are flowing into unproductive holdings of imported gold, as households expect a rise in inflation

Money for Nothing New York Times Subscription Required
Paul Krugman (NYT) Jul 26, 2012
Why do the markets love government debt? The answer might tell us something important about the nature of our economic troubles.

Mediterranean madness stops short
WT Jul 26, 2012
Markets plunged in Europe this week. The response in Spain and Italy has been an attempt to halt the collapse by cracking down on short sales. This is the equivalent of shooting the messenger.

Myths and Facts About the Gold Standard Wall Street Journal Subscription Required
John H. Cochrane (WSJ) Jul 26, 2012
No monetary system can absolve a nation of its fiscal sins.

The Great Trade Quantities Collapse
Gita Gopinath, Oleg Itskhoki & Brent Neiman (VoxEU) Jul 28, 2012
The sharp decline in trade values during the recent global recession has captured the attention of both policymakers and academics. This column presents recent research sowing that, within differentiated sectors, the great collapse was one of trade quantities and not one of trade prices.

Keeping the WTO busy while the Doha Round is stuck
Patrick A Messerlin (VoxEU) Jul 29, 2012
Should we give up on the Doha Round and leave the WTO standing still? This column argues that such stalemate is dangerous – the WTO needs to be kept busy.

Dos and Don’ts for the European Central Bank
Martin Feldstein (Project Syndicate) Jul 29, 2012
Recent statements by European Central Bank President Mario Draghi and Bank Governor Ewald Nowotny have reopened the debate about the desirable limits to the ECB’s policy. The issue is not just the ECB’s legal authority under the Maastricht Treaty, but, more importantly, the appropriateness of alternative measures.

Banking Union Is Last Gambit to Save Euro Dream
Luigi Zingales (Bloomberg) Jul 29, 2012
The euro crisis isn’t Angela Merkel’s fault. The real culprits are the founding fathers -- Francois Mitterrand, Helmut Kohl, Jacques Delors or Romano Prodi -- who created a common currency based on poor economics and worse politics.

Welcome to the ECB
Charles Wyplosz (VoxEU) Jul 30, 2012
Financial markets once again pushed Eurozone leaders to act. European Central Bank President Draghi recently promised to “do whatever it takes”. This column argues that Draghi made an implicit commitment to act as lender of last resort to Eurozone governments. This means optimism may be justified – if only because it suggests that the Eurozone has a great central banker who is both a serious economist and an astute politician.

Europe’s political union is an idea worthy of satire Financial Times Subscription Required
Otmar Issing (FT) Jul 29, 2012
The implicit transfer of taxpayers’ money would be a violation of the principle of no taxation without representation.

The Russia Trade Pile-Up Wall Street Journal Subscription Required
WSJ Jul 29, 2012
Congress balks as Obama abandons his own proposal.

Crash of the Bumblebee New York Times Subscription Required
Paul Krugman (NYT) Jul 29, 2012
What would policy makers have to do to save the euro and will they do it?

Africa's Third Liberation New York Times Subscription Required
Jeffrey Herbst & Greg Mills (NYT) Jul 29, 2012
To ensure a new future with both jobs and development, African governments will have to embark on a path down which few have so far ventured.

Europe’s Zero-Sum Poison
Jean Pisani-Ferry (Project Syndicate) Jul 30, 2012
Whenever a society regards its problems solely through the prism of distributional disputes, its chances of solving them diminish greatly, because the “us versus them” mentality distorts analysis and blocks solutions that would unambiguously improve the overall situation. Nowhere is that more obvious today than it is in Europe.

The Achilles heel of America’s financial system Financial Times Subscription Required
Gillian Tett (FT) Jul 30, 2012
An intense fight is bubbling about money market funds. The issue is whether this $2.6tn sector is vulnerable to ‘runs’.

Aid will not sustain Afghanistan’s economy Financial Times Subscription Required
Ahmed Rashid and Alexis Crow (FT) Jul 30, 2012
We need a new model for development that gives Afghans incentives to build their own economy.

Time for west to adjust to ‘new normal’ Financial Times Subscription Required
Andrew Sentance (FT) Jul 30, 2012
This is a difficult recovery for the west but disappointing growth and volatility will be the legacy of the financial crisis.

Covered bonds make lending freeze intense Financial Times Subscription Required
Patrick Jenkins (FT) Jul 30, 2012
A jittery market, tougher liquidity requirements and the risks of relying on covered bonds compel financially strong banks to hide their cash.

US drought: Stuck on dry land Financial Times Subscription Required
Gregory Meyer (FT) Jul 30, 2012
The heatwave that has pushed corn prices to highs threatens a new food crisis and exposes the limits of the top technology.

The Man Who Saved Capitalism Wall Street Journal Subscription Required
Stephen Moore (WSJ) Jul 30, 2012
Milton Friedman, who would have turned 100 on Tuesday, helped to make free markets popular again in the 20th century. His ideas are even more important today.

An Intriguing Idea to Encourage Bank Lending Wall Street Journal Subscription Required
Alan Blinder (WSJ) Jul 30, 2012
The British have a plan to reward banks that extend credit. It might work here.

Good Riddance to Libor, a Flawed Benchmark
Benn Steil and Dinah Walker (Financial News) Jul 30, 2012
New evidence highlighting the endemic flaws in Libor as both a benchmark for setting market lending rates and a central bank metric for judging policy effectiveness.

Trade barriers beyond tariffs: Facts and challenges
Marc Bacchetta & Cosimo Beverelli (VoxEU) Jul 31, 2012
The WTO and its predecessor the GATT have been remarkably successful in negotiating down tariffs over the past six decades. But trade is still a long way from free and since the global crisis, it is becoming even less so. This column reviews the facts, economics, and motives behind these new non-tariff barriers and discusses the challenges they pose for the WTO.

Reviving Rural Russia
Nikolas Sluchevsky (Project Syndicate) Jul 31, 2012
A century ago, Russian Prime Minister Pyotr Stolypin understood the need for conditions that allow private farmers to develop. But today, the disparity between urban and rural life is being allowed to widen – with serious consequences.

America’s Other 30%
Stephen S. Roach (Project Syndicate) Jul 31, 2012
Consumption typically accounts for 70% of America's GDP. But the 70% is barely growing, and is unlikely to revive strongly at any point in the foreseeable future, which puts an enormous burden on the other 30% of the US economy to generate any sort of recovery.

How Should China Respond to the Slowdown?
Yu Yongding (Project Syndicate) Jul 31, 2012
China’s annual GDP growth slowed to 7.6% in the second quarter of 2012, down from 8.1% in the first quarter and the lowest rate since the second quarter of 2009. The data have dispelled fears of a hard landing for China, but now many argue that China must stimulate its economy further to guarantee 8% annual growth.

Rebuilding Venezuelan Democracy
Andres Velasco (Project Sydicate) Jul 31, 2012
In 1988, very few people outside Chile thought that a ruthless dictator like Augusto Pinochet could be removed through the ballot box, just as few people today believe that Hugo Chávez can be removed in Venezuela’s presidential election on October 7. But Pinochet lost, and Chávez appears increasingly vulnerable.

Will Venezuela’s Entry Be MERCOSUR’s Swan Song?
Barbara Kotschwar (PIIE) Jul 31, 2012
Today, July 31, 2012, Venezuela will officially become a full member of the MERCOSUR customs union. But Venezuela’s accession—nearly a decade in the making—effectively puts to rest the pretense of MERCOSUR as a serious economic integration arrangement.

Unilateral Free Trade
Patrick Barron (Mises Daily) Jul 31, 2012
The Only International Economic Policy That a Country Needs: "Mind Your Own Business and Set a Good Example."

Libor Punishment Could Be Worse Than the Crime
Mikhail Chernov (Bloomberg) Jul 31, 2012
People are rightly appalled at the way bankers manipulated Libor, a benchmark interest rate that influences the value of hundreds of trillions of dollars in financial contracts worldwide.

On the European Crisis
Mohamed A. El-Erian Jul 31, 2012
Europe is in the midst of a consequential historic phase. Its challenges are part of a broader western reality dominated by the foursome of too little growth (overall and in key countries), too much debt in the wrong places, too extreme a political polarization, and increasing policy ineffectiveness. With this foursome, it is not surprising that Europe repeatedly finds itself in the grips of adverse feedback loops – be it between bad economics and bad politics, or between weak banks and deteriorating sovereign creditworthiness.

Finance must escape the shadows Financial Times Subscription Required
Sebastian Mallaby (FT) Jul 31, 2012
Shadow-bank reform has remained, well, shadowy because nobody wants to grapple with what money really is.

Our opt-in opt-out solution for the euro Financial Times Subscription Required
Hans-Werner Sinn and Friedrich Sell (FT) Jul 31, 2012
The idea is to allow countries to adopt their own currency temporarily with an option to return later.

India’s outsourcing suffers self doubt Financial Times Subscription Required
James Crabtree (FT) Jul 31, 2012
Subcontinent’s big four IT groups are suffering as European and US companies, which make up most of their customers, struggle with low growth.

Time for something different from the ECB Financial Times Subscription Required
Ralph Atkins (FT) Jul 31, 2012
Previous measures have had only limited success and markets are looking for bold decisions in efforts to tackle Europe’s debt crisis

The Music Men Wall Street Journal Subscription Required
WSJ Jul 31, 2012
The illusion that central banks can conjure faster growth.

How to Avoid Another Bank Bailout Wall Street Journal Subscription Required
Robert Downey (WSJ) Jul 31, 2012
Prohibitions on proprietary trading will be hard to enforce. There's a better way.

Mercosur Trade Bloc Admits Venezuela as Full Member New York Times Subscription Required
Simon Romero (NYT) Jul 31, 2012
After a long diplomatic struggle, the nation joined Mercosur's four full members, including Brazil, which was influential in the admission decision.

Global Slowdown Pulling More Heavily on Asia New York Times Subscription Required
Reuters/NYT Jul 31, 2012
The European sovereign debt crisis, a slowing China and sluggish activity in the United States are weighing on global demand, hurting exporters like Japan, South Korea and Taiwan.

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