NAFTA's Bad Rap
Gary Clyde Hufbauer and Jeffrey J. Schott (PIIE/TIE) Summer 2008
Political soundbites that blame NAFTA for US economic woes do not stand up to facts. Even if exaggerated claims that 100,000 jobs lost annually can be attributed to NAFTA are right, this figure is only six-tenths of one percent of the annual churn in the US job market, and this soundbite totally ignores the fact that an integrated and efficient North American economy preserves US production that would otherwise be outsourced to overseas plants. As for the claim that NAFTA has depressed wages, increased trade has helped wages: Four of the top five US states, in terms of trade with Mexico, recorded nominal wage growth higher than the national average (49, 48, 45, and 28 percent by Texas, California, Arizona, and Illinois respectively, compared to the national average of 26 percent). Critics charge that NAFTA has increased the US trade deficit with Mexico and Canada. But US energy imports account for two-thirds of this increased deficit, which translates to $81 billion less going to OPEC. And increased illegal immigration is not surprising considering constrained job prospects in Mexico caused by factors unrelated to NAFTA—the peso crisis of the mid-1990s, the growth of the working-age population, and escalating drug wars.
Self-Financing Development
Stephany Griffith-Jones, Jose Antonio Ocampo and Pietro Calice (Project Syndicate) Sep 2008
A remarkable feature of the international financial system in the last decade has been the rapid and vast accumulation of foreign-exchange reserves by developing countries. World foreign reserves tripled from $2.1 trillion in December 2001 to an unprecedented $6.5 trillion in early 2008, according to IMF data.
Ending the Nation-State Myth
Devin Stewart (Project Syndicate) Sep 2008
This fall, thousands of college students will be taught a myth presented as fact. It is a myth that has helped fuel wars and may hinder finding solutions to the world’s biggest problems. Though the origin of this myth is cloudy, science has proven its falsity, and a globalized world has rendered it anachronistic. I am talking about the nation-state.
After Doha: Protectionism Creep
Razeen Sally (FEER) Sep 2008
Nascent trade protectionism in the region and its consequences.
Do Central Banks Have an Exit Strategy?
Kenneth Rogoff (Project Syndicate) Sep 2008
A year into the global financial crisis, several key central banks remain extraordinarily exposed to their countries’ shaky private financial sectors. So far, the strategy of maintaining banking systems on feeding tubes of taxpayer-guaranteed short-term credit has made sense. But eventually central banks must pull the plug. Otherwise they will end up in intensive care themselves as credit losses overwhelm their balance sheets.
Hedge Funds: The Sting is in the Tail
Dean P. Foster and H Peyton Young (Project Syndicate) Sep 2008
Imagine that you are shopping for a high-performance car, but that you are not allowed to look under the hood. What’s inside is a secret. Furthermore, you cannot find out how similar vehicles have performed, because there are none. Finally, the car carries no warranty.
Fixing the Food Chain
Per Pinstrup-Andersen (Project Syndicate) Sep 2008
The global food system is in disarray. Four years ago, a 30-year trend of decreasing food prices rapidly reversed course. Grain prices have more than doubled since 2004, and prices for most other foods have increased significantly. Add unsustainable management of natural resources, emerging negative effects of climate change, and sharply rising prices for fertilizers and energy, and we are faced with the most severe global food crisis since the early 1970’s.
Is Export Led Growth Passé?
Dani Rodrik (Project Syndicate) Sep 2008
For five decades, developing countries that managed to develop competitive export industries have been rewarded with astonishing growth rates: Taiwan and South Korea in the 1960’s, Southeast Asian countries like Malaysia, Thailand, and Singapore in the 1970’s, China in the 1980’s, and eventually India in the 1990’s.
Farewell to the Neo-Classical Revolution
Robert Skidelsky (Project Syndicate) Sep 2008
The looming bankruptcy of Lehman Brothers, and the forced sale of Merrill Lynch, two of the greatest names in finance, mark the end of an era. But what will come next?
When “Sovereignty” Risks Global Health
Richard C. Holbrooke and Laurie Garrett (Project Syndicate) Sep 2008
Here’s a concept you’ve probably never heard of: “viral sovereignty.” This dangerous idea comes to us courtesy of Indonesia’s minister of health, Siti Fadilah Supari, who asserts that deadly viruses are the sovereign property of individual nations – even though they cross borders and could pose a pandemic threat to all the world’s peoples. Political leaders around the world should take note – and take very strong action.
Africa’s Hard Black Gold
Richard Uku (Project Syndicate) Sep 2008
Few infrastructure services in the developed world may be as taken for granted as electric power. To consumers in industrialized countries, uninterrupted power supply is a given. Not so in much of Africa, which experiences some of the world’s greatest power deficits, and where only two in ten people have access to electricity.
How to Clean up Toxic Waste
Raghuram G. Rajan (FP) Sep 2008
The $700 billion bailout plan is flawed and argues that Wall Street needs to step in and help out—or risk Main Street’s wrath.
The dollar’s long run value: Micro-econometric evidence on US current account sustainability
Harald Hau & Hélène Rey (VoxEU) Sep 1, 2008
The sustainability of the US current account depends on foreigners’ willingness to holding US assets. This column discusses new micro-econometric evidence that equity funds rebalance in reaction to increased exchange rate risk. In short, there is a limit to foreigners’ holding of US assets; the US will either have to run a trade surplus in the future, or the dollar must fall to deflate the value of foreigner’s holdings.
Sterling drops to record low against euro
FT Sep 1, 2008
The pound dropped to a record low against the euro on Monday, as money markets digested warnings from Alistair Darling that the economic times the UK faces “are arguably the worst they’ve been in 60 years”.
Tipping points and product differentiation in financial exchange competition
Estelle Cantillon & Pai-Ling Yin (VoxEU) Sep 2, 2008
In the “battle of the Bund,” trading of German government bonds shifted from London to Frankfurt in less than a decade. This column analyses that famous financial episode and assesses the potential for new financial exchanges to dethrone incumbents.
An Even Poorer World
NYT Sep 2, 2008
The World Bank reported that 1.4 billion people live below the poverty line. The developed world needs to do more to help the world's most vulnerable people.
What the presidential choice could mea
Martin Wolf (FT) Sep 2, 2008
This presidential election might well determine the character of the next, possibly final, epoch of Anglo-American global hegemony. The question is whether the American people will choose the instinct for conflict or that for co-operation.
How the Fed Can Fix the World
Roger C. Altman (NYT) Sep 2, 2008
In order to prevent our financial system, and the Fed, from being stretched like this again, our entire regulatory system must be rebuilt.
Africa Needs More Spending on Health, IMF Tells Panel
IMF Survey Sep 2, 2008
Africa needs a significant increase in spending on health, IMF Deputy Managing Director Murilo Portugal tells a panel at a forum on aid effectiveness in Accra, Ghana. He adds that boosting spending on health alone is not enough to achieve better health outcomes.
Blanchard Sees Global Economy Weathering Financial Storm
IMF Survey Sep 2, 2008
In an interview, Olivier Blanchard, the IMF's new Economic Counsellor and Director of Research, speaks about the current crisis facing the global economy; the IMF's evolving role; his priorities for research; and what attracted him to join the Fund.
Sovereign Wealth Funds: Their Role and Significance
John Lipsky (IMF) Sep 3, 2008
I will share with you some observations on the economic role and policy significance of Sovereign Wealth Funds (SWFs). I will begin by placing the expanding significance of these Funds in a global economic and financial context. I will then discuss their role in attaining the goals of their sponsoring governments. I will conclude by examining the Funds' international importance, and the rationale underpinning the deliberations of the International Working Group of Sovereign Wealth Funds, whose successful and productive meeting has just concluded here in Santiago.
WTO Ag Talks to Resume; Deal Still Possible This Year, Some Say
BRIDGES Weekly Trade News Digest - Vol. 12, Number 28 Sep 3, 2008
In the month following the failure of world trade talks, trade ministers and world leaders have sought to ensure that the significant progress that was made before negotiations fell apart will not be lost in the aftermath of the collapse. Whether - or to what extent - that aim can be realised is far from certain.
Georgia Conflict Stalls Russia's WTO Bid
BRIDGES Weekly Trade News Digest - Vol. 12, Number 28 Sep 3, 2008
Brazilian Foreign Minister Celso Amorim says that his government will be moving ahead with its request for sanctions against US cotton subsidies and is considering a similar case on biofuels.
US set to challenge China over steel prices
FT Sep 3, 2008
US trade officials are close to filing a case against China at the World Trade Organisation challenging export restrictions on raw materials used in steel-making and other industries.
How donors should cap aid in Africa
Adrian Wood (FT) Sep 3, 2008
I propose they set collectively an upper limit on the amount of aid they give to any developing country.
US to challenge China over steel prices
FT Sep 3, 2008
US trade officials are close to filing a case against China at the World Trade Organisation challenging export restrictions on raw materials used in steel-making and other industries.
For sovereign funds, respectability is the real prize
Andrew Hill (FT) Sep 3, 2008
A trophy is an object with no useful purpose except as a symbol of power, excellence or, in the case of trophy assets, wealth. That’s not something that seems to worry Abu Dhabi.
Making globalisation work: skills, families, unions and the welfare state
Richard Baldwin (VoxEU) Sep 4, 2008
Today’s globalisation is operating with higher resolution. It is not enough to think of skill groups and sectors; the impact is more unpredictable, sudden and individual than in the past. This column assesses how high-resolution globalisation differs and how governments need to respond to make it work.
Global: A Different Type of Downturn
Joachim Fels (MSDW) Sep 4, 2008
Rather than a deep recession, we continue to expect a prolonged period of relative economic stagnation in the industrialised world. Further, we continue to believe that markets are underestimating the longer-term inflation threat.
The Bank must act to end the euro's wild rise
Paul De Grauwe (FT) Sep 4, 2008
The European Central Bank managed to sell a minimalist interpretation of its mandate. In this view, the ECB is only responsible for price stability.
How bad are regional trade agreements?
Economist Sep 4, 2008
Should free traders applaud the rise of preferential trade deals?
Regional trade agreements
Economist Sep 4, 2008
India's new trade deal is a good example of why bilateral trade deals are less useful than multilateral ones
The meek shall inherit the web
Economist Sep 4, 2008
Computing: In future, most new internet users will be in developing countries and will use mobile phones. Expect a wave of innovation.
Is America Losing At Globalization?
Daniel Gross (Newsweek) Sep 4, 2008
Other nations nimbly compete - embracing education, investing in infrastructure and avoiding debt.
Are exchange rates unpredictable? The asset pricing approach redux
Jian Wang (VoxEU) Sep 5, 2008
A random walk is (in)famously a better predictor of short-term exchange rates than models emphasising economic fundamentals. This column explains recent literature that has addressed the puzzle by considering an asset-pricing approach. Fundamentals (and expectations of them) are still relevant.
Bilateral Trade-Off
Bernard K. Gordon (WSJ) Sep 5, 2008
Asian FTAs are undermining the Doha round.
European economic integration and trade: how big was the boost?
Jeffrey H. Bergstrand (VoxEU) Sep 6, 2008
European economic integration is 50 years old this year. Most analyses suggest that it had a rather small international trade impact. This column argues that these results are incorrect. A properly specified empirical analysis suggests far larger economic effects, since traditional models ignore the self-selection in their calculations.
Exchange rates that forecast commodity prices
Yu-chin Chen, Kenneth Rogoff & Barbara Rossi (VoxEU) Sep 8, 2008
In a recent speech, Fed Chair Ben Bernanke highlighted the difficulty of obtaining a meaningful gauge for future commodity price movement, noting the inadequacy of forecasts based on commodity futures signals. Looking at exchange rates may be a promising alternative.
A Sigh of Relief, but Hard Questions Remain
NYT Sep 8, 2008
Asian markets rallied early Monday, even as the takeover of Fannie Mae and Freddie Mac reinforced concerns about the U.S. economy and its reliance on foreign investors.
Currencies: Foreign Holdings of US Agencies and the Dollar
Stephen Jen (MSDW) Sep 8, 2008
Foreign central/large banks have essentially stopped buying or selling new agency debt, while increasing their buying of USTs. Depending on the resolution and reforms of the GSEs, agency debt may/may not remain an attractive asset to foreign central banks. For now, the dollar will remain supported due to ample foreign financing.
No alternative to nationalisation
Martin Wolf (FT) Sep 8, 2008
The US public has ended up with an open-ended guarantee of the liabilities created by supposedly private entities. It is a bad place to be.
Democratization and Its Discontents
Bret Stephens (WSJ) Sep 9, 2008
Supporting dictators is not sustainable.
IMF Sees Gradual Global Rebound During 2009
IMF Survey Sep 9, 2008
Dragged down by protracted financial strains and high commodity prices, the global economy is projected to slow further in the second half of 2008, with a recovery gaining pace gradually in 2009, IMF First Deputy Managing Director John Lipsky tells a conference in Germany.
Sovereign Wealth Funds: New Challenges from a Changing Landscape
Edwin M. Truman (PIIE) Sep 10, 2008
Some progress has been made on establishing international standards of best practices for sovereign wealth funds, but that countries receiving investments need to do better in strengthening the openness of their financial systems. In congressional testimony on Wednesday, September 10, Truman presented his latest "scoreboard" rating the practices of 46 funds.
Trade Talks Resume among Limited Players
BRIDGES Weekly Trade News Digest Vol. 12, Number 29 Sep 10, 2008
Senior trade officials from seven economic powers are meeting in Geneva this week for the first time since world trade talks collapsed at the end of July.
US Mulls WTO Case against Chinese Export Restrictions
BRIDGES Weekly Trade News Digest Vol. 12, Number 29 Sep 10, 2008
The US government may soon initiate a WTO case against China's export restrictions on a range of raw materials used mainly in the steel industry, arguing that by depressing domestic input costs, the restrictions effectively subsidise Chinese steel producers in contravention of multilateral trade rules.
Leaving the dragon
Economist Sep 10, 2008
China is the main source of immigrants to rich countries.
Dragging Down the World
Daniel Gross (Slate) Sep 10, 2008
That hot theory that the global economy doesn't depend on the United States any more? It's completely wrong.
Global: Of Public and Private Virtues and Vices
Joachim Fels & Manoj Pradhan (MSDW) Sep 11, 2008
Public indebtedness is likely to rise in the next several years as governments try to cushion the economic downturn and serve as lenders of last resort to troubled financial institutions. While this should help to prevent a deep recession, it raises two issues: the potential inflationary consequences and the longer-term economic outlook.
Capitalism and the credit crunch
Samuel Brittan (FT) Sep 11, 2008
There will be no 'glad confident morning' for free-market principles for a long time to come.
Estimating RMB misalignment: Lessons in humility
Yin-Wong Cheung, Menzie D. Chinn & Eiji Fujii (VoxEU) Sep 12, 2008
For years, policy analysts and policy makers asserted that the Chinese currency was substantially undervalued. This column shows that statistical and data uncertainties should humble those making strong claims about the renminbi’s value.
Why the Discomfort Over Free Trade
Kevin Casas-Zamora (YaleGlobal) Sep 12, 2008
By neglecting legitimate concerns, free traders court danger in the developing world.
Transmission of liquidity shocks: Evidence from the 2007 subprime crisis
Nathaniel Frank, Brenda González-Hermosillo & Heiko Hesse (VoxEU) Sep 13, 2008
The recent credit crisis started as a credit shock and then rapidly promulgated in the form of market and funding illiquidity before inducing solvency problems at some financial institutions. This column presents empirical evidence mapping the transmission channels of the crisis.
The euro-dollar reserve battle: Don’t forget the politics
Benjamin J. Cohen (VoxEU) Sep 13, 2008
Jeffrey Frankel and others predict that the euro could surpass the dollar as the premier international currency relatively soon. This column argues that predictions borne of economic formalism unrealistically neglect the political forces shaping international currencies. Politics may ensure the dollar’s dominance for some time.
How ethnic fragmentation undermines good governance
Alberto Alesina & Ekaterina Zhuravskaya (VoxEU) Sep 15, 2008
Research on a large new dataset suggests that regional segregation within a country is associated with worse government – even after controlling for reverse causality.
U.S. Futures Contracts Fall With the Dollar
NYT Sep 14, 2008
The dollar fell sharply against major currencies in Singapore, while futures contracts on American stocks nosed-dived.
Financial Russian Roulette
Paul Krugman (NYT) Sep 14, 2008
If institutions need to be rescued like banks, they should be regulated like banks -- why were we so unprepared for this latest shock?
Skimming the froth
Economist Sep 14, 2008
Emerging markets are no longer a safe haven.
See You Later, Speculator
WSJ Sep 15, 2008
It was said to be the year of speculators gone wild. Seemingly everyone in Washington, including Barack Obama and John McCain, decided that oil prices were soaring because profiteers and middlemen were manipulating the futures markets. "Speculators" were spotted everywhere this side of the grassy knoll.
Nightmare on Wall Street
Economist Sep 15, 2008
A weekend of high drama reshapes American finance.
This Is the Day Asian Capital Woke Up
Michael Lewis (Bloomberg) Sep 15, 2008
As important as it seems right now on Wall Street, this isn't a day that most Americans will remember as all that big of a deal. When Lehman Brothers Holdings Inc. goes out of business, the reaction of the average citizen is either ``Lehman who?'' or, ``I heard of them! What do they do?'' It is a big deal, however, but not because some bond traders are out of work, or that puff pieces in business sections about Dick Fuld's survival skills turned out to be wrong. It's a big deal because this is the day that American financiers, from the point of view of the Asians who sit on top of the world's biggest pile of mobile capital, became a bad risk.
No More Creampuffs
Kenneth Rogoff (WP) Sep 16, 2008
The Government Is Willing to Let Wall Street Firms Fail. That's Good.
Yale's Shiller Sees `Turning Point' as Lehman, Merrill Go Down
Bloomberg Sep 16, 2008
When Robert J. Shiller looks at the subprime-mortgage maelstrom, he sees more than Lehman Brothers Holdings Inc. and Merrill Lynch & Co. sliding down the financial drain. He sees parallels to the Treaty of Versailles, the Great Depression and the Marshall Plan.
Financial Crisis Weighs on Global Economy
IMF Survey Sep 17, 2008
The crisis in U.S. financial markets is raising uncertainty and dampening growth prospects around the world, but the IMF still expects a gradual economic recovery during 2009, IMF Managing Director Dominique Strauss-Kahn says.
G-7 Talks Continue; Lamy Could Summon Ministers 'Within Weeks'
BRIDGES Weekly Trade News Digest - Vol. 12, Number 30 Sep 17, 2008
High-level officials from the G-7 group of major trading nations met in Geneva last Wednesday in a renewed push to conclude a world trade deal. While acknowledging that difficult compromises would be necessary to achieve an agreement, those close to the negotiations appeared unusually up-beat about the potential for progress.
America will need a $1,000bn bail-out
Kenneth Rogoff (FT) Sep 17, 2008
It is hard to see how the US can create a firewall against further contagion without spending five to 10 times more than it has.
Europe and Asia see U.S. as no longer practicing what it preaches
IHT Sep 17, 2008
By extending an $85 billion lifeline to AIG, the troubled insurer, Washington has turned away from rhetoric about the dangers of government intervention.
A Regional Crisis
NYT Sep 17, 2008
Regional governments must prepare for the effects of the financial sector's implosion, which threatens to devastate tax revenues and increase the demand for aid.
Closing the Innovation Gap
Judy Estrin (Globalist) Sep 17, 2008
Is collaboration the key to keeping up with the rest of the world?
How to prevent the next Wall Street crisis
Joseph Stiglitz (CNN) Sep 17, 2008
Many seem taken aback by the depth and severity of the current financial turmoil. I was among several economists who saw it coming and warned about the risks. There is ample blame to be shared; but the purpose of parsing out blame is to figure out how to make a recurrence less likely.
Trade Saves the Day
C. Fred Bergsten (PIIE/WP) Sep 17, 2008
From the way the presidential candidates have been talking, you might think that American factories and workers are unable to compete in the global economy. John McCain has promised to open new markets for American goods and provide help for workers who lose their jobs. Barack Obama has expressed doubts about past trade agreements and has proposed changes in tax laws that he says now encourage companies to ship jobs overseas.
What's Behind the Financial Market Crisis?
Antony Mueller (Mises Daily) Sep 18, 2008
The financial crisis is not over. Neither tax rebates nor low interest rates nor higher or lower exchange rates can do the job of reviving an economy that is burdened by debt loads that are too high. On the contrary: the policy measures that the US authorities have been applying will prolong the agony. Be prepared for the challenges of extended financial turmoil and economic stagnation.
The F.A.Q.’s of Lehman and A.I.G.
Douglas W. Diamond and Anil K. Kashyap (NYT) Sep 18, 2008
For most of the last 20 years we have been studying banks, monetary policy, and financial crises. So for us the events of the last year have been especially fascinating.
The new multinationals
Economist Sep 18, 2008
A special report on globalisation.
What Next?
Economist Sep 18, 2008
examining how finance is being torn apart—and outlining how it could be put back together again.
Beyond crisis management
Economist Sep 18, 2008
Bold ideas for solving America’s financial mess.
The $300 Trillion Question
Donald MacKenzie (LRB) Sep 18, 2008
Judged by the amount of money directly dependent on it, the British Bankers’ Association’s London Interbank Offered Rate matters more than any other set of numbers in the world. Libor anchors contracts amounting to some $300 trillion, the equivalent of $45,000 for every human being on the planet. It’s a critical part of the infrastructure of financial markets but, like plumbing, doesn’t usually get noticed. Only a handful of economists, and no other academics, have ever looked in any detail at Libor, and even the financial press didn’t show much interest in how Libor is calculated until this spring, when there was sharp controversy over whether these crucial numbers could be trusted.
Why global capitalism needs global rules
Philip Stephens (FT) Sep 18, 2008
Wise after the calamity, central bankers, market regulators and the rest are calling for tighter rules, closer oversight and a premium on sobriety. The rest of us may ask why it has taken so long for these guardians to stir from their complacency.
The dangers of protectionism
Economist Sep 18, 2008
As long as the protectionists don't spoil it.
Ins and outs
Economist Sep 18, 2008
Acronyms BRIC out all over.
Education does not produce pecuniary externalities
Steven Yamarik (VoxEU) Sep 19, 2008
A good deal of the direct cost of education is subsidised by governments – supposedly because education generates external returns for society. This column argues that there is little evidence of such returns. If there are reasons to subsidise education, they don't include economic externalities.
Crisis Endgame
Paul Krugman (NYT) Sep 19, 2008
On Sunday, Henry Paulson, the Treasury secretary, tried to draw a line in the sand against further bailouts of failing financial institutions; four days later, faced with a crisis spinning out of control, much of Washington appears to have decided that government isn’t the problem, it’s the solution. The unthinkable — a government buyout of much of the private sector’s bad debt — has become the inevitable.
Dollar Ready for Second Wind When Dust Clears
Michael R. Sesit (Bloomberg) Sep 19, 2008
Missed the recent dollar rally? Too bad; it was a whopper.
A crisis too complex for easy fixes
IHT Sep 19, 2008
Many of the players in the Wall Street crisis did not fully understand the investments their own firms were making.
Currencies: Nationalisation ? Currency Weakness
Stephen Jen & Spyros Andreopoulos (MSDW) Sep 19, 2008
Nationalisation per se is not bad for currencies, based on historical experience. Indeed, it often marks the low point for a currency. We believe that this is currently the case for the dollar. A remaining medium-term risk for the dollar, unrelated to the costs of nationalisation, is the US fiscal position.
Morgan Stanley deal could include Chinese sovereign fund
IHT Sep 19, 2008
Morgan Stanley, in the throes of market turmoil, has stepped up its merger negotiations with Wachovia in a deal that could also include the involvement of a Chinese sovereign wealth fund, people involved in the talks said.
Mother of all bailouts and what it means for Europe
Daniel Gros & Stefano Micossi (VoxEU) Sep 20, 2008
The radical moves in the US have direct implications for European banks and indirect implications for European governments. This column discusses the likely channels and notes that several European banks are both too big to fail and may be too big to be saved by their national governments alone.
Death and Near-Death Experiences on Wall St.
NYT Sep 20, 2008
Merrill Lynch and Lehman Brothers rode similar paths of decline but had vastly different endgames.
The shadow banking system is unravelling
Nouriel Roubini (FT) Sep 21, 2008
Excessive risks, high leverage and poor management mean a shake-out among bloated hedge funds is likely.
Why Paulson is wrong: Saving capitalism from the capitalists
Luigi Zingales (VoxEU) Sep 21, 2008
This weekend’s decisions will shape the type of capitalism we live with for the next fifty years. Here one of the world’s leading financial scholars, Chicago Business School Professor Luigi Zingales, argues that bailing out the financial system with taxpayers’ money is wrong. He discusses an alternative – forced debt-for-equity swap or debt-forgiveness.
A Measure of Hope
Paul Collier (NYT) Sep 21, 2008
The United Nations is falling short on helping the poorest countries converge with the rest of mankind.
Do not exaggerate investment banking's death
Philip Augar (FT) Sep 22, 2008
It is likely that investment banks will exist as recognisable entities and investment banking as an industry will emerge with enhanced validity.
A systemic crisis demands systemic solutions
Dominique Strauss-Kahn (FT) Sep 22, 2008
I welcome the bold steps taken in the US and call for other advanced economies to prepare contingency plans along similar lines
A better way to keep the capital in capitalism: A matched preferred stock plan
Charles W. Calomiris (VoxEU) Sep 22, 2008
Here is a better way of ending the financial crisis: Instead of buying toxic assets, the US government should buy preferred stock capital in ailing banks that could raise matching private sector equity. This would avoid the intractable problems of how the government should value the toxic assets and directly address the banks' immediate problem – a lack of bank capital.
Why Paulson is right (maybe): Saving the financial system from the bankers
Charles Wyplosz (VoxEU) Sep 22, 2008
The world’s bankers created a reckless mix of lending and securitisation that exploded in their faces last year; they’ve stonewalled since. It would be criminal to bail them out, but spilling blood for its own sake is foolish. Here one of the world’s leading macroeconomists explains how the ‘Paulson Package’, history’s largest bet, might work and might not cost taxpayers too much. It’s too early to know which label to apply: “bailout” or “shrewd cleansing operation”.
Huge Reserves, Emerging Market 'Challengers' and Other Forces Are Changing Global Finance
K@W Sep 22, 2008
Rapidly developing economies have become drivers of change -- and sometimes disruption -- in global financial markets. That has important implications for companies in the U.S. and Europe as new players emerge, including sovereign wealth funds, state-controlled entities and acquisition-minded corporations. According to experts at Wharton and The Boston Consulting Group, these entities will increasingly look to buy assets beyond their borders, including controlling stakes in foreign companies.
Failing the World's Poor
NYT Sep 23, 2008
Wealthy nations have fallen far behind on their aid commitments to the world's poor.
Inconvenient Geopolitical Truths
Matthew Hulbert (Globalist) Sep 23, 2008
What does politics have to do with oil markets?
The Buck Stopped Then
James Grant (NYT) Sep 23, 2008
Critics of the administration’s Wall Street bailout condemn the waste of taxpayer dollars. But the taxpayers aren’t the weightiest American financial constituency, even in this election year. The dollar is the world’s currency. And it is on the world’s opinion of the dollar that the Treasury’s plan ultimately hangs.
The Wrong Emergency
Roger Lowenstein (New Republic) Sep 23, 2008
What Washington doesn't understand about the financial crisis.
The End of Wall Street
WSJ Sep 23, 2008
Goldman and Morgan Stanley end the investment bank era.
Defending the Dollar
WSJ Sep 23, 2008
Our financial woes would be made worse by a global run on the greenback.
Fifty Countries Still Hurt by Food, Fuel Crisis, IMF Says
IMF Survey Sep 24, 2008
Although food and fuel prices have eased from recent peaks, some 50 low and middle-income countries have suffered a significant "shock" and will remain at risk through 2009 because of deteriorating foreign exchange reserves, rising inflation, and slowing world growth, according to an IMF study.
And then there were none
Economist Sep 24, 2008
What the death of the investment bank means for Wall Street.
The Global Economy and Financial Crisis
John Lipsky (IMF) Sep 24, 2008
The past few weeks included momentous and almost unimaginable financial sector developments.
G-7 Fails to Find Consensus on SSM
BRIDGES Weekly Trade News Digest - Vol. 12, Number 31 Sep 24, 2008
Capital-based officials from seven major trading powers met last week in a last-ditch attempt to hammer out their differences on an agricultural safeguard mechanism for developing countries, a controversial trade tool that triggered the collapse of world trade talks in Geneva at the end of July.
Hedge funds move $100bn into safe havens
FT Sep 24, 2008
Hedge funds charging hefty fees for sophisticated trading strategies aimed at outperforming the wider market have collectively parked $100bn in simple money market funds typically used by investors seeking safe rather than spectacular returns
The Perilous Price of Oil
George Soros (NYRB) Sep 25, 2008
In January 2007, the price of oil was less than $60 per barrel. By the spring of 2008, the price had crossed $100 for the first time, and by mid-July, it rose further to a record $147. At the end of August it remains over $115, a 90 percent increase in just eighteen months. The price of gasoline at the pump has risen commensurately from an average of $2.50 to around $4 a gallon during this period. Transportation and manufacturing costs have risen sharply as well. All this has occurred at the same time as a world credit crisis that started with the collapse of the US housing bubble. The rising cost of oil, coming on top of the credit crisis, has slowed the world economy and reinforced the prospect of a recession in the US.
How to resolve the Doha stalemate: A better agricultural safeguard trigger
Robert E. Baldwin (VoxEU) Sep 25, 2008
WTO negotiations collapsed in July 2008 when India and the US could not agree on the details of a “special safeguard mechanism” in agriculture. The mechanism would allow developing countries to raise import duties on agricultural products in response to import surges without an injury test. Here one the world’s leading trade economists proposes a mechanism design that reconciles the US and Indian positions and could put Doha back on track.
IMF Says Crisis Marks Tectonic Shift in Financial Markets
IMF Survey Sep 25, 2008
The upheaval from the U.S. financial crisis is like a tectonic shift on a scale not seen in the financial systems around the world, the IMF's John Lipsky says. He tells a California conference that a serious downturn in the global economy can be avoided.
Why We Need to Act Now
Anne O. Krueger (WP) Sep 25, 2008
It is imperative that the United States act quickly to restore confidence and the flow of credit. The longer action is delayed, the more costly rescue is likely to be. Rescuing the financial system is in the interests of all Americans: Failure to do so would result in rising unemployment and falling output... A financial system incapable of appropriately assessing the trade-offs between risk and reward cannot support economic growth.
Global: Pulling All the Strings?
Joachim Fels (MSDW) Sep 25, 2008
Inflationary risks over the medium and longer term are still lingering. But the tail risk of a deflationary outcome has also increased, especially if the Treasury’s plan is blocked or delayed. Policymakers may soon be forced to pull all available strings, including rate cuts by all the major central banks.
Emerging Lessons from the U.S. Financial Crisis
Eswar Prasad (Brookings) Sep 25, 2008
As other emerging markets watch the U.S. financial crisis with caution, they might be wary to adopt the free-market principles that guided the development of the U.S. financial markets. This is the wrong lesson to take from the crisis, however. Emerging markets should instead learn from the U.S. lessons on fraud, corruption, and government regulation.
Breaking the bank
Economist Sep 25, 2008
A vaunted model development project goes awry.
The world was watching
Economist Sep 25, 2008
When the WTO came to Hollywood.
New research on the risks of attracting large inflows of foreign money
Economist Sep 25, 2008
Does Wall Street's meltdown show financial globalisation itself is part of the problem?
We need a new Global Monetary Authority
Jeffrey Garten (FT) Sep 26, 2008
Even if the US's massive financial rescue operation succeeds, it should be followed by something even more far-reaching – the establishment of a Global Monetary Authority to oversee markets.
The Subprime Crisis and Global Justice
Martin Hüfner (Globalist) Sep 26, 2008
Reflections on the West's subprime mortgage troubles and the Asian financial crisis of 1997.
The Global Economic Symposium
Dennis J Snower (VoxEU) Sep 26, 2008
The world has a new forum for formulating solutions to global problems. In this column, its founder, Dennis Snower, President of the Kiel Institute of World Economics, explains the goals of the Global Economic Symposium – something like Davos but where the economics is the focus instead of the window dressing.
Bailout May Be Granddaddy of All Carry Trades
John M. Berry (Bloomberg) Sep 26, 2008
There might be a gem in the Treasury's plan to buy $700 billion of dubious mortgage-related assets.
Is the Dollar the Next Front for the Financial Crisis?
Edwin M. Truman (PIIE) Sep 24, 2008
The financial crisis has been raging for 15 months. One shoe that has yet to drop has been the dollar. Against major currencies the greenback has declined on balance only 4 percent since June 2007 though it dipped 11 percent through April before coming back until recently. The risk is that if the US authorities are not perceived to have their act together, a renewed rapid decline in the dollar will open up a new front in the crisis. At a minimum, it is more than likely that the Bush administration will be defending the dollar before it leaves office on January 20, 2009, and it should be open to doing so.
Each Crisis is Different and all Crises Are the Same
Edwin M. Truman (PIIE) Sep 26, 2008
The global credit crisis is entering its fifteenth month. This crisis is different in its origins, but its contours are familiar to anyone who was watched such crises over the past several decades or to anyone who has studied the history of earlier crises. Those regularities include the replacement of greed by fear and the slow adjustment by policy makers as they gradually recognize that rules have to be broken.
From commodity boom to financial and political crisis
Erwin Bulte, Christopher M. Meissner, Mare Sarr & Tim Swanson (VoxEU) Sep 27, 2008
It is well known that resource wealth may be a “curse” for some countries, as resource booms are translated into lingering ill effects. This column blames unstructured financial investments.
Taxpayers can still benefit from a bail-out
Lawrence Summers (FT) Sep 28, 2008
The idea has taken hold that the US will have to scale back its aspirations in areas such as healthcare. This is more wrong than right.
Bank governance and regulation interact: One size won’t fit all
Luc Laeven & Ross Levine (VoxEU) Sep 29, 2008
When the storm passes, bank regulation will top the global policy agenda. This column presents new evidence that a bank’s private governance structure influences its reaction to bank regulation. Since governance structures differ systematically across countries, one-size-fits-all regulation may be ineffective. Bank regulations must be custom-designed and adapted as financial governance systems evolve.
Regulation and financial models: Complexity kills
Jon Danielsson (VoxEU) Sep 29, 2008
Complex financial models and intricate assets structures meant extraordinary profits before the crisis. Markets for structured products became overly inflated as even the banks did not have a clear view of the state of their investments. Given complexity's role in today’s mess, future regulation should focus on variables that are easy to measure and hard to manipulate (e.g. leverage ratios).
Asia rides high - for the moment
FT Sep 29, 2008
The financial and economic troubles of the US may be no laughing matter for China and India. For all the increased and justified confidence in both countries, China and India are both still very vulnerable to a downturn in the US, writes Gideon Rachman
Currencies: Risks of a Sharp Reduction in Capital Flows to EM
Stephen Jen & Spyros Andreopoulos (MSDW) Sep 29, 2008
We believe that the risk of a global recession has risen. Correspondingly, capital flows into EM could fall from around US$750 billion a year during 2007-08 to US$550 billion or so by 2009, in turn undermining EM’s economic growth and pressure some EM currencies lower. FDI, portfolio and loan flows will also likely decline.
Currencies: Capital Flows and the BRIC Currencies
Stephen Jen & Spyros Andreopoulos (MSDW) Sep 29, 2008
Looking at the BoP positions of the BRIC economies, a prospective decline in capital flows into EM might be most damaging for the INR and least so for the CNY. RUB looks somewhat better positioned than BRL. Thus, CNY > RUB > BRL > INR.
Two steps the EU should take to protect Europe’s financial system
Daniel Gros & Stefano Micossi (VoxEU) Sep 30, 2008
Europe’s largest banks are highly leveraged and thus vulnerable, as Fortis showed. But some of these banks are both too large to fail and too big to be rescued by a single government. The EU should: (1) urgently pass legislation to cover banks with significant cross-border presence and empower the ECB to provide direct support, and (2) create an EU-level rescue fund managed by an existing institution like the European Investment Bank.
Rescue hopes drive dollar higher
FT Sep 30, 2008
The dollar surged higher as shock over the US administration's failure to push its $700bn financial rescue plan through Congress gave way to optimism that a deal would eventually be struck.
America must seek aid for a global credit line
Kenichi Ohmae (FT) Sep 30, 2008
From the experience of Japan, the financial crisis will go through three phases, each requiring a different measure.