Rupiah Remembrances
Steve Hanke (GlobeAsia) Sep 2010
The Indonesian rupiah has garnered plenty of news coverage recently. Most of it has focused on the rupiah's newfound stability. That stability, in part, has given Bank Indonesia (BI) enough courage to float a new idea. In early August, the BI signaled that it was considering a redenomination of the rupiah.
Restoring Hope: Reinvigorating the Millennium Development Goals
Finance and Development Sep 2010
Assessments of how the world is doing in meeting the MDGs--international development targets that all UN member countries and many international organizations have set for 2015. Our lead article, 'Regaining Momentum,' says that while several of the MDGs are within reach, the global economic crisis has set back progress toward a number of the targets, especially those related to health. Developing countries will need the support of advanced economies in to get back on track. Economist Jagdish Bhagwati calls into question the premise of the MDGs and argues that they should be rethought. Philanthropist Melinda Gates gives us the good news that maternal health has been improving, though we are not yet on track to meet the MDG target on maternal mortality. Picture This takes a look at child mortality rates and finds a more sobering picture. In related stories, economists Arvind Panagariya and Rodney Ramcharan have different views on how important it is to fight inequality. This issue also examines the deterioration of fiscal positions in advanced economies--as a result of both the global financial crisis and the long-run health and pension costs of an aging population. 'How Grim a Fiscal Crisis?' argues that consolidation in advanced economies should focus on spending cuts, given the already high tax burdens in many countries. In 'A Hidden Fiscal Crisis,' economist Laurence J. Kotlikoff examines the serious budget issues in the United States. We also look at the expensive needs of a rapidly aging population in France, and steps China is taking to improve pensions and health care. People in Economics profiles Maria Ramos, the academic-turned-Treasury mandarin who had a central role in stabilizing the budget in South Africa. And the 'Back to Basics' feature discusses unemployment.
Seven Ways to Save the World
Ian Bremmer & Nouriel Roubini (II) Sep 2010
Policymakers of the Group of Seven nations can avoid being condemned to a series of ever-increasing boom-and-bust cycles if they are willing — and able — to perform seven radical procedures on their economies.
Paradise Lost: Why Fallen Markets Will Never Be the Same
Ian Bremmer & Nouriel Roubini (II) Sep 2010
The financial crisis has discredited free-market capitalism and given its state-driven counterpart a boost.
The Lofty Ambitions of Dominique Strauss-Kahn
Kevin Muehring (II) Sep 2010
Managing Director Dominique Strauss-Kahn has reasserted the IMF’s centrality to the international financial system. Will he stick around to see his sweeping reform plans through?
Euro Will Unravel, and Soon: Collapse Could Imperil U.S. Economy
Desmond Lachman (AEI) Sep 2010
The outbreak of a sovereign-debt crisis in the eurozone's peripheral economies has been among the more important developments in the global economy in 2010. Sadly, this crisis will likely intensify in the months ahead as markets increasingly focus on the intractable solvency and competitiveness issues confronting countries like Greece, Portugal, Spain, and Ireland. Such intensification will affect Europe's already-troubled banking system, seriously threatening both the European and the global economic recovery.
An Interesting Week Ahead
Mohamed El-Erian (PIMCO) Sep 2010
The failure to reduce risk spreads in peripheral European countries means that the public sector bailout is not working. The list of industrial countries wishing to depreciate their currencies is not matched by a list of emerging economies happy to let their currencies appreciate significantly. As a result, foreign exchange tensions are mounting.
Credit Opportunities in the New Normal
Mark Kiesel (PIMCO) Sep 2010
The New Normal, as described by PIMCO’s outlook, is marked by uncertainty and risk, including slower growth in developed nations, reregulation and deleveraging of private sector balance sheets. Select high-quality credit investments should benefit in the New Normal and there exist several global opportunities today for investors who can get the top-down, macroeconomic themes right and then express those views with the best possible risk-adjusted opportunities from the bottom up. Bank bonds senior in the capital structure, noncyclical and defensive sectors, secured bonds and asset-rich industries that derive a large portion of their revenue from faster-growing emerging economies are poised to outperform given the outlook for subpar economic growth in the developed world.
The Myth of Diversification: Risk Factors vs. Asset Classes
Sébastien Page and Mark A. Taborsky (PIMCO) Sep 2010
In our New Normal world, regime shifts in economic conditions will continue to cause significant challenges for risk management and portfolio construction. On average, correlations across risk factors are lower than correlations across asset classes, and risk factor correlations tend to be more robust to regime shifts. Risk factors provide a flexible language with which investors may express their forward-looking economic views, adapt to regime shifts and diversify their portfolios accordingly.
The Rising Euro Leaves a Sinking Feeling
Andrew Balls (PIMCO) Sep 2010
The euro stands out as a major world currency where the central bank is neither attempting to actively weaken it or prevent it from appreciating. Spreads on the bonds and sovereign credit default swaps of several European peripheral countries have continued to widen in spite of the range of policy interventions. European peripheral countries are embarking upon huge fiscal adjustments that are likely to crush domestic demand growth, leaving countries hoping that they can increase exports. The common currency's appreciation (and overvaluation) threatens to make a bad situation worse.
The China Syndrome: Will the Economic Growth Continue?
Vitaliy Katsenelson (II) Sep 2010
China may have led the world out of recession, but its recent economic growth - based on an unprecedented stimulus package and extraordinary government involvement in the economy - is not sustainable.
A truer picture of China’s export machine
John Horn, Vivien Singer, and Jonathan Woetzel (McKinsey Quarterly) Sep 2010
China's growth depends less on exports than conventional wisdom suggests.
Germans show signs of taking the risk-averse route of Japan
Ad van Tiggelen (FT) Sep 1, 2010
Similarities to the developments in Japan in the 1990s can be seen now in what is happening in Germany.
Hedge funds should cool it on tax
John Gapper (FT) Sep 1, 2010
Tempting as it is to single out Wall Street and to narrow a tax loophole widely employed on Wall Street, it is not justified.
The New Old World Order
Victor Davis Hanson (National Review) Sep 2, 2010
A global shift to past politics also signals a return to past solutions like free markets and strong borders.
Causes of the Recent Financial and Economic Crisis
Ben S. Bernanke (FRB) Sep 2, 2010
The charge to examine the causes of the recent financial and economic crisis is indeed important. Only by understanding the factors that led to and amplified the crisis can we hope to guard against a repetition.
Quantitative easing 2: War footing
Economist Sep 2, 2010
Monetary and fiscal stimulus make a potent, if uneasy, combination.
Global economic policy: Monetary illusions
Economist Sep 2, 2010
Central bankers are not magicians. Don't count on them to conjure up remedies if the rich economies flag.
Sovereign debt: Wiggle room
Economist Sep 2, 2010
The IMF offers indebted governments some reassurance.
The EU can be a boon for Greece
Paul Romer (FT) Sep 2, 2010
Creating a powerful new anti-corruption commission could be like tossing a gun into the
Capitalism and its divided critics
Sebastian Mallaby (FT) Sep 2, 2010
Financial commentators should not denounce securitisation without acknowledging the point that is obvious to management commentators: bureaucratic risk controls are also flawed.
Central banks: Monetary illusions
Economist Sep 2, 2010
Central bankers are not magicians. Don’t count on them to conjure up remedies if the rich economies flag.
The Skills Deficit
Daniel Gros (Project Syndicate) Sep 2, 2010
The slowdown in the pace of economic recovery, particularly in the US, has predictably led to calls for further fiscal and monetary stimulus. But economic policy can do little more than ease the social pain of the long and difficult structural adjustment that countries like the US face as they try to re-establish the skills needed to strengthen exports.
Measuring the output responses to fiscal policy
Alan J Auerbach & Yuriy Gorodnichenko (VoxEU) Sep 3, 2010
The return from a fiscal stimulus – the fiscal multiplier – remains one of the most controversial topics in economics today. This column considers the influence of expectations, of variation in recessions and expansions, and of different components of government spending. It finds that the size of the multiplier varies considerably over the business cycle: between 0 and 0.5 in expansions and between 1 and 1.5 in recessions.
Economic consequences of speculative side bets: The case of naked CDS
Yeon-Koo Che & Rajiv Sethi (VoxEU) Sep 4, 2010
The role of naked credit default swaps in the global crisis is an ongoing source of controversy. This column seeks to add some formal analysis to the debate. Its model finds that speculative side bets can have significant effects on economic fundamentals, including the terms of financing, the likelihood of default, and the scale and composition of investment expenditures.
Recession Geopolitics
Harold James (Project Syndicate) Sep 5, 2010
The news that China has overtaken Japan as the world’s second largest economy did not come as a surprise. This is the major geo-political outcome of the Great Recession of the early twenty-first century – one that carries both economic hope and political fear.
The Case for an Indian Sovereign Wealth Fund
Edwin M. Truman (PIIE) Sep 5, 2010
The Indian government is again considering establishing a sovereign wealth fund (SWF). Whether such a SWF would be wise depends on five possible objectives. (1) If the government believes that the Reserve Bank of India holds excess foreign exchange reserves that should be invested to generate a higher return, a case could be made for establishing a sovereign wealth fund. (2) If the government believes that its overall investment portfolio should be more diversified internationally, including the portion of that portfolio that is now managed by the central bank, establishing an SWF is one way of transparently accomplishing that objective. (3) If India's objective were to permit the government to participate in strategic investments abroad, that goal potentially raises broader issues. (4) If the objective were to make strategic investments abroad alongside investments by Indian private sector entities, that approach could create controversies over cross-subsidies and in turn generate trade policy disputes. (5) And finally, if India's objective were to use its SWF as a mechanism to redirect to the domestic economy funds that are currently invested abroad, for example international reserves, India would need to undertake significant adjustments to its macroeconomic policies.
Do not fall for talk of European solvency
Wolfgang Münchau (FT) Sep 5, 2010
To guarantee the solvency of the eurozone’s peripheral countries would require not a few quarters of solid growth, but an entire decade.
Business should speak up for immigration
Michael Skapinker (FT) Sep 6, 2010
The business response is pusillanimous. The case for immigration should be made by those who stand to benefit – the companies that cannot do without immigrants’ labour and skills.
Europe's future differs from Japan's past
Stephen Macklow-Smith (FT) Sep 6, 2010
Despite parallels, crucial contrasts between the two regions mean theories that the eurozone is heading into the same deflationary mire as Japan may be wide of the mark.
Japan As Number Three
Heizo Takenaka (Project Syndicate) Sep 6, 2010
China has now officially supplanted Japan as the world’s second largest economy. The question for Japan is whether or not the country will continue to tumble down the list of the world’s great economies, or whether its politicians will return to a path of reform that can revive growth.
How to Sell Global Re-Balancing
Raghuram Rajan (Project Syndicate) Sep 6, 2010
We keep hoping that somehow meetings of heads of state will magically produce the policies that will rebalance world trade. Unfortunately, the macroeconomic changes that countries must make involve actions to which even heads of state cannot commit, because there is virtually no domestic constituency to support and promote them.
Europe's new dividing line
Anne Applebaum (WP) Sep 7, 2010
On the economy, the continent seems to be redividing itself into 'North' and 'South.'
Germans are wrong: the eurozone is good for them
Martin Wolf (FT) Sep 7, 2010
Germany has an enormous political and economic interest in making the eurozone work, however unpopular that view may be.
German banking weaknesses come to light
John Plender (FT) Sep 7, 2010
Anglo-Saxon banks are seen as the villains, but German banks are in reality the Achilles' heel of the European banking system.
To rate a return, think of what you’re missing
John Kay (FT) Sep 7, 2010
All rate of return measures suffer from the flaw that they conflate rewards to risk with rewards to patient waiting – two quite distinct things.
Can Russia Be Great?
Joseph S. Nye (Project Syndicate) Sep 7, 2010
Is Russia an industrialized banana republic whose corrupt institutions and insurmountable demographic and health problems make decline inevitable, or will reform and modernization enable Russia to surmount its problems? Either outcome is possible, but there are few good reasons to be optimistic.
The Cracks in the G-20
Javier Solana (Project Syndicate) Sep 7, 2010
The world financial crisis has acted as a quick and efficient catalyst to the G-20. But, despite its recent achievements in advancing multilateralism and coordinated global action, the G-20 remains very much a work in progress – and one that needs much work to succeed, as its most recent summit in Toronto showed.
Why don’t Japanese exporters use the yen?
Takatoshi Ito, Satoshi Koibuchi, Kiyotaka Sato & Junko Shimizu (VoxEU) Sep 9, 2010
Why do so many Japanese firms risk their profits by invoicing their exporters in foreign currencies? This column, based on firm-level interview data, suggests that such invoicing may be motivated by the fact that many Japanese firms export their goods to foreign subsidiaries facing local competitors. Invoicing in foreign currencies concentrates currency risk at the company headquarters.
Global Trade Grows, So Do Imbalances
Bridges Weekly Trade News Digest Volume 14, Number 30 Sep 8, 2010
Global goods trade in the first half of 2010 was about 25 percent higher than the same period of the year before, and the value of worldwide merchandise trade grew during the second quarter, according to new data from the WTO secretariat. But the volume of global trade remains well below the peaks reached in mid-2008 before the global financial and economic crisis. And other data suggest that global macroeconomic imbalances are widening once again, threatening to increase tensions around trade relations.
Watered-down ACTA Approaching Conclusion
Bridges Weekly Trade News Digest Volume 14, Number 30 Sep 8, 2010
Controversial multi-country negotiations on an "Anti-Counterfeiting Trade Agreement" are within striking distance of conclusion, according to a leaked draft text. The secrecy surrounding the talks took another hit this week when Knowledge Ecology International, a Washington-based non-governmental organisation, posted the draft on its website, along with a note stating that the United States was alone among participating governments in opposing the draft's release.
Japanese lessons on ill-timed fiscal tightening
Sushil Wadhwani (FT) Sep 8, 2010
Double-dip recessions are rare. Is the current growth scare different? A warning against delaying policy action, which cost Japan dear.
A Productivity Boom-in-Waiting?
Barry Eichengreen (Project Syndicate) Sep 8, 2010
There is growing concern In the US that the worst recession since the Great Depression has damaged the economy’s capacity to grow. But it is often forgotten that, in addition to the similarities between then and now – credit rationing by banks, low investment, and jobless growth – the 1930's witnessed the fastest productivity growth in US history.
Is Chinese Mercantilism Good or Bad for Poor Countries?
Dani Rodrik (Project Syndicate) Sep 8, 2010
China's huge trade surplus and a stalling US recovery point to renewed pressure on the Chinese government to revalue the renminbi. But, rather than holding China responsible for pursuing its own economic interests, other countries, particularly in the developing world, should reconsider their own misguided currency policies.
Foreign Aid: Good or Bad?
IMF Survey Sep 9, 2010
It's one of the thorniest issues in developmental economics: what, if any, are the benefits of foreign aid. Two economists pit their radically different views against each other.
Europe heads for Japanese irrelevance
Philip Stephens (FT) Sep 9, 2010
The view that the EU can measure its influence against China and the US stretches credulity. The caravan, as they say, has moved on.
What can be done to slow high-frequency trading?
Gillian Tett (FT) Sep 9, 2010
Would it be possible to impose a speed limit on equity trading? This question is being addressed by regulators and policymakers.
The new disintegration of finance
Stéphane Rottier and Nicolas Véron (FT) Sep 9, 2010
Two major shifts in the global financial landscape are impeding previous moves towards regulatory harmonisation.
Trading Away the Stimulus
Alan Tonelson &Kevin L. Kearns (NYT) Sep 9. 2010
Economic recovery depends on the government taking more effective steps to reduce the trade deficit.
Smarter Thinking on Climate Change
Bjørn Lomborg (Project Syndicate) Sep 9, 2010
A new collection of studies supports the view that climate engineering and higher spending on R&D for alternative energy, not carbon cuts, are the most effective ways to fight global warming. This agenda promises a less expensive and faster fix than trying to cut carbon emissions, and developing countries are far more likely to embrace it.
Global: Deflation---Will America and Europe Follow Japan?
Robert Alan Feldman (MS GEF) Sep 10, 2010
Investors are asking whether America and Europe will follow Japan into deflation. We think not.
Global: Crisis, Credit and Capital
Joachim Fels (MS GEF) Sep 10, 2010
Autumn brings new challenges to Europe as the sovereign debt or banking sector crises have not been resolved.
We'll Always Have Basel
WSJ Sep 10, 2010
In the fight over bank capital, more is better.
We have failed to muffle the banks
Clive Crook (FT) Sep 12, 2010
The Great Recession showed that financial regulation needed more than tweaking. Obscured by politics and special pleading, the lesson has still not been learnt.
Not a Food Crisis
NYT Sep 12, 2010
The world need not experience another food crisis as long as big agricultural producers do not follow Russia's example.
A eurozone banking crisis left unresolved
Wolfgang Münchau (FT) Sep 12, 2010
Two years on there has been lots of activity – bailouts, bad banks – but no resolution. It was always clear that this wait-and-see approach would eventually backfire.
Beijing currency saga returns
Alan Beattle (FT) Sep 12, 2010
Here we go again. After a brief hiatus over the summer, the Chinese currency saga is returning for its fall season.
China, Japan, America
Paul Krugman (NYT) Sep 12, 2010
Japan knows that its economy is hurt when China buys up its bonds. It's the same for our economy, but our policy makers just don't get it.
Governments, central bankers, and banking supervision reforms: Does independence matter?
Lucia Dalla Pellegrina, Donato Masciandaro & Rosaria Vega Pansini (VoxEU) Sep 12, 2010
The global crisis has led policymakers in the EU and the US to broaden their central banks' mandates to include greater banking supervision. This column argues that this new responsibility should be seen as an evolution of the central bank specialisation as a monetary agent rather than a reversal of the specialisation trend.
The decade after the fall: Diminished expectations, double dips, and external shocks
Carmen M. Reinhart & Vincent Reinhart (VoxEU) Sep 13, 2010
Is the global economic recovery about to grind to a halt? This column provides evidence on economic performance in the decade after a macroeconomic crisis. It finds that growth is much slower and as well as several episodes of “double dips”. It adds that many of these economies experience plain “bad luck” that strikes at a time when the economy remains highly vulnerable.
Foreign-currency loans in Eastern Europe: Borrower pull or bank push?
Martin Brown, Karolin Kirschenmann & Steven Ongena (VoxEU) Sep 13, 2010
Foreign-currency loans in Eastern Europe are seen as a major threat to financial stability. Why then are they so widespread? This column presents evidence from over 100,000 loans made by a Bulgarian bank between 2003 and 2007. It finds that one-third of foreign-currency loans were actually requested in local currency by the firm, suggesting that banks are pushing them.
Paradox for the post-crisis generation
Francesco Guerrera (FT) Sep 13, 2010
Memories of the turmoil are bankers' best hope of avoiding the same mistakes, yet those memories could discourage actions to boost profits and to persuade markets that the financial industry remains a rewarding investment
It is time to dance to a new long-term tune
Glenn Hubbard (FT) Sep 13, 2010
Our collective over-emphasis on policy for the short term over long term in the era before Lehman’s fall has returned to haunt us. For the economy as a whole, however, there are seeds of prosperity.
Basel needs a firm hand and fewer delays
David Scharfstein and Jeremy Stein (FT) Sep 13, 2010
Regulators should push banks to raise fresh capital by forbidding dividends or limiting executive compensation.
Opec at 50: cartel faces new challenges
Javier Blas (FT) Sep 13, 2010
The growth of Asia and competition from other energy sources will be among the chief concerns of the next 50 years.
The New Bank Rules
NYT Sep 13, 2010
An agreement by international banking regulators to require banks to increase their capital cushions is a considerable improvement over the status quo.
Can the Millennium Development Goals be Saved?
Shashi Tharoor (Project Syndicate) Sep 14, 2010
The target date for fulfilling the UN's Millennium Development Goals is 2015, and the world knows it is not on course to meet those goals. In order to get back on track, we must change the way the world goes about the business of providing development aid.
The Empire strikes back
Avinash Persaud (VoxEU) Sep 14, 2010
The role of financial institutions in the global crisis has led to a consensus that financial regulation must change. This column argues that the banking lobby, far from depleted, has struck back with a vengeance. It has managed to postpone the much needed regulation for a time when the need for it will be forgotten.
EU stress tests and sovereign debt exposures
Adrian Blundell-Wignall & Patrick Slovik (VoxEU) Sep 14, 2010
Despite the encouraging results from the stress tests of the EU’s banking sector, market confidence in the financial system remains subdued. This column argues that while most of the sovereign debt held by EU banks is on their banking books, the EU stress test only considered their smaller trading book exposures. Market participants do not have the luxury of being so selective.
The European semester: Terms of reference for policymakers and markets
Nicolaus Heinen (DB Research) Sep 14, 2010
The summit meeting of the EU’s economy and finance ministers (Ecofin) on September 7 produced numerous new developments. Besides a reform of EU financial market supervision, a European semester is to ensure from 2011 that national economic and fiscal policies are assessed in Brussels first before they are adopted by the member states. What does this mean exactly?
Basel: the mouse that did not roar
Martin Wolf (FT) Sep 14, 2010
The world needs a smaller and safer banking industry. The defect of the new rules is that they will fail to deliver this.
We must press on with breaking up banks
John Kay (FT) Sep 14, 2010
Pledges of co-ordinated international action to reform global finance in the aftermath of the crisis have proved empty.
Lessons of a banking collapse, in Lehman’s terms
Peter Chapman (FT) Sep 14, 2010
Lehman Brothers had two distinct histories: one of a migrant family that created an American success story, the other of the contemporary Wall Street types who threw it all away.
An Inconvenient Truth about OPEC
A. F. Alhajji (Project Syndicate) Sep 15, 2010
The three major organizations that forecast long-term oil demand and supply, along with oil companies and consulting firms, believe that OPEC will reconcile predicted global demand and non-OPEC supply. But they are wrong: OPEC output will not meet such projections, because they are based on flawed and outdated forecasting models.
Brady Bonds For the Eurozone
Simon Johnson & Peter Boone (Project Syndicate) Sep 15, 2010
Today’s conventional view of the eurozone is that the crisis is over – the intense, often existe ntial concern earlier this year about the common currency’s future has been assuaged, and everything now is back under control. But this is completely at odds with the facts – and the IMF seems poised to make Europe's insolvency problems worse.
Holding Back Europe’s Economic Nationalists
Elie Cohen (Project Syndicate) Sep 15, 2010
The global economic crisis, together with the growth of emerging markets, is putting Europe’s longstanding overcapacity problems firmly in the spotlight. To prevent the EU's single market from going bust, national policymakers must implement industrial restructuring policies in tandem.
Do free-trade agreements increase protectionism towards non-members?
Thomas Prusa & Robert Teh (VoxEU) Sep 15, 2010
While countries rush to enact more and more free-trade agreements, not enough is known about their impact. This column presents evidence suggesting that free-trade agreements are more discriminatory than their preferential tariffs suggest. It finds a stark increase in contingent protection as free-trade agreements cause a 10%-30% increase in the number of antidumping disputes against non-member countries.
IMF Meetings Should Target Double-Dip Risk
Mohamed A. El-Erian (Bloomberg) Sep 15, 2010
Many topics are being teed up for next month’s annual meetings of the International Monetary Fund and World Bank in Washington, a gathering that will draw about 190 country representatives. There is a substantial risk of disappointment, one that would be detrimental to the welfare of billions around the world over time.
The Eurozone’s Autumn Hangover
Nouriel Roubini (Project Syndicate) Sep 15, 2010
After a summer of Europeans forgetting their woes and tanning themselves at the beach, the time for a reality check has come. For the fundamental problems of the eurozone remain unresolved - and are re-asserting themselves with a vengeance.
Why it is time for the (BR)ICs to further liberalise capital outflows
Markus Jaeger (DB Research) Sep 15, 2010
The degree of capital account openness is difficult to measure precisely. Different approaches yield different degrees of openness. Few analysts would disagree, however, that both Brazil and Russia have a more open capital account than China and India. The degree of capital account openness affects the composition and size of external balance sheets. In Russia, the sum of gross external liabilities and assets as a percentage of GDP amounts to 170% of GDP, compared with a 100% or less in the other BRIC. However, if reserve assets are excluded, both Brazil (84%) and Russia (135%) are financially more open than China (54%) and India (51%)...
Tax Cuts vs. 'Stimulus': The Evidence Is In
Alberto Alesina (WSJ) Sep 15, 2010
A review of over 200 fiscal adjustments in 21 countries shows that spending discipline and tax cuts are the best ways to spur economic growth.
China's trade trap
Harold Meyerson (WP) Sep 15, 2010
The U.S. must finally stand up to China on international trade.
WTO Public Forum Kicks off in Geneva
Bridges Weekly Trade News Digest, Volume 14, Number 31 Sep 15, 2010
Civil society descended on the Centre William Rappard this morning as the WTO’s annual Public Forum got underway at the organisation’s headquarters on the shores of Lake Geneva. Some 200 panellists and an estimated 1500 participants - from union leaders to business owners to farmers - will make their way to 43 different discussions focussing on this year’s Public Forum theme, “the forces shaping world trade.”
Fiscal policy and global imbalances
S. M. Ali Abbas, Jacques Bouhga-Hagbe, Antonio Fatás, Paolo Mauro & Ricardo Cicchelli Velloso (VoxEU) Sep 16, 2010
What impact will fiscal policy have on current-account imbalances in the years to come? Using data from a large and diverse panel of countries, this column finds that a strengthening in the fiscal balance by 1 percentage point of GDP is, on average, associated with a current-account improvement of 0.2-0.3 percentage points of GDP.
Now we must build on Basel’s good work
Emilio Botín (FT) Sep 15, 2010
The proposed reforms strike a good balance between strengthening banks’ balance sheets and allowing for sustainable economic recovery. But there is still some way to go.
Gold will keep its lustre with either inflation or deflation
Jonathan Spall (FT) Sep 15, 2010
Other investments might have a rational claim to be effective but none have the history and emotional attraction that bullion enjoys
Correcting the Chinese Exchange Rate
C. Fred Bergsten (PIIE) Sep 15, 2010
China's currency remains substantially undervalued, importantly due to that country's massive intervention in the foreign exchange markets, and is a major cause of its large and growing trade surplus. Its "new exchange rate policy" announced in June 2010 has resulted in less than a 1 percent rise in the renminbi. During 2005–08 China let its exchange rate rise by 20 to 25 percent; the US goal should be to persuade it to permit a similar increase over the next two to three years. This appreciation would reduce China's global current account surplus by $350 billion to $500 billion and the US global current account deficit by $50 billion to $120 billion. Elimination of the Chinese misalignment would create about half a million US jobs, mainly in manufacturing and with above-average wages, over the next couple of years. Bergsten proposes that the United States seek to mobilize a multilateral coalition to press China to let its currency rise by the needed amount, as part of the global rebalancing strategy adopted by the G-20. This coalition should also seek authorization from the World Trade Organization to impose restrictions on imports from China unless it allows its currency to adjust adequately. To credibly lead this effort, the US administration must designate China as a "currency manipulator." In the meanwhile, it should treat China's currency undervaluation as an export subsidy for the purposes of applying countervailing duties. In addition it should initiate a new strategy of "countervailing currency intervention" against Chinese purchases of dollars by making offsetting purchases of Chinese renminbi. This action program entails risks, but the risks of inaction, including to the international trade and financial system, are much greater than the costs of the proposed measures.
Japan needs to look beyond the low yen
Richard Katz (FT) Sep 16, 2010
A cheap currency may benefit exporters but it imposes costs on the nation as a whole.
Next steps on the road to financial stability
Mario Draghi (FT) Sep 16, 2010
The new Basel standards will markedly increase the resilience of the banking system. Now we must address the problem of “too big to fail”.
For currency control lessons read yen for renminbi
Gillian Tett (FT) Sep 16, 2010
These days it is Beijing which is primarily using a weak currency and "centralised credit allocation" to boost an export machine.
The IMF and Global Coordination
Michael Spence (Project Syndicate) Sep 16, 2010
Having initially been shunned at the outset of the recent financial crisis, the IMF has assumed a key role in financing – and, more importantly, implementing – fiscal-stabilization programs. But the Fund is also at the epicenter of large-scale global coordination challenges, particularly the need to rebalance and restore global demand.
The WTO rules on Boeing: Another nose in the trough
Economist Sep 16, 2010
Boeing gets huge illegal subsidies, the WTO rules.
Africa's banking boom: Scrambled in Africa
Economist Sep 16, 2010
Chinese and Western banks are flocking to Africa but finding a strategy that works isn't easy.
Financial regulation: Basel's buttress
Economist Sep 16, 2010
New rules on bank capital and derivatives trading.
The landscape of finance: Taming the banks
Economist Sep 16, 2010
The public's urge for revenge may not have been sated, but the new Basel rules make sense.
Managed exports and the recovery of world trade: The seventh Global Trade Alert report
Simon J Evenett (VoxEU) Sep 16, 2010
Our understanding of the recent recovery in world trade would be incomplete without a consideration of the export inducements put in place during the past 12 to 18 months by major trading nations. This column summarises the findings of the seventh report of the Global Trade Alert, including a regional focus on Latin America.
Fiscal policy and global imbalances
S. M. Ali Abbas, Jacques Bouhga-Hagbe, Antonio Fatás, Paolo Mauro & Ricardo Cicchelli Velloso (VoxEU) Sep 16, 2010
What impact will fiscal policy have on current-account imbalances in the years to come? Using data from a large and diverse panel of countries, this column finds that a strengthening in the fiscal balance by 1 percentage point of GDP is, on average, associated with a current-account improvement of 0.2-0.3 percentage points of GDP.
Automatic stabilisers and the global crisis
Mathias Dolls, Clemens Fuest & Andreas Peichl (VoxEU) Sep 17, 2010
While debate rages over the appropriate size and timing of fiscal expansions, this column points out that much less attention is devoted to role of the automatic stabilisers in the tax and transfer system. It compares these stabilisers in Europe and the US, finding that social transfers play a key role in the stabilisation of disposable incomes and consumer demand.
China's Real Monetary Problem
WSJ Sep 17, 2010
Focus on yuan sterilization, not the yuan-dollar rate.
Democratizing the Millennium Development Goals
Olivier De Schutter (Project Syndicate) Sep 17, 2010
On September 20-22, world leaders will assess progress towards meeting the UN's Millennium Development Goals – a set of eight global development objectives to be achieved by 2015. But this summit should acknowledge that the MDGs have gone badly astray, and choose a radically different approach.
Competition and stability in banking
Xavier Vives (VoxEU) Sep 18, 2010
With the recent wave of bank bailouts and mergers, competition in the sector has surely been affected. This column introduces a new Policy Insight arguing that a trade-off between regulation and competition in the banking sector, while complex, does exist. The optimal policy requires coordination between regulation and competition policy depending on the level of competition in the market.
Unicef's Idea
NYT Sep 18, 2010
A compelling study argues that providing services to the world's poorest children in the most impoverished communities is more cost-effective than helping the less poor in easier-to-reach areas.
To combat poverty, get Africa’s children to school
Gordon Brown (FT) Sep 19, 2010
We can address the fading momentum and lead the most sustained assault on ignorance in human history.
Beijing is right to ignore the currency pleas
Stephen King (FT) Sep 19, 2010
A rise in the exchange rate would achieve little beyond the short term and would harm China’s workers in the long term.
Taste differences, home markets, and the gains from trade: Did Krugman praise Linder, or bury him?
Raphael Auer (VoxEU) Sep 19, 2010
Do differences in tastes impede gains from trade? This column says that that may be the case only in special circumstances. In fact, the effects of trade liberalization may be entirely unaffected by the distribution of foreign tastes and coincide with those of a representative agent approach.
Hysteria will not help the Roma
Gideon Rachman (FT) Sep 20, 2010
The only acceptable long-term solution to the problems of the Roma in Europe, as a whole, has to be employment, education and training. But nobody should kid themselves that improving the lot of the Roma is going to be quick or cheap.
Pool resources and reinvent global aid
Jeffrey Sachs (FT) Sep 20, 2010
We must replace the fragmentation of bilateral programmes with a new strategy based on multi-donor pooled funding that has clear timelines, objectives and accountability.
China must have the courage to save less
George Magnus (FT) Sep 20, 2010
A stronger renminbi is entirely in keeping with the shift to a more consumer-centric economy that is widely debated in Beijing.
We need rules to limit the risks of superfast trades
Martin Wheatley (FT) Sep 20, 2010
HFT needs to bring more benefits than costs to the market.
Trade likely to grow by 13.5% in 2010, WTO says
WTO Sep 20, 2010
Following faster than expected recovery in global trade flows so far in 2010, WTO economists have revised their projection for world trade growth in 2010 upwards to 13.5%. Director-General Pascal Lamy said: “This surge in trade flows provides the means to climb out of this painful economic recession and can help put people back to work. It underscores, as well, the wisdom governments have shown in rejecting protectionism.”
IMF Urges Countries to Redouble Growth Drive, Revive MDGs
IMF Survey Sep 20, 2010
IMF Managing Director Dominique Strauss-Kahn, saying the global economic crisis had set back momentum toward the Millennium Development Goals, urges countries to redouble efforts to get back on track, arguing that a revival of world economic growth is the key to success.
Politics and Corporate Money
Lucian Bebchuk (Project Syndicate) Sep 20, 2010
Spending by corporations on political campaigns and candidates raises well-known questions about democracy and private power. But another important question is often overlooked: who should decide for a publicly traded corporation whether to spend funds on politics, how much, and to what ends?
Seven More Years of Hard Times?
Robert J. Shiller (Project Syndicate) Sep 20, 2010
It is not true that if you break a mirror, you will have seven years’ bad luck. But if you allow a financial market to spin wildly until it breaks down, it really does seem - based on historical patterns - that you run the risk of years of economic malaise.
Did France cause the Great Depression?
Douglas Irwin (VoxEU) Sep 20, 2010
A large body of research has linked the gold standard to the severity of the Great Depression. This column argues that while economic historians have focused on the role of tightened US monetary policy, not enough attention has been given to the role of France, whose share of world gold reserves soared from 7% in 1926 to 27% in 1932. It suggests that France’s policies directly account for about half of the 30% deflation experienced in 1930 and 1931.
China: Energy superpower
Michael T Klare (AT) Sep 21, 2010
China's emergence as the world's top energy consumer - and the likelihood of it keeping that status - has immense implications for the future of great-power politics and of the planet. Washington is watching with anxiety.
Culture can determine long-run growth
Yuriy Gorodnichenko & Gérard Roland (VoxEU) Sep 21, 2010
Does culture affect long-run growth? This column argues that countries with a more individualist culture have enjoyed higher long-run growth than countries with a more collectivist culture. Individualist culture attaches social status rewards to personal achievements and thus provides not only monetary incentives for innovation but also social status rewards.
Prescription Financial Products
Kaushik Basu (Project Syndicate) Sep 21, 2010
One positive fallout of the financial crisis of 2007-201? is our realization that financial products can be as complex and dangerous as drugs. But, if that's true, shouldn't we require a prescription for buyers of certain financial products?
Lula's Legacy
Jorge G. Castañeda (Project Syndicate) Sep 21, 2010
Brazil is on the cusp of sustained growth, higher international stature, and consolidating its middle-class status. But, until it develops a mature foreign policy that matches its economic aspirations – a foreign policy based on principled leadership, not heedless Third World solidarity – its global influence will be constrained.
Basel III is priming big banks to work the system
John Plender (FT) Sep 21, 2010
Basel III means that the world cannot afford to have another large-scale banking crisis for nine years. Can we rely on the bankers to do the decent thing?
We should clone the robo-trader rather than revile him
Sebastian Mallaby (FT) Sep 21, 2010
Denouncing high-frequency traders for their quick turnover of inventory is like saying your local shop sells too much.
Wen is right to worry about China's growth
Martin Wolf (FT) Sep 21, 2010
What could stop the juggernaut? Some point to rapid monetary growth, credit bubbles, asset price overshoots and bad debts. But excessive dependence on investment is a bigger threat.
Rich China plays the 'poor' card for aid
Antoaneta Becker (AT) Sep 22, 2010
China showers largesse on Africa and Latin America when influence and resources are up for grabs, but even as it celebrates being the world's second-biggest economy, it holds its hand out for aid that could go to poorer countries.
We need a Tobin tax to fund development
Pete Stark (FT) Sep 22, 2010
A tiny levy on transactions, many of which are purely speculative, would raise billions of dollars to invest in key domestic and global priorities.
Towards a new era of currency intervention
Mansoor Mohi-Uddin (FT) Sep 22, 2010
Other G20 nations have remained silent about Japan's currency intervention is because soon they'll all be at it.
Opinion: Missed Goals
NYT Sep 22, 2010
Rich nations have not contributed the money needed to make the so-called Millennium Development Goals a reality. They have to deliver.
Is China Strong or Weak?
Jeffrey N. Wasserstrom (Project Syndicate) Sep 22, 2010
Outsiders are increasingly convinced that China is a superpower, and that it needs to show that it can be a responsible one. But China’s rulers only sometimes embrace the designation – and the Communist Party still sometimes behaves as if it had only a tenuous hold on power.
US-China Trade Tensions Rise Further
Bridges Weekly Trade News Digest, Volume 14, Number 32 Sep 22, 2010
Trade tensions between the United States and China grew more strained over the past week, as Washington slapped trade remedies on several Chinese imports, launched two WTO complaints targeting the Asian manufacturing juggernaut, and sharpened its criticism of Chinese currency and commercial policy. Chinese officials have also stepped up the war of words, rejecting the US allegations and warning of a trade war with retaliation against US imports if Washington does not back down.
EU Members Agree to Give Pakistan Trade Concessions, Specifics Remain Unclear
Bridges Weekly Trade News Digest, Volume 14, Number 32 Sep 22, 2010
EU member states have agreed to temporarily waive tariffs on imports from Pakistan, in an attempt to support economic recovery in the flood-stricken country. But the duration, coverage, and depth of the proposed trade concessions remain to be determined.
Doha Accord Would Help WTO Contribute to MDGs, Says Lamy
Bridges Weekly Trade News Digest, Volume 14, Number 32 Sep 22, 2010
Concluding a Doha Round agreement and increasing aid for trade are the contributions the WTO can make to ongoing global efforts to reduce the problems afflicting the world's poor, Director-General Pascal Lamy told world leaders at the UN Millennium Development Goals Summit in New York this week.
Some Unpleasant Irish Dynamics
Jacob Funk Kirkegaard (PIIE) Sep 23, 2010
Despite the difficulties of Prime Minister Brian Cowen of Ireland in laying out a plan to address the imploding banking sector, the Irish Treasury managed this week to sell a heavily oversubscribed €1 billion of 2018 and €500 million of 2014 bonds. They were costly, with dear yields of 6 and 4.8 percent respectively. But the sale should help to calm renewed fears about the immediate Irish financial situation.
The G-20 leaders' meeting in Seoul, Korea in November 2010 is an opportunity and challenge for Asian leaders in particular. Their test will be, first, to demonstrate that they can responsibly advance economic recovery. They must also deliver on institutional reform, in particular of the International Monetary Fund (IMF). Edwin M. Truman advocates a substantial expansion of the IMF's role as lender of last resort that is integrated with the surveillance role of the IMF in the form of comprehensive prequalification for IMF assistance and policy advice and a substantial increase in the IMF's financial resources. Truman also proposes an approach to meaningful reform of the distribution of IMF quotas along with limiting European seats on the IMF executive board.
Nicolas Véron (PIIE) Sep 23, 2010
The rise of emerging economies has long been recognized as a defining feature of our times when it comes to trade, manufacturing, and an increasing range of services businesses. Until recently, however, there was widespread sentiment that international finance was somehow escaping the trend. A dominant share of financial assets, financial companies, financial centers, and financial regulatory power remained concentrated in the North Atlantic. Even as the world's economic center of gravity was moving away, the financial one seemed firmly anchored in the West. But this feeling was an illusion that is rapidly dissipating.
You're the yuan that I want: A Mao in every pocket
Economist Sep 23, 2010
China struggles with a new export: its own currency.
Speak less softly, carry a stick
Economist Sep 23, 2010
The Obama administration’s patience with China wears thin.
How to fix the euro
Economist Sep 23, 2010
The answers Brussels is unlikely to suggest.
Currency interventions: Trial of strength
Economist Sep 23, 2010
Will today's currency interventions hurt or help the world economy?
A Keynesian prototype: Standard solution
Economist Sep 23, 2010
A 69-year-old plan for dealing with imbalances in currency unions.
Too Soon To Call For Asian Decoupling
Arpitha Bykere (Forbes) Sep 23, 2010
Until Asia expands its domestic demand and internal trade, the region's economic fate will remain tied to the U.S. and E.U.
Rebuilding Euro Governance
Niels Thygesen (Project Syndicate) Sep 23, 2010
Europe’s sovereign-debt problems have prompted a search for more effective approaches to economic governance in the EU, particularly in the eurozone. A task force chaired by President Hermann van Rompuy will submit its final report in October, but we can anticipate its conclusions in the light of the current system’s major shortcomings.
The Price of Crisis Prevention
Jean Pisani-Ferry (Project Syndicate) Sep 23, 2010
In the long term, the world economy can easily afford the costs of higher capital requirements for banks in order to insure against ruinous financial crises. The problem is that the short-term transition costs of tighter regulation could undermine the pace of economic recovery.
Can I trust the government? New evidence on democracies and financial development
Marc Quintyn & Geneviève Verdier (VoxEU) Sep 23, 2010
What do countries need for sustainable financial development? This column argues that protection of property rights is necessary but not sufficient. Using a sample of 160 countries from 1960 to 2005, it finds that checks and balances on power and political stability are the vital ingredients.
BRIC sovereign wealth funds
Markus Jaeger (DB Research) Sep 24, 2010
The external wealth of governments.
Japan’s Savings Crisis
Martin Feldstein (Project Syndicate) Sep 24, 2010
Japan is heading toward a savings crisis. The potential financing crunch caused by a combination of rising fiscal deficits and a plummeting household saving rate could have powerful negative effects on both the Japanese and the global economy.
Casino gibes do our banks no justice
John Varley (FT) Sep 23, 2010
Restoring stakeholders’ trust will take time – but can be done.
Guzzle for the sake of the world economy
Samuel Brittan (FT) Sep 23, 2010
We will achieve little by exhorting countries such as China, Germany and Japan to increase their consumption.
Europe must make way for a modern IMF
Paulo Nogueira Batista (FT) Sep 23, 2010
A US initiative provides the Fund with an opportunity to increase the influence of emerging markets over its lending decisions.
Repo needs a backstop to avoid future crises
Gillian Tett (FT) Sep 23, 2010
The core vulnerability that was exposed during the Lehman shock has still not gone away.
Asia's Currency Market Shakeup
Philip Bowring (Asia Sentinel) Sep 24, 2010
The region's finance ministers, central bankers protect their own interests.
China plays by its own currency rules
Peter Lee (AT) Sep 25, 2010
Facing possibly "the biggest bubble in the history of finance", the Chinese government can forestall a domestic crisis only by raising interest rates, rather than aggravating risk through a hike in the value of its currency. Least of all will Beijing revalue the yuan under outside pressure, recognizing that the process must be non-transparent to deter influxes of speculative money. Washington doesn't get it.
Could any country risk a eurozone bail-out?
Wolfgang Münchau (FT) Sep 26, 2010
No euro member would ever want to borrow from the European Financial Stability Facility, unless it was absolutely unavoidable.
IMF governance turns into giant sudoku puzzle
Alan Beattie (FT) Sep 26, 2010
The saga of power within the IMF, which has unfolded in infinitesimal increments for years in the manner of a Tolstoyan familial saga, has suddenly become a Stieg Larsson race-against-time thriller.
Blaming China Won't Help the Economy
Anatole Kaletsky (NYT) Sep 26, 2010
Sorry, but from now on governments will control currency values.
China Won't Revalue the Yuan
John Lee (FP) Sep 24, 2010
No amount of hectoring by Barack Obama is going to change the calculus of Chinese leaders. An undervalued currency may be critical to their very survival.
The Slave Ethos and the African Economy
Sanou Mbaye (Project Syndicate) Sep 27, 2010
For much of Africa, high commodity prices and rising consumption should mark a decisive break with endemic poverty. But, unless African leaders change their ways, it will not.
Solidarity in a Pluralist Age
Charles Taylor (FT) Sep 27, 2010
Democratic societies cannot function beyond a certain level of mutual distrust or a sense on the part of some members that other members have abandoned them. But loss of identity and increasing individualism – a focus on one’s own ambitions and economic prosperity – are now undermining the very basis of what a modern democratic society is.
The Regulation Tax Keeps Growing
Nicole Crain and Mark Crain (WSJ) Sep 27, 2010
Blame Washington, not China, for the decline of American manufacturing.
The makings of a trade war
Robert Samuelson (WP) Sep 27, 2010
Provoking China would be better than allowing it to remake the trading system.
The rising power problem
Fareed Zakaria (WP) Sep 27, 2010
Rising powers want to be deferred to on regional matters, yet prioritize national self-interest.
Eurozone needs a permanent bail-out fund
Peter Bofinger, Henrik Enderlein, Tommaso Padoa-Schioppa and André Sapir (FT) Sep 27, 2010
The eurozone faces a scenario where policymaking is difficult. The resulting instability could jeopardise EMU.
China’s muscle-flexing is a sign of weakness
Jonathan Holslag (FT) Sep 27, 2010
We have seen outbursts of assertiveness before, but this spat with Japan is the product of a bottleneck in China’s domestic transition, which, if not managed well, could lead to a return of destabilising patriotism.
Open markets will relieve political tensions
Komal Sri-Kumar (FT) Sep 27, 2010
Understanding the economics of trade will ease political tensions.
The donkey in the China shop
Antal E Fekete (AT) Sep 28, 2010
US President Barack Obama's delivery of a blackmail message to Prime Minister Wen Jiabao of China - revalue the yuan or else - was more than an arrogant and gross misuse of the United Nations building to threaten a trade war. His charge that the Chinese artificially hold their currency weak is a red herring, concocted purely for domestic political gain.
A Game of Trade Chicken
WSJ Sep 28, 2010
Poultry protectionism shows where the U.S. and China are heading.
Currencies clash in new age of beggar-my-neighbour
Martin Wolf (FT) Sep 28, 2010
Twenty five years ago, France, West Germany, Japan, the US and the UK met at the Plaza Hotel in New York and agreed to push for depreciation of the US dollar. Today America has the same desire. But this time, the focus of attention is not a compliant ally, such as Japan, but the world’s next superpower: China. When such elephants fight, bystanders are likely to be trampled.
Germany’s defence of euro has its limits
Ralph Atkins (FT) Sep 28, 2010
European Union authorities this week will seek new rules to secure the euro’s future after the bruising crisis over public finances that took the continent’s monetary union to the brink of disaster.
China needs to exercise caution over rapid rail growth
Mure Dickie (FT) Sep 28, 2010
China’s railway development is a reminder to foreign businesses that they are dealing with a nation that is no longer willing to be a technology follower and is able to use the allure of its vast market to catch up
Cultivating the Chinese Consumer
Stephen S. Roach (NYT) Sep 28, 2010
To fix the U.S.-China trade imbalance, new initiatives are needed to encourage Americans to save more and Chinese to spend more.
China's Innovation Wall
Adam Segal (Foreign Affairs) Sep 28, 2010
In a bid to end its dependence on foreign intellectual property and become a global power in science and technology, China is attempting to foster indigenous innovation. Are the U.S. government and business community right to be worried about threats to free trade and intellectual property rights?
Eurozone Crisis as Historical Legacy
Mary Elise Sarotte (Foreign Affairs) Sep 29, 2010
For all the success of German reunification, it left behind fateful seeds that sprouted into the current eurozone crisis. To overcome the current downturn, Europe should finish the job started two decades ago and retrofit the European Union with stronger political institutions.
Who's the currency manipulator?
Hossein Askari and Noureddine Krichene (AT) Sep 29, 2010
Imposing sanctions on China for its currency policy will not impinge the country's export competitiveness or resolve the problems facing the United States economy. Meanwhile, the Federal Reserve continues to do its own currency manipulations through low interest rates and lax credit.
China’s Great Migration
Fan Gang (Project Syndicate) Sep 29, 2010
It is difficult to overestimate the importance of regional issues – particularly inter-regional disparities – for China’s politics. That is why ensuring continued migration from the country's vast interior to the coastal regions is as important as maintaining large investment flows in the opposite direction.
America Embraces Trade Discrimination
Jagdish Bhagwati & Arvind Panagariya (Project Syndicate) Sep 29, 2010
Economists generally agree on the advantages of openness in trade. But the case for non-discrimination in trade is also a compelling one - and the US is flouting WTO rules against it by raising visa fees for temporary foreign workers.
How to stop currency manipulation without a trade war
Daniel Gros (VoxEU) Sep 29, 2010
With the US threatening to label China a “currency manipulator”, this column presents a plan to address global imbalances without risking a trade war. It proposes a “reciprocity” requirement – if the US can’t buy Chinese government bonds, then China can’t buy US bonds either.
How do trade and labour market institutions affect employment during crises?
Elisa Gamberoni, Erik von Uexkull & Sebastian Weber (VoxEU) Sep 29, 2010
How do trade and labour market institutions affect employment during a crisis? This column finds that trade openness leads to sharper drops in employment, but also faster recoveries. High severance pay dampens employment contraction and very high unemployment benefits are associated with a stronger contraction. These findings suggest that global employment is set to remain stagnant for 2010 before recovering in 2011.
Plaza II is the wrong approach for global rebalancing
Yiping Huang (VoxEU) Sep 29, 2010
How should policymakers deal with global imbalances? This column argues that a return to the Plaza Accord of the 1980s with an exclusive focus on the exchange rate could well dilute the G20’s other agendas and may not even work in practice. The best solution is instead to focus on structural reforms.
China's Next Leap Forward
Gary Becker (WSJ) Sep 29, 2010
The jump from middle-income to rich status is much harder to achieve than the ascent from poverty. But there are plenty of reasons to believe China's growth prospects remain strong.
IMF Says Steps Needed to Avert Systemic Liquidity Shortages
IMF Survey Sep 29, 2010
The inability of financial institutions to obtain short-term funding during the global financial crisis was the result of risk management weaknesses by the institutions themselves, serious and unforeseen issues in how wholesale funding markets work, and regulatory gaps, according to a new IMF report.
EU economic reforms fall short on growth
Simon Tilford (FT) Sep 29, 2010
The European Commission’s push to fix public finances will fail unless it removes obstacles to a sustained recovery.
A recipe for trouble in China’s backyard
David Pilling (FT) Sep 29, 2010
If Japan cannot stand up to the Chinese, what hope for the many smaller nations that have territorial disputes with Beijing.
As bounce-backs go it's all relative
Jim Paulsen (FT) Sep 29, 2010
The US economic recovery is widely perceived as the weakest ever, syncing with the popular idea of a "new-normal" economy.
Brazilian Finance Minister Warns of 'International Currency War'
Bridges Weekly Trade News Digest, Volume 14, Number 33 Sep 29, 2010
For months, tensions have been brewing among the world's major economies over currency values and each others' attempts to boost export competitiveness. On Monday, Brazilian Finance Minister Guido Mantega sounded a warning. The global economy is in an "international currency war," he told an audience of Brazilian industrialists in São Paulo.
Farm Trade Talks Must Clarify Future Rules, Say Argentina, China and India
Bridges Weekly Trade News Digest, Volume 14, Number 33 Sep 29, 2010
In a short paper discussed by trade negotiators this week, Argentina, China and India called for agriculture negotiations at the WTO to focus on clarifying 'ambiguous' issues in the draft Doha Round agreement text, instead of solely focusing on how to provide the data that members will need to submit if and when a multilateral accord is finalised.
Food Supply Matches Demand, FAO Tells Governments, Markets
Bridges Weekly Trade News Digest, Volume 14, Number 33 Sep 29, 2010
As world market prices for food continue to climb, the UN Food and Agriculture Organization has moved to reassure governments that a repeat of the 2008 price spikes is unlikely. Although it estimates the number of hungry people to be declining, the FAO last week brought together experts from 75 countries to find remedies for swings in food prices and to help determine what role the organisation can play amidst the uncertainty.
Economists urge IMF overhaul
Jim Lobe (AT) Sep 30, 2010
Europe is coming under renewed pressure to play its part in reforming the International Monetary Fund by ceding some power on the Fund's executive board to emerging economies. If a deadline early next year is to be met, agreement must be reached before a meeting of leading nations in Seoul next month.
What drives reserve accumulation (and at what cost)?
Eduardo Levy-Yeyati (VoxEU) Sep 30, 2010
Total foreign exchange holdings are larger than ever, largely due to reserve accumulation by emerging and developing economies. This column investigates the driving forces behind the accumulation of foreign exchange reserves and finds that exchange-rate smoothing, rather than precautionary stockpiling, is the main driver.
Economics for Parrots
J. Bradford DeLong (Project Syndicate) Sep 30, 2010
It is said that the early nineteenth-century British economist J.R. McCulloch originated the old joke that the only training a parrot needs to be a passable political economist is one phrase: “supply and demand, supply and demand.” It would be a welcome development nowadays of more economists behaved like MucCulloch's parrots.
From currency warfare to lasting peace
Barry Eichengreen (VoxEU) Sep 30, 2010
The "international currency war" mentioned by Brazil's finance minister poses massive dangers for the world trade and financial systems. This column by one of the world's most respected international economists argues that there is a better way. The G3 should engage in quantitative easing so they all can export more to each other. For the emerging markets, the danger lies in inflation, asset bubbles, and trade retaliation. To shield their key manufacturing sectors, they should encourage the domestic demand for manufactures.
Two Cheers for the New Bank Capital Standards
Alan S. Blinder (WSJ) Sep 30, 2010
Why do we still rely on the rating agencies, and why are we still allowing Lehman Brothers levels of leverage?
Multiple Risks From A Multispeed Eurozone Recovery
Elisa Parisi-Capone (Forbes) Sep 30, 2010
The uneven speed of the eurozone economic recovery may bring new challenges in 2011.
Recession's Dampening Impact on Trade Likely to Linger
IMF Survey Sep 30, 2010
Trade is rebounding from the recent recession, but has not yet fully recovered the ground lost during the global economic crisis. This is particularly the case in economies hit by a banking crisis, the IMF says in a chapter of its World Economic Outlook.
Budget Cuts and Growth: Short-term Pain, Long-term Gain
IMF Survey Sep 30, 2010
Almost all advanced economies will need to cut deficits and raise taxes to put their fiscal positions back on a sustainable footing in coming years. The IMF's World Economic Outlook says governments can act to reduce adverse short-term effects of fiscal consolidation.
The IMF’s foolish praise for austerity
Martin Wolf (FT) Sep 30, 2010
Effective policy would see the government increase its deficit and have this rise funded by the Bank of England.
Ireland will recover quickly from bank crisis
Danny McCoy (FT) Sep 30, 2010
Companies have used the crisis to address their costs and productivity, bringing a substantial improvement in competitiveness.
India will cross the line only in its own good time
Kevan Watts (FT) Sep 30, 2010
India has an infrastructure deficit and closing it quickly is critical for its hopes of maintaining the high growth trajectory of the past decade. It will achieve this but in its own time.
Transatlantic differences split debate on banks
Gillian Tett (FT) Sep 30, 2010
The question of whether the modern world has a sensible scheme for handling bank collapses is absolutely crucial for the future
A Message for China
NYT Sep 30, 2010
China needs to hear and see that its currency policy is undermining the global influence it so clearly desires.
Taking On China
Paul Krugman (NYT) Sep 30, 2010
Diplomacy on China's currency has gone nowhere. Paving the way for possible sanctions is a step in the right direction.