The Asian Century: Reality or Hype?
Various (TIE) Sep 1, 2013
Conventional wisdom has argued that the twenty-first century will be dominated by Asia while America’s global importance declines. Is this journalistic hype, or are we living in the second decade of the Asian Century?
Germany Is a Stealth Currency Manipulator
Clyde Prestowitz (TIE) Sep 1, 2013
It improves its competitive position and export performance at the expense of its eurozone partners.
Germany Is Not Manipulating the Euro
Michael Hüther (TIE) Sep 1, 2013
The charge amounts to “old wine in new bottles.”
The Rise of the Rest of India
Ruchir Sharma (FA) Sep 1, 2013
India’s national growth rate has slowed in recent years, but many of its component states have turned into economic dynamos.
Petroleum to the People
Larry Diamond and Jack Mosbacher (FA) Sep 1, 2013
Over the next decade, a massive wave of new oil and gas discoveries will transform Africa. If the resource curse plays out as it usually does, this oil boom will only serve to entrench authoritarian rule and inhibit democracy. Unless, that is, African governments embrace a radical approach: handing a large share of the new revenues directly to the people as taxable income.
Why Convergence Breeds Conflict
Mark Leonard (FA) Sep 1, 2013
Many fear that the world will be torn apart as the gulf that separates China and the United States grows wider. But it is time to stop thinking that the two countries come from different planets and that the tensions between them are the product of their differences. In fact, until recently, China and the United States got along quite well -- precisely because their interests and attributes differed. Today, it is their increasing similarities that are driving the two apart.
EM crisis threatens the global recovery
Guillermo Ortiz (FT) Sep 1, 2013
Fast-growing economies are more and more important for global growth. It is increasingly odd that feedback effects on the US economy are taboo.
Measuring the gauges of stock valuations
John Authers (FT) Sep 1, 2013
Cape and Tobin’s q tell the same story, that the US stock market is overvalued, and this contradicts much analysis from Wall St and the City Read more >>
Is the Indonesian economy in trouble?
Peter McCawley (EAF) Sep 1, 2013
Suddenly there are signs of pressure in the Indonesia economy. Until recently, the economy seemed to be doing well. But growth is now slowing, inflation is rising, the balance of payments is under pressure, and the value of the rupiah has slumped. Why the change in economic fortunes?
India's Food Crises: A Close-Up
Jean-Pierre Lehmann & Nina Ninkovic (Globalist) Sep 1, 2013
Can India be a global power when it can't guarantee its own food security?
Politicians Talk, the Rupee Drops, India’s Economy Tanks
Bloomberg View Sep 1, 2013
India’s economy has stalled. Growth in the second quarter fell to 4.4 percent at an annual rate, down from 8 percent two years ago. The rupee has slumped. Consumer-price inflation is about 10 percent and rising. The country faces what could be a full-scale financial crisis.
India and the Emerging Market crisis
Marco Annunziata (VoxEU) Sep 1, 2013
India, like other emerging markets, is having a tough summer. This column argues that India needs to step up reforms and critical infrastructure investment to reboot growth. Its economic health – and that of other emerging markets – is not as dire as headlines suggest. The alarm and pessimism surrounding emerging markets appears to have run well ahead of any deterioration in fundamentals.
China should seek a sustainable economy
Michael Pettis (FT) Sep 2, 2013
The elimination of a hidden subsidy paid by lenders that encourages irresponsible borrowing and forces down household income is long overdue.
Summer calm opens window for banks
Patrick Jenkins (FT) Sep 2, 2013
With optimism reigning in stock markets, banks would be well advised to get all their money-raising done sooner rather than later.
Clash of the Cape crusaders
John Authers (FT) Sep 2, 2013
The world’s two leading market historians are locked in an intense debate over the true value of stocks. Both are backed by loyal camps of investors.
The Transatlantic Battle Against Tax Evasion
Stephan Richter (Globalist) Sep 2, 2013
Why is combatting tax evasion so important in the globalization debate?
Can wealthy nations stay rich in the 21st Century?
Marco Nappolini (Pieria) Sep 2, 2013
In their fascinating new book, The Third Globalization, Dan Breznitz & John Zysman gather leading political economists to assess the prospects for growth and prosperity in advanced industrial nations
Misconceptions About Fed’s Bond Buying
Joseph E. Gagnon (Bloomberg) Sep 2, 2013
To combat the recession that began in 2007, the Federal Reserve and some other central banks have been buying large amounts of long-term bonds. The novelty of this quantitative easing makes the policy especially prone to popular misconceptions.
Emerging Economies’ Misinsurance Problem
Gene Frieda (Project Syndicate) Sep 2, 2013
Over the last decade, America’s expansionary monetary policy and China’s rapid GDP growth have been the two key drivers of global financial flows. Whether emerging economies are able to cope with the reversal of these dynamics will depend on whether they are sufficiently insured against domestic credit risks.
Are Emerging Markets Submerging?
Kenneth Rogoff (Project Syndicate) Sep 2, 2013
After years of solid output gains since the 2008 financial crisis, the combined effect of decelerating long-term growth in China and a potential end to ultra-easy monetary policies in advanced countries is exposing significant fragilities in emerging markets. Is the inevitable “echo crisis” in these countries already upon us?
Recasting international income differences: The next-generation Penn World Table
Robert C Feenstra, Robert Inklaar & Marcel Timmer (VoxEU) Sep 2, 2013
Why some countries are richer than others is among the most difficult and important questions in economics. Yet, the Penn World Table, widely used to compare living standards across countries, has faced criticism in recent years. This column discusses how the new version of the tables both addresses these criticisms and provides a wider range of tools that will help researchers gain insight into why income differs across countries.
Export obsession is crushing Germany
Adam Posen (FT) Sep 3, 2013
Cutting wages has been the basis of the nation’s export success in the past dozen years, when exports have been its sole consistent growth source.
Back from the bailouts
Stephen Foley (FT) Sep 3, 2013
Five years after a huge rescue that defined the financial crisis, Fannie and Freddie are posting surprisingly robust profits. But investors are now fighting the US Treasury for a share of the spoils.
World Economy Growing Unevenly, O.E.C.D. Says
David Jolly (NYT) Sep 3, 2013
The global economy will continue a slow expansion, despite relative weakness in China and an uneven euro zone recovery, the research group predicts.
The Man Who Resisted 'Blackboard Economics'
David Henderson (WSJ) Sep 3, 2013
Nobel laureate Ronald Coase taught that economists should study real markets.
Populism behind rupee's free fall
Kunal Kumar Kundu (AT) Sep 3, 2013
Government determination to secure the popular vote rather than address fundamental economic and administrative issues is directly linked to the rupee's present freefall. With the next election in India due next spring, expect little to change.
Stop Saying Robots Are Destroying Jobs—They Aren’t
Robert D. Atkinson (MIT Tech Review) Sep 3, 2013
Many experts would have us believe that robots and other technologies are behind the job drought. That couldn’t be farther from the truth.
Shale Energy No Quick Solution
Deepak Gopinath (YaleGlobal) Sep 3, 2013
Innovations in drilling and hydraulic fracture technologies have opened new supplies of shale oil and gas for the United States, and other countries are intrigued. The United States anticipates energy independence, but the shale boom may be more short-lived than many had expected, and shale’s global potential may also be overstated.
Bank Leverage Is the Defining Debate of Our Time
Simon Johnson (Bloomberg) Sep 3, 2013
Every age has great debates on its defining questions. Sometimes these disputes are on a grand scale: capitalism versus communism. Sometimes they concern details that puzzle later generations: Summarize the main points of contention in the Thirty Years’ War, without consulting Google.
The Changing Mood on Migration
Peter Sutherland (Project Syndicate) Sep 3, 2013
Headlines about migration can seem unbearably stark: attacks on foreigners by neo-fascists in Greece, domestic workers on death row in the Gulf, a callous campaign by the British government to drive out migrants. Yet, despite anti-immigrant sentiment, promising signs of a more enlightened approach to migration are emerging.
Rebalancing and long term growth
Michael Pettis (CFM) Sep 3, 2013
Growth forecasts for China's economy in the medium-term are falling, but a forecast that claims 3-4% annual growth rates will soon to be the country's upper limit? And that might be the good news.
Five More Years of the G20 Standstill on Protectionism?
Simon J Evenett (VoxEU) Sep 3, 2013
G20 leaders are currently meeting in St Petersburg to discuss protectionism. This column, which summarises the key findings of the new 14th Global Trade Alert report, argues that the current G20 approach to promoting open trade and investment is not working. In recent years G20 members resorted to protectionism more frequently than at the beginning of the economic crisis and, indeed, the stock of crisis-era protectionist measures imposed by the G20 members keeps on growing. The G20’s ‘softly softly’ approach isn’t working.
The ‘fractal market hypothesis’: Implications for financial market stability
Nicola Anderson & Joseph Noss (VoxEU) Sep 3, 2013
Financial prices display ‘fractal’ properties. This column conjectures that this is caused by interactions among agents with different horizons and interpretations of information. This structure appears to be associated with a special sort of stability that can be disrupted – leading to price crashes – if these interaction breaks down. While embryonic, this thinking may have important implications for the regulation of financial markets.
Like India’s, Indonesia’s growth is stalling
David Pilling (FT) Sep 4, 2013
Manmohan Singh was once hailed as the superman of Indian reform. In his second term, he has turned back into Clark Kent.
Don’t blame the Fed for EM woes
Patrick Zweifel (FT) Sep 4, 2013
The real villains are elsewhere. Emerging market stocks trade at a discount to their developed peers partly because of structural deficiencies that will take time to address.
India’s Central Bank Chief May Have a Short Honeymoon
Keith Bradsher (NYT) Sep 4, 2013
Glowing coverage of Raghuram Rajan, the new governor of the Reserve Bank of India, could be quickly eclipsed by escalating economic troubles.
Falling Economic Tide in India Is Exposing Its Chronic Troubles
Keith Bradsher (NYT) Sep 4, 2013
As its boom ends, India suffers from a weak currency, soaring prices, neglected infrastructure and red tape.
The Next Emerging Market Crisis
Simon Johnson (NYT) Sep 4, 2013
No developing-world crisis seems imminent, but that could change quickly if overconfidence returned to the global markets, an economist writes.
Global Cooperation Buckling Under Past Successes
Thomas Hale, David Held & Kevin Young (Globalist) Sep 4, 2013
In finance and beyond, how is global cooperation failing from its own prior wins?
The Disruptive Dozen
Erik Brynjolfsson, James Manyika and Andrew McAfee (Project Syndicate) Sep 4, 2013
The McKinsey Global Institute has identified 12 rapidly developing technologies that are likely to disturb the status quo by 2025. While these disruptions will benefit consumers, they will create new challenges for workers, businesses, and governments.
The Failure of Free-Market Finance
Adair Turner (Project Syndicate) Sep 4, 2013
Five years after the collapse of the US investment bank Lehman Brothers, the world has still not addressed the fundamental cause of the subsequent financial crisis – an excess of debt. If the debt problem continues to be ignored, the 2008 crisis will not be the last.
The Vultures’ Victory
Joseph E. Stiglitz (Project Syndicate) Sep 4, 2013
The recent decision against Argentina by a United States appeals court threatens to upend global sovereign-debt markets. Indeed, a basic principle of modern capitalism – that when debtors cannot pay back creditors, a fresh start is needed – has been overturned.
The Riksbank is wrong about household debt
Lars E.O. Svensson (VoxEU) Sep 4, 2013
The Riksbank maintains high policy rates since it fears that a lower rate would increase the household-debt ratio. This column argues that a higher rate in fact leads to a higher debt ratio, not a lower one. The higher rate reduces nominal housing prices and new mortgages, but since the new mortgages are such a small share of total mortgages, the total nominal debt falls very slowly. Yet nominal GDP falls much faster, so the debt-to-GDP ratio rises.
External liabilities and crisis risk
Luis AV Catão & Gian Maria Milesi-Ferretti (VoxEU) Sep 4, 2013
Debt seems to be a lightning rod for crises. This column presents new research showing that the ratio of net foreign liabilities to GDP, and in particular its net external debt component, is indeed a significant crisis predictor for both advanced economies and emerging markets. Large current-account deficits and real exchange rate appreciation – the standard predictors – still matter, but we should be thinking more about net external debt.
The BRICs party is over
Anders Åslund (VoxEU) Sep 4, 2013
Emerging markets are under pressure. This column argues that this is not a mere headwind but that the BRICs’ party is over. Their ability to get going again rests on their ability to carry through reforms in grim times for which they lacked the courage in a boom.
Energy security: Strength in reserve
Ed Crooks and Geoff Dyer (FT) Sep 5, 2013
The shale oil and gas boom will strengthen America’s diplomatic influence but it will not allow it to disengage from the Middle East.
China’s stimulus has more to show than US
Henny Sender (FT) Sep 5, 2013
The fiscal policies of the two countries, the world’s largest and second-largest economies, are the mirror image of each other.
TPP Talks "Intensify" in Brunei as Year-End Deadline Looms
Bridges Weekly Trade News Digest, Volume 17, Number 28 Sep 5, 2013
Negotiators meeting in Brunei last week "intensified" their work in the hopes of completing the Trans-Pacific Partnership (TPP) Agreement by year’s end, officials said on Friday. However, the talks remain "difficult," some say, despite the hope that the talks could be near their final stage.
Roberto Azevêdo Takes Office as WTO Director-General
Bridges Weekly Trade News Digest, Volume 17, Number 28 Sep 5, 2013
Roberto Carvalho de Azevêdo formally began his term as WTO Director-General on Sunday, succeeding Pascal Lamy in the role. The leadership transition comes as the organisation's 159 members gear up for their December ministerial conference, where they hope to clinch a package of deliverables from the long-running – and often troubled – Doha Round of trade talks.
How Many Economists Does It Take to See a Crisis?
Mark Buchanan (Bloomberg) Sep 5, 2013
Suppose you went into the street and hit passersby with some breaking news: “Listen,” you say, “derivatives and other exotic financial products can sometimes make financial markets less stable and more prone to crises. What do you think about that?”
G-20 Needs to Reinvent Itself to Be Relevant
Jim O’Neill (Bloomberg) Sep 5, 2013
Is the Group of 20 leading economies any longer fit for purpose? That depends on what you think its purpose should be.
India’s New Central Banker Isn’t a Superhero
William Pesek (Bloomberg) Sep 5, 2013
The most important indicator of whether India will crash is the sweat on Raghuram Rajan’s brow.
What’s Liquidity and Why Do We Need It?
Bloomberg View Sep 5, 2013
Concern about a thing called liquidity has become one of the biggest obstacles to reforms aimed at making the U.S. financial system more resilient. Wall Street banks say that new capital requirements or constraints on speculative trading will cause it to dry up. They warn of dire consequences.
Why Is Prosperous China So Anxious?
Orville Schell (YaleGlobal) Sep 5, 2013
China, like other countries, seeks economic success and global respect. The country has accomplished so much in a few short decades – massively expanding the economy, reducing poverty and developing impressive infrastructure. Yet Chinese leaders exude anxiety.
1913-2013: How Russia Botched an Entire Century
Alexei Bayer (Globalist) Sep 5, 2013
Could Russia have been as successful as the United States?
The Birth of Fiscal Unions
Harold James and Jennifer Siegel (Project Syndicate) Sep 5, 2013
A fiscal union can serve as a powerful mechanism for enhancing creditworthiness, while creating a sense of solidarity among disparate countries. But such unions tend to work only when there is an unmistakable shared security interest – something that the EU lacks.
Europe’s Asian Pivot
Karl Kaiser and Manuel Muniz (Project Syndicate) Sep 5, 2013
America's "pivot to Asia" is its most important strategic shift since the end of the Cold War, and it holds profound implications for Europe. By joining the US in the global rebalancing process, Europe could contribute to global stability and deepen its ties with the US, while securing its role in an increasingly important region.
Sovereign default risk and banks in Europe’s monetary union
Harald Uhlig (VoxEU) Sep 5, 2013
EZ banks are more exposed to their own nation’s government bonds than ever. This column argues that Eurozone members can now afford to tell their banks to diversify, but pressure from Germany, Austria, France and the ECB might be necessary. Defusing the pernicious entanglement between the Eurozone’s weak banks and weak sovereigns would reduce the cost of any new crisis and reduce the likelihood of such a crisis occurring.
An unintended consequence of WTO membership
Beata Javorcik & Gaia Narciso (VoxEU) Sep 5, 2013
WTO membership does not come cheap in a political sense. So what is the point? This column addresses the idea that institutional reforms in the joining nations are an important element of the gains. It focuses on one reform – changes in customs procedures that limit discretion. This shuts down one channel for tariff evasion, but the column shows that greater evasion occurs through alternative channels.
Now It’s the Developed Nations’ Turn to Grow
Floyd Norris (NYT) Sep 6, 2013
During and after the financial crisis, emerging economies like Brazil and India tended to post rising orders, but in both July and August those countries reported declines for the first time since March 2009.
Political challenges of the macroprudential agenda
Jeffrey Chwieroth & Jon Danielsson (VoxEU) Sep 6, 2013
Central banks frequently lead the macroprudential policy implementation. The hope is that their credibility in conquering inflation might rub off on macroprudential policy. This column argues the opposite. The fuzziness of the macroprudential agenda and the interplay of political pressures may undermine monetary policy.
Global Institutions after the Crisis
Ngaire Woods (Project Syndicate) Sep 6, 2013
When the global financial crisis erupted five years ago, many glimpsed a silver lining: the promise of more effective global economic governance. But, despite a flurry of early initiatives, the world remains as far from that goal as ever.
Emerging Markets’ Euro Nemesis
Daniel Gros (Project Syndicate) Sep 6, 2013
A few years ago, when the US Federal Reserve embarked on yet another round of “quantitative easing,” some emerging-market leaders complained loudly. But the real reason why capital flowed into emerging markets over the last few years, and why the external accounts of so many of them have swung into deficit, is the euro.
The Changing Development Order
Viswanathan Shankar (Project Syndicate) Sep 6, 2013
The Millennium Development Goals, which expire in two years, established a successful framework for the world to address poverty, health, hunger, and education. As discussions commence on the post-2015 global development agenda, it would be helpful to rethink the private sector's role.
Squaring the circle
Economist Sep 7, 2013
Financial markets are sending incoherent messages.
Global finance: Where’s the next Lehman?
Economist Sep 7, 2013
Five years after the maelstrom of September 2008, global finance is safer. But still not safe enough
Predicting the effects of regional trade agreements
Holger Breinlich & Alejandro Cuñat (VoxEU) Sep 7, 2013
Recent development of heterogeneous firm models in international trade were built on the observation that extensive margin effects are important in explaining the trade and productivity effects of trade liberalisation. This columns adds that if we want to use the current generation of heterogeneous firm models for the purpose of forecasting the effects of trade agreements, we need to allow not only for sources of within-industry but also within-firm productivity increases.
China will stay the course on growth
Li Keqiang (FT) Sep 8, 2013
Asian countries have learnt the lessons from the past and enhanced their capabilities to fend off risks.
India in Reverse
NYT Sep 8, 2013
The country needs decisive reforms to revive growth, control inflation and support the rupee.
Local Pleasures Make a Global Comeback
Pankaj Mishra (Bloomberg) Sep 8, 2013
Emerging one recent evening from a theater in downtown Chatham, Massachusetts, I felt again the appeal of conservatism in the age of globalization. I stood on this Cape Cod city’s Main Street, which is still dominated by small, family-run businesses of the kind that originally underpinned the strengths of both American democracy and capitalism. The play I had just seen, “Shakespeare in Hollywood,” takes a caustic look at the usually grisly fate of literary classics in Hollywood in the 1930s through the German director Max Reinhardt’s attempt to film “A Midsummer Night’s Dream.” The actors were young drama students (with the exception of the writer Bernard Cornwell, a longtime resident of Chatham), reminding with their talent and energy how a play can be more engrossing and stimulating than a movie.
Why Have Markets Learned Nothing in the Last 50 Years?
Matt Levine (Bloomberg) Sep 8, 2013
An editorial last week about financial market liquidity, by my new colleagues at Bloomberg View, cited this fascinating paper by Jennie Bai, Thomas Philippon and Alexi Savov called "Have Financial Markets Become More Informative"?* The answer is no.
Is technological progress a thing of the past?
Joel Mokyr (VoxEU) Sep 8, 2013
Has technological progress slowed down? Have we really picked all the low-hanging fruit? This column argues that technological progress is in fact not a thing of the past. Far from it. There are myriad reasons why the future should bring more technological progress than ever before – perhaps the most important being that technological innovation itself creates questions and problems that need to be fixed through further technological progress. If we rethink how innovation happens, we have every reason to suspect that we ain’t seen nothing yet.
A plan to finish fixing global finance
Mark Carney (FT) Sep 9, 2013
The G20 has made progress on financial reform, but more remains to be done. How we complete the job will do much to affect future global prosperity
Japan must be brave and put up its taxes
Takatoshi Ito (FT) Sep 9, 2013
If the consumption tax rose to the European level of 20-25 per cent, the country’s fiscal situation would become perfectly sustainable.
China will stay the course on growth
Li Keqiang (FT) Sep 9, 2013
Asian countries have learnt the lessons from the past and enhanced their capabilities to fend off risks.
As Corruption Abates, Hope Amid a Slowdown
Gardiner Harris (NYT) Sep 9, 2013
Some economists say India’s economic boom was based on a toxic “corruption bubble,” and even those who had benefited and are now suffering say they are glad to see a crackdown.
Market Rebound in China Shows Beijing's Resolve
Bill Bishop (NYT) Sep 9, 2013
Those predicting a sharp slowdown in China a couple of months ago appear to have underestimated the central government’s determination to keep things on track, the author writes.
As Congress Dawdles, the World Steals Our Talent
Steve Case (WSJ) Sep 9, 2013
Immigration reform is essential to attract the best and brightest.
Push for Customs Union Turns Friends to Foes
Anders Åslund (PIIE/Moscow Times) Sep 9, 2013
British Prime Minister David Cameron took umbrage last week when President Vladimir Putin's spokesman Dmitry Peskov allegedly ridiculed Great Britain as a "small island." But Russia and Britain suffer from similar ailments: their inability to overcome their glorious imperial past and adjust to the modern world. Their minds are too 19th century, but Russia far more so.
China Needs Beijing to Be Even Bigger
Yukon Huang (Bloomberg) Sep 9, 2013
One of the most critical and controversial economic debates in China today revolves around how the country should urbanize. Already, more Chinese live in cities than on the land, a proportion that is expected to rise to 70 percent by 2030.
Italian Nights: Europe's New Trench Warfare
Thomas Mayer (Globalist) Sep 9, 2013
A not-so-imaginary chat between German and Italian economists reveals differing national views on the euro and economic cultures.
Credit rating agencies and the Eurozone Crisis: What is the value of sovereign ratings
Norbert Gaillard (VoxEU) Sep 9, 2013
Credit rating agencies didn’t anticipate the Eurozone Crisis and their ratings have been procyclical ever since. This column discusses research on the agencies' recent performance. Since 2009, credit ratings have persistently lagged behind market spreads, suggesting that ratings have been more lenient with respect to Eurozone countries than generally believed. The author suggests that bond spreads may be too volatile for regulatory purposes.
The power of the bond markets is a bluff
John Kay (FT) Sep 10, 2013
With long-term borrowing costs at about zero for advanced economies, those worried about future financing should issue as much debt as possible.
End of cheap money hits Asian groups
Henny Sender (FT) Sep 10, 2013
Strengthening dollar and prospect of tapering of Fed’s quantitative easing take toll just as China looks set to put pressure on regional competitors.
Why forward guidance fails to convince
Lorenzo Bini Smaghi (FT) Sep 10, 2013
Markets suspect central bank moves by to be more transparent are part of a strategy aimed at pushing them towards taking more.
Markets: The debt penalty
Tracy Alloway (FT) Sep 10, 2013
Wall Street’s bond-trading desks are shrinking as banks are forced to hold more capital. The liquidity they provided may be missed when the 30-year bond rally ends.
Impact of Downturn on India's Aid Program for Neighbors
Kabir Taneja (NYT) Sep 10, 2013
With India’s gross domestic product growth crashing from 8 percent over the last few years to 4.4 percent in the latest quarter, many areas like foreign aid and development may see a cash crunch.
Five Years Later, Financial Lessons Not Learned
Alan Blinder (WSJ) Sep 10, 2013
A good-though-weak law sinks under the weight of special-interest lobbies.
Are Emerging Economies Entering a Lost Decade?
Anders Aslund (Bloomberg) Sep 10, 2013
Financial markets are signaling that several major emerging economies may be approaching crisis.
The Global Stake in China’s Anti-Corruption Reform
Michael J. Boskin (Project Syndicate) Sep 10, 2013
China’s export-led growth, which previously masked the macroeconomic costs of corruption and excessive state intervention, is slowing. As China enters an era of more subdued growth amid increased competition from other low-cost countries, this damage will become increasingly apparent – and increasingly destructive.
Enhancing the global financial safety net through central-bank cooperation
Edwin M. Truman (VoxEU) Sep 10, 2013
Should we expect more global financial crises? This column argues that we should. Global financial crises are far from being a thing of the past because they are often caused by buildups of excessive domestic and foreign debt. To successfully address them and to limit negative spillovers, we need coordinated actions that prevent a contraction in global liquidity. Unless we establish this more robust, coordinated global financial safety net centred on central banks (which is where the money is), we may end up being incapable of addressing inevitable future crises.
5 Years Later, We've Learned Nothing From the Financial Crisis
James Kwak (Atlantic) Sep 10, 2013
Why haven't we destroyed the idea that destroyed the world?
Mining: Hazards of the frontier
Andrew England (FT) Sep 11, 2013
Companies flocked to invest in Mozambique’s much-hyped coal reserves but their logistical problems illustrate the dangers of rushing to difficult new territories.
Post-crisis policies promise stagnation
Satyajit Das (FT) Sep 11, 2013
The real solution always required reducing debt, reversing imbalances, decreasing financialisation and modifying behaviours.
Encouraging Entrepreneurship in Portugal and Beyond
Simon Johnson (NYT) Sep 11, 2013
More steps may be needed in southern Europe to encourage entrepreneurs to step forward and revitalize the economy.
The Vital Link of Education and Prosperity
Paul Peterson and Eric Hanushek (WSJ) Sep 11, 2013
Data from 50 countries over half a century reveal how even a small education gain can mean a big economic payoff.
Is Europe Out of the Woods?
Barry Eichengreen (Project Syndicate) Sep 11, 2013
There is no doubt that the outlook for Europe has brightened since the dog days of early 2012. But, unless policymakers complete unfinished business, recent claims that the eurozone crisis is over will prove deceptive.
Emerging Markets’ Nirvana Lost
Andrés Velasco (Project Syndicate) Sep 11, 2013
“Nirvana” is defined as the state of freedom from suffering. For emerging markets, that state is over; but, in some cases, their citizens – still feeling rich from cheap money and high export prices – have no inkling of the suffering that may be upon them.
Learning from Lehman
Liu Mingkang (Project Syndicate) Sep 11, 2013
Five years after the collapse of Lehman Brothers, the world still needs a systemic approach to deal with systemic risks and system failures. Unfortunately, there may be little hope of strengthening global financial governance as long as implementation and enforcement of rules remain at the national level.
The Case for India
Raghuram Rajan (Project Syndicate) Sep 11, 2013
Indian cricket fans are manic-depressive in their treatment of their favorite teams. Such bipolar behavior seems to apply to assessments of India’s economy as well, with foreign analysts participating in swings between over-exuberance and self-flagellation.
When Harry meets Sally: The buyer margins of firms’ exports
Jerónimo Carballo, Gianmarco I.P. Ottaviano & Christian Volpe Martincus (VoxEU) Sep 11, 2013
Firm-level data has told us much about exporters, but little about export buyers. This column discusses new research that shows how buyer margins can be a critical channel through which trade policies influence aggregate exports. Reaching a larger number of buyers is an important vehicle of export expansion, both at the country level and at the firm level. As buyer margins are important, they should be incorporated into the assessment of policies such as export promotion and customs facilitation.
The shaking up of Europe’s old order
Tony Barber (FT) Sep 12, 2013
Successful financial disentanglement depends on how comprehensively the old order is broken down. Neither in Italy nor Spain is the outlook clear.
Lehman’s legacy: Five bitter pills
Patrick Jenkins (FT) Sep 12, 2013
Concerns that new regulations amount to mere tinkering that will fail to prevent another meltdown have led to radical proposals to strengthen the system.
We can do better than the defunct FTT
Hugh Dixon (FT) Sep 12, 2013
Rather than fiddle with the FTT to make it legal, Brussels should put some order into different countries’ bank levies.
Insane financial system lives post-Lehman
Gillian Tett (FT) Sep 12, 2013
There are a host of developments that are at best counterintuitive and, at worst, dangerously bizarre.
Defection Hurts Polish Premier Amid Protests
Dan Bilefsky (NYT) Sep 12, 2013
A country that enjoyed growth through Europe’s debt crisis is now feeling the pain of a slowing economy.
How Emerging Markets Can Get Their Mojo Back
Robert Zoellick (WSJ) Sep 12, 2013
Only productivity-boosting reforms, not short-term stimulus, will ensure sustained economic growth.
Central banks and illusions of independence
Reuven Brenner (AT) Sep 12, 2013
The cult of personality around central bankers is encouraged by their not having a clear and enforceable mandate - certainly in the United States. That's one reason we hardly hear about Swiss politicians or central bankers: their unique direct democracy prevents them from pursuing drastic follies.
Azevêdo Sets Bali Ministerial Success as "First Priority"
Bridges Weekly Trade News Digest, Volume 17, Number 29 Sep 12, 2013
Achieving a successful result at this December's WTO ministerial conference in Bali will be his "first priority," new Director-General Roberto Carvalho de Azevêdo told the organisation's members in his inaugural speech on Monday. In his statement, the global trade chief outlined a "rolling schedule of meetings" that he has planned for the coming weeks in the hopes of reaching that goal.
G-20: Global Economy on the Mend, But More Work Remains
Bridges Weekly Trade News Digest, Volume 17, Number 29 Sep 12, 2013
The global economy is in better standing than it was a year ago, members of the Group of 20 major industrialised economies said during their annual meeting in St. Petersburg, Russia on 5-6 September. However, more work remains, given the fragile nature of the recovery and concern over slowing growth in emerging markets.
Why Is Zambia So Poor?
Michael Hobbes (Pacific Standard) Sep 12, 2013
This landlocked country in Sub-Saharan Africa isn’t a failed state in the traditional sense: There’s no dictator, no child soldiers. But most of its 14 million people live on less than $1 per day. How did things get this way, and can they ever get better?
India Embraces the Welfare State
Shashi Tharoor (Project Syndicate) Sep 12, 2013
In recent weeks, India’s parliament has surprised its detractors by passing two pieces of legislation that could transform the lives of hundreds of millions of people. Taken together, the new laws underscore the government’s move toward making India a society in which welfare is based on entitlements rather than on ephemeral charity.
Betting on the Tortoise in Japan
Jeffrey Frankel (Project Syndicate) Sep 12, 2013
Many countries today require easy fiscal policy, together with plans to achieve fiscal rectitude in the long run. Given this, governments should provide specific fiscal-consolidation mechanisms that are visibly likely to take effect when the time comes.
Reduce policy uncertainty to solidify EZ recovery
Marco Buti & Pier Carlo Padoan (VoxEU) Sep 12, 2013
The Eurozone is recovering but the revival is fragile – ringed by downside risks. This column argues that three steps – reducing policy uncertainty, repairing the financial system, and creating new investment opportunities – are essential. They could switch the negative confidence-growth feedback loop into a positive one, thus paving the way to robust medium-term growth. There is no room for complacency or procrastination.
And then there was one
Tom Engelhardt (AT) Sep 13, 2013
Even if global economic power has become, thanks to a rising China, more "multipolar", no actual state seriously contests the United States' role on the planet. It's taken a couple of decades since the Soviet Union collapsed even to be able to consider what that really means: delusional thinking of the first order as, from 9/11 to the Syrian crisis, Washington re-imagines the world.
Foreign Pork and Corporate Taxes
WSJ Sep 13, 2013
Takeovers aren't the main problem for U.S. companies.
The Blind Eye of Admati & Hellwig: Why their book, 'Bankers New Clothes', is simply wrong
Robin Fransman (Pieria) Sep 13, 2013
Holding more equity makes the likelihood of bank failure significantly smaller, but is it achievable? What would it take to implement these high levels of equity? Let’s take the macro perspective
What's Happening to Bonds and Why?
Mohamed A. El-Erian (PIMCO) Sep 13, 2013
To say that bonds are under pressure would be an understatement. Over the last few months, sentiment about fixed income has flipped dramatically: from a favored investment destination that is deemed to benefit from exceptional support from central banks, to an asset class experiencing large outflows, negative returns and reduced standing as an anchor of a well-diversified asset allocation. Understanding well what created this change is critical to how investors may think about the future, including the role of fixed income as part of prudent investment portfolios that help generate returns and mitigate risk.
Mind the Gap: Narrowing Imbalances, while Maintaining Growth
IMF Survey Sep 13, 2013
Five years on since the crisis, the G20 advanced and emerging market economies have showed some progress in reducing their major internal and external imbalances. But greater coordinated policy action is necessary for sustainable global growth, says a new analysis by IMF staff.
China’s Developing World Edge
Richard Ghiasy, Stephan Mothe, and Frances Pontemayor (Diplomat) Sep 13, 2013
The IMF and World Bank should take a leaf from China’s focus on developing world infrastructure.
Five Years of Financial Non-Reform
Anat Admati (Project Syndicate) Sep 13, 2013
Five years after the collapse of Lehman Brothers triggered the largest global financial crisis since the Great Depression, the world’s financial system remains dangerous and dysfunctional. Worse, despite years of debate, no consensus about the nature of the system’s problems – much less how to fix them – has emerged.
Did Capitalism Fail?
Roman Frydman and Michael D. Goldberg (Project Syndicate) Sep 13, 2013
Regulators, bankers, and rating agencies bear much of the blame for the 2008 crisis. But the near-meltdown was not so much a failure of capitalism as it was a failure of contemporary economic models’ understanding of the role and functioning of financial markets – and, more broadly, instability – in capitalist economies.
Asia’s Emerging Community
Fidel V. Ramos (Project Syndicate) Sep 13, 2013
While US efforts to enhance stability in the Asia-Pacific region are welcome, they are inadequate to offset the rising strategic and economic uncertainty facing ASEAN member countries. Fortunately, ASEAN leaders seem to recognize this, and are working to establish a full-fledged diplomatic and economic “community” by 2015.
Export-market exit during the crisis: Evidence from the UK
Holger Görg & Marina-Eliza Spaliara (VoxEU) Sep 13, 2013
International trade declined dramatically during the Global Crisis. This column focuses on UK firms that exited from exporting during the Global Crisis. The evidence clearly points to the importance of financial factors. Firms that exited were more heavily indebted, less liquid, and faced higher firm-specific interest rates.
Electronic payments in Africa: Cash be cowed
Economist Sep 14, 2013
Paul Edwards took pay-TV and mobile phones to Africa. Now it’s e-payments.
Riding high
Economist Sep 14, 2013
The big winner from the financial crisis.
Mother of all sudden stops
Olivier Accominotti & Barry Eichengreen (VoxEU) Sep 14, 2013
From 2001 to 2008, half of Europe received capital inflows from the other half and beyond. In 2009, that stopped, capital accounts switched signs and a crisis occurred. This column draws parallels from a similar episode in Europe just before the Great Depression. It highlights that in both episodes global factors – largely exogenous to conditions in the borrowing countries – shaped the capital flows and reversals.
Mercantilism vs. Free Trade: The Early Years
Chi-Yuen Wu (Mises Daily) Sep 14, 2013
Consider some early controversies in Mercantilist thought, and their effects on our thinking about free trade. A debate existed between the interests of England-based manufacturers of clothing and the importers of clothing from the East India Company. In both cases, they are arguing from the position of special interest groups, but the arguments made by the East India Company, while not made in the spirit of any true devotion to free trade, are harbingers of later advances in our understanding of the value of free trade.
Quantitative easing: Tale of the taper
Robin Harding (FT) Sep 15, 2013
The Federal Reserve is wrestling with how to step away from the monetary policy that has defined the response to the financial crisis around the world.
Mexico’s ‘Aztec tiger’ struggles to roar
John Paul Rathbone (FT) Sep 15, 2013
President Enrique Peña Nieto’s honeymoon is over, and his reform drive has slowed, but it may be too soon to write it off as a failure.
When market movers are the index makers
John Authers (FT) Sep 15, 2013
Judging by the way markets moved last week, when several indices made slight changes, traders do not understand how the indices work.
Protectionists Pick Your Pocket Again
Greg Simon and Richard Titus (WSJ) Sep 15, 2013
You'll pay more for cabinets and anything made with Chinese plywood, and U.S. jobs will be lost too.
Will Asian trade strategies unite or divide?
Shiro Armstrong (EAF) Sep 15, 2013
Whether we like it or not, free trade agreements are — at best — only part of the solution to further international trade liberalisation, and their proliferation has resulted in a ‘noodle bowl’ of overlapping agreements throughout the Asia Pacific.
Trade and innovation in services
Leonardo Iacovone, Aaditya Mattoo & Andrés Zahler (VoxEU) Sep 15, 2013
Service exports and innovation may be a source of dynamic growth for countries in the middle-income trap. This column presents new research showing some support for this optimistic view. That said, it’s clear that researchers need to improve their understanding of how firms in the services sector innovate and increase productivity, and whether better-tailored policies can promote trade and innovation in services.
Ignore the doomsayers on Europe
Wolfgang Schäuble (FT) Sep 16, 2013
Despite what the critics of European crisis management say, fiscal and structural repair work is paying off, laying the foundations for sustainable growth.
New Policies To Fend Off Financial Crises
IMF Survey Sep 16, 2013
Policies to protect a country’s financial system can help avoid a repeat of the global crisis that has taken a toll on financial stability and economies around the world.
Liquefied Natural Profits
Amy Myers Jaffe and Edward L. Morse (FA) Sep 16, 2013
The United States and the remaking of the global energy economy.
Psychological games and financial crises
Frances Coppola (Pieria) Sep 16, 2013
Five years on from the collapse of Lehman, the psychological game-playing that caused the 2007/8 financial crisis - and that still continues today.
A New Greek Test for Europe
Ashoka Mody (Project Syndicate) Sep 16, 2013
Greece’s debt crisis may have been pushed off the world's front pages, but it has not gone away. Indeed, the upcoming decision on the next round of Greek aid threatens to break the mold on the scale of official debt forgiveness, defy the IMF’s presumed insulation from default, and trigger a new round of political and legal turmoil.
The European Consequences of Germany’s Election
Kemal Dervis (Project Syndicate) Sep 16, 2013
Nearly a century ago, in 1919, John Maynard Keynes analyzed the economic consequences of the peace following Germany’s defeat in World War I. To be sure, the consequences of Germany’s general election on September 22 will not be nearly as momentous; but the outcome will not be as inconsequential as most analysts currently claim.
‘Hot money’ stays sticky in India
James Crabtree (FT) Sep 17, 2013
During the recent troubles for the rupee, surprisingly foreign investors left much of their money in India, keeping faith with favoured businesses.
We still live in Lehman’s shadow
Martin Wolf (FT) Sep 17, 2013
The collapse of the bank was less significant than many believe, not least because crisis was on its way in any case.
Mining: Gone to potash
Courtney Weaver and Charles Clover Jan Cienski (FT) Sep 17, 2013
After making billions in Russian banking and other rough-and-tumble sectors, Suleiman Kerimov may have met his match in one of the least risky industries: fertiliser.
The Mismeasure of Poverty
Sheldon H. Danziger (NYT) Sep 17, 2013
Lowering poverty means both recognizing the successes of safety net programs we now have and devising new policies that can spread the wealth created by economic growth.
Is the Commodity Supercycle Dead?
Nicholas J. Johnson and Greg E. Sharenow (PIMCO) Sep 17, 2013
While commodity price appreciation won't likely mirror the supercycle, this shouldn't necessarily imply a negative view on commodity returns going forward. We believe commodity prices are at reasonable levels from a long-term valuation perspective. In addition, the roll yield from investing in commodities is the highest it's been since 2005. The outlook for commodity returns today seems broadly consistent with historical returns, and commodities remain an important tool for hedging inflation risk.
The American Myth of Cheap Oil and Gas
Carl Pope (Bloomberg) Sep 17, 2013
In recent years, U.S. business and political leaders have giddily talked of a “Saudi America” gurgling with domestic oil and gas. It’s true that the U.S. now has access to abundant supplies of cheap domestic gas capable of transforming the U.S. economy. Too bad these same leaders are about to give away a vast chunk of North America’s hydrocarbon production -- and all the strategic advantages that go with it.
How Poverty Takes Over the Mind
Cass R. Sunstein (Bloomberg) Sep 17, 2013
Suppose you got no sleep last night and you have to take an intelligence test today. If you’re like most people, you’re not going to do so well on that test. Now suppose you are struggling with poverty and you have to take the same intelligence test. How, if at all, will your test score be affected?
Silver Linings for a Golden Age
Kishore Mahbubani (Project Syndicate) Sep 17, 2013
To gain purchase on where the world is headed, we must consider three crucial issues: whether the US will reassert its moral leadership; whether China will recapture its economic-growth momentum; and whether Japan and Europe can recover their animal spirits. Despite the many challenges ahead, there is reason to be optimistic.
Europe’s Smart Asian Pivot
Javier Solana (Project Syndicate) Sep 17, 2013
While the US has commenced its “pivot” to Asia, the EU is at a critical historical juncture, one that demands its own strategic shift eastward. Paradoxically, Europe's lack of great-power status in the region provides a degree of diplomatic agility that the American heavyweight cannot muster.
The Wisdom of Crisis Prevention
Mehmet Simsek (Project Syndicate) Sep 17, 2013
Regardless of how differently governments may formulate policy, ensuring financial stability is their common responsibility. The simple truth is that the cost of preventing financial crises is much lower than the costs imposed by them after they erupt.
Crisis Offers Preliminary Lessons on Fiscal Policy
IMF Survey Sep 17, 2013
Evidence on how advanced economies performed during and after the 2008–09 crisis sheds new light on the fiscal risks these economies face and on the effectiveness of using fiscal policy to stabilize the economy.
Let money leave China to ease pressures
Charles Dumas (FT) Sep 18, 2013
Removing controls on capital movements would improve the supply-side operation of China’s economy and achieve badly needed devaluation.
Breathing Room for Emerging Markets Watching Money Flee
Kaith Bradshet, Simon Romero & Ceylan Yeginsu (NYT) Sep 18, 2013
While previous exoduses by investors from emerging markets have caused bank failures, bankruptcies and layoffs, the latest retrenchment has been much milder.
Armageddon looting machine
Ellen Brown (AT) Sep 18, 2013
Five years on from the financial collapse precipitated by the Lehman Brothers bankruptcy the risk of another full-blown financial panic is looming large, thanks to the amount of risk being driven to unregulated lenders in the "shadow banking" sector.
Macroeconomic Mercy and German History
Robert Kuttner (Globalist) Sep 18, 2013
Why Germany should show more generosity toward eurozone countries in crisis.
Coase’s Chinese Legacy
Andrew Sheng and Xiao Geng (Project Syndicate) Sep 18, 2013
Ronald H. Coase, the father of "new institutional economics" who died recently at age 102, will be missed in developing countries like China. His insights into the role of firms, financial institutions, and the state in shaping markets and supporting economic growth will prove crucial as China works to achieve high-income status.
Mercantilism: Six centuries of vilifying the poor
David Spencer (Pieria) Sep 18, 2013
The vilification of the “lazy and undeserving poor” has persisted from the beginning of mercantilism and remains a barrier to the formulation of better policy and the creation of a better society.
Merkel’s conservative critics will be key
Karl-Theodor zu Guttenberg (FT) Sep 19, 2013
Ironically, disillusioned rightwing voters backing the small but buoyant anti-euro Alternative for Germany party might pave the way for a grand coalition.
Debt explosion real story of Fed QE dance
Gillian Tett (FT) Sep 19, 2013
Western addiction to credit makes a mockery of existing economic textbooks and official policy assumptions and a radical overhaul is needed.
The 'London Whale' vs. the Big-Fish Strategy
Stephen R. Etherington (WSJ) Sep 19, 2013
Legal action aimed squarely at the individual is the best deterrent to rogue trading.
Central banks: Women wanted
Caroline Freund (WP) Sep 19, 2013
Janet Yellen would be the first female Fed chief. But other countries aren’t doing much better.
Strong U.S. Economy, Strong Global Economy—Two Sides of Same Coin
IMF Survey Sep 19, 2013
In a world of increasing economic interconnections, the United States’s stake in the global recovery is greater than ever, IMF Managing Director Christine Lagarde said in a speech to business leaders at the U.S. Chamber of Commerce in Washington, D.C.
The Interconnected Global Economy: Challenges and Opportunities for the United States—and the World
Christine Lagarde (IMF) Sep 19, 2013
It is the interplay between the global economy and the U.S. economy on which I would like to focus today. I would like to focus on three issues: one, the current state of the global economy; two, the role of the United States economy in our interconnected world; and three, why the IMF matters for the global economy and for the United States.
Azevêdo Jump-Starts WTO Talks as Bali Ministerial Approaches
Bridges Weekly Trade News Digest, Volume 17, Number 30 Sep 19, 2013
New WTO Director-General Roberto Azevêdo has jump-started negotiations in Geneva by launching an intensive series of meetings aimed at narrowing gaps ahead of the global trade body's ninth ministerial conference, delegates say.
EU-China Investment Talks Could Set Stage for Trade Deal, Officials Say
Bridges Weekly Trade News Digest, Volume 17, Number 30 Sep 19, 2013
Talks for a Brussels-Beijing investment deal could kick off later this autumn, EU officials confirmed this week, with EU member states set to tackle the subject at a meeting in Luxembourg in October. The proposed pact, if enacted, has been touted as a potential stepping stone toward a future trade agreement.
Banking Without Risk Is Impossible
Megan McArdle (Bloomberg) Sep 19, 2013
Bank reforms can't make crises impossible, but they can make them less expensive.
A Healthier Global Health Agenda
Kent Buse and Sarah Hawkes (Project Syndicate) Sep 19, 2013
On September 25, world leaders will meet in New York at a special UN session to chart a path to a new set of Sustainable Development Goals. While a universal health goal should be included in the new SDG framework, it must address the threat of non-communicable diseases, such as smoking, obesity, and physical inactivity.
The Irresistible Rise of the Muslim Middle Class
Shahid Javed Burki (Project Syndicate) Sep 19, 2013
The current turmoil in the Muslim world has one important cause that is rooted in neither religious ideology nor sectarian struggle. In Egypt, Syria, Tunisia, and Turkey, rapidly growing and increasingly assertive middle classes want a say in politics and greater economic opportunity.
Asia’s Game Without Frontiers
Jaswant Singh (Project Syndicate) Sep 19, 2013
Many Asian countries are responding to current territorial disputes by adopting robust national-defense strategies aimed at fending off current challenges and precluding future threats. But there are few rules governing how these shifts – particularly by China, Japan, and India – take place.
The Blurry Frontiers of Economic Policy
Michael Spence (Project Syndicate) Sep 19, 2013
Economic policies are set at the national level, where officials seek to benefit the domestic economy. But these policies are increasingly affecting other economies and the global system, giving rise to what might be called “policy externalities” – consequences that extend outside policymakers’ target environment.
Banking recovery and resolution directive
Thomas Huertas & María J Nieto (VoxEU) Sep 19, 2013
To end moral hazard, investors, not taxpayers, should bear the loss associated with bank failures. Recently, the EU took a major step in this direction with the Banking Recovery and Resolution Directive. This column argues that this is a game changer. It assures through the introduction of the bail-in tool that investors, not taxpayers, will primarily bear the cost of bank failures, and it opens the door to resolving banks in a manner that will not significantly disrupt financial markets.
Why Your iPhone Upgrade Is Good for the Poor
Daniel Fletcher (WSJ) Sep 20, 2013
Smartphone cameras, for example, are being repurposed as microscopes.
Rewriting the Lehman Post Mortem
Holman Jenkins (WSJ) Sep 20, 2013
Asset bubbles for the rich and a welfare boom for the rest does not a recovery make.
What Really Is Competitiveness?
Robert D. Atkinson (Globalist) Sep 20, 2013
Nations compete — but no one ever accurately measures national competitiveness.
Europe’s Japan?
Federico Fubini (Project Syndicate) Sep 20, 2013
The lack of significant outbursts of public anger over the last six years in Italy can be explained partly by the savings cushion built by previous generations. But it is precisely the generational divide between rentiers and producers that threatens to drive Italy toward a Japanese-style lost decade – or two.
The Best, Brightest, and Least Productive?
Robert J. Shiller (Project Syndicate) Sep 20, 2013
In the US, 7.4% of total compensation of employees in 2012 went to people working in the finance and insurance industries. Whether or not that percentage is too high, the real issue is that the share is even higher among the most educated and accomplished people, whose activities may be economically useless, if not harmful.
Investment is the new consumption
Tom Streithorst (Pieria) Sep 20, 2013
We generally think of consumption as indulgent and investment as serious and sober but perhaps in our demand starved world, this is an outdated prejudice.
Exit-path implications for collateral chains
Peter Stella (VoxEU) Sep 20, 2013
QE is still on, but central banks are pondering exit pathways. Exit requires vacuuming up excess reserves, winding down massive securities holdings, and restoring normal interest rates – all without killing the recovery. This column points to the importance of a seemingly technical issue – the impact of the exit on the supply of high-quality collateral. This matters since collateral plays a critical role in today’s credit and money creation processes. When reducing excess reserves, the ‘how’ matters as much as the ‘when’ and ‘how much’.
Taper tiger
Economist Sep 21, 2013
The Federal Reserve surprises everyone by changing nothing.
Awakening the WTO
Hector R. Torres (VoxEU) Sep 21, 2013
'Special and differential treatment' was justified on the basis that developing countries lacked the fiscal resources to smooth the transition to free trade. However, despite improved fiscal circumstances, exceptions to WTO rules remain in place. Establishing an independent watchdog for the WTO could help it to address these issues.
Renting capital to un-constrain credit
Peter N. Gal & Gabor Pinter (VoxEU) Sep 21, 2013
Renting capital goods makes up 20% of total capital expenses by US companies and this type of capital spending increases in downturns. This column discusses research showing that the systematic pattern of corporate leasing can be linked to credit constraints. This means that a robust rental sector has the potential to mitigate the negative effects of financial disruptions when obtaining credit becomes difficult.
The ignorance of markets
Frances Coppola (Pieria) Sep 21, 2013
The apparently irrational response of markets to monetary policy signals from central banks is too often caused by simple ignorance. Trading strategists should do their homework.
The New Climate Economics
Felipe Calderón and Nicholas Stern (Project Syndicate) Sep 22, 2013
Climate scientists are now more than 95% certain that human activity – largely the combustion of fossil fuels – is causing temperatures and sea levels to rise. But, as climate-change skepticism is put to rest, a more critical question will emerge: How can reducing greenhouse-gas emissions be reconciled with rapid economic growth?
The Fed is wrong to delay its tapering
Martin Felstein (FT) Sep 22, 2013
Although the initial bond-buying may have helped stimulate demand in 2010-11, it is now doing very little to stimulate economic growth and employment.
Brazil economy risks lost decade
Joe Leahy (FT) Sep 22, 2013
Despite a huge government stimulus, investment in transport and logistics as a share of GDP continues to lag behind other large economies.
Side-effects that should call time on QE
John Authers (FT) Sep 22, 2013
Whether or not quantitative easing proves useful in bringing the economy back to life, the policy has side-effects, which is why the Fed wants to exit.
Baseball reflects Japan’s economic shift
Kurt Campbell (FT) Sep 23, 2013
In sport as in the economy, Japanese are coming to see how competition from outside is both an essential and an inevitable feature of progress.
QE erodes bank enthusiasm for securitisations
Patrick Jenkins (FT) Sep 23, 2013
Regulatory changes have made securitisation look less appealing, with high capital requirements imposed both on bank and insurance company buyers.
China Reforms Face Headwinds at Home and Abroad
Lee Jong-Wha (Project Syndicate) Sep 23, 2013
For more than three decades, Chinese demand has supported other Asian economies’ export-led growth. Now, with China facing a growth slowdown and significant downside risks, Asian countries must abandon their export-oriented development strategies in favor of more balanced growth models, underpinned by domestic demand.
Michael Pettis (Bloomberg) Sep 23, 2013
In the late 1980s, University of Chicago professor Robert Aliber proposed, partly in jest, what he called the Andy Warhol theory of economic growth: “In the future every country will grow rapidly for 15 years.” He had in mind the plethora of so-called miracle economies that seemed to take off one after the other in the postwar era. In every case, decades of high growth, almost always driven by very high levels of investment, eventually faltered.
Merkelism Is a Harder Sell Outside Germany
Harold James (Bloomberg) Sep 23, 2013
Germany’s elections yesterday weren’t supposed to be a cliffhanger, but they started to look like one in the last weeks of campaigning. No one doubted that Chancellor Angela Merkel’s Christian Democratic Union would come out with largest number of votes and the largest number of seats in the parliament. What was uncertain -- and remains unclear from the early results -- was the nature of the coalition she would need to work with.
Merkel’s Victory Is Stunning and Depressing
Marc Champion (Bloomberg) Sep 23, 2013
Merkel's win does not bode well for the future of the euro.
Bubbles Tomorrow, Yesterday, but Never Today?
John C. Williams (FRBSF) Sep 23, 2013
Standard asset price models have generally failed to detect bubbles, with enormous costs to the economy. Economists are now creating promising new models that account for bubbles by relaxing the assumption of rational expectations and allowing people’s decisions to be driven by their perceptions of what the future may hold. The following is adapted from a presentation by the president and CEO of the Federal Reserve Bank of San Francisco to the National Association for Business Economics in San Francisco, California, on September 9, 2013.
Offshoring and innovation in emerging economies
Ursula Fritsch and Holger Görg (VoxEU) Sep 23, 2013
Outsourcing is a controversial practice. This column looks at its effects on firm-level innovation in emerging markets. The authors find robust evidence that outsourcing is positively related to various innovation measures. However, outsourcing only leads to increased R&D spending in countries where intellectual-property rights are well-protected.
Next Greek package: Dangers for the EZ
Charles Wyplosz (VoxEU) Sep 23, 2013
Greece is in dire straits; it will need more debt relief. This column argues that Greece is suffering because northern EZ countries kicked the can down the road by forcing crisis countries to borrow rather than restructure their debts early on. It is time for the ‘generous’ lenders to face the consequences of their short-sightedness. The bad news that Chancellor Merkel ought to break now to her people is that official debt restructuring is inevitable.
The Euro Tug-of-War
Thomas Kressin (PIMCO) Sep 23, 2013
Faced with lingering economic stagnation, record unemployment and continued political strife in the region, the common consensus for a depreciation of the euro seems only natural and very much required to counter the weak cyclical position of the eurozone. The rising current account surplus in combination with net long-term capital inflows point to a stronger euro that could stay with us for an extended period; such a development could potentially undermine the fragile social consensus to continue with the necessary structural and fiscal reforms. The eurozone could end up with problems over the longer term similar to Japan's: a too-strong, overvalued exchange rate, weak growth, very low overall inflation and deflationary tendencies.
Germany’s strange parallel universe
Martin Wolf (FT) Sep 24, 2013
A huge structural current account surplus does not just export products – it also exports bankruptcy.
ICBC makes bull case for China’s banks
Simon Rabinovitch (FT) Sep 24, 2013
Shifting investor sentiment and a 20 per cent share price surge have returned the bank to the position of world’s biggest by market capitalisation.
The End of Poverty, Soon
Jeffrey D. Sachs (NYT) Sep 24, 2013
The evidence for eradication of poverty worldwide is on the side of optimists.
Party Will Pay the Price for China’s Rebalancing
Michael Pettis (Bloomberg) Sep 24, 2013
We need to keep the impact of financial repression in mind in understanding the Chinese growth model. It is a fundamental cause of China’s rapid expansion and its extraordinary imbalances. State-owned enterprises, like other large-scale investors, have benefited from artificially low interest rates, and it is quite easy to prove that over the past decade they have been value destroyers on a very significant scale.
Weak States, Poor Countries
Angus Deaton (Project Syndicate) Sep 24, 2013
The absence of state capacity – that is, of the services and protections that people in rich countries take for granted – is one of the major causes of poverty and deprivation around the world. Unfortunately, the world’s rich countries currently are making things worse.
Women and the World Economy
Christine Lagarde (Project Syndicate) Sep 24, 2013
In many countries, public debate about gender equality focuses mainly on women’s access to top positions and high-powered career opportunities. But the broader question is whether women have the same opportunities as men to participate in labor markets in the first place – and recent research suggests that here progress has stalled.
Obama to World: Bad News. The American Empire Is Dead.
Colum Lynch & Ty McCormick (FP) Sep 24, 2013
U.S. President Barack Obama presented world leaders at the United Nations with an image of America as a reluctant superpower, ready to confront Iran's nukes and kill its enemies with targeted drone strikes, but unprepared to embark on open-ended military missions in Syria and other troubled countries. That, he hinted, should give the world cause for anxiety.
Forecasting oil prices using product spreads
Christiane Baumeister, Lutz Kilian & Xiaoqing Zhou (VoxEU) Sep 24, 2013
Recent work on forecasting oil prices raises the question of whether oil industry analysts know something about forecasting the price of oil that academic economists have missed. This column presents evidence that they do, but economists know how to improve further on these practitioners’ insights.
Forward guidance and home economics
Robert Shrimsley (FT) Sep 25, 2013
As central bankers struggle to give a clear steer on policy direction, they may have to tread lightly to manage their domestic expectations too.
Shares move from ‘hope’ to ‘growth’ story
Peter Oppenheimer (FT) Sep 25, 2013
Profits should rise as economic growth picks up and while the pace of recovery is unlikely to last, it is better than feared.
Russian energy: Frozen assets
Guy Chazan (FT) Sep 25, 2013
As conventional oil reserves diminish Kremlin hopes are pinned on Siberian shale to maintain the nation’s standing, but stiff challenges remain.
Why China Will Disappoint the Pessimists Yet Again
Jim O’Neill (Bloomberg) Sep 25, 2013
China’s eagerly anticipated “hard landing” hasn’t happened yet, and recent indicators make me wonder (not for the first time) if it ever will. In the past two months, the Chinese economy has actually shown signs of accelerating.
China Running Out of Room to Restructure Economy
Michael Pettis (Bloomberg) Sep 25, 2013
If we accept the argument that China must, and will, rebalance its economy by reducing its reliance on investment, what happens if it proves politically impossible to cut investment rates sharply? Gross domestic product growth rates would remain very high, but debt levels would also grow unsustainably. At some point, China will reach its debt capacity limits and no longer be able to fund investment.
'Lord Libor' Was Good At Predicting Libor
Matt Levine (Bloomberg) Sep 25, 2013
By this point regulators have brought a bunch of cases against banks and people who manipulated the London interbank offered rate and have learned some lessons from those cases. Perhaps the most important lesson is that these cases are sort of boring, but they are enlivened by just bushels of dumb emails and instant messages.
Latin America’s Middle-Class Mirage
Eduardo Levy Yeyati (Project Syndicate) Sep 25, 2013
Rising incomes across the developing world will bring some 400 million people into the middle class by 2020, up from 1.8 billion today. But closer examination of their economic circumstances suggests that these new consumers are neither as wealthy nor as secure as we may think.
The Cooperation Crisis
Zaki Laïdi (Project Syndicate) Sep 25, 2013
Many hoped that the rise of a multipolar global economy would bolster multilateralism. In fact, the opposite is true: the logic of national sovereignty has made a comeback, with major economies consistently undermining cooperation on issues ranging from Syria’s civil war to trade to climate change.
Occupy QE
Stephen S. Roach (Project Syndicate) Sep 25, 2013
The Occupy Wall Street movement began two years ago this month, galvanizing attention to income and wealth inequality in the US and around the world. But, if anything, economic inequality has deepened since then – and, lost in the angst over inequality, is the critical role that central banks have played in exacerbating the problem.
Should Brazil’s central bank be selling foreign reserves?
Márcio Garcia (VoxEU) Sep 25, 2013
The recent reversal of capital flows to emerging markets raises the question of whether and how to intervene in currency markets. Brazil’s central bank has intervened heavily, spending more than $50 billion and promising to double that by the end of the year. However, almost all of that intervention has taken place in onshore derivative markets that settle in real. This column argues that such interventions can be effective, but that central banks must stand ready to use their foreign-exchange reserves if necessary.
Nairobi foreshadows urban conflicts
David Kilcullen (FT) Sep 26, 2013
The field of battle is shifting from rugged, remote hinterlands to areas surrounding crowded, connected, coastal cities.
China banks face daunting money squeeze
Henny Sender (FT) Sep 26, 2013
There are doubts about whether the country’s banks have the necessary risk management skills for the brave new world they are entering.
WTO Members Prepare for "Final Countdown" as Ministerial Looms
Bridges Weekly Trade News Digest, Volume 17, Number 31 Sep 26, 2013
With just ten weeks to go until the WTO's ministerial conference in Bali, Indonesia, members have spent the month of September feverishly working in an effort to prepare a final set of deliverables in time for the December gathering. While the renewed pace of work is "inspiring," WTO Director-General Roberto Azevêdo reported on Monday, members must continue to "expedite our negotiations and work more intensely" in the remaining months ahead.
Services Talks Advance as TISA Members Prepare to Exchange Offers
Bridges Weekly Trade News Digest, Volume 17, Number 31 Sep 26, 2013
Negotiations for a plurilateral agreement on services trade advanced in Geneva last week, sources confirmed to Bridges, with members making "substantial" progress on the deal’s draft text. The group has also set November as the date when members will exchange initial market access offers, with the US and Japan already presenting theirs this month.
Trade Secrets and the Return of the 99 Percent
Marc-William Palen (Globalist) Sep 26, 2013
What are the architects of the Trans-Pacific Partnership trade agreements trying to keep secret?
Shanghai Free-Trade Zone Is a Symbol, Not a Threat
William Pesek (Bloomberg) Sep 26, 2013
Hong Kong is dead. Economic roadkill on China’s way to world domination. Starting this weekend, a free-trade zone opening in Shanghai will supplant the former British colony as the gateway to the world’s most dynamic economy.
Three Unlearned Lessons From the Financial Crisis
Simon Johnson (Bloomberg) Sep 26, 2013
There are three straightforward and rather obvious lessons from the collapse of Lehman Brothers Holdings Inc. five years ago: The financial crisis was devastating; we haven’t ended the problems associated with “too big to fail” financial institutions; and we must force the biggest banks to break up -- or risk dire consequences.
Housing versus Habitat
Ricardo Hausmann (Project Syndicate) Sep 26, 2013
Peter Drucker, the influential management guru, famously said, “What does not get measured, does not get done.” He might have added that what gets measured poorly gets done poorly – and low-income housing, in developing and rich countries alike, is a case in point.
Disgruntled Democracies
Jorge G. Castañeda (Project Syndicate) Sep 26, 2013
In the last two years, Brazil, Chile, Colombia, Mexico, and Peru – previously models of economic success and democratic promise – have experienced slowing GDP growth and declining government credibility. Now, popular protests are gaining traction, with serious implications for representative democracy.
Capital is back!
Thomas Piketty & Gabriel Zucman (VoxEU) Sep 26, 2013
According to many measures, inequality has been increasing in the developed world and is now approaching prewar levels. Income inequality does not tell the whole story. This column documents the increase in the ratio of private wealth to national income. This macroeconomic change, precipitated by slowing GDP growth, exacerbates the problem of wealth inequality and makes the economy more susceptible to bubbles.
TPP a Trojan horse
Sachie Mizohata (AT) Sep 27, 2013
The Trans-Pacific Partnership, planned to cover nearly 40% of the world's economy, is branded as a "free trade" agreement but has nothing to do with fair and equitable treatment. Its secretive commitments do, however, infringe mightily on the rights of individuals and sovereign states.
Free Immigrants, Free Capital, Free Markets
David Howden (Mises Daily) Sep 27, 2013
Early this year, the Saudi Arabian government decided to crack down on foreign workers. Writing for The Globe and Mail, Martin Dokoupil and Marwa Rashad argue that this will lead to a “stronger, more diverse economy.” In particular, they focus on the plethora of businesses open at the moment — more than they think is necessary — and the resultant reduction in both “unnecessary” labor and businesses that would be possible if these foreign workers were forced to leave.
Dilemma with the financial Trilemma
Michael W Klein & Jay C. Shambaugh (VoxEU) Sep 27, 2013
The ‘financial trilemma’ – that open capital markets and pegged exchange rates mean a loss of monetary autonomy – has recently been challenged. Some argue that even flexible exchange rates cannot assure monetary autonomy without capital controls, while others argue even countries with fixed exchange rates can gain autonomy through temporary capital controls. This column argues that free floating exchange rates do in fact allow autonomy, and partially floating ones allow partial autonomy. For countries with fixed exchange rates, capital controls provide monetary autonomy when they are widely applied and longstanding, but not when they are temporary and narrowly targeted.
A Systemic Approach to Financial Stability
Andrew Sheng (Project Syndicate) Sep 28, 2013
At next month's Global Economic Symposium, world leaders will attempt to develop concrete solutions to today's most pressing economic problems, including monetary and financial instability. Designing effective proposals will require a new, more comprehensive understanding of the systemic factors affecting financial stability worldwide.
Why world trade growth has lost its mojo
Gavyn Davies (FT) Sep 29, 2013
One intractable problem is that the export-led growth model followed by emerging economies in the last few decades seems to have run into the sands.
The eurozone is far from recovering
Wolfgang Münchau (FT) Sep 29, 2013
The main constraint on the resumption of growth in the currency area is not fiscal policy but the continued failure to clean up the banking sector.
World economy: Brighter prospects
Stefan Schneider (DB Research) Sep 30, 2013
Whereas the first fruits of "Abenomics" are becoming more evident in Japan, the Fed and the ECB have been proceeding extremely cautiously. Defying expectations, the Fed did not begin to taper its bond buying programme in September, justifying its decision with worries about financial conditions and potential collateral damage from the complex US negotiations on the budget and the debt ceiling. ECB President Draghi emphasised at that institution's recent press conference that he remained "very, very cautious about the recovery" in the euro area.
Financial Crises Yield More Synchronized Economic Output
IMF Survey Sep 30, 2013
The global panic set in motion by the 2008-09 financial crisis generated an unprecedented output collapse around the world that temporarily had countries moving in close lockstep, according to a new study by the IMF.
Gender Parity and Economic Performance
Laura Tyson (Project Syndicate) Sep 30, 2013
Whether women have the same opportunities as men to participate and advance in labor markets is a fundamental question for economic growth. Unfortunately, despite considerable gains in many countries, labor markets around the world remain divided along gender lines, with progress toward parity having stalled.
The Eurozone’s Calm Before the Storm
Nouriel Roubini (Project Syndicate) Sep 30, 2013
A little more than a year ago, in the summer of 2012, the eurozone, faced with growing fears of a Greek exit and unsustainably high borrowing costs for Italy and Spain, appeared to be on the brink of collapse. Today, that risk has diminished significantly – but the factors that fueled it remain largely unaddressed.
Angela Merkel’s Return to Europe
Jean Pisani-Ferry (Project Syndicate) Sep 30, 2013
Now that Germany's general election is over, the biggest question is where Chancellor Angela Merkel will invest her enormous political capital. Her choice may well define the future of the eurozone and European integration.
The Taper Chase
Martin Feldstein (Project Syndicate) Sep 30, 2013
Global financial markets were stunned when the US Federal Reserve announced on September 18 that it was not ready to begin the widely anticipated slowdown of its long-term asset purchases. There are three possible reasons why the Fed shifted its plans so dramatically, and all point to continuation of quantitative easing.