News & Commentary:

October 2011 Archives


Going for growth in a go-slow world
Lowell Bryan, John Horn, and Sven Smit (McKinsey Quarterly) Oct 1, 2011
No matter what happens, investors will reward companies that master the art of growing under pressure.

A 'China Round' of Trade Talks
Arvind Subramanian (PIIE/Business Standard) Oct 1, 2011
One way to signal that the world community recognizes the need to deal with a dominant China in the future, and to do so multilaterally, would be to put to bed the Doha Round and embark on a new round of trade negotiations. The aim of such a "China Round" would in fact be to anchor China, to the maximum extent possible, in the multilateral trading system.

Where the Skills Are
Richard Florida (Atlantic) Oct 1, 2011
In today’s expanding cities, social skills are becoming ever more essential to economic growth.

The Next Russian Revolution
Chrystia Freeland (Atlantic) Oct 1, 2011
Outside Moscow, the Kremlin is making plans for a Russian Silicon Valley. But while tech companies are on board, the Russian people are less enthusiastic.

Six Pac(k)in'
Bill Gross (PIMCO) Oct 1, 2011
There are no double-digit investment returns anywhere in sight for owners of financial assets. Long-term profits cannot ultimately grow unless they are partnered with near equal benefits for labor. There is only a New Normal economy at best and a global recession at worst to look forward to in future years. If global policymakers could focus on structural as opposed to cyclical financial solutions, New Normal growth as opposed to recession might be possible.

The Eurozone Crisis and the US Economy: What Has Gone Wrong?
John H. Makin (AEI) Oct 1, 2011
Simultaneous economic crises in the United States and Europe have created a serious threat to the world economy. Recent US stimulus efforts have failed to boost the economy, and this pattern is likely to continue with future proposed stimulus plans. Many of Europe’s problems stem from its adoption of a monetary union, which has increased shared risk from southern European sovereign debt. No easy solutions to these crises exist; one crucial, but inadequate, step is for central banks in Europe and the United States to work together to preempt deflation.

The world economy: Be afraid
Economist Oct 1, 2011
Unless politicians act more boldly, the world economy will keep heading towards a black hole

Making globalisation work for workers
Sascha O Becker, Marion Jansen & Marc Muendler (VoxEU) Oct 1, 2011
As jobs losses continue to haunt the headlines, people are left asking if long-term unemployment is to be one of the so-called benefits from globalisation. This column reports on a conference aimed at understanding how globalisation can be made to work for workers.

How Argentina left its Eurozone
Eduardo Levy Yeyati (VoxEU) Oct 2, 2011
One of the many proposals for escaping the Eurozone crisis is to follow in the footsteps of Argentina since its currency fiasco a decade ago. This column points out the realities of such a path: regressive wealth transfers and debt dilution. Against this dismal backdrop, a fiscal union might well be a better option.

Does fiscal stimulus work in a monetary union? Evidence from US regions
Emi Nakamura & Jón Steinsson (VoxEU) Oct 2, 2011
A major question facing many governments in the rich world today is whether we should try to stimulate the economy by increasing government spending. This column exploit variation in military spending across US states and identifies a fiscal multiplier of around 1.5. It then suggests that aggregate fiscal stimulus should have large output multipliers when the economy is at the zero lower bound.

Eurozone fix a con trick for the desperate Financial Times Subscription Required
Wolfgang Münchau (FT) Oct 2, 2011
The most recent crazy idea pursued by officials is to turn the rescue fund into a collateralised debt obligation.

Holding China to Account New York Times Subscription Required
Paul Krugman (NYT) Oct 2, 2011
Legislation that would threaten sanctions against currency manipulators won't solve our economic problems on its own, but it can contribute to a solution.

The Wrong Tax for Europe
Kenneth Rogoff (Project Syndicate) Oct 3, 2011
There is ample reason to be angry at financiers, and real change is needed in how they operate. But the European Commission's proposal to tax financial transactions, despite its noble intellectual lineage, is no solution to Europe’s problems – or to the world's.

The Power to End Poverty
Ban Ki-moon (Project Syndicate) Oct 3, 2011
This month, the Millennium Villages Project launches its second five-year stage. Around Africa, and now around the world, governments are scaling up the lessons from this project and others like it: empower communities, help them to invest in their futures using cutting-edge technologies, and thereby end extreme poverty.

How to rescue the euro: Ten commandments
Hans-Werner Sinn (VoxEU) Oct 3, 2011
No simple solution to the euro crisis exists. This column argues the heart of the Eurozone’s woe is a balance-of-payments crisis whose solution requires real adjustment of prices and wages in the periphery countries. It proposes Ten Commandments that balance the need for discipline with the need to minimise panic when a crisis does strike.

Currency wars: Lessons from the US experience
Michael Bordo & Owen F Humpage (VoxEU) Oct 3, 2011
The Great Recession has resulted in sharp exchange-rate changes and threats of ‘currency wars’ linger. Some countries – notably Japan and Switzerland – have shown an interest in foreign-exchange intervention. This column argues that sterilised intervention does not afford monetary authorities a means of systematically affecting their exchange rates independent of their domestic policy objectives. Countries that engage in currency wars run a real risk of shooting themselves in the foot.

The Markets for Contagion
Mohamed El-Erian (PIMCO/Reuters) Oct 3, 2011
Friday’s worldwide sell-off was a fitting end to a miserable month and a horrible quarter for equity markets.

China or the US? Make your choice Financial Times Subscription Required
Gideon Rachman (FT) Oct 3, 2011
With the US government borrowing 40 cents of every dollar that it spends – and China the largest foreign buyer of US debt – the Chinese are indirectly funding American military dominance of the Pacific.

Gold bugs beware – the bubble is finally bursting Financial Times Subscription Required
Mark Williams (FT) Oct 3, 2011
If yellow metal is falling in a weak economy, imagine how it will perform when the global economy moves from chaos to prosperity.

Italy must engage more with its creditors Financial Times Subscription Required
Richard Milne (FT) Oct 3, 2011
Rome will follow the path of Athens if it cannot woo investors.

How to Value a Currency
Arvind Subramanian (WSJ) Oct 3, 2011
Broadly, there are two approaches to assessing whether a currency is over or under-valued: macroeconomic and development. Both these define or provide a sense of an “equilibrium” exchange rate, that is, what the level of the exchange rate ought to be at a point in time. Comparing this with the prevailing exchange rate gives a sense of over- or under- valuation. The assessment cannot be precise because an equilibrium exchange rate depends on many factors, changes over time, and the underlying determinants cannot be measured accurately.

Market controls: does intervention work?
John Beck (The Banker) Oct 3, 2011
With a notorious reputation for destabilising companies, short sellers are obvious targets when the markets start to crash, and short selling bans are almost always implemented at the crux of a financial crisis. Yet there is little evidence to prove that such bans aid recovery. To the contrary, some economists suggest that they may negatively affect the market, causing decreases in trading volumes and making it harder and more expensive to trade.

Will Europe Rise to the Occasion?
Stephan Richter (Globalist) Oct 3, 2011
Why the world's worries over European debt are overblown.

Complexity Mathematics, the EU and Global Governance
Andrea Illy (Globalist) Oct 4, 2011
Linear thinking is no longer sufficient when it comes to global governance. Supranational governance — such as that practiced in the EU — is a real-world exercise in non-linear complexity management.

Managing financial integration and capital mobility: Lessons from emerging markets
Joshua Aizenman & Brian Pinto (VoxEU) Oct 4, 2011
With the merits of a globally integrated economy in question, this column reviews the policy lessons from two decades of policy in emerging markets aimed at opening up their economies. It also outlines the steps countries have taken to reduce exposure to financial crises and argues that these may be the best option while policymaking at the G20 level is stuck in a stalemate.

The Microfinance Catalyst
Tarun Khanna & Jayant Sinha (Project Syndicate) Oct 4, 2011
When both governments and markets fail, impact investors can stimulate change. Microfinance – its advent, rise, and recent crises – shows how.

Bleed the Foreigner
Harold James (Project Syndicate) Oct 4, 2011
The economists’ commonplace that a monetary union demands a fiscal union is only part of a much deeper truth about debt and obligation. Debt is rarely sustainable if there is not some sense of communal or collective responsibility.

The Euro Area: Moving in the Right Direction?
Jacob Funk Kirkegaard (PIIE) Oct 4, 2011
Despite its failure to reach the fiscal targets mandated by the International Monetary Fund (IMF) this year and next, Greece is certain to get the next tranche of its IMF bailout funding. The reason is that Athens did enough last weekend to comply with the austerity program in the eyes of the euro group and the IMF. Finally, for example, the Greek government and parliament have agreed to begin laying off previously unsackable public sector workers. Measured against Greece's dire economic situation, the government's intention to transfer up to 30,000 public sector workers nearing retirement age to reduced-pay status, effectively forcing them to retire right away, is hardly an overwhelming policy response. But in light of the country's accelerating recession, the political symbolism was clear.

How to keep the euro on the road Financial Times Subscription Required
Martin Wolf (FT) Oct 4, 2011
The eurozone needs a credible path of adjustment, at whose end we see weaker economies restored to health. If such a path is not found it will fracture.

The perils, prizes and pitfalls of the post-Gaddafi era of oil Financial Times Subscription Required
Daniel Yergin (FT) Oct 4, 2011
Even in our most optimistic scenario of the new oil era, only 10 per cent of new cars in 2020 are electric vehicles.

Washington's Free Trade Adult Wall Street Journal Subscription Required
WSJ Oct 4, 2011
John Boehner acts presidential.

What Financial Crisis? Wall Street Journal Subscription Required
Holman Jenkins (WSJ) Oct 4, 2011
Politicians aren't the only ones in denial about new realities.

Grim Outlook for U.S. Foreign Aid
James M. Lindsay (CFR) Oct 4, 2011
For U.S. voters, domestic economic problems trump international crises around the world. As a result, cutting foreign aid is inevitable, and the U.S. government will end up doing less.

The Wrong Way to Deal With China
NYT Oct 4, 2011
A Senate bill to punish countries that manipulate their currencies is a bad idea. If Beijing retaliates, it could damage the American economy further.

Food and Finance: a little less speculation, a little more action please...
Ruth Kelly (Oxfam) Oct 5, 2011
When they work properly, financial markets are great at greasing the cogs of the food system. Why, then, are so many people blaming speculation for recent food price spikes?

Agricultural Export Restrictions Spur Discussion Ahead of WTO Ministerial
Bridges Weekly Trade News Digest Volume 15, Number 33 Oct 5, 2011
An unofficial 2 November deadline for finalising the agenda of the WTO's December ministerial conference has caused quiet consultations on agricultural export restrictions to pick up the pace, trade sources say.

After Long Delay, US FTAs with Korea, Colombia, Panama Submitted to Congress
Bridges Weekly Trade News Digest Volume 15, Number 33 Oct 5, 2011
The push to pass the US free trade agreements (FTAs) with Colombia, Panama, and South Korea is quickly gaining momentum, with the White House submitting the pacts to Congress on 3 October after years of back-and-forth political wrangling. The US House of Representatives is expected to vote on the three FTAs early next week, in tandem with voting on a controversial worker aid programme that delayed the pacts' passage over the summer months.

Russia Picks Up Speed on Road to WTO Accession
Bridges Weekly Trade News Digest Volume 15, Number 33 Oct 5, 2011
The last month has seen trade officials make a concerted push toward resolving the remaining hurdles in the Russia WTO accession process in the hopes that Russia could become the global trade body's 154th member by December's ministerial conference. Recent reports indicate that Moscow may have clinched the outlines of an agreement with the EU, while Russian officials announced yesterday in Washington that they are close to an accession deal.

India Leads Group of 26 Nations Against EU Aviation Emission Levy
Bridges Weekly Trade News Digest Volume 15, Number 33 Oct 5, 2011
A group of 26 countries last week came together in New Delhi, India for a two-day meeting to protest against the EU's decision to charge airlines departing from and arriving in the EU for their emissions. The EU initiative to address emissions from the aviation sector has sparked strong opposition by several countries and airlines - some of which have now banded together to dispute the EU decision.

US Senate Gears Up for China Currency Vote
Bridges Weekly Trade News Digest Volume 15, Number 33 Oct 5, 2011
The US Senate is prepared to take up legislation targeting China's valuation of its currency, with senators voting on Monday 3 October to begin debate on a bill that would allow the US to impose duties on countries that undervalue their currencies. The move has provoked a stern response from the Chinese government, which has cautioned that such legislation could lead to a trade war between the two countries.

European Commission Puts Renewed Pressure on EPA Negotiations
Bridges Weekly Trade News Digest Volume 15, Number 33 Oct 5, 2011
The European Commission announced on 30 September that countries that have concluded an Economic Partnership Agreement (EPA) with the EU without having taken the steps to ratify and implement them will be withdrawn from the Market Access Regulation as of 1 January 2014 onward. Should these developing countries not ratify an EPA by this new deadline, they could potentially lose their free access to the EU market.

Eight Countries Sign Anti-Counterfeiting Trade Pact
Bridges Weekly Trade News Digest Volume 15, Number 33 Oct 5, 2011
The controversial Anti-Counterfeiting Trade Agreement (ACTA), a multi-country intellectual property trade agreement that has been in negotiations since 2006, was signed on Friday by eight countries, including the US. Representatives from the eleven negotiating parties gathered in Tokyo, Japan on 1 October for the ACTA signing ceremony. The pact has been a source of substantial debate in terms of the agreement's potential impact on non-signatory countries.

Countries Struggle at Panama Climate Meeting on Road to Durban
Bridges Weekly Trade News Digest Volume 15, Number 33 Oct 5, 2011
Climate change measures with trade implications continue to create friction during negotiations taking place in Panama City, Panama this week as part of the final preparations for December's United Nations Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP). Two major areas of discussion have already spurred countries to come forth with strongly-worded proposals in efforts to safeguard trade and economic development. The first relates to the possible negative impacts of unilateral measures taken to address climate change; the second relates to global sectoral approaches to mitigate emissions.

Messy rule is a must for modern America Financial Times Subscription Required
Amar Bhidé (FT) Oct 5, 2011
Using swift, behind the scenes bargains or mindless formulas on the debt ceiling to avoid intervention is not the answer.

What will persuade investors to dump cash piles? Financial Times Subscription Required
Robert Parker (FT) Oct 5, 2011
Overall, the key to markets over the next few months is whether elevated cash levels are reduced.

A Liquid Europe
Daniel Gros (Project Syndicate) Oct 5, 2011
The eurozone might just be stepping back from the brink – that is, if a new framework to resolve the ongoing sovereign-debt crisis includes liquidity support for solvent governments. If investors knew that a liquidity squeeze was no longer possible, they would refrain from speculative attacks on such governments' bonds.

No Country for Young Oligarchs
Alexander Etkind (Project Syndicate) Oct 5, 2011
This past June, Mikhail Prokhorov, one of Russia's richest men, formed a political party to contest December’s parliamentary elections, seeming to believe that his business experience would boost his political prospects. He was wrong.

The democratic transition
Fabrice Murtin & Romain Wacziarg (VoxEU) Oct 5, 2011
As witnessed during this year’s Arab Spring, democracy doesn’t always emerge smoothly. This column examines the long march toward political freedom since 1800. It argues that while both income and education affect democracy, the rise in primary education has been the main driver of democratisation over 1870-2000.

Obama is upside down on trade
Clyde Prestowitz (FP) Oct 5, 2011
In trying to build public support for congressional ratification of Free Trade Agreements with Colombia, Panama, and South Korea, President Obama is telling audiences that "these agreements will support tens of thousands of jobs across the country for workers making products stamped with three proud words: Made in America".

The Free Trade Agreement Could Spoil South Korea's State Visit
Victor D. Cha (FA) Oct 5, 2011
Relations between Washington and Seoul have never been better. But if the two do not reconcile differences on North Korea and seal the deal on a Free Trade Agreement, the alliance will suffer. Read

How a Good Idea Became a Tragedy
Spiegel Oct 5, 2011
The Greek crisis has revealed why the euro is the world's most dangerous currency. The euro was built on a foundation of debt and trickery, where economic principles were sacrificed to romantic political visions. The history of the common currency is the story of a good idea that turned into a tragedy of epic proportions.

How the Euro Zone Ignored Its Own Rules
Spiegel Oct 6, 2011
After they joined the euro zone, the countries of southern Europe suddenly discovered they could borrow money at German-style rates, and any hope of sorting out their dodgy finances vanished. But it was France and Germany who set the worst example, when they broke the euro-zone rules they had forced on others.

Mubarak’s Odious Debts
Saifedean Ammous (Project Syndicate) Oct 6, 2011
The interest that Egypt pays on its foreign loans is larger than its budget for education, healthcare, and housing combined, accounting for 22% of government expenditures. For the sake of Egyptians and people living under tyranny everywhere, Egypt’s government must take a brave stand by voiding these debts as "odious."

India, China lead gold rush
Raja Murthy (AT) Oct 6, 2011
China has joined the few countries with ATMs that dispense bullion and gold coins. It is the latest indication of the yellow metal's popularity in Asia, where consumer demand surged 25% in China in the past year and 38% in India.

Save the euro – let Greece default Financial Times Subscription Required
Philip Stephens (FT) Oct 6, 2011
In the longer term the numbers cannot be made to add up, and Greece’s politics are not getting any better.

America's six key lessons for a 'euro Tarp' Financial Times Subscription Required
Gillian Tett (FT) Oct 6, 2011
Eurozone faces severe difficulties in emulating the success of the capital injections that effectively halted the US banking crisis.

The Trouble With Greece New York Times Subscription Required
NYT Oct 6, 2011
Europe has been right to demand that Athens carry out painful reforms, but it is wrong to ask for too much austerity.

How Greece Could Escape the Euro New York Times Subscription Required
Floyd Norris (NYT) Oct 6, 2011
What could be worse for Europe than a Greek default? Well, the country could revive the drachma.

What Options Are Left for the Common Currency?
Spiegel Oct 7, 2011
Politicians have maneuvered their countries into an unparalleled situation in the euro crisis. And they already know what most voters don't yet suspect. In the end, only two possibilities will remain to save the beleaguered common currency: an expensive transfer union or a smaller monetary union. Either solution will be extremely costly.

The Euro’s Hard Rain Falls
Leif Pagrotsky (Project Syndicate) Oct 7, 2011
Politicians and bankers made grave errors that contributed to the current euro crisis. But, regardless of how bad Europe's political and financial leaders may seem, a sudden rise in the number of incompetent or immoral individuals throughout the eurozone's periphery is not a credible explanation of this crisis.

The cost of financial ignorance
Hernando de Soto (WP) Oct 7, 2011
Federal Reserve Chairman Ben Bernanke said recently that, given the ongoing credit contraction, "advanced economies like the U.S. would do well to re-learn some of the lessons" that have led to success among emerging market economies. Ironically, those economies in the 1990s accepted 10 points for promoting economic growth that were known as the "Washington Consensus."

It’s a trade war
Robert J. Samuelson (WP) Oct 7, 2011
U.S. is right to push China to revalue its currency.

Here we go again
Economist Oct 8, 2011
The Europeans are pushing the global banking system to the edge.

Shorting China: Panda bears Economist Subscription Required
Economist Oct 8, 2011
Betting against China is in vogue.

Greek rescue - if only
Reuven Brenner (AT) Oct 8, 2011
There is a sensible way out of crisis for Greece (beyond revenues from transporting the Mediterranean's natural resources), as Ireland has shown. But there is nothing in it for the bureaucrats in Brussels and the International Monetary Fund.

What stock markets say about regional trade agreements
Christoph Moser & Andrew K Rose (VoxEU) Oct 9, 2011
Who benefits from regional trade agreements? This column uses stock-market reactions to news about trade deals to argue that "natural" trading partners and poor economies benefit from such agreements.

Cracks in Beijing’s financial edifice Financial Times Subscription Required
James Kynge (FT) Oct 9, 2011
If Beijing wishes to launch another stimulus, it may be unable to repeat its resolute response of 2009.

Eurozone quick-fix will create political monster Financial Times Subscription Required
Wolfgang Münchau (FT) Oct 9, 2011
Countries such as the UK would not join a financial insurance scheme – and might block a single banking supervisor.

Hungary’s new path is the hidden danger to Europe Financial Times Subscription Required
Ian Bremmer (FT) Oct 9, 2011
The EU has a political blind spot threatening its foundations. There are no mechanisms to enforce adherence to its mandate.

It’s time for a radical blueprint for a new Europe Financial Times Subscription Required
David Owen and David Marsh (FT) Oct 10, 2011
The new group would help Europe better withstand euro strains and would be a source of unity, in contrast to the divisiveness of the present set-up.

How to stabilise the eurozone’s banks – and satisfy voters Financial Times Subscription Required
Jessica Einhorn (FT) Oct 10, 2011
No citizenry now loves its bankers. But supporting the banking system is an easier sell than propping up profligate neighbours.

Nervous Asia has good reasons to fear eurozone crisis Financial Times Subscription Required
Patrick Jenkins (FT) Oct 10, 2011
Singapore and its neighbours are vulnerable because so much of their economic activity depends on international trade.

The rise of the renminbi as international currency: Historical precedents
Jeffrey Frankel (VoxEU) Oct 10, 2011
Over the last few years, use of China’s currency for international trade has been growing steadily. Some argue this is the start of a journey that will see the renminbi displace the dollar and become the international reserve currency within a decade. This column asks whether such prophecies are realistic by looking at how other international currencies established themselves.

A Nobel for Non-Keynesians Wall Street Journal Subscription Required
David R. Henderson (WSJ) Oct 11, 2011
People's expectations about government policy make it difficult for officials to affect the economy in the ways they intend to.

The Case for Free-Trade Leadership Wall Street Journal Subscription Required
Mary Anastasia O'Grady (WSJ) Oct 11, 2011
Mexico's growth in investment and trade, both imports and exports, shows the benefits of open borders.

Lessons of the Irish Comeback
Michael Hasenstab (WSJ) Oct 11, 2011
Investors would be shortsighted to overlook the country's progress. Other indebted governments would have to be blind.

Coco for Europe
Barry Eichengreen (Project Syndicate) Oct 11, 2011
After a year and half of delay and denial, Greece is about to restructure its debt. But this by itself will not be enough to draw a line under the eurozone’s existential crisis, for which so-called "contingent convertible bonds," or "cocos," might be the answer.

Milton Friedman’s Magical Thinking
Dani Rodrik (Project Syndicate) Oct 11, 2011
Free-market enthusiasts’ place in the history of economic thought will remain secure. But thinkers like Milton Friedman leave an ambiguous and puzzling legacy, because it is the interventionists who have succeeded in economic history, where it really matters.

Europe's Misuse of the Term 'Tobin Tax'
John Williamson (PIIE) Oct 12, 2011
The European Union, citing the term "Tobin Tax," is discussing a tax rate of 0.1 percent on all financial transactions with the principal objective of raising revenue. Note the emphasis, because these details have created a misleading impression. When the economist James Tobin first called for a new tax (Tobin 1972, 1977), he advocated a tax rate of perhaps 0.5 percent on changing one currency into another with the principal objective of discouraging short-term speculative transactions. What is currently under discussion by the European Union (2010) is thus quite different even though it is often described as a Tobin tax. The only similarity is that both aim at taxing some financial transactions.

First aid is not a cure Financial Times Subscription Required
Martin Wolf (FT) Oct 11, 2011
One-sided and unduly hasty offsetting adjustment would exacerbate the downturns in the eurozone and world economies. What is needed is financing and adjustment.

The Swedish model for Europe’s bail-out Financial Times Subscription Required
Anders Borg and Carl Bild (FT) Oct 11, 2011
The challenges to secure financial stability and restore market confidence are similar to what Sweden faced during our banking crisis in the early 1990s, but on a European level.

Succession pains make family planning crucial Financial Times Subscription Required
Kevin Brown (FT) Oct 11, 2011
Asia’s powerful family-run businesses must learn lessons from each other.

The Broken Contract Foreign Affairs Subscription Required
George Packer (FA) Oct 11, 2011
Like an odorless gas, economic inequality pervades every corner of the United States and saps the strength of its democracy. Over the past three decades, Washington has consistently favored the rich -- and the more wealth accumulates in a few hands at the top, the more influence and favor the rich acquire, making it easier for them and their political allies to cast off restraint without paying a social price.

Euro's Affordable Salvation, in 5 Steps
Laurence Kotlikoff (Bloomberg) Oct 11, 2011
German Chancellor Angela Merkel and French President Nicolas Sarkozy are in a terrible bind. They don’t want financially distressed European governments to default. But they can’t afford to keep them solvent.

Broad-based Growth Can Counter Inequality, Instability—Stiglitz
IMF Survey Oct 11, 2011
Countries should strive to achieve high, broad-based growth to avoid potential political instability triggered by rising inequality, economist Joseph Stiglitz tells a Washington conference. An increasing GDP does not necessarily mean that life is getting better for all a country’s citizens, he adds.

Money and banking – realigned efficiently
Hans Gersbach (VoxEU) Oct 12, 2011
Current macroeconomic policymaking suffers from an inadequate range of instruments and the absence of a comprehensive assignment of responsibilities. This column introduces a new CEPR Policy Insight designed to remedy these shortcomings. It proposes a framework for monetary, macroprudential, and microprudential policies.

Time for euro bonds – but with conditions
John Muellbauer (VoxEU) Oct 12, 2011
The Eurozone is staggering under the weight of serious problems, including a democratic deficit for greater fiscal union; missing incentives for the fundamental structural reforms expected but not delivered by monetary union; failure to narrow divergent unit labour costs; burden sharing widely perceived to be unfair; and a loss of confidence among edgy international investors. This column argues that conditional euro bonds could help resolve these problems.

Euro bonds without cross-country subsidisation? Yes, we can
Angelo Baglioni amp; Umberto Cherubini (VoxEU) Oct 12, 2011
One of the main objections to the idea of euro bonds is that Germany would be guaranteeing the debt of Greece, among other cross-country subsidies between the core and the periphery. This column argues that this need not be the case.

Wall Street's Gullible Occupiers
Peter Wallison (WSJ) Oct 12, 2011
The protesters have been sold a bill of goods. Reckless government policies, not private greed, brought about the housing bubble and resulting financial crisis.

A Standby Program for the Eurozone
Raghuram Rajan (Project Syndicate) Oct 12, 2011
The world has a large stake in the resolution of the eurozone’s problems, but those problems might soon become too big for the eurozone's members to address. Fortunately, the world has an institution that can channel the help that Europe needs: the IMF.

Repeating the Future
Neel Kashkari (PIMCO) Oct 12, 2011
Look globally for the companies with strong balance sheets that are best positioned to thrive in the multi-speed global economy. For long-term investors, meaning those prepared to stay invested for three, five and even 10 years, who can endure volatility, we believe equities can offer attractive returns. In an extended period of slow economic growth and deleveraging, interest rates are likely to remain low. Actual income generation from investments is important. Hopefully society can institutionalize the lessons from this crisis so that future generations don’t repeat it: Individuals, corporations and countries should only borrow to fund long-term investment, not current consumption.

Pass the China Currency Bill
Peter Morici (AT) Oct 12, 2011
The United States' trade deficit is destroying more US jobs, yet President Barack Obama and House Speaker John Boehner, for now, oppose the one measure that could transform that situation - the China Currency Bill.

Why Americans should learn to love the renminbi Financial Times Subscription Required
David Pilling (FT) Oct 12, 2011
As millions of workers in the emerging economies have entered the global workforce, they have begun to even out wage disparities.

Eurozone ‘outs’ must stick up for the single market Financial Times Subscription Required
Charles Grant (FT) Oct 12, 2011
The biggest danger is that the current eurozone crisis will lead to a two-speed Europe that fractures the single market.

Time to adapt to a world without QE Financial Times Subscription Required
Tim Bond (FT) Oct 12, 2011
Bubbles created by quantitative easing stop distribution of growth to where it is needed.

Does the Euro Have a Future?
George Soros (NYRB) Oct 13, 2011
To resolve a crisis in which the impossible becomes possible it is necessary to think about the unthinkable. To start with, it is imperative to prepare for the possibility of default and defection from the eurozone in the case of Greece, Portugal, and perhaps Ireland. To prevent a financial meltdown, four sets of measures would have to be taken.

Slovakia's stand against bailouts
Nita Ghei (WT) Oct 12, 2011
Countries around the world are inching ever closer to bankruptcy. The response from politicians has been the predictable call for yet more government intervention in the marketplace. So it's worthy of note when a tiny nation is willing, if only temporarily, to take a stand against bailouts.

Europe needs a growth agenda
Fareed Zakaria (WP) Oct 12, 2011
Solving current crisis won’t resolve core problems.

Nobels Give Econometrics Pioneers Their Due
Lars Peter Hansen (Bloomberg) Oct 12, 2011
Thomas J. Sargent and Christopher A. Sims richly deserve the Nobel Memorial Prize in Economic Sciences they were awarded this week for their seminal work in the fields of macroeconomics and time series econometrics.

European Court Opinion Suggests Aviation Emission Levy Lawful
Bridges Weekly Trade News Digest Volume 15, Number 34 Oct 12, 2011
The EU's plan to extend its emission trading scheme (ETS) to aviation is fully compatible with international law, an official opinion of the trading bloc's highest court found last week, dismissing a high profile challenge by American airlines.

US FTAs with Korea, Colombia, Panama Face Long-Awaited Congressional Vote
Bridges Weekly Trade News Digest Volume 15, Number 34 Oct 12, 2011
After four years of political limbo, the US free trade agreements with South Korea, Colombia, and Panama are scheduled for votes in both chambers of the US Congress later today. The free trade agreements are largely expected to clear both the Senate and the House; a vote in the House on a controversial worker aid programme blamed for slowing down the pacts' passage this summer is also expected shortly.

Panama Climate Meet Sets Stage for Outcomes in Durban
Bridges Weekly Trade News Digest Volume 15, Number 34 Oct 12, 2011
UN climate negotiators trudged forward on a range of issues at a major meeting last week in Panama City, but slow progress on trade issues and the questions over the future of the Kyoto Protocol bode poorly for chances of finalising a robust package this year.

EU Farm Policy: Commission Reform Proposals Spark Mixed Response
Bridges Weekly Trade News Digest Volume 15, Number 34 Oct 12, 2011
Plans to reform the EU's multi-billion euro Common Agricultural Policy met with a mixed response from parliamentarians, farm groups, and civil society organisations on Wednesday 12 October, as the European Commission formally unveiled its proposals for agriculture in the post-2013 period - one month after drafts were leaked online.

WIPO Assemblies Call for Diplomatic Conference on Audiovisual Performances
Bridges Weekly Trade News Digest Volume 15, Number 34 Oct 12, 2011
Last week, the World Intellectual Property Organization's (WIPO) 184 member states brought their annual Assemblies meeting to a close with a landmark decision to hold a diplomatic conference in 2012 for a treaty on the international protection of audiovisual performances, as proposed by the Standing Committee on Copyright and Related Rights (SCCR) in June of this year.

Pressure on China Currency, Subsidies Builds in Washington
Bridges Weekly Trade News Digest Volume 15, Number 34 Oct 12, 2011
Tensions are ramping up between Beijing and Washington on trade and currency issues, with the US Senate passing legislation on Tuesday 11 October that effectively targets China's valuation of its currency. The vote comes just days after US Trade Representative Ron Kirk announced that Washington had submitted information to the WTO detailing over 200 subsidy programmes that the US claims China failed to notify the global trade body.

Disputes Roundup: US Finds Trade Success both on Home Front, WTO
Bridges Weekly Trade News Digest Volume 15, Number 34 Oct 12, 2011
Trade found its way onto the agenda of both the US' and EU's highest courts this week, with the European Court of Justice releasing a legal opinion on aviation levies - see related article, this issue - and the US Supreme Court ruling on the Department of Commerce's anti-dumping calculation method. Meanwhile, a WTO panel established to hear a US complaint over Chinese restrictions on electronic payment services issued a preliminary decision on 30 September that rejected Beijing's claim that Washington's complaint was unlawful.

The Instability of Inequality
Nouriel Roubini (Project Syndicate) Oct 13, 2011
Any economic model that doesn’t properly address inequality will eventually face a crisis of legitimacy, as today's global protests are now demonstrating. Unless the relative economic roles of the market and the state are rebalanced, the protests of 2011 will become more severe, eventually harming long-term economic growth and welfare.

Libya’s Shadow on Sovereign Wealth Funds
Efraim Chalamish (Project Syndicate) Oct 13, 2011
As Libya’s citizens rebuild their lives and economy, undoing the corruption in the Libyan Investment Authority, the sovereign wealth fund in which the Qaddafi regime stashed and misused Libya’s oil wealth, is becoming a priority. Whatever the outcome, all sovereign wealth funds – and

Eurozone banks must be freed from national capitals
Nicolas Véron (VoxEU) Oct 13, 2011
Europe, and the Eurozone especially, is years into an economic crisis. This column argues that if the euro is to survive, Eurozone citizens will have to accept the surrender of economic policy decision-making on an unprecedented scale.

A bad haircut is not forgotten quickly
Juan José Cruces & Christoph Trebesch (VoxEU) Oct 13, 2011
What are the financial costs of a sovereign default? This column presents new data on investor losses – haircuts – in all sovereign debt restructurings between 1970 and 2010. Countries imposing high haircuts take significantly longer to reaccess capital markets after the event and subsequently pay higher interest rates.

Crowds and constitutions: Insights from Iceland
Thorvaldur Gylfason (VoxEU) Oct 13, 2011
Iceland’s economic meltdown has led to a change in its constitution. This column, by one of the 25 people elected to draft the new document, documents the journey.

Time has come for some intelligent policymaking Financial Times Subscription Required
Martin Wolf (FT) Oct 13, 2011
As Deng Xiaoping said, “it does not matter if a cat is black or white, so long as it catches mice.” Who cares if a policy is called fiscal or monetary, so long as it works?

Insurance is way to stabilise eurozone Financial Times Subscription Required
Paul Achleitner (FT) Oct 13, 2011
While politicians feel they have just accomplished an enormous task, the markets once again feel this lacks credibility.

India misses boat on securing foreign capital Financial Times Subscription Required
Henny Sender (FT) Oct 13, 2011
Net foreign direct investment in 2010 plummeted to $11bn, with the drop especially pronounced for infrastructure projects.

The Senate's New Protectionists Wall Street Journal Subscription Required
WSJ Oct 14, 2011
Dissecting the China tariff vote.

Getting Serious About Europe's Banks Wall Street Journal Subscription Required
WSJ Oct 14, 2011
Nations that regulate their banks should recapitalize them.

Slovakia Says No to Europe's Bailouts
Mats Persson (WSJ) Oct 14, 2011
The country has made painful reforms and is now asked to pay the bills of countries like Greece, which haven't.

What haircut for Greece?
Paolo Manasse (VoxEU) Oct 14, 2011
Markets are already prepared for a Greek default. This column says the real question is not whether Greece will default – it is how big a haircut will be imposed on creditors and what the consequences will be.

A Bipartisan Triumph
WSJ Oct 14, 2011
Republicans pass Obama's trade bills.

Global: Crisis, Credibility and Institutional Change
Spyros Andreopoulos (MS GEF) Oct 14, 2011
The restoration of credibility requires, ultimately, the policy authority at the epicentre to relinquish some policy flexibility by committing itself to follow a rule.

The vital few
Reuven Brenner (AT) Oct 15, 2011
The tendency of successful family businesses to rise and fall within three generations is well documented. Countries can similarly squander resources. A common element is the unwillingness of those in charge to consider what they can put back into, rather than plunder from, their heritage.

The Water Hegemon
Brahma Chellaney (Project Syndicate) Oct 14, 2011
International discussion about China’s rise has focused on its increasing trade muscle, growing maritime ambitions, and expanding capacity to project military power. One critical issue, however, usually escapes attention: China’s rise as a riparian hegemon with no modern historical parallel.

Making HIV/AIDS Investments Count
Bjørn Lomborg (Project Syndicate) Oct 14, 2011
Funding from developed governments for efforts to combat HIV/AIDS is dropping – a trend that must be reversed. But we also need to acknowledge that billions of dollars have been spent on well-meaning attempts to save lives, with an alarming lack of high-quality evaluation of how these investments have performed.

It's Not Just the Currency New York Times Subscription Required
NYT Oct 15, 2011
The United States and its allies need to find better ways to persuade China to change policies that are both battering the global economy and damaging its own future.

A Better Idea for Green Jobs Wall Street Journal Subscription Required
WSJ Oct 15, 2011
It's crazy to educate the world's brightest and then deport them.

Recapitalising Europe’s banks: Cushion calculations
Economist Oct 15, 2011
Policymakers agree that banks need more capital. Little else is clear.

Tax havens: Trouble island
Economist Oct 15, 2011
Public anger and shareholder unease threaten tax havens’ tranquillity

Trade with China: And now, protectionism Economist Subscription Required
Economist Oct 15, 2011
America’s latest anti-China bill tackles a problem already being solved.

G-20 Reaffirms Commitment to Resolve Crisis
IMF Survey Oct 15, 2011
Finance ministers and central bank governors of the Group of Twenty (G-20) industrialized and emerging market economies said they remained committed to take all necessary actions to preserve the stability of banking systems and financial markets, as they wrapped up their final meeting before the G-20 Leaders’ Summit in Cannes.

Why Europe’s officials lose sight of the big picture
Wolfgang Münchau (FT) Oct 16, 2011
Do I think the experts are morons? I would not say that. But they are either ill-informed or lying.

China needs a long-term solution to its property woes
George Magnus (FT) Oct 16, 2011
Beijing has to rebalance its credit-hungry economic model to one built round household consumption and output.

An aid agency in the crosshairs
Raj Kumar and John Hewko (WP) Oct 16, 2011
Saving the Millennium Challenge Corp.

Stepping Up from Regional Influence to a Global Role
Moshin Khan (PIIE) Oct 16, 2011
Asia is in a strong position to assert itself in global financial governance. The remarkable growth of the economies in the region and their integration in global trade and finance bestow upon Asian states considerable potential clout in international forums and institutions. However, Asia's current influence is not yet commensurate with its economic weight in the International Monetary Fund (IMF), arguably the premier institution in global finance.

The Global Jobs Challenge
Michael Spence (Project Syndicate) Oct 17, 2011
Over the past three decades, hundreds of millions of new workers have entered the global economy, bringing tremendous growth in income levels, opportunities, and the size of the global economy. But these new workers have also brought more employment competition, which has had profound distributional effects.

Capping interest rates to stop EZ contagion
Bernard Delbecque (VoxEU) Oct 17, 2011
It is widely recognised that without a firewall around illiquid but solvent Eurozone countries, a loss of confidence in the markets could increase interest rates to levels high enough to make any country insolvent. The aim of this column is to propose a concrete plan to build such a firewall and halt the spread of contagion of the debt crisis to Italy and Spain.

Brazil as a commodity exporter – opportunities & risks
Markus Jaeger (DB Research) Oct 17, 2011
Rapid commodity-intensive industrialisation, population growth and rising per capita incomes in the emerging markets should continue benefit the Brazilian economy over the medium term. An over-reliance on commodity exports, if not skillfully managed, tends to have a number of detrimental effects, however. Creating a solid framework for dealing with the expected pre-salt-related revenue windfall, reforms targeting productivity growth and a strong fiscal adjustment are necessary if a potentially risky shift towards an economic model that relies too much on domestic consumption and improving terms-of-trade is to be avoided.

Barrels, Bushels, and Bonds
Jeffrey Frankel (Project Syndicate) Oct 17, 2011
Commodity-exporting countries have been booming in recent years, but they are highly vulnerable to a sudden plunge in dollar prices, as a result of a new recession, an increase in US real interest rates, fluctuations in climate, or random sector-specific factors. Commodity bonds may offer a neat way to circumvent these risks.

Rest of world not immune to eurozone ills Financial Times Subscription Required
(FT) Oct 17, 2011
G20 finance ministers from outside the eurozone warn there must be a ‘decisive’ plan.

America must manage its decline Financial Times Subscription Required
Gideon Rachman (FT) Oct 17, 2011
Those who refuse to entertain any discussion of decline actually risk accelerating the process.

Reasons to be bullish, albeit with a lower case 'b' Financial Times Subscription Required
Laszlo Birinyi (FT) Oct 17, 2011
The bears may prevail, but don't buy high and sell low.

Faltering China carries global risk
Francesco Sisci (AT) Oct 18, 2011
As China's growth falters, the country is having to contend with too many doubtful loans, too much new property, and a squeeze on small, exporting businesses. The impact on Europe and the United States could exacerbate their economic problems in a dangerous cycle with huge implications.

Language imperialism - 'democracy' in China
Thorsten Pattberg (AT) Oct 18, 2011
Since European languages have their own histories and traditions, they cannot sufficiently render Chinese concepts, such as shengren and minzhu, which are erroneously translated as "philosophers" and "democracy". The solution would be to not translate the most important foreign concepts at all, but adopt them.

As Kaldor’s Facts Fall, Occupy Wall Street Rises
Peter Orszag (Bloomberg) Oct 18, 2011
In Economics 101, students learn that the share of national income received by labor stays roughly constant with the share received by capital. This is the first of “Kaldor’s stylized facts,” articulated half a century ago by the Cambridge economist Nicholas Kaldor. Recent experience betrays this lesson. Over the past two decades -- and especially since about 2000 -- the share of national income that flows into wages and other kinds of worker compensation has been plummeting in various countries.

There is no sunlit future for the euro Financial Times Subscription Required
Martin Wolf (FT) Oct 18, 2011
It is conceivable – if unlikely – that the eurozone will find ways to manage its emergency. It is inconceivable that it will cure the illness.

The random shock that clinched a brave Nobel prize Financial Times Subscription Required
John Kay (FT) Oct 18, 2011
In a brilliant linguistic coup, Prof Sargent and colleagues applied the term ‘rational expectations’ to the study of macroeconomic relationships.

Imagined in America New York Times Subscription Required
Thomas L. Friedman (NYT) Oct 18, 2011
A bill that could impose tariffs on Chinese exports would trigger a trade war and distract the United States from the real issues it faces.

Opportunities Abound, Even for the Risk Averse New York Times Subscription Required
Paul Sullivan (NYT) Oct 18, 2011
Wealthy investors fall into three categories right now: the bargain hunters, the natural resource crowd and the bettors.

The Immigration Solution for Job Growth
Leonard A. Lauder (WSJ) Oct 18, 2011
Immigrants and their children founded almost half of Fortune 500 firms like Google and Intel.

America at Stall Speed?
Mohamed A. El-Erian (Project Syndicate) Oct 19, 2011
Judging from the skittishness of both markets and “consensus expectations,” US economic prospects remain truly confusing. This situation is both understandable and increasingly dangerous for America’s well-being and that of the global economy.

The Bankers’ Capital War
Howard Davies (Project Syndicate) Oct 19, 2011
Almost everyone nowadays agrees that banks need more capital. But a wide gap has opened up between financial authorities and the banks on the costs and benefits of the much higher capital requirements that regulators are now demanding.

Human development in Africa: A long-run perspective
Leandro Prados de la Escosura (VoxEU) Oct 19, 2011
How has Africa performed over the long-run in terms of wellbeing? This column aims to answer this question by improving the UN’s Human Development Index. By looking at data stretching from 1870 to 2007, it argues that human development in Africa is lower than previously thought and that compared to the developed world, Africa stopped catching up in 1980 and began to fall behind.

'Too Big to Fail' Is Simply Too Big Wall Street Journal Subscription Required
Jon Huntsman (WSJ) Oct 19, 2011
There is no evidence huge banks add sufficient value to offset the systemic risk they pose.

All That Glitters Is Not a Cash Equivalent
Jerome Schneider (PIMCO) Oct 19, 2011
With proper liquidity management, we believe investors are able to make more prudent selections with their intermediate cash. The latest volatility has investors asking questions about the securities they own, in particular probing any exposures to European issuers. Cash investors often over-allocate to money market and bank investment vehicles, while the most attractive risk-adjusted opportunities might fall just outside of this space. We currently see opportunities in short-dated, non-financial BBB-rated corporate bonds, along with dollar-hedged bonds and bills issued by sovereigns with solid balance sheets.

Finish Line "Clearly in Sight" for WTO Govt Procurement Deal: Chair
Bridges Weekly Trade News Digest Volume 15, Number 35 Oct 19, 2011
Forty-two countries are close to finalising a deal that would liberalise access to billions of dollars worth of public procurement contracts, the chair of the WTO committee on government procurement said yesterday. Delegations are being urged to finish negotiations by the global trade body's December ministerial.

US, EU Press for China Currency Revaluation
Bridges Weekly Trade News Digest Volume 15, Number 35 Oct 19, 2011
Pressure is growing from the EU and US for China to loosen its strict control of its currency, particularly amid new reports of slowing Chinese trade growth. EU trade chief Karel de Gucht and US Treasury Secretary Timothy Geithner have lately reiterated the call for China to revalue the yuan - however, Chinese Premier Wen Jiabao has made clear in recent statements to Chinese media that his government would endeavour to keep the yuan stable.

Brazil Continues Push against Import Surge
Bridges Weekly Trade News Digest Volume 15, Number 35 Oct 19, 2011
Tensions are building between Brazil and its trade partners over imports, with the Brazilian government announcing on 4 October an investigation on whether China is shipping footwear to the South American country via Vietnam and Indonesia to avoid paying an antidumping tariff. Meanwhile, Japan and South Korea reportedly raised concerns at a WTO committee meeting last week over Brasilia's new imported car tax increase.

US Lawmakers Challenge China on Solar Subsidies
Bridges Weekly Trade News Digest Volume 15, Number 35 Oct 19, 2011
Chinese subsidies to solar panel producers are increasingly drawing attention from US lawmakers, as Washington deals with the aftermath of US solar panel maker Solyndra's bankruptcy filing last month. At a news conference on Friday 14 October, Sander Levin - the top Democrat on the powerful House Committee on Ways and Means - called for the US to step up and protect its solar industry from Chinese competition.

Revealed – the capitalist network that runs the world
Andy Coghlan and Debora MacKenzie (New Scientist) Oct 19, 2011
As protests against financial power sweep the world this week, science may have confirmed the protesters' worst fears. An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy.

Stepping Up from Regional Influence to a Global Role
Moshin Khan (PIIE/East Asia Forum) Oct 19, 2011
Asia is in a strong position to assert itself in global financial governance. The remarkable growth of the economies in the region and their integration in global trade and finance bestow upon Asian states considerable potential clout in international forums and institutions. However, Asia's current influence is not yet commensurate with its economic weight in the International Monetary Fund (IMF), arguably the premier institution in global finance.

China may prove both bulls and bears correct Financial Times Subscription Required
Jamil Anderlini (FT) Oct 19, 2011
Many believe Beijing can probably pump its economy up one more time but that the years of high growth and low inflation will soon end.

The Bogey of Fiscal Stimulus
Jomo Kwame Sundaram (Project Syndicate) Oct 20, 2011
Despite the need for strong and sustained fiscal stimulus in many countries, today's political leaders seem to be held hostage by financial interests and associated media, ideologists, and oligarchs. As a result, the main threat that now confronts us is not public debt or inflation but rather a downward economic spiral.

A deadline for solving a deadly Eurozone sovereign debt crisis
Guillermo de la Dehesa (VoxEU) Oct 20, 2011
Time is running out for EU leaders to put an end to the Eurozone crisis. This column explains how leaders could find a definitive solution to Greece insolvency, isolate solvent countries from possible Greek contagion, improve EU governance by creating a true European parliament, and refocus on a pro-growth policy mix.

South-South free trade agreements: A work in progress?
Ganeshan Wignaraja (VoxEU) Oct 20, 2011
South-South trade and trade agreements are booming amid the stalled Doha trade talks and a fragile world economy. In Asia alone, trade agreements have grown from only 3 to 61 between 2000 and 2010. This column examines Asia’s experience and argues that South-South trade agreements should increase their coverage of goods and services and improve consistency with global rules to fully support South-South trade.

Challenges and Opportunities in the Era of Population Aging
Kim Jeung-Kun (SERI Quarterly) Oct 20, 2011
Despite including some of the most populous nations in the world, East Asia’s demographic future has become one of population decline. Three out of every ten elderly people will be East Asian by 2035. Low rates of childbirth and changing cultural obligations toward parents require novel solutions, including the development of new “senior friendly” industries.

The Impact of China’s Aging Population
Muqun Li (SERI Quarterly) Oct 20, 2011
China is like its Asian neighbors in that it is aging rapidly, and will soon face a declining workforce, and increasing labor and healthcare costs. Unlike its neighbors, however, China is facing a future where it may become old before it becomes rich. China needs to prepare for its future as an aging society by revamping its healthcare industry and looking for opportunities among senior consumers.

The future reserve currencies
Danniel Hui (SERI Quarterly) Oct 20, 2011
The outlook for the main currencies of the future, particularly the US dollar and the Chinese yuan. Hui believes that the dollar is set for a decline in importance, while the yuan is set to grow into an anchor currency for Asia and beyond. Any changes, however, are likely to take decades.

Blame the Fed for the Financial Crisis
Ron Paul (WSJ) Oct 20, 2011
The Fed fails to grasp that an interest rate is a price, the price of time. Attempting to manipulate that price is as destructive as any other government price control.

Understanding the Second Great Contraction
Kenneth Rogoff (McKinsey Quarterly) Oct 20, 2011
What history can teach us about the global downturn and why climbing out of it is still rife with risks.

China’s Crippled Financial Sector
Yao Yang (Project Syndicate) Oct 20, 2011
Even in the best of times, it is difficult for China’s small and medium-size enterprises to get bank loans. But, with the current regimen of credit austerity making conditions for SMEs worse, the financial sector – the least reformed sector in China – now is suffocating the beating heart of the country’s economic dynamism.

Look to America for lessons in sharing a currency Financial Times Subscription Required
Steve Rattner (FT) Oct 20, 2011
As many of us predicted, lashing 17 disparate economies together monetarily and expecting them to march in step was ludicrous.

To become rich is great but to pay taxes is glorious Financial Times Subscription Required
Kishore Mahbubani (FT) Oct 20, 2011
Demonstrations on Wall Street and around the world provide early tremors of powerful earthquakes to come.

Germany has leading role in eurozone drama Financial Times Subscription Required
Tony Barber (FT) Oct 20, 2011
Paris, with pressure on its AAA credit rating, can no longer pretend to be Berlin’s equal and any result is likely to be on Merkel’s terms.

Central bankers must update outdated analytical toolkit Financial Times Subscription Required
Gillian Tett (FT) Oct 20, 2011
While Claudio Borio's proposed checklist of necessary reforms might sound obvious, most of these are merely pipe dreams.

Three Ways to Save the Eurozone
Jean Pisani-Ferry (Project Syndicate) Oct 21, 2011
Since the summer, the continuing installments of the Greek crisis have concealed a worrying process of fragmentation in the eurozone. The decision to reform the surveillance of governments and banks, and to boost the European Financial Stability Facility, is a welcome response, but the key issue is how to construct a more robust monetary union.

Who Was the Richest Person Ever?
Branko Milanovic (Globalist) Oct 21, 2011
Frustration over income inequality has given rise to protests in the United States and abroad. An answer to the question of who was the richest person to have ever lived.

The Case for Eurobonds
John Bruton (Globalist) Oct 21, 2011
How eurobonds would help Europe to provide part of the world’s economic solution — rather than being the world’s economic problem.

Synthetic Bonds Are the Answer to Euro-Area Crisis
Harald Uhlig (Bloomberg) Oct 21, 2011
The euro area is burning and policy makers seem increasingly powerless to douse the flames. Meanwhile, we can only stand by and watch this nerve-wracking spectacle. Yet the situation may not be utterly hopeless. In the last month or so, researchers have floated proposals for the creation of synthetic euro bonds that may offer a way out. The idea rests on three principles: No cross-subsidization between countries; safety; and the replacement of risky sovereign debt by synthetic bonds in European Central Bank repurchases.

Global: Is Modern Central Banking Ancient History?
Manoj Pradhan (Project Syndicate) Oct 21, 2011
The era of fiscal dominance that we are now living through requires a different strategy of monetary policy.

Dollar's History Points to Future of Global Monetary System
IMF Survey Oct 21, 2011
Long-term strengthening of the international monetary system will require concerted efforts from policymakers in advanced and emerging economies alike, a Washington seminar heard. The event discussed a new book on the rise of the dollar in the 20thcentury by Berkeley economics professor Barry Eichengreen.

Europe's savior: A new Deutsche Mark
Brett Decker (WT) Oct 21, 2011
The utopian dream of a United States of Europe is coming apart at the seams. Greece, Italy, Portugal and Spain are all on the verge of default, which would push the rest of the common market into the abyss. For once, Paris is refusing to surrender and continues to fight the inevitable downgrade of France's credit rating. The European Central Bank isn't strong enough to do much to prevent a continental banking meltdown. Overall, European economic chaos makes U.S. fiscal indiscipline look manageable. This is slim comfort, however, because in the modern global economy, we all sink or swim together.

Why Europe Dithers Wall Street Journal Subscription Required
Holman Jenkins (WSJ) Oct 21, 2011
German voters don't want to bail out French banks and the French government can't afford to.

Will Mrs. Merkel Wake Up in Time? New York Times Subscription Required
NYT Oct 21, 2011
If Europe's leaders do not come up with a more robust plan, the judgment of global stock and credit markets is likely to be harsh and swift.

Occupy Wall Street and Washington's History of Financial Bailouts
Russ Roberts (FA) Oct 21, 2011
Protesters in Lower Manhattan are missing the point. The so-called "one percent" actually does a lot of good. It's Washington's willingness to bailout banks that is the real problem.

Europe pays for lost character
Reuven Brenner (AT) Oct 22, 2011
Europe is paying the price of two decades of handing out money to countries that barely had a pulse - a far cry from when J Pierpont Morgan argued that the sole criterion for extending a loan should be the "character" of the borrower.

Europe is now leveraging for a catastrophe Financial Times Subscription Required
Wolfgang Münchau (FT) Oct 22, 2011
The biggest danger now is the large number of politicians drawing red lines in the sand.

Seven Billion
Josel H. Cohen (NYT) Oct 22, 2011
Can humanity handle the unprecedented rise in population?

Why do we need a financial sector?
Wouter den Haan (VoxEU) Oct 24, 2011
This column launches a new Vox Debate titled “Why do we need a financial sector and how much should we pay for it”. The column argues standard measures of the financial sector’s economic contribution overestimate its true value to a modern economy. As such, regulation that makes it more difficult for the sector to perform some activities is not necessarily a bad thing.

A comprehensive strategy for the Eurozone crisis
Jeromin Zettelmeyer (VoxEU) Oct 24, 2011
Eurozone leaders are struggling to put together a rescue package to save the single currency. This column, which arose from discussions among many experts at the World Economic Forum’s Global Agenda Council Summit in Abu Dhabi, presents the outlines of a plan to put out the flames that threaten the euro’s existence while simultaneously setting the Eurozone on a medium-term sustainable path.

Central banks need a bigger and bolder mandate Financial Times Subscription Required
Barry Eichengreen, Raghuram Rajan and Eswar Prasad (FT) Oct 24, 2011
Financial stability must become an explicit objective, along with price stability.

Europe's dithering over banking risks 2008 again Financial Times Subscription Required
Oliver Sarkozy (FT) Oct 24, 2011
If we are to avoid catastrophe, we must address the accelerating outflow of liquidity from Europe’s banking system.

Banks turn to financial alchemy in search for capital Financial Times Subscription Required
Tom Braithwaite (FT) Oct 24, 2011
How lenders round the world can achieve target ratio of core capital to risk-weighted assets by 2019 will prove increasingly controversial.

Risk on the rise as political leaders give in to mob rule
Ray Dalio (FT) Oct 24, 2011
Markets will suffer if we see a return to populist policies.

What Occupy Wall Street Gets Wrong About Inequality
Douglas Holtz-Eakin (FA) Oct 24, 2011
The protestors of the Occupy Wall Street complain about the unfairness of the bailout, unemployment, and taxes. But to make the U.S. economy more fair, Washington needs to use the capitalist system, not to destroy it.

Bias, Blindness and How We Truly Think (Part 1)
Daniel Kahneman (Bloomberg) Oct 24, 2011
Most of us view the world as more benign than it really is, our own attributes as more favorable than they truly are, and the goals we adopt as more achievable than they are likely to be. We also tend to exaggerate our ability to forecast the future, which fosters overconfidence.

Bias, Blindness and How We Truly Think (Part 2)
Daniel Kahneman (Bloomberg) Oct 25, 2011
In 1738, the Swiss scientist Daniel Bernoulli argued that a gift of 10 ducats has the same utility to someone who already has 100 ducats as a gift of 20 ducats to someone whose current wealth is 200 ducats.

Italy’s Capital Flight
(Project Syndicate) Oct 25, 2011
When it comes to refinancing Italy, bond purchases are just the tip of the iceberg: in August alone, Italy’s central bank drew €40 billion in credit from the ECB system, and it probably drew roughly another €50 billion in September. This is not the end of the world – not even for the ECB – but the eurozone has entered dangerous territory.

Britain’s Path of Denial
Andrés Velasco (Project Syndicate) Oct 25, 2011
The worse the British economy tanks, the more fervently Prime Minister David Cameron’s ministers and Tory economists insist that draconian spending cuts are good for economic growth. The longer this goes on, the more serious the problem will become, making a non-inflationary recovery even more difficult to achieve.

Dying to Grow?
Henry I. Miller (Project Syndicate) Oct 25, 2011
Studies that show an association between a factor and a health effect should be regarded as no more than a preliminary result that points researchers toward further research and analysis. But even professional regulators, who should know better, sometimes don't, as a recent advisory about human-growth hormone shows.

The Phony Success of China's Stimulus Wall Street Journal Subscription Required
Joseph Sternberg (WSJ) Oct 25, 2011
Easy money has delayed Beijing's day of reckoning. Expect to see a lot of bank loans go bad.

The EU's 'Make or Break Moment'
Charles A. Kupchan (CFR) Oct 25, 2011
The European Union will likely survive this crisis and could even grow stronger by creating more capable institutions to oversee the euro.

Resolving the current European mess
Charles Wyplosz (VoxEU) Oct 25, 2011
A series of policy mistakes have put Europe on the wrong path. This column says that the current plan to enlarge the EFSF and recapitalise banks through markets will fail. The twin crises linking sovereign debts and banking turmoil need to be addressed simultaneously for Europe to avoid economic disaster.

The future of cross-border banking
Dirk Schoenmaker (VoxEU) Oct 25, 2011
Responses to the financial crisis have largely been along national lines. Governments rescued banks headquartered within their borders, and supervisors are requiring banks to match their assets and liabilities at a national level. This column says stable cross-border banking is incompatible with national financial supervision, which means the European banking market needs European authorities.

Why are unionised countries often successful in attracting foreign direct investment?
Andreas Haufler & Ferdinand Mittermaier (VoxEU) Oct 25, 2011
If there is a thing that most policymakers are happy to receive, no matter where they are in the world, it is foreign direct investment. But how do you attract companies to your country if unionisation is pushing up wages? Surprisingly, countries with strong unions have been relatively successful. This column explains how.

The Dodd-Frank Act, systemic risk and capital requirements
Viral Acharya & Matthew Richardson (VoxEU) Oct 25, 2011
Macroprudential regulation aims to reduce systemic risk by correcting the negative externalities caused by breakdowns in financial intermediation. This column describes the shortcomings of the Dodd-Frank legislation as a piece of macroprudential regulation. It says the Act’s ex post charges for systemic risk don’t internalise the negative externality and its capital requirements may be arbitrary and easily gamed.

The changing role of emerging-market banks
Neeltje van Horen (VoxEU) Oct 25, 2011
The global financial crisis has hurt banks in both advanced and emerging economies, but this column says the turmoil has favored the emerging-market entities in relative terms. It predicts a growing role for emerging-market banks in the global financial system, particularly in their own regions.

Destabilising market forces and the structure of banks going forward
Arnoud Boot (VoxEU) Oct 25, 2011
The financial sector has become increasingly complex in terms of its speed and interconnectedness. This column says that market discipline won’t stabilise financial markets, and complexity makes regulating markets more difficult. It advocates substantial intervention in order to restructure the banking industry, address institutional complexity, and correct misaligned incentives.

Finance, long-run growth, and economic opportunity
Ross Levine (VoxEU) Oct 25, 2011
Financial systems support and spur economic growth. But does financial innovation foster financial development? While recent innovations have done damage, this column says the long-run story is that financial innovation is essential for economic growth.

Loose monetary policy and excessive credit and liquidity risk-taking by banks
Steven Ongena & José-Luis Peydró (VoxEU) Oct 25, 2011
Do low interest rates encourage excessive risk-taking by banks? This column summarises two studies analysing the impact of short-term interest rates on the risk composition of the supply of credit. They find that lower rates spur greater risk-taking by lower-capitalised banks and greater liquidity risk exposure.

The Future of Banking – solving the current crisis while addressing long-term challenges
Thorsten Beck (VoxEU) Oct 25, 2011
For better or worse, banking is back in the headlines. From the desperate efforts of crisis-struck Eurozone governments to the Occupy Wall Street movement currently spreading across the globe, the future of banking is hotly debated. This eBook presents a collection of essays by leading European and American economists that discuss both immediate solutions to the on-going financial crisis and medium- to long-term regulatory reforms.

Bank governance and regulation
Luc Laeven (VoxEU) Oct 25, 2011
Recent financial regulatory reforms target banks’ risk-taking behaviours without considering their ownership and governance. This chapter argues that bank governance influences how regulations alter bank’s incentives. Banks with more powerful owners tend to take more risks, and greater capital requirements actually increase risk-taking in banks with powerful shareholders. Bank regulation should condition on bank governance.

Coins to Credit Cards, a Short History of Money
Neil MacGregor (Bloomberg) Oct 25, 2011
We’ve all grown so accustomed to using little round pieces of metal to buy things, it’s easy to forget that coins arrived quite late in the history of the world. For more than 2,000 years, states ran complex economies and international-trading networks without a coin to hand.

Be bold, Mario, put out that fire Financial Times Subscription Required
Martin Wolf (FT) Oct 25, 2011
You must choose between two paths: the orthodox one leads towards failure; the unorthodox one should lead towards success.

Experiencing a real shift in Brics assets Financial Times Subscription Required
Joe Leahy (FT) Oct 25, 2011
The Bric countries may be the future of the global economy but even Brazil, Russia, India and China still have their erm ‘issues’.

Trade talks offer leadership test for Noda Financial Times Subscription Required
Mure Dickie (FT) Oct 25, 2011
Regional trade pact has awarded Yosihiko Noda the perfect opportunity to show the kind of decisive leadership that has been so sorely lacking

Clearinghouse Over-Confidence
Mark Roe (Project Syndicate) Oct 26, 2011
To reduce the chance that a financial meltdown like that of 2007-2008 will recur, regulators are now seeking to buttress institutions for the longer run by strengthening clearinghouses for derivatives – instruments that accelerated the implosion of AIG and others in the last financial crisis. But a clearinghouse is no panacea.

Strengthening the Stabilizers
Olin L. Wethington (Project Syndicate) Oct 26, 2011
The G-20 summit in November is a major opportunity to address the mandate, governance, and institutional capacity of the Financial Stability Board, the international body that monitors, and makes recommendations about, the international financial system. But, while the FSB should be strengthened, it must not become a new bureaucracy.

Riots and revolutions in the digital age
Chris Ellis & John Fender (VoxEU) Oct 26, 2011
For the Arab Spring it was Twitter; for the summer riots in London it was BlackBerry Messenger. This column explores how the latest technology is helping to accelerate ‘information cascades’, where people make decisions based on what they see other people doing – and getting away with.

How not to resolve a banking crisis: Learning from Iceland’s mistakes
Jon Danielsson (VoxEU) Oct 26, 2011
Much of macroeconomic policymaking is trial and error. This column discusses calamitous error on the part of Iceland’s policymakers, in the hope that others can at least try something else.

European summits in ivory towers
Paul De Grauwe (VoxEU) Oct 26, 2011
The Eurozone crisis plays on to a familiar tune. Finance ministers meet on the weekend only for markets to dismiss their efforts the following Monday. This column argues that Europe’s leaders have lost touch, that the ECB has the firepower but is not prepared to use it, and that the outcome of all this is depressingly clear: Defeat by the financial markets.

How the Euro Zone Can Restore Confidence Wall Street Journal Subscription Required
David Malpass (WSJ) Oct 26, 2011
Investors are looking for a home for trillions in idle Federal Reserve-generated dollars, and a little reform in Europe might attract them.

Global: Delaying the End-Game
Gerard Minack (MS GEF) Oct 26, 2011
On a long view, I’m bearish on the end-game for all the highly indebted economies.

China a 'Precocious' Superpower?
Arvind Subramanian (PIIE/Business Standard) Oct 26, 2011
Can a country that is not amongst the richest in the world and also not at the economic and technological frontier be a superpower? That is one of the most common questions raised against the central assertion in my recent book that China's economic dominance is more imminent, broader in scope, and greater in magnitude than is currently imagined.

Road to Ministerial Appears Murky as WTO Members Explore Options
Bridges Weekly Trade News Digest, Volume 15, Number 36 Oct 26, 2011
The past week has seen a flurry of activity at the WTO in preparation for the upcoming December ministerial. With the event less than eight weeks away, delegations are pushing to finalise items for inclusion on the ministerial agenda before next week's 2 November deadline. Meanwhile, members are also exploring the option of an "early harvest" for some Doha items in an effort to move past the current negotiating impasse. Today also saw the General Council approve Vanuatu's accession to the global trade body.

'Green Economy' Generates Trade Concerns in Run-Up to Rio+20
Bridges Weekly Trade News Digest, Volume 15, Number 36 Oct 26, 2011
Participants in recent regional meetings paving the way for the Rio+20 Conference next June have struggled to find agreement on the concept of a 'green economy.' While some see a redefinition of the economy in green terms as a path towards sustainable development, others fear the concept is synonymous with green trade protectionism and conditionalities - to the point where participants at one regional meeting chose not to mention the green economy in their meeting conclusions.

Disputes Roundup: China in the Spotlight over Zeroing, Internet Censorship
Bridges Weekly Trade News Digest, Volume 15, Number 36 Oct 26, 2011
This past week has seen the US and China continue to spar over trade policies, drawing the attention of international trade law observers. While bringing a new "zeroing" dispute on anti-dumping duties on shrimp and diamond sawblades in its own right, Beijing was also recently asked by Washington to explain its internet regulation policies and the trade impact of periodically shutting down US business' websites in China.

WTO Accession: Russia Strikes Deal with EU
Bridges Weekly Trade News Digest, Volume 15, Number 36 Oct 26, 2011
Russia and the EU announced on Friday 21 October that they had reached an agreement regarding Russia's accession to the WTO. While disagreements continue between Russia and neighbour Georgia, the EU agreement puts Moscow one step closer toward becoming the global trade body's next member.

US Farm Bill Talks Push Forward at Breakneck Pace
Bridges Weekly Trade News Digest, Volume 15, Number 36 Oct 26, 2011
A fast approaching deadline has kicked negotiations for the US 2012 omnibus farm legislation into overdrive. The domestic US budget debate has pressed lawmakers into an unusually sharp timeline to reach a compromise between various agricultural interest groups.

Rare Earths: Largest Chinese Producer Shuts Off Production for a Month
Bridges Weekly Trade News Digest, Volume 15, Number 36 Oct 26, 2011
While the WTO has been quiet as of late on the contentious rare earths front, trade in the precious materials has been shaken quite a bit over the past months. The global rare earths market has recently experienced massive upheaval, with prices falling sharply in June 2011. In response, China's largest rare-earth producer, Inner Mongolia Batou, announced last week that it would be halting production for four weeks' time.

Euroland’s hidden balance-of-payments crisis Adobe Acrobat Required
Thomas Mayer (DB Research) Oct 26, 2011
Below the surface of the euro area’s public debt and banking crisis lies a balance-of-payments crisis caused by the misalignment of internal real exchange rates. The path of least resistance seems to be an appreciation in creditor countries through the inflation of goods, services and asset prices. But will the electorates in the creditor countries accept a policy of easy money and exchange rate depreciation or push an exit from EMU? The authorities in creditor countries could insure their population against inflation and a soft currency policy by offering them index-linked securities that would convert into a new currency should these governments eventually decide to abandon the euro. Alternatively, authorities could aim at generating a combination of intra-EMU transfers, deflation in the debtor countries and inflation in the creditor countries such that the economic pain felt in each country group is shared between them in a way that leaves it below the level triggering a break-up of EMU.

Does Redistributing Income Reduce Poverty?
Jagdish Bhagwati (Project Syndicate) Oct 27, 2011
Many on the left are suspicious of the idea that economic growth helps to reduce poverty in developing countries, and that redistribution is the key to poverty reduction. These assertions, however, are not borne out by the evidence.

Europeanizing Europe
Joschka Fischer (Project Syndicate) Oct 27, 2011
The eurozone is at the center of the global financial crisis, because only there, in the realm of the second most important currency after the dollar, does the crisis hit a weak structure rather than a state with real power. Anything less than a United States of Europe will not be powerful enough to prevent the looming disaster.

The Vatican Versus Washington and Wall Street
Globalist Oct 26, 2011
As we shift from a G7 world to a G20 world, it is clear that current forms of global governance need to be re-envisioned. In this Globalist Document, we present the Vatican’s call for a more-inclusive system of global governance — and a fairer economic system.

Europe’s next calamity
Matt Miller (WP) Oct 26, 2011
Regulators have no idea of the fallout potential.

Bias, Blindness and How We Truly Think (Part 3)
Daniel Kahneman (Bloomberg) Oct 26, 2011
Take a look at the photos of two pairs of eyes, and take note: Your heartbeat accelerated when you looked at the left-hand figure. In fact, it accelerated even before you could label what is so eerie about the picture.

Bias, Blindness and How We Truly Think (Pt 4)
Daniel Kahneman (Bloomberg) Oct 27, 2011
Early in the days of my work on the measurement of experience, I saw Verdi’s opera “La Traviata.” Known for its gorgeous music, it is also a moving story of the love between a young aristocrat and Violetta, a woman of the demimonde.

Iceland: Was the IMF programme successful?
Jon Danielsson (VoxEU) Oct 27, 2011
According to the IMF, Iceland has graduated from its Fund-supported programme with unqualified success. This column begs to differ.

Coordinating bank failure costs and financial stability: Lessons for the EZ
Marco Spaltro & Iman van Lelyveld (VoxEU) Oct 27, 2011
The dissent brewing throughout Europe hinges on the question of whether the financial burdens of the Eurozone crisis should be shared between weak and strong. This column presents a new paper arguing that the wealthier, more stable economies don’t have much choice.

EZ rescue: Déjà vu all over again
Guido Tabellini (VoxEU) Oct 27, 2011
EU leaders are at it again. This column argues that the crisis won’t be over until the underlying flaw of the euro is fixed – namely the separation of monetary and fiscal policy. German public opinion has to realise that the euro was built on imperfect foundations and that these imperfections must be corrected. Meanwhile, the Italian president of the ECB will need all his technical and political expertise to keep the Eurozone together.

The new, post-crisis global economic geography
Ignacio Munyo & Ernesto Talvi (VoxEU) Oct 26, 2011
The global crisis crippled advanced economies, but it also freed up financial resources that flooded emerging markets. This column introduces an index to identify the post-crisis winners and losers, digging into the causes of the new economic geography and exploring the vulnerability of emerging economies to a recurrence of a Lehman-type virus.

The Mortgage Crisis---Some Inside Views Wall Street Journal Subscription Required
Charles Calomiris (WSJ) Oct 27, 2011
Emails show that risk managers at Freddie Mac warned about lower underwriting standards--in vain, and with lessons for today.

The Vatican's Monetary Wisdom Wall Street Journal Subscription Required
Robert A. Sirico (WSJ) Oct 27, 2011
More than 'greed,' fiat money and central-bank policies caused the financial crisis.

Europe Gets a Deal New York Times Subscription Required
NYT Oct 27, 2011
Europe's leaders are only grappling with the financial symptoms of the deepening crisis, not its underlying causes.

The Path Not Taken New York Times Subscription Required
Paul Krugman (NYT) Oct 27, 2011
There were alternatives to the economic doctrine that championed bank bailouts and mass suffering from the public. Look at Iceland.

Everyone Bails Out Everyone Wall Street Journal Subscription Required
WSJ Oct 27, 2011
Europe's policy makers are still ignoring the crisis's real origins.

Can It Be Rescued?
Sebastian Mallaby and Benn Steil (CFR) Oct 27, 2011
European leaders, meeting in Brussels into the early hours Thurdsay morning, agreed on a three-pronged deal to address a widening eurozone sovereign debt crisis. Mallaby and Steil analyze the implications of this deal on the eurozone, the G20, and the U.S. economy on this breaking news call. Read More »

The Past, the People, the Policies
Spyros Andreopoulos (MS GEF) Oct 28, 2011
Understanding monetary policy currently requires understanding the thoughts of the people that make it.

The Shadow Superpower
Robert Neuwirth (FP) Oct 28, 2011
Forget China: the $10 trillion global black market is the world's fastest growing economy -- and its future.

Europe’s Dying Bank Model
Gene Frieda (Project Syndicate) Oct 28, 2011
The good news for Europe is that it will not reenact the dramatic collapse of Lehman Brothers, thanks to the ECB’s unlimited ability to provide liquidity. But European leaders have yet to recognize that old bank business models are obsolete, and that reliance on private-sector leverage for repairing banks' balance sheets is doomed to failure.

America's Other 87 Deficits
Stephen S. Roach (Project Syndicate) Oct 28, 2011
The US runs a huge trade deficit with China, but it also runs deficits with 87 other countries. These deficits cannot be fixed by putting pressure on one of the bilateral components – but try telling that to America’s growing chorus of China bashers.

EZ rescue or recession? Fallout of the October 2011 package
Richard Baldwin (VoxEU) Oct 28, 2011
Markets loved the EZ rescue. This column argues that it was short-term good news in that it defused ‘the bomb’ – the possible catastrophe vortex of failing banks and defaulting sovereigns. The bad news is that it will induce a recession. Banks will create a credit crunch in trying to meet capital adequacy ratios, and the new austerity will create a fiscal contraction. The recession will weaken banks, sovereigns, and Greece. We’ll be needing another crisis summit by Spring 2012.

Capital flows and growth: 1990–2010
Joshua Aizenman, Yothin Jinjarak & Donghyun Park (VoxEU) Oct 28, 2011
The relationship between financial openness and economic growth remains the subject of heated controversy. This column examines the links between economic growth and FDI, portfolio investment, equity investment, and short-term debt in the last 20 years. It finds a large and robust relationship between growth and FDI but not with other types of financial flows.

Goldmanite Quant Derman Slams Wall Street's Hypocrisies
James Pressley (Bloomberg) Oct 29, 2011
Disturbed, disillusioned and ashamed: Those aren’t emotions you expect a Wall Street quant to express when asked why taxpayers were obliged to bail out wealthy bankers. Unless, of course, the quant is Emanuel Derman, a particle physicist and former head of quantitative finance at Goldman Sachs.

Upstream sovereigns
Laura Alfaro, Sebnem Kalemli-Ozcan & Vadym Volosovych (VoxEU) Oct 29, 2011
With all the focus on Europe, it is easy to ignore the argument that global imbalances remain a drag on economic recovery. This column decomposes international capital flows into public and private components and claims that upstream flows from emerging to advanced economies and global imbalances in general are the result of the same underlying factor.

The End of Population Growth
Sanjeev Sanyal (Project Syndicate) Oct 30, 2011
The UN forecasts that world population will rise to 9.3 billion in 2050 and surpass 10 billion by the end of this century. But such forecasts misrepresent underlying demographic dynamics: The future we face is not one of too much population growth, but too little.

The G-20’s Helpful Silence on Capital Controls
Jose Antonio Ocampo, Stephany Griffith-Jones & Kevin P. Gallagher (Project Syndicate) Oct 30, 2011
When French President Nicolas Sarkozy took the reins as host of this year’s G-20 summit, to be held in Cannes on November 3-4, he called on the IMF to develop an enforceable “code of conduct” for the use of capital controls in the world economy. But, while the IMF’s proposed code is a step in the right direction, it is misguided.

Is the recent bank stress really driven by the sovereign debt crisis?
Guntram Wolff Oct 30, 2011
Stress in the interbank market has increased dramatically since July 2011, and bank stock market valuations have fallen by 22% on average for 60 of the most important banks subject to stress tests. This column argues that bank stock valuation has been affected by the banks’ exposure to Greek debt and that Greek banks were particularly affected. Holdings of debt of the other four periphery countries does not, however, appear to be a strong determinant of stock price movements.

Will Europe Rescue China?
Gordon G. Chang (Forbes) Oct 30, 2011
Beijing can't stand by and let the fiscal crisis in Europe erode demand for its exporters' goods or imperil its sizable euro-denominated investments.

Investment banking
Charles A.E. Goodhart (VoxEU) Oct 31, 2011
As protestors occupy Wall Street and financial centres around the world, among the grievances are “socially useless” investment banks. This column argues, however, that investment banking is critical to any effective economy – the idea that policymakers can safeguard retail banking alone is not only tragically mistaken but also horribly dangerous.

Should India set up a sovereign wealth fund?
Kavaljit Singh (VoxEU) Oct 31, 2011
In 2007 China set up its sovereign wealth fund, the China Investment Corporation, with an initial capital fund of $200 billion. Since then, Asia’s other emerging economic power – India – has been wondering if it should follow. This column argues that such a move is ill-advised and that India has more worthy investment opportunities at home.

The Eurozone needs exit rules
Christian Fahrholz & Cezary Wójcik (VoxEU) Oct 31, 2011
With the sovereign debt crisis spreading across Europe, there is no shortage of suggestions on how to save the Eurozone. This column says exit rules are the silver bullet. It argues that exit rules would decrease the probability of a breakup of the Eurozone by enhancing market discipline, increasing the political bargaining power of EZ members vis-à-vis the profligate countries, enhancing internal discipline in the profligate countries, and reducing market uncertainty.

Eurozone crisis: Credibility is not everything
Paolo Manasse (VoxEU) Oct 31, 2011
Many have argued in recent months that the Eurozone’s emergency meetings should be about restoring credibility, with a ‘big bazooka’ or otherwise. This column looks at Italy, a country financiers are fast turning their back on. It argues however that the problem is Italy’s fundamentals – not its credibility.

Euro Crisis -- Doubting the 'Domino' Effect Wall Street Journal Subscription Required
Edward Lazear (WSJ) Oct 31, 2011
Preventing a Greek default will not reverse the lackluster growth that has plagued the other vulnerable countries for many years now.

Preventing digital trade war in the cloud
Alan Raul (WT) Oct 31, 2011
Just about the last thing the world economy needs right now is a trumped-up digital trade war over electronic data stored and processed on servers located virtually anywhere. However, unless the governments of the United States and Europe and multinational tech companies start talking soon about reconciling and simplifying international data-protection rules, some ominous storm clouds could threaten trans-Atlantic e-commerce.

Europe accepts the inevitable
Nita Ghei (WT) Oct 31, 2011
The new European rescue deal is being put in place. While details are still being hammered out, it will effectively allow Greece to default on its debt - despite protestations to the contrary.

The ECB’s Battle against Central Banking
J. Bradford DeLong (Project Syndicate) Oct 31, 2011
When the European Central Bank announced its program of government-bond purchases, it let financial markets know that it thoroughly disliked the idea, was not fully committed to it, and would reverse the policy as soon as it could. But the ECB's refusal to accept responsibility for financial stability flies in the face of the history of central banking.

Obama and Asia’s Two Futures
Yuriko Koike (Project Syndicate) Oct 31, 2011
Despite the relentless shift of global economic might to Asia, and China’s rise as a great power, America’s focus over the past decade has been elsewhere. In November, Barack Obama can begin to correct that when he hosts the Asia Pacific Economic Cooperation summit in his native state of Hawaii.

The Coming Global Credit Glut
Andrew Sheng (Project Syndicate) Oct 31, 2011
When world leaders meet at the end of this week at the G-20 in Cannes, France, the next economic minefield that they will face is already coming into view. It is likely to take the form of an opaque global credit glut, turbocharged by the fragile mixture of too-big-to-fail global banking with shadow banking.

Why it’s worth keeping the EU dream alive Financial Times Subscription Required
Giuliano Amato and Federico Ghizzoni (FT) Oct 31, 2011
Being freer, but isolated and weaker, would leave us all at the mercy of the wider world.

Beijing will not ride to eurozone’s rescue Financial Times Subscription Required
Yu Yongding (FT) Oct 31, 2011
Don’t blame it if China’s help is short of your expectations. China has never claimed it can save the EU from the debt dragon.

EFSF needs bigger bazooka to maximise its firepower Financial Times Subscription Required
Willem Buiter (FT) Oct 31, 2011
Granting banking powers to the euro bail-out fund could provide the €3,000bn required to prevent other nations defaulting on sovereign debt.

Chinese dragon flexes economic muscles
Tony Blankley (WT) Oct 31, 2011
Price of euro bailout might be silence about Beijing’s predatory trade practices.

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