News & Commentary:

November 2012 Archives


How to Make Almost Anything Foreign Affairs Subscription Required
Neil Gershenfeld (FA) Nov 1, 2012
In recent decades, the world has been rocked by revolutions in the digitization of computation and communication. Now the physical world is being digitized, thanks to new technologies that can turn data into things and things into data. Digital fabrication will let people build custom home furniture, living organs out of cells, and drones that can fly out of a printer; science fiction is becoming industrial fact.

America’s Global Election
Joseph E. Stiglitz (Project Syndicate) Nov 1, 2012
Most people around the world will not be able to vote in the upcoming US presidential election, even though they have a great deal at stake in the result. Overwhelmingly, non-US citizens favor Barack Obama’s re-election over a victory for his challenger, Mitt Romney – for good reason.

Asia’s Stifled Services
Changyong Rhee (Project Syndicate) Nov 1, 2012
The eurozone crisis has dominated policy discussion over the last few years, but the economic slowdown in Asia’s two giants – China and India – has become a growing source of public concern as well. Maintaining growth in the face of a global slowdown is a daunting task, and it requires rethinking the future of “factory Asia.”

Predicting the Next Shock to the Global Economy
A. Gary Shilling (Bloomberg) Nov 1, 2012
The growing gulf between the behavior of investors enamored with monetary and fiscal largess and the reality of globally weakening economies -- a phenomenon I call the Grand Disconnect -- is profoundly unhealthy.

Oil rulers toy with Armageddon
Hossein Askari (AT) Nov 1, 2012
The conflict, repression, and vast disparities of wealth that mark out the Persian Gulf mock the religion of which it is the birthplace. The region's future is bleak, with Armageddon a near-inevitable endpoint of present trends. The alternative is for the international community to recognize how it can help end the drift towards disaster. But it will take unprecedented vision, statesmanship and cooperation to do so.

Panic in Persia as Hyperinflation Hits Iran
Steve H. Hanke (Cato/Central Banking) Nov 1, 2012
For decades, the Iranian economy has been cobbled together by religious-bureaucratic regimes that have employed mandates, regulations, price controls, subsidies and a wide variety of other interventionist devices, in an attempt to achieve their goals. It's all been kept afloat – barely afloat – by oil revenues.

Asia needs more independent asset managers Financial Times Subscription Required
Henny Sender (FT) Nov 1, 2012
Asia needs independent asset managers who can police corporate groups, not merely further their interests.

TARGET2 as a scapegoat for German errors
Paul De Grauwe & Yuemei Ji (VoxEU) Nov 2, 2012
A systemic Eurozone breakup would be the mother of all financial crises. This column – a rejoinder to Hans-Werner Sinn’s recent column – agrees that Germany would lose massively from a breakup, but argues that the ultimate source is the €600 billion current account surpluses it ran with other EZ nations during the good years, not the TARGET2 system. German banks lent vast amounts to peripheral countries without doing a proper credit analysis. No one other than Germany itself is responsible for taking on these risks.

What’s Troubling India?
Kenneth Rogoff (Project Syndicate) Nov 2, 2012
Just a couple of years ago, India was developing a reputation as an attractive investment location, with heads of state virtually tripping over one another to meet business leaders in Mumbai and pave the way for further trade and investment. Now their interest has faded, along with India's macroeconomic numbers.

More Leadership for More Europe
Carlo Secchi (Project Syndicate) Nov 2, 2012
Any assessment of European economic governance must acknowledge the slow, contradictory nature of intergovernmental decision-making, in which national assertion, fueled by upsurges in popular anti-EU sentiment, has led to a stop-and-go process. Viewed in these terms, Europe's political class has failed to lead.

Financial crises and the dangers of economic policy uncertainty
John H. Makin (AEI) Nov 2, 2012
Economic policy uncertainty in the United States has built up since the 2008 financial crisis, hindering our economic growth. Uncertainty harms the economy by reducing consumers’ level of spending on goods and services and lowering levels of investment and hiring by firms. Economic policymakers must focus not on experimental policy responses, but rather on reducing the high level of economic policy uncertainty by simplifying the tax system and avoiding new initiatives like the Federal Reserve’s QE3.

The Other Financial Crisis
Mohamed A. El-Erian (Project Syndicate) Nov 2, 2012
Two variants of financial crisis are continuing to wreak havoc on Western economies: the sovereign debt crisis, involving governments; and a less visible one at the level of small and medium-size businesses and households. Until both are addressed properly, the West will remain burdened by sluggish growth.

Europe, Not Euro, May Break Apart
Joergen Oerstroem Moeller (YaleGlobal) Nov 2, 2012
Who needs nations? Scotland, Catalonia, other European regions seek closer ties with EU

In Europe, a Repeat of the Credit Crisis New York Times Subscription Required
Floyd Norris (NYT) Nov 2, 2012
In the euro area as a whole, the amount of credit outstanding has fallen to levels lower than they were a year ago, according to figures released last week by the European Central Bank.

Indonesia's New Economic Model
Pankaj Mishra (Bloomberg) Nov 4, 2012
Indonesia’s most-promising politician, Joko Widodo, who was elected governor of Jakarta province last month, looks like Barack Obama: lean and coolly self-possessed in a way that seems as much Bogartian as Javanese. Emerging out of nowhere, and serenely vaulting over the heads of establishment politicians, he embodies the possibility of change. But here the resemblance to the U.S. president ends.

Crisis and public support for the euro
Lars Jonung, Felicitas Nowak-Lehmann & Felix Roth (VoxEU) Nov 5, 2012
The Eurozone crisis has meant slow growth, rising unemployment, and social unrest. This column gauges the impact of all this on European citizens‘ opinions about the euro and EU institutions. Using Eurobarometer surveys, the authors find that, within the Eurozone, the crisis has only marginally lowered support for the euro but has led to a sharp fall in public trust in the ECB.

Getting to Normal
Daniel Gros (Project Syndicate) Nov 5, 2012
In both the US subprime crisis and Europe's sovereign-debt crisis, assets previously regarded as risk-free proved to be anything but safe. Recovery for Europe, however, is likely to be much slower than it has been for the US, owing to the absence of debt mutualization and continued uncertainty about default risk.

Europe’s Regional Revolts
Ana Palacio (Project Syndicate) Nov 5, 2012
Growing calls for independence in Catalonia and Scotland are symptomatic of conditions not only in Spain and the UK, but also in the EU as a whole. Whatever its roots in old grievances, secessionism, it seems, is a logical extension of Europe's ongoing financial crisis.

A fix for America’s industrial commons Financial Times Subscription Required
Gary Pisano and Willy Shih (FT) Nov 5, 2012
What you can make determines what you can design. Manufacturing competence is integral to innovation.

Brazil’s banks lose shine as growth slows Financial Times Subscription Required
Patrick Jenkins (FT) Nov 5, 2012
Over the past few months a handful of banks have run into difficulties as the economy stutters and amid pressure to lower their interest rates.

Private Education’s Public Benefits
Olusegun Obasanjo and Sunny Varkey (Project Syndicate) Nov 6, 2012
In order to maintain growth and continue to attract foreign direct investment, Africa must develop a high-skilled, well-trained workforce. With governments lacking the resources to ensure high-quality education, the private sector will have to take a central role in meeting rising demand for schools.

The Eurozone breakup debate: uncertainty still reigns
Jens Nordvig (VoxEU) Nov 6, 2012
Conversations about the breakup of the Eurozone are changing. This column argues that an 'avoid breakup at all costs' dogmatism may not be a prudent view. Getting good data may well be difficult, but any arguments about the cost of a Eurozone breakup must be compared to the ongoing cost of the status quo.

Europe’s Plan A
Harold James (Project Syndicate) Nov 6, 2012
Today, a new consensus is emerging that the euro was devised in a fit of giddy and irresponsible optimism – or, alternatively, panic at the prospect of German hegemony over Europe in the wake of the fall of the Berlin Wall. Nothing could be further from the truth.

Economics must heed political risk Financial Times Subscription Required
Sebastian Mallaby (FT) Nov 6, 2012
The answers to today’s global questions are far more consequential than fine adjustments to housing or export data forecasts.

Quantitative easing has hit Japan hard Financial Times Subscription Required
John Plender (FT) Nov 6, 2012
The experience of Japan suggests there is one clear negative outcome from ultra-loose monetary policy: it does structural damage to the economy.

Rule of Law 3, Argentina 0 Wall Street Journal Subscription Required
WSJ Nov 6, 2012
A deadbeat nation can't discriminate among its creditors.

Why supervisors should continue measuring financial risks – the fallacy of simple rules
Lars Frisell (VoxEU) Nov 7, 2012
Measuring financial risk is difficult. But what lessons, if any, have we learnt from the current crisis? This column argues against a move to leverage ratios and instead proposes continuing to measure financial risk (despite the difficulties), but with higher capital charges for banks. Focusing on the basics can only bolster central banks’ ability to fulfil their duties – looking for imbalances, and promptly tackling them with informed decisions.

Forex intervention, bond spillovers, and currency wars: Evidence from Japan 2003-04
Petra Gerlach-Kristen, Robert McCauley & Kazuo Ueda (VoxEU) Nov 7, 2012
Do incidental large-scale bond purchases have a global portfolio balance effect? This column argues that one country’s bond purchases can ease monetary conditions abroad. Whether this effect is welcome depends on the phase of the business cycle, but the authors emphasise that it is of paramount importance for resolving the current crisis that Eurozone policymakers closely consider the effects of large-scale bond buying.

Inside Africa’s Consumer Revolution
David Fine (Project Syndicate) Nov 7, 2012
Nowadays, Africa’s economic potential – and the business opportunities that go with it – is widely acknowledged. But, for many companies entering Africa or seeking to expand there from a local base, the challenge now is to obtain a better understanding of the market and its consumers.

The Second Coming of Barack Obama
Kemal Dervis (Project Syndicate) Nov 7, 2012
Barack Obama will embark on his second term in office with the global economy at a crossroads. The US alone cannot determine the world economy’s future, but the course that it takes nonetheless has huge global importance, given that it remains the largest economy and retains strong influence in the main multilateral institutions.

How to Pay Greece's Creditors and Rebuild Its Economy New York Times Subscription Required
Jos M. Barrionuevo, Nikolaos Georgikopoulos, Emmanuel D. Hatzakis and Guillermo Nielsen (NYT) Nov 7, 2012
Greece's economic programs have all failed because they have been based on unrealistic views of how financial markets actually work.

Eurozone Crisis, US "Fiscal Cliff" Fears Dominate G-20 Gathering
Bridges Weekly Trade News Digest, Volume 16, Number 38 Nov 7, 2012
Fears of an increasingly prolonged eurozone crisis and an impending US "fiscal cliff" took centre stage as senior finance officials from the Group of 20 major developed and emerging economies met in Mexico on Monday. The high-profile gathering comes amid discussions in other forums on how to use trade to foster a quicker global recovery and prevent a possible slowdown, and concluded just a day before the US presidential election that granted President Barack Obama another four-year term in office.

What lies beneath Financial Times Subscription Required
Tom Burgis, Helen Thomas and Misha Glenny (FT) Nov 7, 2012
Guinea is examining how rights to a vast iron ore deposit were awarded in what could prove a test case for anti-corruption efforts across Africa.

America’s Third-World Politics
Dani Rodrik (Project Syndicate) Nov 8, 2012
With its presidential election over, the US can finally take a break from campaign politics, at least for a while. But a question lingers: How is it possible for the world’s most powerful country and its oldest continuous democracy to exhibit a state of political discourse that is more reminiscent of a failed African state?

Underinvesting in Resilience
Michael Spence (Project Syndicate) Nov 8, 2012
There are two distinct components of disaster preparedness, both important. The one that gets the most attention is the capacity to mount a rapid and effective response; but the second component, which comprises investments that minimize the expected damage to the economy, is too often neglected.

Swiss National Bank under attack
Michael J Lamla & Jan-Egbert Sturm (VoxEU) Nov 9, 2012
The Swiss National Bank (SNB) is again the focus of much debate, accused as it is of currency manipulation. This column outlines the effects of the SNB’s minimum exchange rate. On balance, the authors argue that the move is a boon, effectively enacting a much-needed relaxation of monetary policy within the Eurozone.

Hedging macroeconomic risk in the Eurozone: Fiscal union versus capital markets
Mathias Hoffmann & Bent E. Sørensen (VoxEU) Nov 9, 2012
How do members of existing monetary unions share risk? Drawing on a decade of research, this column argues that fiscal transfers in fact make a limited contribution to economic coherence. In the context of Europe’s current crisis, the evidence suggests that unfinished capital market integration must be completed if we wish to see adequate and effective risk sharing.

Asian economies: Asia’s great moderation
Economist Nov 10, 2012
Some of the world’s stablest economies are Asian. Time to worry?

Greece’s debt burden: How to end the agony
Economist Nov 10, 2012
Greece will remain a disaster until it gets the treatment given to heavily indebted poor countries in the past.

Europe: Stretched at the seams Financial Times Subscription Required
Tony Barber (FT) Nov 8, 2012
Separatist movements are gaining strength, raising questions about the integrity of EU nations – and the bloc itself.

Our dangerous illusion of tech progress Financial Times Subscription Required
Garry Kasparov and Peter Thiel (FT) Nov 8, 2012
The innovation that is essential to our future depends upon liberty to take risk and make long-term plans.

China’s ever greater expectations Financial Times Subscription Required
Jamil Anderlini (FT) Nov 8, 2012
The party knows its subjects are becoming less patient and more demanding and its minions are getting out of control.

Europe’s Populists at the Gate
Barry Eichengreen (Project Syndicate) Nov 9, 2012
Investors, policy analysts, and even officials are quietly beginning to suggest that the euro crisis might be over. But, investors are missing the real risk: the collapse of public support for, or at least acquiescence to, the austerity policies required to work down heavy debts, and for governments pursuing these policies.

Obama’s Global Challenges
Bruce Stokes(YaleGlobal) Nov 9, 2012
On most issues, Obama faces divisions at home and with allies.

Oil exporters’ dilemma
Reda Cherif & Fuad Hasanov (VoxEU) Nov 10, 2012
Policymakers in many commodity-exporting countries confront the question of how much to consume, save, and invest out of revenues from commodity exports. This column says policy should focus on improving productivity in the tradeable sector and reducing volatility through diversifying this sector. This would lower precautionary saving needs, increase investment, raise consumption, and improve welfare.

Power supply: Batteries required Financial Times Subscription Required
Pilita Clark (FT) Nov 11, 2012
Sharp growth in renewable power plants has increased the need for grid-scale batteries to store the electricity they produce.

South Sudan faces hard road over its oil Financial Times Subscription Required
Sylvia Pfeifer (FT) Nov 11, 2012
For emerging nations, the discovery of natural resources is often only the start of an arduous journey, with no obvious route for governments to follow.

Is Finance Too Competitive?
Raghuram Rajan (Project Syndicate) Nov 12, 2012
Many economists are advocating for regulation that would make banking “boring” and uncompetitive once again. Instead of abandoning competition and giving banks protected monopolies once again, the public would be better served by making banks easier to close when they get into trouble.

Some pitfalls in global investing
Tatiana Didier, Roberto Rigobon & Sergio Schmukler (VoxEU) Nov 12, 2012
Investment through global funds increases year on year. But how and where are global funds’ portfolios allocated? How and which recipient countries, underlying investors, and policymakers benefit? This column argues that global funds in fact represent restrictive investment practises. If we want as many countries, investors and companies to benefit as possible, we must aim to change global funds’ organisational structures and thereby managers’ behaviour.

Development: Towards a bona fide bazaar Financial Times Subscription Required
Borzou Daragahi (FT) Nov 12, 2012
Countries across the Arab world must bring millions of informal workers out of the shadows – but instead of offering incentives and cutting red tape they are using force.

Fund Greek debt buyback with asset sales Financial Times Subscription Required
Komal Sri-Kumar (FT) Nov 12, 2012
A reduction in the level of debt using market mechanisms would be the first step in restarting the Greek economy after a five-year recession

Escape From Basel Wall Street Journal Subscription Required
WSJ Nov 12, 2012
Regulators postpone new bank rules, but they ought to disavow them.

A Vote in Favor of Global Equities New York Times Subscription Required
Sonia Kolesnikov-Jessop (NYT) Nov 12, 2012
Gary Dugan, the chief investment officer for Asia and the Middle East at Coutts, spoke recently about current market conditions and asset allocation.

Europe’s Pain without Gain
Michael Marder (Project Syndicate) Nov 13, 2012
Political leaders have often asked citizens to sacrifice personal freedoms and comforts in the name of secularized spiritual entities, such as the nation or the state – and citizens have eagerly obliged. Why, then, has the rhetoric of sacrifice under the banner of austerity proven ineffective in Europe’s current crisis?

Foreign investment in farmland: No low-hanging fruit   Acrobat Required
Claire Schaffnit-Chatterjee (DB Research) Nov 13, 2012
Is there a global rush for farmland? Which countries are of interest, to whom, and what are the main drivers? Can it contribute to food security? What are consequences for host countries? We discuss in this paper risks and opportunities associated with foreign investment in farmland as well as ways forward - at a time when there is a strong case for private investment in agriculture.

China's New Leaders Face an Economic Turning Point
Peter Orszag (Bloomberg) Nov 13, 2012
As the U.S. has been consumed by its own political transition (or, more precisely, lack thereof), it has paid scant attention to the one occurring in China.

It is time for China to calm down Financial Times Subscription Required
Keiichi Hayashi (FT) Nov 13, 2012
A responsible member of the international community should not resort to violence or coercion to get its own way.

Fetish for making things ignores real work Financial Times Subscription Required
John Kay (FT) Nov 13, 2012
In the value chain of goods we consume, only a small proportion of the value is represented by manufacturing and assembly.

China's Economic Espionage
James A. Lewis (FA) Nov 13, 2012
Deng Xiaoping launched China's rise by reforming its economy and opening the country to the West. With this opening, however, came a long-running, state-sponsored espionage program to acquire advanced technology and accelerate the growth of Beijing's civil and military industries. But what was tolerable for a developing economy is no longer acceptable when it is a potential military competitor.

Why bankers rule the world
Ellen Brown (AT) Nov 14, 2012
The inexorable mathematics of the private banking system guarantees that 35% to 40% of everything we buy goes to interest, leading to exponential growth in financial sector profits at the expense of the non-financial sectors. The answer is to turn banks into public utilities and their profits into public assets, so they can feed the economy rather than feed off it.

Missing Growth Multipliers
Ashoka Mody (Project Syndicate) Nov 14, 2012
In its April 2010 World Economic Outlook, the IMF predicted that global GDP growth would exceed 4% in 2010, with a steady annual growth rate of 4.5% maintained through 2015. But the forecast seriously underestimated the tax and world-trade multipliers, resulting in much lower growth than expected.

The Emerging World’s Education Imperative
Shashi Tharoor (Project Syndicate) Nov 14, 2012
The nine most populous developing countries account for more than half of the world’s population, and more than three-fifths of its illiterates. Unless high-quality education becomes widely available in these countries, their young people's lack of opportunities for employment will fuel social unrest and organized violence.

China’s rapid change and missed chances Financial Times Subscription Required
David Pilling (FT) Nov 14, 2012
If Hu Jintao is to be remembered for his failures during the boom years, the task that awaits his successor will be formidable.

Europe needs to embrace banking union Financial Times Subscription Required
Emilio Botín (FT) Nov 14, 2012
A unified framework is crucial if confidence in the financial system and financial institutions is to be restored.

Developing Countries Table Food Security Proposal at WTO
Bridges Weekly Trade News Digest, Volume 16, Number 39 Nov 14, 2012
The G-33 group of developing countries has tabled a new proposal on farm trade and food security, trade sources say, in a bid to fast-track elements of the draft Doha accord ahead of the WTO's ministerial meeting next year.

EU Trade Chief Renews Push for Brussels-Washington Trade Deal
Bridges Weekly Trade News Digest, Volume 16, Number 39 Nov 14, 2012
With the US presidential election now over, Washington and Brussels should turn their attention toward launching negotiations for a bilateral trade deal, the EU's top trade official said last week, particularly given the continued economic difficulties facing both sides.

TRIPS Council: LDCs Request Extension of Transition Period, While Members Discuss Innovation
Bridges Weekly Trade News Digest, Volume 16, Number 39 Nov 14, 2012
Least developed countries (LDCs) have asked their fellow WTO members to again extend the transition period for implementing the organisation’s intellectual property rules, citing concerns that the situation of the WTO's poorest members has not improved sufficiently since the last extension. The 6-7 November meeting of the WTO Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS) also saw members debate the relationship between intellectual property and innovation for the first time, while revisiting previous discussions regarding biological diversity.

One Flew Over the Resource Curse
Simon Zadek (Project Syndicate) Nov 15, 2012
Bucking the resource curse demands, first and foremost, strong domestic political leadership. But it also requires a global investment community – public and private – that can move beyond short-term thinking, ideological bias, ignorance, and cynicism to help the world's poorest countries to reach their potential.

China’s Growth Challenge
Paola Subacchi (Project Syndicate) Nov 16, 2012
A key question for China's new leaders over the next decade is whether official growth targets will be enough to preserve social cohesion as further economic and political reforms are gradually implemented. As the economic pie grows less rapidly, greater social justice, it seems, will be crucial to maintaining stability.

China and the American Dream
Dominique Moisi (Project Syndicate) Nov 16, 2012
China may be just a few years away from becoming the world’s leading economic power, and America’s strategic centrality may be on the wane. But America still makes people dream, and, as Barack Obama's reelection showed, its emotional hold on the world remains unique.

From Economic Growth to Human Growth
Dennis Snower (Globalist) Nov 17, 2012
Can the world meet the consumption demands of the global middle class in an environmentally sustainable way? No, not unless we reconsider our consumption-based ideas of economic growth.

Sparking off the magic of diasporas
Alireza Naghavi & Chiara Strozzi (VoxEU) Nov 18, 2012
Does emigration create a brain drain or – as commentators have recently been suggesting – do diasporas in fact represent a net brain gain? This column argues that if sending countries can protect intellectual property rights, they will foster the necessary diaspora knowledge networks to significantly help economic development in sending countries.

A Battle for the 'Seoul' of South Korea's Economy
Robert E. Kelly (Diplomat) Nov 18, 2012
South Korea's necessary transformation into a service and information-driven economy will require change - away from copying towards innovation.

Liberating Money Funds Wall Street Journal Subscription Required
WSJ Nov 18, 2012
The best reform is to let asset prices float.

Bond markets: A false sense of security IMG SRC="ft.gif" ALT="Financial Times Subscription Required">
Michael Mackenzie, Dan McCrum and Stephen Foley (FT) Nov 18, 2012
Investors seek perceived refuge in bonds but fears are rising that their faith has been ill-placed.

Global trade in services: Fear, facts, and offshoring
J. Bradford Jensen (VoxEU) Nov 19, 2012
Should developed countries fear trade in services? Won’t high skilled jobs be lost to cheaper, developing country service workers? This column argues that trade in services represents a profitable opportunity as long as international trade in services is liberalised. The US and other developed countries should aggressively pursue fairer and thus more favourable terms under the WTO’s Government Procurement Agreement.

The Year of Betting Conservatively
Nouriel Roubini (Project Syndicate) Nov 19, 2012
As consumers, firms, and investors become more cautious and risk-averse, the equity-market rally of the second half of 2012 has crested. And, given the seriousness of the downside risks to growth, the correction could be a bellwether of worse to come for the global economy and financial markets in 2013.

Role reversal will slow climate change Financial Times Subscription Required
Aaditya Mattoo and Arvind Subramanian (FT) Nov 19, 2012
China must act for its own sake and prod the reluctant west to combat climate change.

Capitalism: red in tooth and claw Financial Times Subscription Required
Victor Mallet (FT) Nov 19, 2012
Extremism in the intertwined worlds of business and politics is fostering a yearning for democracy and the rule of law.

More QE could distort rather than deliver Financial Times Subscription Required
Stephen King (FT) Nov 19, 2012
Central banks risk becoming agents of government fiscal policy, foregoing their role as independent guardians of monetary and financial stability.

When the US Asked Europe for Its Money Back
Philip Scranton (Bloomberg) Nov 19, 2012
"No sooner had the last U.S. ballot been counted, than Great Britain led France and other Debtor Powers last week in a free-for-all drive by press stories and diplomatic notes toward present postponement and future cancellation of what Europe owes the U.S." So wrote Time magazine two weeks after voters had elected Democratic New York Governor Franklin D. Roosevelt as president and handed him a basket of wailing economic "babies," the most insistent being World War I debts and reparations.

Lies, damn lies and GDP
Morten Jerven (Guardian) Nov 20, 2012
Or, how Ghana went from being one of the poorest countries in the world one day to an aspiring middle-income one the next.

Market access in global and regional trade
José de Sousa, Thierry Mayer & Soledad Zignago (VoxEU) Nov 20, 2012
Do trade costs still matter in a modern era characterised by a fall in transaction costs? This column argues that there is a dearth of good analysis in the debate around market access difficulties. Complaining about restrictions in accessing foreign markets is political leaders’ current favourite hobby yet. In light of stalled WTO negotiations, shouldn’t rigour, not rhetoric, lead this debate?

A New Agenda for China’s New Leaders?
Michael Boskin (Project Syndicate) Nov 20, 2012
Managers, workers, consumers, investors, and governments in every corner of the world, many reeling from their own economic problems, have a lot riding on China’s new leadership navigating reform sensibly, now and in years to come. With the transition almost complete, the world will soon know more about what to expect.

Greece Needs Growth, Not Austerity
(Bloomberg) (Bloomberg) Nov 20, 2012
Greece’s economy and society are imploding.

Banking must not be left in the shadows Financial Times Subscription Required
Gary Gorton (FT) Nov 21, 2012
Market economies change. Isn’t it clear that the measurement systems should also change to keep up?

My part in China’s war on corruption Financial Times Subscription Required
Patti Waldmeir (FT) Nov 21, 2012
A donation made as an expression of heartfelt gratitude is sullied when it lines the pockets of the rapacious.

Faith in the state underpins China Inc Financial Times Subscription Required
Simon Rabinovitch (FT) Nov 21, 2012
So long as growth is strong and government-owned companies remain profitable, impetus for reform of the Chinese corporate system will be weak.

The Age of Financial Repression
Sylvester Eijffinger and Edin Mujagic (Project Syndicate) Nov 21, 2012
Given low economic growth and the unpopularity of tax hikes and spending cuts, many Western governments are seeking alternative solutions to rein in rising national debt. But many of the policies that are being implemented constitute financial repression – once considered among the gravest sins that a central bank could commit.

Macroeconomic adjustment and the history of crises in open economies
Joshua Aizenman & Ilan Noy (VoxEU) Nov 21, 2012
Are countries that have previously experienced banking crises less vulnerable to them in the future? This column argues that, in fact, previous crises might make future crises more likely. There isn’t much evidence of a learning process from past mistakes because the regulator often lags behind banking’s pace of innovation. Preparing to prevent the last crisis does not prevent the next and it seems that the ‘too big to fail’ doctrine provides cover for banks, delaying the day of adjustment.

Cuddly or cut-throat capitalism: Choosing models in a globalised world
Daron Acemoglu, James A Robinson & Thierry Verdier (VoxEU) Nov 21, 2012
Amid the current economic slowdown there is renewed interest in what type of capitalism fosters growth and best improves welfare. This column argues Nordic-style capitalism may provide higher welfare but in an interconnected world, it may be the cut-throat US capitalism, with its extant inequalities, that makes possible the existence of more cuddly Nordic societies.

Asia-Pacific Leaders Announce Major Regional Trade Talks
Bridges Weekly Trade News Digest, Volume 16, Number 40 Nov 21, 2012
Leaders from various Asia-Pacific nations gathering in Phnom Penh, Cambodia earlier this week formally announced the launch of negotiations for a 16-country deal which – when completed – would form one of the world's largest trade pacts. Separate efforts to initiate talks for a possible trilateral trade agreement between China, Japan, and South Korea also moved forward this week, despite earlier concerns that brewing tensions over disputed islands would stall the initiative.

Cautious Welcome for Farm Trade Proposals at WTO
Bridges Weekly Trade News Digest, Volume 16, Number 40 Nov 21, 2012
Trade officials gave a cautious welcome to new proposals on farm trade at an informal WTO negotiating meeting last Friday, sources say.

Europe Is Breaking. How Many EUs Will There Be?
Pawel Swieboda (Bloomberg) Nov 21, 2012
Prospects for the survival of the euro area are looking up, raising a new question to dominate debate about the continent’s future: Will there be one European Union, or several?

China will suffer for not tackling imbalances Financial Times Subscription Required
Charles Dumas (FT) Nov 21, 2012
Debt is building up and growth is slowing. Charles Dumas says the People’s Bank must act now or feel greater pain later.

Debt should be at heart of Greece’s deal Financial Times Subscription Required
Zsolt Darvas (FT) Nov 21, 2012
Policy makers must recognise the failure of their strategy and decide whether they want to keep Greece inside the eurozone.

How effective were the 2008-2011 capital controls in Brazil?
Yothin Jinjarak, Ilan Noy & Huanhuan Zheng (VoxEU) Nov 22, 2012
Capital controls are experiencing a renaissance, due in part to the current financial crisis. But do they really have an effect? This column assesses the Brazilian experience, arguing that policies may be more politically or electorally convenient than effective in any economic sense. It seems policymakers understand capital controls’ relative economic impotence, but nevertheless feel forced to resort to adopting them.

Ire and Ice: A Tale of Two PIIIGS
Frank Shostak (Mises Daily) Nov 22, 2012
There were a lot of commentaries regarding the Ireland and Iceland 2008–2012 financial crises. Most of the commentaries were confined to the description of the events without addressing the essential causes of the crises. We suggest that providing a detailed description of events cannot be a substitute for economic analysis, which should be based on the essential causes behind a crisis. The essential cause is the primary driving force that gives rise to various events such as reckless bank lending (blamed by most commentators as the key cause behind the crisis) and a so-called overheated economy. Now, in terms of real GDP, both Ireland and Iceland displayed strong performance prior to the onset of the crisis in 2008. During 2000–2007, the average growth in Ireland stood at 5.9 percent versus 4.6 percent in Iceland. So what triggered the sudden collapse of these economies?

A Shoe Tariff With a Big Footprint Wall Street Journal Subscription Required
Blake Krueger (WSJ) Nov 22, 2012
Kids' sneakers are smacked with a 48% duty tax from 1930.

Can India be governed as a democracy? Financial Times Subscription Required
Victor Mallet (FT) Nov 22, 2012
The paralysed parliament and the lack of good laws and government policies suggest the world’s largest democracy is struggling to function.

Banking union and ambiguity: Dare to go further
Sylvester Eijffinger & Rob Nijskens (VoxEU) Nov 23, 2012
The Eurozone is moving towards a banking union with the ECB at its centre. This column argues that there are problems with the European Commission’s proposal. The ECB can never supervise all 6000 banks in the Eurozone, supervision should be separated from monetary policy to avoid conflicts of interest, and joint deposit insurance and resolution funds must be created. Furthermore, the ECB should exert constructive ambiguity in its supervision.

Should Europe Emulate the US?
Jean Pisani-Ferry (Project Syndicate) Nov 23, 2012
In 2008, many Europeans lambasted the US for being at the root of the financial turmoil, and hailed the euro for protecting the continent from it. Unfortunately for Europe’s boosters, the facts are unambiguous: US per capita GDP is expected to return to its 2007 level next year, while remaining 3% below that level in the eurozone.

Argentina shows the integrity of default Financial Times Subscription Required
Mario Blejer (FT) Nov 25, 2012
The New York court ruling could have serious consequences for many recent and probably future debt relief cases.

Fiscal discipline in the monetary union
Charles Wyplosz (VoxEU) Nov 26, 2012
For the euro to survive, the recession must be halted without piling on more debt. This column argues that the unpalatable conclusion is that public debts must be written down. The massive moral hazard problem this will cause must be dealt with by making sure that public debts will never again be allowed to grow to unsustainable levels. To this end, decentralised US-style fiscal discipline is needed.

Heavy technology: The process of technological diffusion over time and space
Diego Comin, Mikhail Dmitriev & Esteban Rossi-Hansberg (VoEU) Nov 26, 2012
Geographical distance is a fundamental impediment to virtually all economic transactions. This column, using data on technology adoption in 161 countries over 140 years, argues that it also inhibits the spatial diffusion of technology. Moreover, it shows that technology spreads like an epidemic. As more people adopt a technology, the importance of distance to the technological leader diminishes until it eventually becomes irrelevant.

An industrial revolution for South Africa Financial Times Subscription Required
Moeletsi Mbeki (FT) Nov 26, 2012
Long-term investment will arrive only when the ANC creates the conditions needed for a process begun in the 19th century.

Greece does not need debt forgiveness Financial Times Subscription Required
Daniel Gros (FT) Nov 26, 2012
Under current plans Athens would spend less on interest than it did during the first few years after it joined the euro,

Paris sends conflicting signals on reform Financial Times Subscription Required
Hugh Carnegy (FT) Nov 26, 2012
France’s finance and anti-globalisation industry ministers are at odds over how to transform the country’s economic structures.

Crisis Could Be Causing the Balkanization of Europe
Tim Judah (Bloomberg) Nov 26, 2012
Instead of the Europeanization of the Balkans, are we now witnessing the start of the Balkanization of Europe?

Emerging economies have shifted the balance of power in world trade—Lamy
Nov 26, 2012
The rising weight of influence of emerging economies has shifted the balance of power. This clearly implies a number of transitions to which we have not yet adjusted as classic Westphalia concepts of sovereignty are being challenged by the realities of interdependence. Some may consider this a problem, it is perhaps better to think of it as an opportunity to look at the real shaping factors of trade.

Inequality Breeds Resistance to Globalization
Pranab Bardhan (YaleGlobal) Nov 27, 2012
Don’t blame globalization for inequality – but rather policies hijacked by a few.

Polluters Must Pay
Jeffrey D. Sachs (Project Syndicate) Nov 27, 2012
As we enter a new era of sustainable development, impunity for those who have caused massive environmental damage must turn to responsibility. Major companies, whether in rich or poor countries, need to accept responsibility for their actions.

Banking union: If Ireland were Nevada
Daniel Gros (VoxEU) Nov 27, 2012
An integrated banking system saved Nevada after a local real estate boom turned to bust. Without an integrated banking system, the same wasn’t true of Ireland. This column argues that comparing Ireland and Nevada shows that banking union is far more important for Europe than current proposals of fiscal union. And, in the absence of a proper banking union that covers losses, it seems ever more likely that Europe will be pushed back towards nationally segmented financial markets.

Private Wealth and European Solidarity
Peter Jungen (Project Syndicate) Nov 27, 2012
Many in the eurozone are asking why creditor-country taxpayers should finance debtor countries that often have higher private-wealth/GDP ratios than their more solvent counterparts. By calling on citizens to fund their countries’ debts, governments can fix their own economies – and strengthen European solidarity.

Indebted Dragon
Lynette H. Ong (FA) Nov 27, 2012
Financing the Middle Kingdom's recent building boom has been expensive: Estimates put local government debt alone at between $800 billion and $2 trillion, or around 13 to 36 percent of GDP. If the real estate bubble pops, financial and social crises will follow

Critics of gas should be realistic Financial Times Subscription Required
Michael Levi (FT) Nov 27, 2012
Curbing supplies immediately would lead to more use of coal and oil because renewable energy is still relatively expensive.

Disguised Greek debt forgiveness buys time Financial Times Subscription Required
Gavyn Davies (FT) Nov 27, 2012
The latest stop-gap offer points the way to a longer-term deal after the German election, based on official debt forgiveness.

Markets: An unforgiven debt Financial Times Subscription Required
Robin Wigglesworth and Jude Webber (FT) Nov 27, 2012
A US ruling could switch some of the initiative in bond markets back to creditors and away from indebted countries.

No easy fix for Congo’s lingering woes Financial Times Subscription Required
William Wallis (FT) Nov 27, 2012
As history repeats itself in the eastern DRC, there seems little signs of hope for a resolution of the chaos threatening to engulf the region.

Bernanke's Seoul Brothers Wall Street Journal Subscription Required
WSJ Nov 27, 2012
Loose money in America, capital controls abroad.

Aging Asia's Demographic Dilemma
Gordon G. Chang (World Affairs) Nov 27, 2012
With fertility rates historically low and dropping, Japan and the rest of East Asia are headed into uncharted demographic territory—with few precedents to predict what happens next

Time to dump on housing
Martin Hutchinson (AT) Nov 28, 2012
The United States' and British economies are hugely and unnecessarily burdened by numerous mortgage subsidies. The governments of both countries, struggling to control budget deficits, should get rid of such support - and look to Germany for a sensible and sustainable housing model.

The euro lives, but unity is dead
Francesco Sisci (AT) Nov 28, 2012
Europeans hopeful that economic crisis would bring nations together will be sorely disappointed. Greece is saved and the euro is sound, but politically the continent looks dead. Solace comes with the perspective that in the general scheme of global affairs, and with the refocus on Asia, the European setback may not count for much.

Restructuring sovereign debt, 1950–2010: From process to outcomes
Udaibir S Das, Michael G. Papaioannou & Christoph Trebesch (VoxEU) Nov 28, 2012
There is an ongoing debate about debt restructurings, debt buybacks and other strategies to resolve sovereign debt crises. Unfortunately there is limited empirical knowledge about the process and outcome of past restructurings to guide the debate and help tackle future crises. This column is an attempt to fill this gap by surveying new data and lessons learned from debt crises of the past six decades.

China’s Dream Team
Stephen S. Roach (Project Syndicate) Nov 28, 2012
China’s recent leadership transition was widely depicted as a triumph for conservative hard-liners and a setback for the cause of reform – a characterization that has deepened the gloominess that pervades Western perceptions of China. In fact, nothing could be further from the truth.

Japan must revitalise its central bank Financial Times Subscription Required
David Pilling (FT) Nov 28, 2012
After 15 years in which the Bank of Japan has failed to defeat deflation, the institution could do with a fresh approach.

Post-crisis flaws to blame for IPO slump Financial Times Subscription Required
Ralph Atkins (FT) Nov 28, 2012
If the cause was a weak economy there would be less concern, the danger is that it results from deeper changes in financial markets’ functioning.

What drives FDI to Russian regions?   Acrobat Required
Jan Strasky and Tamara Pashinova (DB Research) Nov 28, 2012
The big cities of Moscow and Saint Petersburg as well as surrounding areas continue to attract most of the FDI inflows into Russia, although there are newcomer regions. Using quantitative methods we find that past FDI is an important predictor of current FDI, as is regional competitiveness. "Push" drivers such as G-7 interest rates are also shown to be significant. The current outlook for low global interest rates should thus bode well for FDI inflows into Russia over the next couple of years.

Landlocked or policy-locked?
Ingo Borchert, Batshur Gootiiz, Arti Grover Goswami & Aaditya Mattoo (VoxEU) Nov 29, 2012
Services trade policies in both the telecommunications and the air transport sector are more restrictive in landlocked than in coastal countries. Why would landlocked countries choose restrictive policies if they have such a big stake in improving international connectivity? This column suggests the explanation could be related to both weak political institutions and adverse location. It adds that trade-facilitating aid will earn a poor return if not accompanied by services reform.

Europe’s Dysfunctional Growth Compact
Benedicta Marzinotto (Project Syndicate) Nov 29, 2012
Although European governments have agreed to encourage the faster absorption of EU funds in crisis-stricken countries, they have refused to pay into the EU budget to enable the funds’ actual disbursement. Unless a mechanism is introduced that facilitates this process, EU funds cannot be used to stimulate growth in times of crisis.

China’s Coming Growth Tests
Yu Yongding (Project Syndicate) Nov 29, 2012
While no one should be surprised by the recent recovery in China's economic growth, the true challenges lie in the medium and long term. Indeed, the current economic rebound is not an achievement worthy of celebration if it comes at the expense of further reform and structural adjustment.

Keep the net beyond the autocrats’ reach Financial Times Subscription Required
John Kampfner (FT) Nov 29, 2012
Old power structures are working hard to take control of what is often the biggest threat to their existence.

Tokyo faces weak yen and high bond yields Financial Times Subscription Required
Henny Sender (FT) Nov 29, 2012
Measures that may be good for the Japanese economy could prove harmful to the market for government debt.

Turning Points New York Times Subscription Required
Niall Ferguson (NYT) Nov 29, 2012
History, like an oil tanker, turns slowly. So let's not exaggerate how much of a crisis we are actually in.

Global Economic Problems Need Global Solutions New York Times Subscription Required
Gordon Brown (NYT) Nov 29, 2012
The world is at risk of a race to the bottom in financial standards. Where are the global voices that can do something about it?

Cut deficits by cutting spending
Alberto Alesina (VoxEU) Nov 30, 2012
Should debt-ridden and economically struggling Western governments be doing everything possible to reduce their deficits? Should we cut spending or hike taxes to reduce our debt-to-GDP ratios? This column argues that the answer is obvious: the cheapest, most effective and confidence-inspiring route is to cut spending. Coupled with other pro-growth policies, the evidence suggests that it is only really spending cuts that will spur private investment and economic recovery in Europe.

Pulling the OMT Trigger
Luigi Zingales (Project Syndicate) Nov 30, 2012
The ECB’s decision in September to proceed with its “outright monetary transactions” program to purchase distressed eurozone members’ government bonds has restored financial calm to Europe. But vulnerable countries like Italy and Spain would be well advised to request OMT intervention before it is desperately needed.

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