News & Commentary:

December 2009 Archives


The Dollar and the Budget Deficit
C. Fred Bergsten (PIIE/Foreign Affairs) Nov/Dec 2009
The dollar is under attack on two fronts. Private investors are driving it lower in the foreign exchange markets. Monetary authorities are questioning its role as the world's key currency. There is an obvious linkage between the two attacks: Expectations of further falls in the dollar's value will accelerate the prospect that foreign central banks will switch into euros, special drawing rights at the International Monetary Fund, or even commodities and other "real" assets. There is plenty of ammunition to fuel the attacks with over $20 trillion in dollar instruments held outside the United States and much more held by Americans themselves.

Death Cometh for the Greenback Recommended!
Joseph E. Stiglitz (National Interest) Nov/Dec 2009
The dollar is in trouble. That’s clear, and it’s been true for a while.

Bank wrestling for control of climate finance
Bretton Woods Update No.68 Nov/Dec 2009
Plus: Expert panel calls for sweeping Bank governance reform; IFC lends a hand in great "land grab"; Unjustifiable Bank domination over climate funds in Bangladesh; and more.

Dubai: What the Immediate Future Holds Recommended!
Mohamed El-Erian (PIMCO) Dec 2009
Dubai serves as a warning to those that were quick to find comfort in the sharp market rally of the last few months.

The Limits of Dubai
Kenneth Rogoff (Project Syndicate) Dec 2009
Global investors are in a giant huff over Dubai’s decision to allow its flagship private company Dubai World to seek a six-month standstill (implying at least partial default) on payments on some $26 billion in debt. But what really upset investors was the realization that, in an over-leveraged world, some day untenable debt guarantees will have to be withdrawn.

The IMF’s New Direction
Dominique Strauss-Kahn (Project Syndicate) Dec 2009
Roughly one year ago, the global economic situation looked grim: a severe global recession, massive wealth destruction, and declines in trade and employment. But a disaster of “Great Depression” proportions was averted, thanks to unprecedented economic-policy coordination by governments around the world, with the IMF now set to help ensure that it continues.

The Cycles of Economic Discontent
Harold James (Project Syndicate) Dec 2009
Every ten years or so, we think that a particular model of growth is so broken that it cannot be resurrected. The world needed to be rethought in 1979, 1989, 1998, and 2008, with each wave of collapse breeding a greater degree of disillusion about particular institutions.

Too Big to Live
Joseph E. Stiglitz (Project Syndicate) Dec 2009
If we have learned one lesson from the financial crisis, it is that the bigger the bank, and the more risk-taking that big banks are allowed to engage in, the greater the threat to our economies and our societies. That is why we need a multi-prong approach, including special taxes, increased capital requirements, tighter supervision, and limits on size and risk-taking activities.

The Road to Prosperity and Sound Markets
Edmund S. Phelps (Project Syndicate) Dec 2009
The near global financial meltdown and ensuing downturns left the Anglo-Saxon nations pondering what they should do both to set their economies on a path toward recovery and to avoid a similar crisis in the future. Some recommendations by members of Columbia University’s Center on Capitalism and Society were sent to last April’s G20 meeting. To create more jobs in the economy, I proposed that governments establish a class of banks that would acquire the lost art of financing investment projects in the business sector – the type of financing the old “merchant” banks did so well a century ago. I also renewed my support for a subsidy to companies for their ongoing employment of low-wage workers. (Singapore adopted this idea with enviable results.)

The Return of Monetarism
Sylvester Eijffinger and Edin Mujagic (Project Syndicate) Dec 2009
Over the last 30 years or so, many central bankers supposed that all they needed to do was keep their sights fixed on price stability. But we now know that they must also attend to financial stability, and that their ability to set interest rates cannot be used to achieve both aims simultaneously.

Fear Not the Falling Dollar!
Scott Mather (PIMCO) Dec 2009
A gradually weakening dollar may help heal the U.S. economy, stimulate U.S. job creation and help reverse the build-up of global imbalances.

The Gold Bubble and the Gold Bugs
Nouriel Roubini (Project Syndicate) Dec 2009
As the price of gold has risen in recent weeks towards $1,200 an ounce and above, today’s “gold bugs” argue that the price could top $2,000. But the recent price surge looks suspiciously like a bubble, with the increase only partly justified by economic fundamentals.

Investment Strategy after the Crisis
Michael Spence (Project Syndicate) Dec 2009
Investors have been hit hard by the current crisis, and lessons are being learned and strategies revised. But the central lesson for investors is that they should not assume that all times are “normal” times, and that risks to the system as a whole are abnormal.

South Korea’s G-20 Challenge
Barry Eichengreen (Project Syndicate) Dec 2009
When South Korea takes over the G-20 chairmanship from the United Kingdom on January 1, it will gain considerable agenda-setting power over global economic policy. At the top of its agenda should be financial-sector reform, greater progress on global rebalancing, and institutional efforts to boost the G-20's legitimacy and strengthen the influence of emerging-market members.

Insecure Securities
Hans-Werner Sinn (Project Syndicate) Dec 2009
Once upon a time, stocks were risky and collateralized securities were safe. That time is over, as the collapse of the US mortgage securitization market has exposed the once-vaunted American financial system's underlying lack of trustworthiness.

Is Gold a Good Hedge?
Martin Feldstein (Project Syndicate) Dec 2009
Many gold buyers want a hedge against the risk of inflation or possible declines in the value of the dollar or other currencies. But gold is an exceptionally poor hedge against both of these risks, particularly compared to the alternatives, such as inflation-protected government bonds and currency futures, that are available to investors.

Europe’s Rising Global Role
Jose Manuel Barroso (Project Syndicate) Dec 2009
Twenty years after the fall of the Berlin Wall and the end of the Cold War, the contours of world order are still in the making. But two ‘mega trends’ seem clear: the broadest and deepest wave of globalisation the world has ever seen, and the rise of new world players from Asia and elsewhere. We also hear ever-louder calls for more effective global coordination in meeting the great challenges of our times. As the Lisbon Treaty comes into force, The European Union (EU) is, I believe, uniquely suited to take on its leadership responsibilities.

The Fairness of Financial Rescue
J. Bradford DeLong (Project Syndicate) Dec 2009
Financial bailouts are understandably controversial, because they reward those who bet on risky assets. But a policy that leaves owners of risky financial assets impoverished is a policy that shuts down dynamism in the real economy.

Dubai, debt and a return to reality
AT Dec 1, 2009
The trouble with debt-burdened Dubai isn't that its woes could trigger serious shocks around the global financial system. Rather, irrespective of liquidity conditions, the world remains an unforgiving place for those who borrowed too much and gave up too little in return. Various other notions, such as "too big to fail" and "implicit guarantee", will soon fall by the wayside.

Systemic Risk and Fannie Mae
WSJ Dec 1, 2009
The education of Joe Stiglitz and Peter Orszag.

Dubai Son-of-Subprime Shows Disease Still With Us
Matthew Lynn (Bloomberg) Dec 1, 2009
If it was a movie trailer, we know what the voice-over would say: Just when you thought it was safe to go back into the capital markets, Dubai gives us “Son of Subprime.”

Competitive devaluations threaten a trade war
Michael Pettis (FT) Dec 1, 2009
As more countries adjust their currencies, the US and eurozone are suffering. Restrictions on imports appear almost inevitable as a response – repeating the errors of the 1930s.

Choosing an invoicing currency
Linda Goldberg & Cédric Tille (VoxEU) Dec 2, 2009
The international transmission of exchange rate movements depends on which currencies are used for the invoicing of international trade. This column presents transaction-level evidence on how exporters choose their invoicing currency. Industry structure, macroeconomic volatility, and the bargaining strength of the importing firm affect invoicing choices.

Kim Jong Il's Fake Currency "Reform"
Marcus Noland (PIIE) Dec 2, 2009
North Korea announced a surprise currency reform this week. The move isn't about good economics, however; it is yet another stratagem by the central authorities to short-circuit the development of an entrepreneurial class independent of the state.

Why did the crisis go global?
Prakash Kannan & Friederike (Fritzi) Koehler-Geib (VoxEU) Dec 3, 2009
The subprime crisis became the global crisis when the 2007 financial shock mutated into a full-blown global economic crisis in September 2008. This column attributes the rapid transmission of financial stress to the surprise of the crisis. Using historical data, it shows that crises with a pronounced surprise element tend to result in more widespread contagion.

Lessons From Dubai World
Nouriel Roubini (Forbes) Dec 3, 2009
Don't assume government backing for state-owned businesses.

Trade could hold the key to a climate deal
Bård Harstad (FT) Dec 3, 2009
The Montreal Protocol protecting the ozone layer is already restricting trade with non-participants. To repeat this success, signatories should become favoured trading partners.

Insight: Trouble for the mighty repo
Gillian Tett (FT) Dec 3, 2009
The latest regulatory headache on Wall Street is the state of the repo market.

Default and the euro area
Economist Dec 3, 2009
What would happen if a member of the euro area could no longer finance its debt?

The price of oil and the macroeconomy
Olivier Blanchard & Marianna Riggi (VoxEU) Dec 7, 2009
In the 1970s, large increases in the price of oil were associated with sharp decreases in output and large increases in inflation. In the 2000s, even larger increases in the price of oil were associated with much milder movements. This column attributes the difference in the US to more flexible labour markets and more credible monetary policy during the Great Moderation.

Is newer better? The Penn World Table growth estimates
Simon Johnson, Will Larson, Chris Papageorgiou & Arvind Subramanian (VoxEU) Dec 7, 2009
The Penn World Table is a major data source for many studies of economic growth. This column reveals that its GDP statistics are surprisingly sensitive to revisions – GDP growth for the same country at the same point in time changes across successive versions. Researchers analysing annual data may obtain more robust results by using national accounts data, even though they are not PPP-adjusted.

Gross, Roubini Weigh Dueling Chinese Bubbles
William Pesek (Bloomberg) Dec 7, 2009
That loud hissing noise you hear is coming from Dubai, where reality is catching up with an economy built on sand -- literally and figuratively.

Tariffs can persuade Beijing to free the renminbi
Robert Aliber (FT) Dec 7, 2009
It should not take long for the Chinese to learn that they are much more dependent on access to the US market than Americans are dependent on Chinese goods.

Credit booms go wrong
Moritz Schularick & Alan Taylor (VoxEU) Dec 8, 2009
Are credit bubbles dangerous? This column presents long-run historical data showing that, over the past 140 years, episodes of financial instability were often the result of "credit booms gone wrong". Recent years witnessed an unprecedented expansion in the role of credit in the macroeconomy. It is a mishap of history that – just as credit matters more than ever before – the reigning doctrine gives it no role in central bank policies.

Why China's exchange rate policy concerns us
Martin Wolf (FT) Dec 8, 2009
What we are seeing is a failure of adjustment to changes in global competitiveness that has unhappy precedents, notably during the 1920s and 1930s, with the rise of the US, and during the 1960s and 1970s, with the rise of Europe and Japan.

'Good peg' illusion
Chan Akya (AT) Dec 9, 2009
Whether a currency peg is intended to address imbalances that are external or domestic, it will likely be the source of significant volatility, with some effects visible and others not quite so. Ignoring the basic truths of the "unholy trinity" will always prove detrimental in the long run to the interests of those who wish to take undue advantage of a currency peg

Sliding back towards a gold standard
Martin Hutchinson (AT) Dec 9, 2009
Global foreign exchange reserves are at record highs, but there is nothing solid for central banks to buy. A return to the gold standard is, unfortunately, unlikely, but we may see something close to it and the end of the fiat money floating exchange rate system that has prevailed since 1973.

Could Dubai World's Debt Default Spark a Crisis in the Middle East and Beyond?
K@W Dec 9, 2009
When Dubai World announced late in November that it wanted a six-month delay on payments on $26 billion in debt, the financial markets were thrown for a loop. The Dow Jones Industrial Average fell 155 points, or 1.5%, European stocks dropped and oil prices plunged. The Dubai story is still unfolding -- the emirate's stock exchange fell for the third consecutive day on December 9 after Moody's downgraded the ratings of six government-linked companies. Though some investors believe Dubai does not provoke as much fear as other corporate collapses over the past couple of years, Wharton professors point out that the world economy could face serious problems if similar financial troubles spread to European economies such as Greece.

WTO Ministerial Lifts Hopes for Doha, but Scepticism Lingers
Bridges Weekly Trade News Digest, Volume 13, Number 42 Dec 9, 2009
The WTO's seventh ministerial conference, which ran from 30 November to 2 December, largely met expectations, trade delegates said this week. But the meeting, which was billed as a no-surprises 'housekeeping' exercise, also produced a somewhat unexpected political push for the WTO's Doha Round trade talks.

Ongoing Tropical Products Talks Could Slip Up Banana Deal
Bridges Weekly Trade News Digest, Volume 13, Number 42 Dec 9, 2009
The WTO has included the issue of trade in bananas on the agenda of next Thursday's General Council meeting, trade sources said, with the EU and Latin American countries apparently poised to sign an accord on tariff cuts for the controversial fruit. However, ongoing talks on other tropical products could still slip up the deal, as the EU is linking an eventual banana agreement to these related negotiating topics.

Lehman, Dubai Say Much About Double-Dip Economy
William Pesek (Bloomberg) Dec 10, 2009
Ask Japanese why their economy plunged in 2008 and most will blame the “Lehman shock.”

Global financial crisis: What policy responses do markets favour?
Yacine Aït-Sahalia, Jochen Andritzky, Andreas Jobst, Sylwia Nowak & Natalia Tamirisa (VoxEU) Dec 10, 2009
Market distress has eased since the height of the crisis, suggesting that some government policies have been successful. But which ones? This column argues markets are calmed by policies that form part of a strategy; ad-hoc policies add to market fears.

The future of international lender of last resort facilities
Alejandro Izquierdo & Ernesto Talvi (VoxEU) Dec 12, 2009
In spite of its global nature, the current crisis dealt a much smaller blow to emerging markets than its predecessor, the Russian/Long-Term Capital Management crisis of 1998. Although stronger fundamentals are part of the explanation, this column argues that the readiness of the international community to provide lender of last resort facilities played a key role and has major implications for the design of a new international financial architecture.

Naked Copenhagen
Richard Muller (WSJ) Dec 12, 2009
Temperature is increasingly at the mercy of the developing world.

European farce descends into Greek tragedy
Wolfgang Münchau (FT) Dec 13, 2009
I am not condoning the way successive Greek governments have behaved. But to provoke a financial crisis is not a constructive way of dealing with this problem.

The unrelenting pressure of protectionism: Global Trade Alert's third report
Simon J Evenett (VoxEU) Dec 14, 2009
The third report of Global Trade Alert contains the latest assessment of protectionist dynamics at work in the world economy with a focus on the Asia-Pacific region.

Greece: The party is over
Charles Wyplosz (VoxEU) Dec 14, 2009
Greece’s public debt is in turmoil. This column says that the country is nowhere near defaulting, but the Greek government should heed the financial markets’ warning and end three decades of fiscal profligacy. It suggests that Greece adopt immediate deep spending cuts and reform its budgetary process to credibly enforce discipline.

Opinion: High-frequency trading is a natural part of market evolution
Burton Malkiel (FT) Dec 14, 2009
Most high-frequency trades do not create volatile markets, they close gaps and increase market efficiency.

Reconciling Climate Change Goals with the Needs of Developing Countries
Arvind Subramanian (PIIE) Dec 14, 2009
How should climate change goals be met to ensure that developing countries' energy needs are not sacrificed? In a previous posting on RealTime Economic Issues, Meera Fickling offered a different view on an issue posed earlier by Nancy Birdsall and me in our article "Forget Emissions, Focus on Research" in the Financial Times.

Greece: The start of a systemic crisis of the Eurozone?
Paul De Grauwe (VoxEU) Dec 15, 2009
Is the Greek crisis the beginning of a deeper sovereign debt crisis that could destabilise the Eurozone? This column argues the Eurozone is no closer to a debt crisis than the US, but some members are getting close. EU governments could bailout Greece and, to avoid having to do so, they should clarify their stance on the matter.

The Doha Round: Not breathing but still alive
Robert E. Baldwin (VoxEU) Dec 15, 2009
It is clear from the recent WTO ministerial meeting in Geneva that a successful conclusion to the Doha Round is a long way off. But long stoppages have been commonplace in earlier liberalisation efforts. This column outlines some of these delays in an effort to better understand the current standstill.

Real time solutions for US financial reform: A new ebook Recommended!
Viral Acharya, Thomas F. Cooley, Matthew Richardson & Ingo Walter (VoxEU) Dec 15, 2009
The NYU Stern group – authors of the influential book Restoring Financial Stability: How to Repair a Failed System – have completed a new ebook that assesses the strengths and weaknesses of the US financial reform legislation. This column introduces the new ebook.

Why don’t commodity exporters hedge against price fluctuations?
Eduardo Borensztein, Olivier Jeanne & Damiano Sandri (VoxEU) Dec 15, 2009
Accumulating large foreign exchange reserves is a costly insurance strategy for developing countries. This column says that commodity-exporting countries might do better by hedging their risk with financial instruments, thereby reducing the need to hold precautionary reserves. Yet few do so.

Three centuries of climatic variation and the world income distribution
John C. Bluedorn, Akos Valentinyi & Michael Vlassopoulos (VoxEU) Dec 15, 2009
Hot countries tend to be poorer. This column uses the cross-century, cross-country variation in climatic temperatures to estimate the effects of historic temperature upon current incomes. The negative relationship between current temperature and income appears due to temperature variations in the 18th and 19th centuries. That suggests that the consequences of climate change may be felt for a very long time.

Why Everyone Read Samuelson
David R. Henderson (WSJ) Dec 15, 2009
The late Nobel laureate's mathematical approach to economics has been a mixed blessing.

The incomparable economist
Paul Krugman (VoxEU) Dec 15, 2009
A reflection on the life and career of Paul Samuelson.

Paul Samuelson 1915-2009
Avinash Dixit (VoxEU) Dec 15, 2009
Paul Samuelson died last weekend; his legacy lives on. Here one of Samuelson’s most famous students discusses the great master’s work, wit, and lasting impact on the profession.

The Copenhagen Shakedown
WSJ Dec 16, 2009
Developing countries understand the real costs of climate change.

A Nation That 'Builds Things'
Dan Dimicco (WSJ) Dec 16, 2009
It's time to recognize we have trade competitors, not partners.

A tax on short-term debt would stabilise the system
Luigi Zingales (FT) Dec 16, 2009
European leaders have urged the International Monetary Fund to consider a Tobin tax on financial transactions. But such a tax has big shortcomings.

End bankruptcy priority for derivatives, repos and swaps Recommended!
Mark Roe (FT) Dec 16, 2009
If derivatives and repo transactions were not so favourably treated in bankruptcy, financial players would seek other ways to protect themselves. That effort would channel them into stabilising the financial system.

Another Greek Lesson: As Always Hard But Inspiring
Carlo Bastasin (PIIE) Dec 16, 2009
Greece faces the most difficult situation that has ever confronted a eurozone country since the birth of the common currency in 1999. Without draconian measures by the Athens government the fiscal situation of the country will soon become unsustainable. A failure to pay off its debt, though remote, cannot be completely ruled out with risks of contagion for the rest of the euro area.

Will Governments Overreach in Their Crisis Interventions?
Nicolas Véron (PIIE) Dec 17, 2009
For more than two years, financial turmoil has forced an ever wider scope of government intervention in many countries. It is natural that public authorities extend their reach in emergencies, and in many cases there was no other reasonable option. Moreover, in spite of the market rebound, many economies remain disrupted and fragile, making new emergency developments likely as recent headlines about Dubai or Greece illustrate. Further state expansion thus cannot be ruled out.

Who is paying for the beer?
Hossein Askari and Noureddine Krichene (AT) Dec 17, 2009
Run the currency changes correctly, and a wise tourist could enjoy free beer all holiday and return home with cash in hand. As the world watches speculators and bankers profit from central bank largesse, the question, as with the beer, is - who is paying for all the fun?

EU, Latin Americans Call Truce in Long-Running Banana War
Bridges Weekly Trade News Digest, Volume 13, Number 43 Dec 16, 2009
The European Union and a group of Latin American countries have reached an agreement to end tensions over the EU's tariffs on banana imports, bringing to a close the longest international trade dispute in memory.

Liquidity in the financial crisis: New insights on the lender of last resort
Ricardo Lagos, Guillaume Rocheteau & Pierre-Olivier Weill (VoxEU) Dec 16, 2009
Following the last run on a British bank over 130 years ago, Walter Bagehot argued that central banks should act as a lender of last resort. While such policies have been followed by central banks in today’s crisis, this column updates the recommendation by suggesting central banks should also act as a “liquidity provider of last resort”.

Making room for China in the world economy
Dani Rodrik (VoxEU) Dec 17, 2009
Policymakers blame the undervalued RMB for the global imbalances. Here one of the world’s leading development economists argues that the undervalued currency boosts China’s growth, and this, in turn, is good for the world’s recovery and the alleviation of poverty. China could maintain its growth without trade imbalances if it could introduce industrial subsidies to offset a rising yuan. It is better to subsidise tradables directly than to subsidise them indirectly through the exchange rate. This may run afoul of WTO rules, but that doesn’t diminish the economic case for the policy.

How to assess the renminbi’s undervaluation
Helmut Reisen (VoxEU) Dec 17, 2009
Must China let its exchange rate appreciate to reduce global imbalances? This column says the appropriate yardstick to measure currency undervaluation is based on the Balassa-Samuelson effect. That measure says the renminbi is undervalued by only 12%. A gradual renminbi appreciation will be sustained only if Chinese corporate and public savings are lowered.

The financial crisis and the structure of contracts
Charles A.E. Goodhart (voxEU) Dec 17, 2009
The structure of contracts in financial markets is deeply rooted in history. This column retraces the origins of financial contracting and explains why mutual fund banking proposals are wrong headed. It proposes to shift more of the functions of our current banking system away from limited liability back into partnerships. This would involve requiring hedge funds to be entirely separated from banks.

Reforms that will help China maintain its growth
Guo Shuqing (FT) Dec 17, 2009
Will China eventually follow the fate of other rapidly industrialised countries and slip into stagnation? It is possible.

Secrets strengthen case for CDS exchange
Gillian Tett (FT) Dec 17, 2009
The movement of spreads for credit default swaps is starting to grab the attention of investors and politicians alike.

London as a financial centre: Foul-weather friends
Economist Dec 17, 2009
London risks losing its global.

Global: Exit Strategies for the Global Central Bank
Manoj Pradhan (MS GEF) Dec 18, 2009
The ‘triple B’ recovery in G10 will make G10 central banks crawl rather than rush towards the exit, and should leave the ‘triple A’ liquidity cycle intact. The monetary policy stance is likely to remain fairly easy globally, and we expect inflation risks to surface next year.

Global: Global Forecast Update: 2010 Outlook: From Exit to Exit
Joachim Fels, Manoj Pradhan & Spyros Andreopoulos (MS GEF) Dec 18, 2009
This year was all about the exit from the Great Recession. Next year will be all about the exit from super-expansionary monetary policy. While we believe the exit will be the dominant macro theme next year, we identify five important economic themes in our global economic outlook that we see as highly relevant for investors in 2010.

Developing economies can help cure global imbalances
Kemal Dervis (FT) Dec 20, 2009
The focus on China has been excessive. Emerging countries could contribute to a more gentle rebalancing than an abrupt large decline in the Chinese surplus.

The 'Global Imbalances' Myth
Zachary Karabell (WSJ) Dec 21, 2009
Different countries have always played different roles in the world economy.

Playing Ponzi
Economist Dec 21, 2009
The legacy of the financial crisis will continue for some years yet in advanced economies.

It's too late to take the politics out of banking
Philip Stephens (FT) Dec 21, 2009
Leading the running for daft sayings by bankers this year is the latest call for governments to keep out of financial services.

Race against time: New insight on the growth effect of ethnic fractionalisation
Nauro F. Campos (VoxEU) Dec 22, 2009
Does ethno-linguistic fractionalisation stifle economic growth? This column presents new evidence that considers how fractionalisation changes over time and treats it as both a cause and an effect of economic growth. While fractionalisation is found to have a negative effect on growth, it also changes over time, contrary to conventional wisdom.

Why market sentiment has no credibility
Robert Skidelsky (FT) Dec 22, 2009

Insight: More capitalism, less regulation
Derek Scott (FT) Dec 22, 2009
The failure of those running capitalism to understand how it works will affect how we get out of the mess.
The same markets that so wounded the banking system that it had to be rescued by the taxpayer are now demanding fiscal consolidation as the price of their continued support for governments whose fiscal troubles they have largely caused.

The 1967-75 Suez Canal closure: Lessons for trade
James Feyrer (VoxEU) Dec 23, 2009
The effects of distance on trade and of trade on income have puzzled economists for centuries. This column presents new evidence from a natural experiment – the 1967-1975 closure of the Suez Canal. Results suggest that a 10% decrease in ocean distance results in a 5% increase in trade. Also, it estimates that every dollar of increased trade raises income by about 25 cents.

One Cheer for Barney Frank
WSJ Dec 23, 2009
The credit raters lose their oligopoly.

How the noughties were a hinge of history
Martin Wolf (FT) Dec 23, 2009
The rest of the world was inclined to believe that the west, whatever its faults, knew what it was doing. But then the teacher failed the examination.

Politics set to spoil recovery
Shawn W Crispin (AT) Dec 24, 2009
Strong economic growth in the coming year is predicted across Southeast Asia, as rising global growth boosts exports. The danger is that domestic political considerations could trump technocratic sense.

The decade the world tilted east
Niall Ferguson (FT) Dec 27, 2009
The realisation that the yawning US current account deficit was increasingly being financed by Asian central banks, with the Chinese moving into pole position, was, for me at least, the eureka moment of the decade.

How economics managed to make amends
Arvind Subramanian (FT) Dec 27, 2009
Economists may have failed to see the financial crisis coming but they have been vindicated by policies that averted another Great Depression.

US Dollar Takes Temperature of Troubled World
Paul Kennedy (Bloomberg) Dec 28, 2009
It's worth a thought, even during our holiday celebrations.

Commodity Prices Pose Big Risk in 2010
Sri Mulyani Indrawati (Bloomberg) Dec 28, 2009
Indonesia can look back at 2009 as a major outperformer, being one of the few countries in the world where gross domestic product expanded over the year.

Global tides that shaped the Noughties
Simon Schama (FT) Dec 28, 2009
Almost as unanticipated as theo­cracy on the march has been the summons, from the tomb, of financial governance. But the most paradoxical polarity to have opened up in the past 10 years may not be between anarchy and authority so much as between solipsism and community.

The challenges of managing our post-crisis world
Martin Wolf (FT) Dec 29, 2009
The underpinnings of our global economy and so of our globalised civilisation remain dangerously fragile. Somehow, we must manage to sustain a dynamic global economy, promote development, deliver environmental sustainability and ensure peaceful and co-operative international relations.

Insight: Prepare for lower oil prices
Chris Watling (FT) Dec 29, 2009
Increases in oil supply in coming years coupled with current spare capacity suggest a revisit of end 2008 price lows.

Emerging Markets Soar Past Their Doubters
NYT Dec 29, 2009
Staggering gains this decade in Brazil, Russia, China, India and other developing nations have left even some bulls wondering if the good times can last.

Our verdict on Copenhagen
Economist Dec 30, 2009
How an underwhelming accord could yet turn into a useful document.

Bubble trouble?
Economist Dec 30, 2009
China is set to overtake Japan in the world economic rankings.

Buckets of risk and successful diversification
Robert Jaeger (FT) Dec 30, 2009
Understanding different kinds of risk is key to successful diversification.

Western economies under strain
Economist Dec 30, 2009
Choosing between workers and creditors.

Banking after the kindness of strangers
Francesco Guerrera (FT) Dec 31, 2009
What 2010 holds in store for US finance in the first year after the great banking bailout of 2009.

Top Ten Globalist Features of 2009
Globalist Dec 30, 2009
Our features in 2009 offered thought-provoking insights into the global economy, politics and culture. From China's rapid economic rise to the global financial crisis — and from the uprising in Iran to efforts to fight poverty in South Africa — The Globalist covered it all. We present our ten best features of 2009.

Chinese New Year
Paul Krugman (NYT) Dec 31, 2009
Chinese mercantilism is a growing problem, and the victims of that mercantilism have little to lose from a trade confrontation.

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