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Early warning indicators and the global crisis: New evidence
Jeffrey Frankel & George Saravelos (VoxEU) Jul 1, 2010
Can “early warning indicators” predict which countries are most vulnerable to a crisis? This column examines more than 80 contributions to the pre-2008 literature on crisis indicators. It finds that the level of central bank currency reserves can help identify economies worst affected by crises. Other useful early warning indicators include real effective exchange rate overvaluation, current accounts, and national savings.
The Global Jobs Competition Heats Up
Martin N. Baily, Metthew J. Slaughter & Laura D'Andrea Tyson (WSJ) Jul 1, 2010
In a new study, corporate leaders say the U.S. business environment is losing its edge when compared countries like China, India and Brazil.
How to build a winner
WP Jul 1, 2010
Germany and China won the recession battle. Here is how they did it.
Asia: Launching Pad for Tomorrow's Emerging Markets
IMF Survey Jul 1, 2010
Following in the footsteps of Asia's dynamic emerging markets, low-income countries in the region are poised to become tomorrow's emerging markets. This will help to propel Asia's global economic leadership as it becomes the world's largest economic region in about 20 years.
Splintered solidarity has put global governance in a spin
Philip Stephens (FT) Jul 1, 2010
The financial crisis saw unity forged in adversity. Now, the crisis has passed, and with it the push to co-operate and co-ordinate. Politics has turned local again, and markets remain the masters.
What comes after inflation targets
Samuel Brittan (FT) Jul 1, 2010
The great virtue of nominal GDP is it approximates closely to the widely accepted goal of macroeconomic policy, namely sustainable growth with minimal inflation.
Football lessons for Africa’s exiles
Petina Gappah (FT) Jul 1, 2010
Football is one of the most visible signs of Africa’s skills exodus: the players represent just a tiny proportion of the skilled Africans of all trades and professions who leave the continent.
Eurozone woes leave Swiss with a sore head
Gillian Tett (FT) Jul 1, 2010
Zurich's successes – high growth rate, reduced debt – are attracting investors and creating huge pressure for Swiss franc appreciation against the euro.
Myths of Austerity
Paul Krugman (NYT) Jul 1, 2010
Somehow it has become conventional wisdom that now is the time to slash spending, despite the fact that the world's major economies remain deeply depressed.
Asia’s Dueling Duopoly
Heizo Takenaka (Project Syndicate) Jul 1, 2010
In today’s Asia, there are two economic powers of global standing, Japan and China. But the balance of economic power between the two is changing, and fast: sometime this year, China’s GDP will exceed that of Japan, and its economic footprint will continue to spread rapidly across Asia and the rest of the world.
The effects of e-commerce: The click and the dead
Economist Jul 1, 2010
E-commerce favours large companies but only because that is what people want.
Global economic policy: Austerity alarm
Economist Jul 1, 2010
Both sides in the row over stimulus v austerity exaggerate, but the austerity lobby is the more dangerous.
International trade in services: A portrait of importers and exporters
Holger Breinlich & Chiara Criscuolo (VoxEU) Jul 2, 2010
Services trade accounts for a large and growing share of international trade - but we know very little about the firms carrying out this trade. Using firm-level data from the UK between 2000 and 2005, this column paints a detailed picture of importers and exporters of services, and discusses some of the resulting implications for economic policy.
Is Speculating on Food Dangerous?
Denis Drechsler, George Rapsomanikis & Alexander Sarris (Project Syndicate) Jul 2, 2010
Some believe that the food-price crisis in 2007-2008 was amplified by speculative trading in commodity futures, which have become an integral part of food markets. But futures markets have evolved in response to market participants’ need to manage price risks, and they are an indispensable marketing tool for many commodities.
Can Good Emerge From the BP Oil Spill?
Kenneth Rogoff (Project Syndicate) Jul 2, 2010
Perhaps it is a pipe dream, but it is just possible that the ongoing BP oil-spill catastrophe in the Gulf of Mexico will finally catalyze support for a US environmental policy with teeth. If so, the starting point should be a renewed push for a carbon tax.
Afghanistan and the 'Resource Curse'
Stephen Haber and Victor Menaldo (WSJ) Jul 2, 2010
With its newly discovered mineral wealth, it could end up like Nigeria. Or like Mexico.
Economists Who Did Their Homework (800 Years of It)
Catherine Rampell (NYT) Jul 2, 2010
Many economists build careers on only a few decades' worth of data. Kenneth Rogoff and Carmen Reinhart researched eight centuries of financial crises for "This Time Is Different."
Protectionist Myths
Jagdish Bhagwati (Project Syndicate) Jul 3, 2010
The pessimism and despair that often overwhelms free traders today is unwarranted. The arguments of protectionists, new and old, are just so many myths that can be successfully challenged.
Europe risks failing the real test on banks
Wolfgang Münchau (FT) Jul 4, 2010
It is official EU policy to deny that Greece might default – a genuine stress test might expose that as indefensible.
China builds bridges to fuel its engine room
Hongyi Lai (FT) Jul 4, 2010
To succeed, Beijing must diversify both its oil sources and the ways in which oil crosses its borders.
Russia will struggle to join the fold on trade
Peter Rutland (FT) Jul 4, 2010
Some of the gains from Moscow’s WTO entry would be reaped by foreign investors – at the expense of local businesses.
We need institutions to profit from prudence
Martin Jacomb (FT) Jul 4, 2010
There is an important difference between telling banks what they cannot do by regulation and encouraging them to revert to sound management.
Regulate short-funding to make banking safe
Enrico Perotti (VoxEU) Jul 5, 2010
This column argues that government measures to restore confidence in the financial system have achieved a “pause in the panic”, but this is not enough. Governments still need to reverse the dramatic slide of the financial system towards unstable funding – a trend which holds a gun to the heads of governments and central banks.
Reforming China’s Healthcare System necessary for growth rebalancing
Sarah Huelser & Syetarn Hansakul (DB Research) Jul 5, 2010
China’s healthcare system has been underfunded in the past years. 2009, the government announced a “big bang” reform. The changes are not only meant to cover 90% of the Chinese population with healthcare insurance schemes by 2011 but also to boost domestic demand and thereby rebalance China’s growth path. Even though reforms are a step into the right direction, many challenges remain.
China Has a Yuan Asset to Sell You
WSJ Jul 5, 2010
Beijing takes steps to make the renminbi an international currency.
Euroland: Contagion, Exposure and the Policy Response
Daniele Antonucci (MS GEF) Jul 5, 2010
Developments in the periphery can affect the rest of the euro area through various channels, ranging from the bond market to exports, confidence and bank lending. Contagion risks can be considerable, and we look at this theme of from four different angles.
Freedom in retreat
Fred Hiatt (WP) Jul 5, 2010
Around the world, freedom is in peril.
Reform or revenge?
Robert Samuelson (WP) Jul 5, 2010
If basic ingredients of financial panics never change, how helpful is new legislation?
Equities to swoon in the heat of austerity plans
Trevor Greetham (FT) Jul 5, 2010
"Fiscal masochism" will force central banks to print money as deflationary forces intensify.
Waiting for a Trade Policy
NYT Jul 5, 2010
At a time when protectionism is rising around the world, the United States must become a leading voice for open international trade.
China, the Sweatshop
NYT Jul 5, 2010
China's exploited workers don't need an extra parent. They need higher wages, better working conditions and a chance to form independent unions.
Capital controls and the crisis in emerging markets
Kavaljit Singh (VoxEU) Jul 5, 2010
Despite recovering faster than developed countries, many emerging markets are struggling to cope with large capital inflows. This column discusses the recent capital controls imposed by Indonesia and South Korea. It argues that while the international community is warming to these policies, it would be wrong to view capital controls as a panacea.
China Bashing Over Yuan Needs a Long Rest
Ronald McKinnon (Bloomberg) Jul 5, 2010
I’ll say it at the outset: Focusing on the yuan-dollar rate is a serious distraction, and it’s time for the U.S. to back off from bashing China over problems that are born mostly at home.
BRICs' Stepchild Is Cheap at Half the Price
Julian Rimmer (Bloomberg) Jul 6, 2010
When strategists appraise the Russian stock market, they cheep “It’s cheap!” without fail. In this new world order, investors are meant to prize inexpensive emerging markets with flexible exchange rates, political predictability, current account surpluses and reassuring reserves. Markets like Russia’s, for instance.
Let’s do a Doha deal
Gary Clyde Hufbauer & Robert Z. Lawrence (VoxEU) Jul 6, 2010
Originally scheduled to end in 2005, Doha negotiations have dragged into their ninth year. This column argues that, while many observers assign blame to the complexity of 153 members reaching a consensus, the heart of the matter is far simpler. It says that if the US and China come up with new offers, the momentum for a speedy agreement will be unstoppable.
Demand shortfall casts doubt on early austerity
Martin Wolf (FT) Jul 6, 2010
Rapid cuts in fiscal support make sense if, and only if, monetary policy can be effective on its own and expanding the interest-elastic parts of the economy is the best way to climb out of the hole.
Finance spread its own risks but left ours alone
John Kay (FT) Jul 6, 2010
The risks that the financial sector has devised techniques to manage are not the everyday risks of an uncertain world: they are risks almost entirely created within the financial sector itself.
Welcome to the Latin American decade
Luis Alberto Moreno (FT) Jul 6, 2010
Having weathered the financial crisis, Latin America now has the opportunity to join Asia in leading a global economic recovery – if its governments tackle long-neglected problems.
We have yet to address the cause of the crisis
Conrad Voldstad (FT) Jul 6, 2010
Given the list of casualties inflicted by real estate exposure, surely regulation of risk should be the goal of any financial reform.
Will abandoning the dollar peg help China rebalance its economy?
Willem Thorbecke (VoxEU) Jul 6, 2010
Will China’s decision to ditch the dollar peg help rebalance the global economy? This column argues that China’s action may facilitate a concerted appreciation in Factory Asia, helping the region redirect production away from western markets and towards domestic consumers.
A Wall Street Rocket Scientist in King Arthur's Court
Aaron Brown (Wilmott) Jul 6, 2010
What if Hank Morgan had been a quant?
Central Banking Deflowered
Harold James (Project Syndicate) Jul 7, 2010
After the ECB announced on May 9 that it would buy the government bonds of Mediterranean countries experiencing severe fiscal strains, critics complained that the Bank had “lost its virginity.” But, whether they like it or not, central banks' responsibility has always extended far beyond merely ensuring price stability.
Europe’s Banks, Europe’s crisis
Daniel Gros (Project Syndicate) Jul 7, 2010
Europe’s policy makers have let themselves been misled by politically convenient views of the crisis, first believing that all problems came from the US, and now blaming reckless fiscal policy by the eurozone's southern members. But the real problem is the EU's weakly capitalized banks, which are so interconnected that problems in one country quickly jeopardize the entire system.
Fiscal consolidation as a policy strategy to exit the global crisis
Giancarlo Corsetti (VoxEU) Jul 7, 2010
Are governments right to start cutting their deficits? This column presents good news and bad news. It supports a strongly precautionary approach to fiscal consolidation, but warns of the macroeconomic costs that come with each additional cut in the deficit. The financial crisis is not over yet.
Trade accounting in the recent recession
Jonathan Eaton, Samuel S. Kortum, Brent Neiman & John Romalis (VoxEU) Jul 7, 2010
The great trade collapse during the global crisis has reignited interest in the relationship between trade and GDP over the business cycle. This column argues that trade patterns in the recent recession largely reflected the shift away from demand for durable goods, although increasing trade frictions did play a moderate role in some countries.
Political Paralysis Poisons WTO Agriculture Talks
Bridges Weekly Trade News Digest, Volume 14, Number 25 Jul 7, 2010
Paralysis at the political level continues to stymie attempts to move forward in the WTO Doha talks on farm trade, sources said this week, after a meeting on the controversial "special safeguard mechanism" for developing countries produced no further progress.
Officials Seek to Ease Fears of Privacy Violations under ACTA
Bridges Weekly Trade News Digest, Volume 14, Number 25 Jul 7, 2010
Although controversy continues to dog a potential multi-country agreement on strengthening intellectual property enforcement, government negotiators made progress towards an accord during talks in Lucerne, Switzerland last week, and reaffirmed their commitment to work to conclude a deal as soon as possible in 2010.
Keynes vs. Hayek: The Great Debate Continues
Gerald O'Driscoll (WSJ) Jul 7, 2010
Newly discovered letters from two great economists shed light on today's discussion of economic 'stimulus.'
Austerity is not the only option
Michael Hudson (FT) Jul 7, 2010
Tax reform is the best option to help countries regain their competitiveness. In Latvia, for example, high taxes on labour leave open the possibility of shifting taxes to other areas, in particular land.
China’s little emperors demand their due
Geoff Dyer (FT) Jul 7, 2010
Modernisation has unleashed powerful forces – pride and confidence in China’s achievements but also high expectations about the life that can be lived.
The Swiss franc is the new German mark
Mansoor Mohi-uddin (FT) Jul 7, 2010
Switzerland's central bank has the potential to influence markets.
World Recovery Continues, But Risks Increase, Says IMF
IMF Survey Jul 8, 2010
Balancing the strong growth numbers for the first half of 2010 and the adverse impact of renewed financial turbulence, the IMF forecasts world growth to rise 4 ½ percent this year, but new uncertainties pose risks to financial stability and cast a cloud over the outlook
Joseph E. Stiglitz (Project Syndicate) Jul 8, 2010
Finance is supposed to serve the interests of the rest of society, not the other way around. Having gotten the world into its current economic mess, financial markets are now dictating fiscal austerity to countries that have no choice but to go along - and then betting against these countries when they do.
Collaborating with Corruption
Fron Nahzi (Project Syndicate) Jul 8, 2010
Too often, the US, the EU, and the UN choose to look the other way in ethnic Albanian areas of the Balkans, giving free rein to corrupt officials in the vain hope of gaining local support for international efforts to strengthen “regional stability.” But this policy has yielded little stability, while keeping Kosovo, Albania, and Macedonia on the crumbling edge of the “failed state” abyss.
Disasters, recoveries, and the equity premium
Robert Barro, Emi Nakamura, Jón Steinsson & Jose F. Ursua (VoxEU) Jul 8, 2010
Previous research suggests that the potential for rare, but large, economic disasters helps explain the equity-premium and related asset-pricing puzzles. This column presents evidence from a new empirical model of consumption disasters and discusses a range of assumptions required for the model to predict the observed long-run average equity premium.
Can real exchange rate undervaluation boost exports?
Mona Haddad & Cosimo Pancaro (VoxEU) Jul 8, 2010
Current discussions over the value of China’s currency demonstrate the controversy that exchange-rate policy is capable of igniting. This column suggests that while a managed real undervaluation can enhance domestic competitiveness, it is difficult to sustain in the post-crisis environment – both economically and politically. It says that a real undervaluation works only for low-income countries, and only in the medium term.
A safer world financial system
Stijn Claessens, Richard J. Herring & Dirk Schoenmaker (VoxEU) Jul 8, 2010
The major economies' financial reforms come up short on one crucial aspect – the resolution of systematically important cross-border financial institutions. This column introduces the latest Geneva Report on the World Economy, which advocates a two-tier solution to this problem – a universal approach for closely integrated countries such as EU members and a modified universal approach for other countries. It explicitly rejects the territorial or go-it-alone approach.
The euro-area economy: Lemon aid
Economist Jul 8, 2010
Germany's exporting prowess is leaving the rest of the euro area behind.
America needs a growth strategy
Michael Spence (FT) Jul 8, 2010
A bold move is needed: the US must create new capital-intensive jobs where labour productivity levels are consistent with advanced nation incomes.
Why we must halt the land cycle
Martin Wolf (FT) Jul 8, 2010
Ruinous trust in land speculation as the route to wealth has led to expensive houses and inefficient taxes but, far worse, it ended up destabilising the entire global economy.
China's time to draw the line
Antal E Fekete (AT) Jul 9, 2010
The United States, backed by Milton Friedman's theory of floating exchange rates, has long played the role of the bully-boy of international trade. Too many countries - with Japan to the fore - have suffered huge losses on their foreign exchange reserves as a consequence. Maybe this time China will draw the line.
The dollar question: Where are we?
Kati Suominen (VoxEU) Jul 9, 2010
The global crisis has led some to question the dollar’s place as the dominant currency. This column discusses three camps in the literature: those advocating a new synthetic global currency, those arguing that a new reserve currency will emerge, and those suggesting a return to sharing the role. It concludes that talk of the dollar’s death – or even its decline – are exaggerated.
Is Europe Doing Everything Wrong?
Mario I. Blejer & Eduardo Levy Yeyati (Project Syndicate) Jul 9, 2010
Reviving the EU's peripheral economies - Greece, Ireland, Portugal, and Spain - requires euro depreciation, closing the inflation differential between the eurozone's periphery and core, and, in some cases, orderly debt restructuring. But EU policymakers have chosen to do precisely the opposite on each front.
Europe, the United States and Their Common Challenges
Lorenzo Bini Smaghi (Globalist) Jul 9, 2010
How could the current economic difficulties faced by Europe and the United States strengthen the transatlantic alliance?
ASEAN: The Leverage Lesson, Double Dip and the Rebalancing Game
Deyi Tan, Chetan Ahya & Shweta Singh (MS GEF) Jul 9, 2010
The 1998 financial crisis taught ASEAN a lesson on leverage, and the ASEAN economies learned it well. Yet past deleveraging as domestic demand excesses were corrected have left it to the export machine to fill the growth void. With double-dip concerns, the other lesson of macro rebalancing is yet to be mastered.
Global: How I Stopped Worrying and Learned to Love the Double-Dip Scare
Manoj Pradhan (MS GEF) Jul 9, 2010
Markets are clearly worried about a double-dip recession that could wipe out the gains of the past year. A second recession doesn’t seem to be anywhere in sight. As long as a recession doesn’t materialise, policy rates on hold for longer, moderating inflation expectations and lower bond yields have likely set the stage for AAA liquidity to be provided for longer.
How Inequality Fueled the Crisis
Raghuram Rajan (Project Syndicate) Jul 9, 2010
Before the recent financial crisis, politicians from both political parties in the US egged on Fannie Mae and Freddie Mac, the giant government-backed mortgage agencies, to support low-income lending in their constituencies. There was a deeper concern behind this newly discovered passion for housing for the poor: growing income inequality.
Life expectancy around the world
Ryan D Edwards (VoxEU) Jul 10, 2010
In the least 30 years, the difference in life expectancy at birth across the globe has fallen dramatically. This column presents new data on life expectancy within and between countries for the period 1970 to 2000. Controlling for infant mortality, it finds that while within-country inequality in life expectancy fell, between-country inequality rose, leaving total inequality unchanged.
The political economy of the subprime crisis
Atif Mian, Amir Sufi & Francesco Trebbi (VoxEU) Jul 11, 2010
Is the US government to blame for the subprime crisis and by extension the global crisis? This column presents a unique study of how vested interests, measured by campaign contributions from the mortgage industry and the share of subprime borrowers in a congressional district, influenced US government policy during in the build up to the subprime crisis and subsequent global crisis.
The Trilemma of International Finance
N. Gregory Mankiw (NYT) Jul 11, 2010
Economic policy makers around the world have a trio of goals, but they can never accomplish them all.
Why the west faces a harsher future
Martin Wolf (FT) Jul 11, 2010
There is much to admire in the hard realism of Stephen King, HSBC's chief economist, but relative decline should not mean diminished prosperity.
Even eurozone optimists are not optimistic
Wolfgang Münchau (FT) Jul 11, 2010
What kind of recovery, if any, are we going to get? My fear is that the eurozone may end up in a low-growth equilibrium for quite a long time, similar to Japan in the 1990s.
Europe’s banks need a recovery fund
Alessandro Profumo (FT) Jul 11, 2010
Dysfunction in the capital markets should never again be allowed to threaten existence of solvent banks.
The World Isn't Waiting on Free Trade
Mike Johanns (WSJ) Jul 12, 2010
Our exporters are losing ground. The president should act on the trade agreements with Colombia and others.
What Safeway Can Teach Us About Economics
John Tamny (Forbes) Jul 12, 2010
Embrace tariffs and free trade, and let markets correct themselves.
The Dollar and the Dragon
Joseph S. Nye (Project Syndicate) Jul 12, 2010
A "balance of financial terror" has settled over US-China economic relations. China could bring the US to its knees by selling off its massive holdings of dollar-denominated reserves, but it would bring itself to its ankles in the process.
Ending the scourge of dual labour markets in Europe
Samuel Bentolila, Tito Boeri & Pierre Cahuc (VoxEU) Jul 12, 2010
Many economists across Europe agree on the need for labour market reform. In this column economists from France, Italy, and Spain argue that while the reforms of the 1980s increased flexibility, they also led to a two-tier system with ultra-secure permanent workers and vulnerable temporary workers – increasing unemployment in the downturn. In order to complete the reform path, governments should fight dualism by making job security provisions increase smoothly as workers acquire tenure.
The Market Confidence Bugaboo
Dani Rodrik (Project Syndicate) Jul 12, 2010
Governments around the world are now cowering in fear of "market confidence" – that ineffable object of desire that makes officials impement policies they don't really believe in. Indeed, if the current crisis gets worse, it will be political leaders that bear primary responsibility – not because they ignored markets, but because they took them too seriously.
Sagging Global Growth Requires Us to Act
Nouriel Roubini and Ian Bremmer (FT) Jul 12, 2010
The most realistic scenario for global growth is painful, even if we avoid a double dip. US growth in the second half of this year and into 2011 will feel like a recession.
Debt shuffling will be a self-defeating exercise
Satyajit Das (FT) Jul 12, 2010
European Financial Stability Facility must not repeat the mistakes that led to the financial crisis.
In the shadow of the dragon
John Downs (AT) Jul 13, 2010
With the two export markets - the United States and European Union - that in large part fueled China's remarkable growth now very short of cash, Chinese industry will have little choice but to look elsewhere for trade partners and low-cost bases for new plants. That should be good news for neighbors to the south.
New thinking on executive compensation: Pay CEOs with debt
Alex Edmans (VoxEU) Jul 13, 2010
Recovering US insurance giant AIG recently announced that 80% of their executives’ bonuses will depend on the price of their firm’s bonds and only 20% will depend on the price of their equity. This column argues that such moves will better align CEO fortunes with those of all investors – both shareholders and bondholders – and help prevent future financial crises.
Fiscal Fibs and Follies
Barry Eichengreen (Project Syndicate) Jul 13, 2010
Across the globe, the debate over fiscal consolidation has the distinct sound of two sides talking past one another. Whereas severely distressed southern European states may well benefit from cutting their budget deficits, those arguing for fiscal consolidation in the major G-20 economies are playing a dangerous game.
Trade Deficits As Far As The Eye Can See
Brian S. Wesbury and Robert Stein (Forbes) Jul 13, 2010
Why you shouldn't worry too much about the U.S. trade deficit.
Dodd-Frank, Meet William Jennings Bryan
Eugene N. White (WSJ) Jul 13, 2010
Why a 'Financial Crisis Fund' was rejected over a century ago.
A cure that could do more harm than good
Masayuki Oku (FT) Jul 13, 2010
There is a danger that the pursuit of regulatory perfection will merely have the effect of transferring risks from banks to customer.
Mr Market should sometimes get his way
John Kay (FT) Jul 13, 2010
Speculators command authority from the money they put behind the views they express. Talk is cheap, but short selling is not.
Leverage crises nature's way of saying "slow down"
Jamil Baz (FT) Jul 13, 2010
Debt crises are nature's way of telling us to slow down, and policymakers should ignore the signs at their own peril.
Three years and new fault lines threaten
Martin Wolf (FT) Jul 13, 2010
Leaders of the world’s principal economies – both advanced and emerging – will need to reform co-operatively and deeply if the world economy is not to suffer further earthquakes.
Germany's Euro Advantage
Simon Tilford (NYT) Jul 13, 2010
Competitive devaluations within the eurozone pose a threat to the future of the euro.
Reconstructing the World Economy
IMF Survey Jul 13, 2010
As the world emerges from the worst crisis in decades, a new IMF book presents a number of proposals for improving the stability of the global economy.
How Serious Is the Chinese Challenge? Part I
Bruce Stokes (YaleGlobal) Jul 13, 2010
China displays new willingness to exert global leverage.
Youth Without Work
Edoardo Campanella (Project Syndicate) Jul 14, 2010
Among the many devastating effects of the current global financial crisis, one of the most pernicious in the developed world is the upward trajectory of youth unemployment. When young people cease to be the engine of an economy, long-run economic growth is endangered, and social unrest becomes a real threat to the democratic political order.
The changing face of emergence
Martin Hutchinson (AT) Jul 14, 2010
Goldman Sachs' chief economist Jim O'Neill tips Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa as the next favored emerging markets. But the rules of the game have changed since O'Neill's near-decade old, and now famous, forecast of BRIC emergence.
A Roosevelt Moment for America’s Megabanks?
Simon Johnson (Project Syndicate) Jul 14, 2010
Just over a hundred years ago, the US led the world in terms of rethinking how big business worked – and when the power of such firms should be constrained - by enacting the Sherman Antitrust Act. The Dodd-Frank financial-reform bill, which is about to pass the US Senate, does something similar – and long overdue – for banking.
Affordable Green Energy
Bjørn Lomborg (Project Syndicate) Jul 14, 2010
The dominant approach to addressing climate change – subsidizing inefficient technologies or making fossil fuels too expensive to use - cannot possibly achieve the goal of reducing greenhouse-gas emissions by 50% by mid-century. Instead, we should fund the basic research that will make green energy too cheap and easy to resist.
A Dangerous Dynamic In Emerging Asia Markets
Arpitha Bykere and Adam Wolfe (Forbes) Jul 14, 2010
Hong Kong, Singapore and others must prevent volatility from blunting growth.
Economics Behaving Badly
George Loewenstein & Peter Ubel (NYT) Jul 14, 2010
The limits of what psychology can tell us about choices.
Lessons from the "Lords of Finance"
Edwin M. Truman (PIIE) Jul 14, 2010
I am not able these days to make as much time as I would like to read whole books, but during a recent vacation I was able to finish Lords of Finance by Liaquat Ahamed. I recommend it to anyone interested in the interwar period of the 1920s and 1930s, both before and after, and how that experience may relate to the recent economic and financial crisis. It is a good and easy read, even at 500 pages. Some personal thoughts and reactions:
European Commission Looks to Loosen Hold on GMO Regulations
Bridges Weekly Trade News Digest, Volume 14, Number 26 Jul 14, 2010
The European Commission recommended sweeping new changes to the European Union's policy on the cultivation of genetically modified organisms (GMOs) on Tuesday, unveiling a proposal to grant individual member states the right to decide for themselves whether to allow their domestic farmers to grow the altered crops.
The Uses and Abuses of Economic Ideology
Adair Turner (Project Syndicate) Jul 15, 2010
John Maynard Keyenes once wrote that, "Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist.” But today the greater danger is that practical men and women gravitate to vulgar versions of the dominant beliefs of economists who are very much alive.
Immigrants and US Innovation
William Kerr & William Lincoln (VoxEU) Jul 15, 2010
How does high-skilled immigration affect innovation in receiving countries? This column examines how large fluctuations in the admissions levels of H-1B visa holders between 1995 and 2008 influenced US patenting. It suggests higher H-1B admissions increased US innovation through the direct contributions of the immigrants without crowding out those of natives.
Why Germany should not listen to the US
Hans-Werner Sinn (VoxEU) Jul 15, 2010
Some Americans are calling on Germany to pursue expansionary fiscal policy. This column says that the German government should ignore US criticism of its savings measures.
Bank stress tests: Don't flunk this one
Economist Jul 15, 2010
The stress tests of Europe’s banks have been chaotic. But it is too soon to write them off.
The value of finance: A mirage, not a miracle
Economist Jul 15, 2010
The banks' contribution to the economy has been overstated.
Global monetary policy: The central bankers' burden
Economist Jul 15, 2010
Deflation is not imminent but the rich world's central banks must be ready to do what they can to fend it off.
How and when to fsoc it to the hedge funds
Sebastian Mallaby (FT) Jul 15, 2010
When it comes to hedge funds the FSOC may be tempted to cast a wide net. But it needs to resist populist cop-outs.
It is time to face down the threat of deflation
John Makin (FT) Jul 15, 2010
Central banks, led by the Federal Reserve, will have to announce firm price level targets that imply rapid money creation.
Europe’s stress test is no short cut to stability
Mohamed El-Erian (FT) Jul 15, 2010
Next week sees the announcement of stress test results for 91 European banks. A similar test in the US last year is believed by many to have contributed to the normalisation of financial markets. Regrettably, in Europe such a transformation is a far bigger challenge.
How Serious Is the Chinese Challenge? Part II
Markus Jaeger (YaleGlobal) Jul 15, 2010
Despite its rise, China has lopsided financial interdependence with the US.
'Bail-in' will save the taxpayer from the bail-out
Gillian Tett(FT) Jul 15, 2010
A workable solution to the 'Too Big To Fail' conundrum.
Global: Appetite for Restriction
Manoj Pradhan (MS GEF) Jul 16, 2010
Central banks appear to have very little sympathy for market concerns of a double-dip. EM central banks, in particular, have shown a good deal of confidence in the sustainability of the global recovery by making a start to normalising policy.
Yuan as a reserve currency: Likely prospects & possible implications
Markus Jaeger (DB Research) Jul 16, 2010
Rising US indebtedness combined with China’s rising economic and financial prowess have led some analysts to forecast the decline of the dollar and the rise of the yuan as the dominant reserve currency. It will take China 15-20 years to put in place the conditions necessary for the yuan to emerge as an important reserve currency and even longer to rival the dollar as the dominant reserve currency. The emergence of the yuan as a reserve currency would confer moderate financial and significant non-financial benefits on China.
Chinese foreign direct investment: What's happening behind the headlines?
Lucian Cernat & Kay Parplies (VoxEU) Jul 16, 2010
While China is recognised as one of the world's leading destinations for inward foreign direct investment, outward investment by Chinese companies has also taken off in recent years. This column presents survey data suggesting that, similar to western firms, Chinese companies tend to invest in well-developed countries with a large market size and a favourable institutional environment.
In Finance We Distrust
Michael Spence (Project Syndicate) Jul 16, 2010
It now seems universally accepted that government should establish the structure and rules for the financial system, with participants then pursuing their self-interest within that framework. But in a complex system in which expertise, insight, and real-time information are widely dispersed – and trust is lacking – reliance on such a framework seems deficient and unwise.
The folly of common currencies
Henry CK Liu (AT) Jul 16, 2010
Europe should not be surprised at the difficulty it faces in maintaining a common currency across widely divergent economies. The examples of Argentina and Hong Kong in their efforts to peg their currencies to that of another country should have been lesson enough.
Double-Dip Days
Nouriel Roubini (Project Syndicate) Jul 16, 2010
With the world economy set to slow, a scenario in which US growth slumps to 1.5%, the eurozone and Japan stagnate, and China’s growth rate falls below 8% may not imply a global contraction, but it will feel like one. And any additional shock – a highly plausible concern – could tip the global economy back into full-fledged recession.
Meanwhile in Basel
NYT Jul 17, 2010
The Basel committee should do its job and come up with tough rules needed to prevent another financial meltdown.
Calling recessions in real time
James D. Hamilton (VoxEU) Jul 18, 2010
Is the world economy about to experience a "double-dip" recession? This column argues that, while there may be a recession on the way, the current recession ended in the summer of 2009. Any subsequent downturn should thus be labelled a new recession.
One fix for the US mortgage default problem
Alex Edmans (VoxEU) Jul 17, 2010
Foreclosure is often seen as a lose-lose situation. This column describes a new incentive scheme aimed at reducing strategic defaults. The Responsible Homeowner Reward, a debt-like security that only pays off if the lender is repaid in full, is being implemented in the US.
The Next Financial Crisis (the Stamp Bubble?)
Eduardo Porter (NYT) Jul 18, 2010
The Postal Service plans to sell Forever Stamps at their current rate until it raises the price in January. That is as close as one gets to a free lunch.
America’s sensible stance on recovery
Lawrence Summers (FT) Jul 18, 2010
The combination of measures that prevent sharp declines in demand in the short run, and measures that add to confidence by controlling the factors that drive deficits, offers the best prospect for moving the economy forward.
Why the battle is joined over tightening
Martin Wolf (FT) Jul 18, 2010
To tighten or not to tighten – that is the question. It is one to which policymakers have started changing their answers. Are they right to do so?
The failed-state conundrum
Fareed Zakaria (WP) Jul 19, 2010
Trying to fix places like Somalia comes with a high risk of unintended consequences.
The low-interest-rate trap
Francesco Giavazzi & Alberto Giovannini (VoxEU) Jul 19, 2010
Should the crisis spur central banks to change how they conduct monetary policy? This column argues that strict inflation targeting, which ignores financial fragility, can produce interest rates that push the economy into a “low-interest-rate trap” and increase the likelihood of a financial crisis.
Risk panics: When markets crash for no apparent reason
Philippe Bacchetta, Cédric Tille & Eric van Wincoop (VoxEU) Jul 19, 2010
Why did the world economy plunge into the worst recession since the Great Depression? This column argues that economic fundamentals do not explain the global crisis. But they did play a role. Events such as the fall of Lehman Brothers can become focal points for investors’ risk perceptions, changing the way the fundamentals are interpreted. This can lead to “risk panics” – self-fulfilling spikes in risk and a collapse in asset prices.
Today’s Keynesians have learnt nothing
Niall Ferguson (FT) Jul 19, 2010
The austerity debate: Supersized deficits are denting business confidence, not least by implying higher future taxes. Those who liken confidence to an imaginary ‘fairy’ have failed to learn from decades of economic research.
It is far too soon to end expansion
Brad DeLong (FT) Jul 19, 2010
The austerity debate: We will know when the time comes to stop expansion. Financial markets will tell us. And not by whispering in a still, small voice.
Investor reaction to market stress set to change
Robert Parker (FT) Jul 19, 2010
G3 Government bonds are making way for the emerging markets as the safe haven in times of market crisis.
Running in Place on Trade
Jagdish Bhagwati (Project Syndicate) Jul 20, 2010
G-20 meetings regularly affirm the importance of maintaining and strengthening openness in trade, and June’s summit in Toronto was no different. Yet talk is cheap, and the open-mouth policy of (generally pro-trade) pronouncements has not been matched by action.
Monetary theory from a Chinese historical perspective
John Whalley, Yaguang Zhang & Zheng Xueyi (VoxEU) Jul 20, 2010
While many commentators focus on China’s future, this column draws economic theory insights from its past. It argues that Chinese monetary theory preceded Western thought and influenced the likes of Adam Smith and Karl Marx. Moreover, it says the Eastern emphasis on the pursuit of wisdom, as opposed to knowledge, has a role to play in today’s economic debate.
Global: An Exercise in Debt Sustainability
Chuan Lim & Pasquale Diana (MS GEF) Jul 20, 2010
We delve into the topic of debt sustainability and provide the simulation results of the future trajectory of debt to GDP for various EM countries, with specific concentration on Central Europe.
PIIGS to the slaughter
Spengler (AT) Jul 21, 2010
The next time European nations in the south-sweeping arc from Ireland to Greece - aka PIIGS - sink under the weight of their debt, the Germans will not come to the rescue. The hard-working northerners have other priorities, and other friends, and aim to survive when a Latin American-style crisis breaks out in the profligate south.
The Volcker Rule
John Cassidy (New Yorker) Jul 26, 2010
Obama’s economic adviser and his battles over the financial-reform bill.
Alphabet Soup
Bill Gross (PIMCO) Jul 2010
The lack of global aggregate demand – resulting from too much debt in parts of the global economy and not enough in others – is the essence of the problem.
The Politically Incorrect Guide to Ending Poverty
Sebastian Mallaby (Atlantic) Jul/Aug 2010
An eminent economist discovers the virtues of colonialism.
"Asia Leading the Way"
Finance and Development Jun/Aug 2010
Explores how the region is moving into a leadership role in the world economy. The issue looks at Asia's biggest economy, China, which has relied heavily on exports to grow, and its need to increase domestic demand and to promote global integration if it is to continue to thrive. China is not the only Asian economy that heavily depends on exports and all of them might take some cues from the region's second-biggest economy, India, which has a highly developed services sector. Min Zhu, the new Special Advisor to the IMF's Managing Director, talks about Asia in the global economy, the global financial crisis, correcting imbalances, and the IMF in Asia. And "People in Economics" profiles an Asian crusader for corporate governance, Korea's Jang Hasung. This issue of F&D also covers how best to reform central banking in the aftermath of the global economic crisis; the pernicious effects of derivatives trading on municipal government finances in Europe and the United States; and some ominous news for governments hoping to rely on better times to help them reduce their debt burdens. Mohamed El-Erian argues that sovereign wealth funds are well-placed to navigate the new global economy that will emerge following the world wide recession. "Back to Basics" explains supply and demand. "Data Spotlight" explores the continuing weakness in bank credit. And "Picture This" focuses on the high, and growing, cost of energy subsidies.