Mark Kiesel (PIMCO) Jan 2010
Global economic conditions and structural factors remain supportive for the emerging markets to “run fast,” and for the U.S., Canadian and Australian economies to “run faster” on a relative basis than most other developed economies in 2011. This is in sharp contrast to the outlook in Europe and the U.K., where fiscal tightening and lingering sovereign credit issues suggest these regions are set to “run slow.” This large economic differentiation leads to significant credit implications for investors. Investors should favor investing in companies tied to economies with the strongest fundamental outlook. Given longer-term structural and near-term cyclical factors, the emerging markets and the U.S., Canada and Australia present the most attractive credit opportunities today for investors. In terms of specific sectors, investments in emerging market corporate bonds, U.S. banks, secured debt, select municipal BABs and high yield bonds offer compelling opportunities. Investors should take advantage of the improving fundamental trends in select bonds in these sectors as economies in these issuers’ regions run fast. Healthy economic growth in emerging markets and solid cyclical growth in the U.S., Canada and Australia should lead to improving credit fundamentals for numerous companies and issuers in these areas as the global economic expansion is extended due to accommodative monetary and fiscal policies in many parts of the globe. Investors who embrace “running fast” and have an appreciation for the near-term positive cyclical implications for credit fundamentals should prosper.
Getting Surplus Countries to Adjust
John Williamson (PIIE) Jan 2010
It has been 80 years since John Maynard Keynes first proposed a plan that would have disciplined persistent surplus countries. But the Keynes Plan, like the subsequent Volcker Plan in 1972–74, was defeated by the major surplus country of the day (the United States and Germany, respectively), and today China (not to mention Japan or Germany) exhibits no enthusiasm for new revisions of these ideas.
Liftoff or Cold Shower? The Economy in 2011
John H. Makin (AEI) Jan 2011
The extra fiscal stimulus from the tax cuts late in 2010 could produce a 4 percent growth rate for the first half of 2011--a sharp turnaround from December's gloomy news on US employment. However, China's overheating and Europe's sovereign-debt crisis continue to threaten the global recovery. In addition, four risks could make liftoff difficult for the US economy: hostility in the new Congress to additional fiscal stimulus; higher energy costs, which could offset the boost from the payroll tax cut; a housing sector under heavy stress; and fiscal drag from state and local governments as the federal stimulus wears off. We have already fired the economic and monetary stimulus guns for the second time. If these measures fail to provide liftoff, we could face a cold shower in 2012.
The Emergence of Asian Credit: A Dim Sum Perspective
Chia-Liang Lian (PIMCO) Jan 2011
In recent years, the Asian credit asset class has expanded to cover 15 fast-growing countries, with sovereign ratings ranging from AAA to B-. Seven countries in the Asia-Pacific rim received rating upgrades in 2010. The emergence of high yield corporate issuers reflects a confluence of factors in Asia: rapid GDP expansion, broad political stability, an underdeveloped infrastructure, a move toward privatization and a growing need for funding flexibility. While the U.S. remains a major source of investor interest in Asian credit, demand has rippled out to non-U.S. participants, and the hunt for greater investment exposure will likely continue.
Top Risks 2011
Ian Bremmer & David Gordon (Eurasia Group) Jan 2011
The risks that exercise us most usually center on a country, an issue, an event. We worry over political chaos before or after an election, a coup in a fragile regime, or military conflict with a rogue nation. But for the first time since we've been writing, the political risk environment is much broader this year. It's the change in the world order itself that gives us most cause for concern.
Managing Credit in a Levered Sovereign World
Luke Spajic (PIMCO) Jan 2011
The growing risk of contagion, heightened volatility and the blurring of credit quality in much of the European credit market are posing challenges for European credit investors. Adding to the woes of the eurozone’s debt expansion are concerns around deflation. Active security selection and bottom-up credit analysis will likely prove essential in mitigating risks and in unearthing new corporate credit opportunities in both European and global markets.
Andrew Bosomworth (PIMCO) Jan 2011
Markets are concerned that Europe’s policy response to date decisively addresses neither the very real solvency concerns nor the path to regaining competitiveness in a fixed exchange rate environment. The challenges facing Europe were aggravated by the global financial crisis but are rooted in the framework of the Economic and Monetary Union (EMU). We think Europe will muster the political will to keep the monetary union intact, but there remains a residual probability that some societies may prefer to exit the union rather than face years of economic hardship.
New Year’s Hope against Hope
Joseph E. Stiglitz (Project Syndicate) Jan 2, 2011
When the last year hasn’t gone so well, New Year's is a time for hope that the next one will be better. For Europe and the US, 2010 was a year of economic disappointment, and one can only hope that in 2011 their officials will finally stop listening to the financial sector's call for public-sector austerity and delayed restructuring of private-sector debt.
Can trade in services offer an alternative to migration?
Bernard Hoekman & Caglar Ozden (VoxEU) Jan 2, 2011
High unemployment among the young and low skilled is fuelling anti-immigration sentiments across the OECD. This column argues that, in Western Europe, demographic trends are such that demand for many workers will exceed supply. It proposes a framework that enables the temporary movement of services providers, a policy that could address Europe’s labour needs while placating public resistance.
Dashed expectations: Individual reactions to the global crisis
Shannon Mudd, Konstantin Pashev & Neven Valev (VoxEU) Jan 2, 2011
The systemic and macroeconomic issues associated with a banking crisis are much in the news. This column focuses on the impact on individuals, particularly those who experienced losses, and presents evidence of effects on their expectations and behaviour lasting a decade or more.
The big question: Is globalisation on the retreat in 2011?
FT Jan 3, 2011
Five of the world’s leading commentators debate whether this will be the year that the once-unstoppable force of economic, financial and cultural globalisation begins to reverse
Europe tells a tale of (unequal) halves
Patrick Jenkins (FT) Jan 3, 2011
In using share price-to-book valuations, particularly tangible book values that strip out goodwill and other intangible assets, the continent splits along completely different lines.
Armageddon Can Wait
Kenneth Rogoff (Project Syndicate) Jan 3, 2011
It is highly likely that we will see a mix of currency wars, currency collapses, and currency chaos in the year ahead. But this won’t spell the end of the economic recovery, much less the end of the world.
India’s Elites in Crisis
Sanjeev Sanyal (Project Syndicate) Jan 3, 2011
For a country with 1.2 billion people, India is ruled by a surprisingly small elite, which runs everything from the government to large companies and even sports bodies. But a series of scandals, some involving billions of dollars, has now seriously undermined that elite’s standing in the eyes of the Indian public.
2011: India’s Year
Tim Ferguson (Forbes) Jan 3, 2011
Eyes will remain on China as 2011 begins, not just because of Hu Jintao's looming state.
The Official Pursuit of Happiness
Derek Bok (Project Syndicate) Jan 4, 2011
Gross domestic product is taken to be the leading indicator of national well-being. But, as we look ahead to 2011 and beyond, we should ask ourselves: is it really wise to accord such importance to growth?
When oil prices rise, Russia has freedom over a barrel
Anne Applebaum (WP) Jan 4, 2011
Russia's change in tone has a simple explanation: Oil prices have soared.
Inflation, Capital Inflows: Asia and the Challenges of Success in 2011
IMF Survey Jan 4, 2011
Asia is expected to post an average of 7 percent growth in 2011, one percent slower than last year, but the region will need to continue managing its exit from stimulus programs and the large capital inflows pouring into the region, says one of the IMF's leading economists.
Yuan Revaluation Is a Win-Win for China-U.S.
Lee Hsien Loong (Bloomberg) Jan 4, 2011
The world has recovered remarkably quickly from the financial crisis. But growth is now on two tracks: developed economies still struggling with fiscal, financial and structural problems, while emerging economies, especially in Asia, are growing robustly. The resulting global imbalances have created international tensions.
In the grip of a great convergence
Martin Wolf (FT) Jan 4, 2011
Convergent incomes and divergent growth – that is the economic story of our times. We are witnessing the reversal of the 19th and early 20th century era of divergent incomes.
Credit ratings will still have a role to play
Martin Fridson (FT) Jan 4, 2011
Outside of the mortgage-related structured finance sector, credit ratings maintained a solid record in assessing default risk.
China BRICS up Africa
M K Bhadrakumar (AT) Jan 4, 2011
Extension of the BRIC acronym with South Africa's inclusion to the bloc of emerging economic titans holds distinctly political tones. Other "growth economies" had better claims to join, but the decision to legitimize South Africa as a future global power can be seen as a decision by China, the group's dominant economy, and Russia to challenge United States strategies in Africa and the Indian Ocean.
Delivering the Next Economy
Josef Ackermann (Globalist) Jan 4, 2011
Why is the transition to a green economy akin to a new industrial revolution?
The multipolar hazard
Martin Hutchinson (AT) Jan 5, 2011
The relative economic and political decline of the United States and concurrent rise of China does not mean the two will inevitably come into armed conflict. The danger arises from lesser powers that cannot make their way in the world through free-market means.
Debt and Democracy
Harold James (Project Syndicate) Jan 5, 2011
The EU’s sovereign-debt crisis constitutes a fundamental threat not only to the euro, but also to democracy and public accountability. Indeed, the principle of not reneging on public debt is is deeply intertwined with the development of legal security, representative government, and modern democracy.
Charles Wyplosz (VoxEU) Jan 5, 2011
Is the worst of Europe’s crisis behind us? Or yet to come? This column looks at 2011 and argues that the Eurozone crisis offers a unique chance to correct the “dreadful mismanagement” of the past year.
The Global Economy in 2011: A Rocky Ride or Smoother Sailing Ahead?
Knowledge@Wharton Jan 5, 2011
In the United States, most experts are betting that the economy will grow stronger this year, but they warn that high unemployment, a depressed housing industry and other problems could dampen growth. Meanwhile, the fate of the euro is still in question, and the specter of inflation looms large in China, Latin America and India despite their resilience to the recent global downturn. In the Middle East, observers expect renewed growth, but they note that resource constraints will become an increasing problem for the region. Knowledge@Wharton spoke with Wharton faculty and other experts to get their views on what's ahead for the world economy in 2011.
Free markets can still feed the world
Robert Zoellick (FT) Jan 5, 2011
The answer to the current price volatility is not to prosecute or block markets, but to use them better. The G20 must act to put food first.
Europe must start putting its house in order
George Osborne (FT) Jan 5, 2011
It is clear the new bank stress tests must be much tougher, covering a three-year period and looking at liquidity as well as core tier 1 capital.
Risk trades will test investors through 2011
Stacy Williams (FT) Jan 5, 2011
The 'global recovery factor' can be traded directly through simple but judicious portfolio construction.
China still fully coupled
Walden Bello (AT) Jan 6, 2011
The emergence of China, and through its efforts much of East Asia, relatively unscathed from the financial crisis suggests a decoupling of Eastern and Western economies. That is unlikely with the Chinese economy still determinedly reliant on exports to the United States - even as indebted Americans find their incomes squeezed further by fiscal hawks in Washington.
The Japan Myth
Daniel Gros (Project Syndicate) Jan 6, 2011
For the second time in a decade, central banks around the world have responded to the collapse of an asset bubble by moving aggressively to ease monetary policy, a tactic explicitly justified by the need to avoid a Japanese-style "lost decade." The problem is, Japan never lost a decade.
The lion kings?
Economist Jan 6, 2011
How Africa is one of the world's fastest-growing regions.
Country of Future Owes Much to One Man
Mohamed A. El-Erian (Bloomberg) Jan 6, 2011
Eight years ago, a newly elected president, Luiz Inacio Lula da Silva, faced the challenge of saving Brazil from economic and financial collapse. Last Saturday, Lula passed the presidency to Dilma Rousseff having done much, much more than that during his two terms. In the process, he relied on four simple pillars that other leaders would be well advised to consider.
Look behind the myth of global imbalances
Samuel Brittan (FT) Jan 6, 2011
Most sovereign wealth funds have no use for the western pretence of separating commerce from politics. But a remarkable number of their investments make commercial sense.
China's monetary tightening will be felt around the globe
Henny Sender(FT) Jan 6, 2011
The consequences of tightening measures will resonate far beyond China, influencing growth and the price of commodities everywhere.
Inequality Between Nations and Peoples
Branko Milanovic (The Browser) Jan 7, 2011
Global economic inequality and how internal issues of inequality breed aggressive foreign policy.
Feeding China in 2030
Benjamin A Shobert (AT) Jan 7, 2011
Conflicting demands for arable land and an acute water shortage present a national dilemma for China as the ruling Communist Party considers its agriculture policies for the next decades. The Party's own survival may hang on the outcome.
Re-Booting Emerging Europe
Erik Berglof (Project Syndicate) Jan 7, 2011
After the 1997-1998 financial crisis, policymakers in Asia’s major emerging markets, vowing “never again” to be humiliated by international capital markets, set out to address the structural weaknesses that had brought their systems down. Policymakers in post-crisis Eastern Europe need to undergo a similar bout of introspection.
Demand or Supply?
Raghuram Rajan (Project Syndicate) Jan 7, 2011
Typically, supply and demand are equal, and, if not, powerful forces push them towards each other. But, with high and persistent levels of unemployment in the US, there is a real question about the nature of the problem: is aggregate demand too low, or are there problems with supply?
Money market freezes and central banks
Max Bruche & Javier Suarez (VoxEU) Jan 7, 2011
During the global crisis central banks have undertaken unconventional measures that some commentators claim go beyond their mandate. This column focuses on central banks intervening in the money markets as a middle man. It argues that such actions can be welfare improving, but are unlikely to be fiscally neutral, thus raising questions about whether they should be left to a central bank.
Ownership structure and stock returns during financial crises
Cristina Cella, Andrew Ellul & Mariassunta Giannetti (VoxEU) Jan 8, 2011
As stock markets plummeted, short-sellers and hedge funds have been the subject of public anger. But does it matter who owns stock? This column compares stock performance after the collapse of Lehman Brothers in 2008. It finds that companies whose shares are held to a larger extent by short-term investors do indeed experience more severe price drops and larger price reversals.
Shining the light on short selling and over-the-counter derivatives
José A. Tavares (VoxEU) Jan 9, 2011
With the economic crisis mutating, now is the hour of the regulator. This column argues that policymakers should take heed; the opacity of over-the-counter trading should come to an end and regulation and transparency should be extended to all corners of the financial sector.
The world should not fear a growing China
Li Keqiang (FT) Jan 9, 2011
China, large as it is, does not run away from its responsibilities and will fulfil them consistent with its status.
No happy new year for the eurozone
Wolfgang Münchau (FT) Jan 9, 2011
Pause and consider the momentous shift that has taken place. Western Europe is now seen as a higher risk than central and east Europe
To fix our banks we must go back to the 70s
Amar Bhidé (FT) Jan 9, 2011
Bank interest rate ceilings were supposedly consigned to history, along with the regulation of trucks and airlines, swept away by money market funds and deregulation.
That guy who called the big one? Don’t listen to him.
Joe Keohane (Boston Globe) Jan 9, 2011
Inside the paradox of forecasting.
New Rules for the Global Economy
Dani Rodrik (Project Syndicate) Jan 10, 2011
The ultimate paradox of globalization is that it works best when it is not pushed too far. That paradox must be reflected in new global economic arrangements that are based on democratic deliberation where it really occurs – within national states.
Asia in the Balance
Joseph S. Nye (Project Syndicate) Jan 10, 2011
Official pronouncements stress friendly relations between India and China, and some trade analysts argue that the two giant, rapidly growing markets will become an economic “Chindia.” Nevertheless, strategic anxiety lurks below the surface, particularly in India.
The Dollar: Dominant no more?
Barry Eichengreen (VoxEU) Jan 10, 2011
The dollar’s key role in international markets is once again in the spotlight. This column introduces a new book by Barry Eichengreen: Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System. As the author puts it, “If you were worried by talk of currency war late last year, you ain’t seen nothin’ yet.”
In case of fire, break the glass: Argentina’s border emergency-kit in times of global crisis
Demián Dalle & Federico Lavopa (VoxEU) Jan 11, 2011
Since the breakout of the global crisis and the combined pledge to refrain from protectionism, the Global Trade Alert – among others – has documented numerous examples of countries breaking their promises. This column revises a paper from the 7th Global Trade Alert, providing analysis of Argentina’s unique policy responses and their surprising consequences.
Not So Cheap for China
NYT Jan 10, 2011
Beijing would be wise to stop tailoring economic policy to satisfy its exporters and start thinking about the big picture, starting with its own people.
Parallel currencies could boost euro
Michael Butler (FT) Jan 10, 2011
The plan would reduce bail-out amounts required from the stronger economies; creditors and debtors would have a powerful incentive to make it work.
Rising wages will burst China’s bubble
Peter Tasker (FT) Jan 10, 2011
The China story that has been sold all over the world is another version of the ‘new era’ thinking that has characterised every investment mania.
This will be the year of the US comeback
Jim O'Neill (FT) Jan 10, 2011
I had concerns about the sustainability of the world's largest economy, but now believe it will positively shake people up in 2011.
Can Argentina’s Success Last?
Bernardo Kosacoff (Project Syndicate) Jan 11, 2011
Argentina's economy has performed at a breathtaking level over the past eight years – a phoenix rising from the ashes of the 2002 meltdown and debt default. But Argentina's authorities must still implement policies to ensure that the recurring crises and volatility of the past remain in the past.
Back to the Sixties
Barry Eichengreen (Project Syndicate) Jan 11, 2011
In 1964, the rapidly growing economies of Europe, still catching up to the US, howling about the Federal Reserve's. recklessly expansionary monetary policy, which, they argued, was exporting inflation by flooding their economies with imported finance. Plus ça change, as the French would say – and as they are saying now as France assumes the G-20 presidency.
The $6.50 Trade War
WSJ Jan 11, 2011
What Apple's iPhone tells us about U.S. trade with China.
10 reasons why bailouts should stop before reaching Spain
Guillermo de la Dehesa (VoxEU) Jan 11, 2011
The past year has plunged the Eurozone into crisis with many fearing for what 2011 has in store. In this column the CEPR Chairman argues that to prevent the Eurozone’s sovereign debt crisis from becoming a self-fulfilling contagion, the bailouts should not go beyond Ireland; they should not be extended to Portugal even less so to Spain. It outlines 10 reasons why.
Currency cooperation creeps onto Asian agenda
Kevin Brown (FT) Jan 11, 2011
The Chiang Mai Initiative Multilateralisation agreement is the first real fruit of efforts launched after the 1997-98 financial crisis to widen and deepen regional financial integration.
The hidden dangers of passive bond investing
John Plender(FT) Jan 11, 2011
A much greater proportion of bond market money is indexed or closet-indexed than in the equity market.
New reforms can break Europe’s debt cycle
Olli Rehn (FT) Jan 11, 2011
Europe’s recovery in the real economy is still offset by the crisis in bond markets. To secure the recovery, this uncertainty must be overcome.
East and west converge on a problem
Martin Wolf (FT) Jan 11, 2011
The biggest question of the 21st century may be whether resources prove to be binding constraints, as they so often proved to be in the past.
Under the regulator’s microscope: Credit default swaps
Carlos Tavares (VoxEU) Jan 12, 2011
Some argue that the widening spreads between sovereign debt in Germany and that of other European countries have been exacerbated by activity in the market for credit default swaps. This column argues that “naked credit default swaps” are of a different nature to naked short selling and deserve to be treated so. It explores insights from the academic literature, market participants, and securities regulators.
Food prices on the rise: weather events exacerbate a tight supply-demand balance
Claire Schaffnit-Chatterjee (DB Research) Jan 12, 2011
Food prices are rising considerably, prompting talks of another impending food crisis. The UN’s Food and Agriculture Organisation announced last week that prices for basic commodities hit record highs last month. Global prices increased between June and December 2010 by 57% for grains, by 56% for oils and fats and by 77% for sugar. Prices for wheat, corn, sugar and oil seeds are now above their highs of 2007-2008. As Robert Zoellick (President of the World Bank Group) puts it, "rising prices are re-emerging as a threat to global growth and social stability".
Can Europe Be Saved?
Paul Krugman (NYT Magazine) Jan 12, 2011
Is there any way to save Europe's democracies from sinking together in the ill-conceived currency union?
Global Trade in a Post-recession World
K@W Jan 12, 2011
When the world economy nearly collapsed in late 2008, many proponents of globalization feared that a contagion of protectionism would break out, poisoning the prospects for new trade initiatives that could provide long-term benefits for both companies and consumers. In the United States, unemployment was rising to unacceptable levels due in part to continued business services outsourcing (especially to India) and the steady influx of imported goods (especially from China). Many of the trends in international trade that have developed over the past few decades appeared likely to be altered, or even reversed, in response to the weaknesses exposed by the economic downturn. Would multinationals succumb to domestic pressures by bringing home jobs they had outsourced? Would frustration over China’s trade surplus force Beijing to raise the value of the renminbi? Would countries turn inward, protecting their economies during a time of crisis, rather than pushing forward with new trade agreements? These questions, and others, are debated in this special report on global trade in the wake of the recession.
How oil affects the price of peas in China
David Pilling (FT) Jan 12, 2011
Farming increasingly relies on hydrocarbons in the form of fertiliser, as well as fuel for tractors and transport.
Euro looks set to win the race to the bottom
Kenneth Rogoff (FT) Jan 12, 2011
The crystal ball on the forex market does not appear to be getting any clearer, except that no one wants to be the victor in the currency wars.
Behavioral Finance: What Drives Institutional Investors' Decisions?
Meir Statman (II) Jan 12, 2011
When it comes to "rational and smart decision making," investors are influenced by many factors, including their own personality. What really drives institutional investors' behavior?
Goldman Should Withdraw Greek Euro Swap Dodge
Mark Gilbert (Bloomberg) Jan 12, 2011
Product recall notices are a fact of life for consumer-product makers. Dysfunctional hinges trap tiny fingers; undesirable fluids leak into foodstuffs; and sticky accelerator pedals send cars zooming in mysterious ways, forcing manufacturers into costly withdrawals.
Global Risk and Reward in 2011
Nouriel Roubini (Project Syndicate) Jan 13, 2011
So far, the downside and upside risks for the global economy in 2011 are balanced. But if sound government policies in advanced and major emerging economies contain the downside risks that are more prevalent in the first half of this year – which derive from political and policy uncertainty – a more resilient global economic recovery could take hold in the second half and 2012.
The Best Investments
Bjørn Lomborg (Project Syndicate) Jan 13, 2011
In a world fraught with competing claims on human solidarity, we have a moral obligation to direct additional resources to where they can achieve the most good. Unfortunately, that is not how we allocate international aid now.
Financial stability is a task for central banks
Itai Agur & Maria Demertzis (VoxEU) Jan 13, 2011
What institutions should be responsible for financial stability? Do governments need distinct regulators for distinct objectives or should central banks pursue both price stability and financial stability? This column argues that monetary policy inevitably will involve considerations of financial stability due to its effects on banks' risk taking and says that central banks should embrace this dual role.
Is China Already Number One? New GDP Estimates
Arvind Subramanian (PIIE) Jan 13, 2011
When the presidents of China and the United States meet next week in Washington, neither will likely be aware that, measured in terms of purchasing power, it is Hu Jintao not Barack Obama who represents the world’s largest economy. Some time in 2010, the Chinese economy overtook that of the United States.
The perils of mutual miscalculation
Philip Stephens (FT) Jan 13, 2011
You do not have to take sides to see where the present standoff between China and the United States is leading. But there is no easy way out.
Capital controllers need a clear exit plan
Howard Davies (FT) Jan 13, 2011
The debate is polarised between two extremes – highly technical for experts, highly charged for politicians and people.
New ways to control hot money bubbles
Gillian Tett (FT) Jan 13, 2011
Seoul is looking at some unconventional approaches to calming overheating markets.
Bite the bullet
Economist Jan 13, 2011
In the first of three articles on the euro zone’s sovereign-debt woes, we present our estimate of the burdens on the currency club’s four most troubled members.
Hope over experience
Economist Jan 13, 2011
Foreign investment banks are allowed a toehold in the Chinese market.
Economist Jan 13, 2011
Quantifying the difficulties of a country’s banking system.
Economist Jan 13, 2011
Portugal has looked increasingly in need of a bail-out. Firm demand for a bond auction this week cannot mask deep problems with its public finances.
A trade deal snub to Latin America
Bernard Aronson (WP) Jan 14, 2011
Obama is strengthening trade with South Korea at the expense of partners like Colombia.
Five Steps Forward in 2011
Michael Spence (Project Syndicate) Jan 14, 2011
The worst of the economic worst ended for most of the world in 2010, but downside risks in the advanced countries continue to threaten global recovery. A return to stable, inclusive growth is needed to bolster support for economic openness, but achieving this requires meeting five key goals.
Does foreign ownership of multinationals damage R&D?
Roger Bandick, Holger Görg & Patrik Karpaty (VoxEU) Jan 14, 2011
With foreign ownership of domestic companies becoming increasingly common, questions are mounting as to the consequences. One area of concern is the effect on research and development. This column presents new evidence from Sweden, where flagship firms such as Volvo and Saab are now foreign owned, that it hopes will reassure policymakers.
Emerging Africa Expected To See Rise in Investment
IMF Survey Jan 14, 2011
Having demonstrated resilience during the global financial crisis, Africa’s emerging market countries have good prospects for 2011. Foreign direct investment, particularly from Africa’s new trading partners in Asia, is expected to strengthen and demand for African bonds is set to increase.
Global: Ten for the Teens
Spyros Andreopoulos & Manoj Pradhan (MS GEF) Jan 14, 2011
We kick off by describing the economic landscape for the new decade, as it appears in our binoculars.
Rebalancing Growth, Resolving Crisis
Elga Bartsch, Daniele Antonucci, Olivier Bizimana, Anselm Karitter & Tomasz Pietrzak (MS GEF) Jan 14, 2011
Euroland: Heading for Make or Break?
Sacrificing Microcredit for Megaprofits
Muhammad Yunus (NYT) Jan 14, 2011
Commercialization has been a terrible wrong turn for microfinance, and it indicates a worrying "mission drift" in the motivation of those lending to the poor.
Chinese Mercantilism: The Long View
Arvind Subramanian (PIIE) Jan 14, 2011
Start first with history and the parallels between Chinese mercantilism today and its counterpart of the early 1800s. Then, like today, China was running large trade surpluses and accumulating reserves, not in the form of dollars but silver. Then, like today, the deficit country was agitated by the imbalance and the resulting outflow of silver and threatened action. Unlike today, the action taken by the United Kingdom was effective and unconscionable. To redress the bilateral imbalance, the United Kingdom flooded the Chinese market with opium grown in India.
The End of Corruption?
Parag Khanna (Globalist) Jan 15, 2011
How curbing corrupt practices will spur economic growth in the developing world.
A German-led eurozone rescue
Wolfgang Münchau (FT) Jan 16, 2011
Angela Merkel is not going to take the kind of risks a genuinely expanded European financial stability facility would entail.
Europe's Challenge: Fostering Growth Amid Austerity
NYT Jan 16, 2011
Weaker euro zone members are taking hard steps to stabilize their finances, but the strains on a currency that must serve both solvent and wavering economies are visible.
Thinking through the climate change challenge
Open letter (VoxEU) Jan 16, 2011
In October 2010, a group of leading thinkers on environmental policy met at the Sustainable Consumption Institute at the University of Manchester for a conference in honour of Nobel Laureate Tom Schelling. This column presents a 10-point guideline for climate change policy co-authored by 26 attendees that focuses on designing policies that are credible, easily monitored, and easily enforced.
Who Next at the ECB Helm?
Sylvester Eijffinger & Edin Mujagic (Project Syndicate) Jan 17, 2011
During the crisis, the ECB has had an outstanding president in the person of Jean-Claude Trichet. But his non-renewable term will end in October 2011, and the euro’s member countries are already bargaining over his successor.
Globalisation’s final frontier: Lowering trade costs in services
Sébastien Miroudot, Jehan Sauvage & Ben Shepherd (VoxEU) Jan 17, 2011
Trade in the services sector is a central theme of the Doha trade negotiations. This column argues that restrictive policies can make trade costs in the services sector up to three times higher than in the goods sector. Such high costs, it claims, are holding back the growth of trade in services.
BRICs & G-3 – changing interaction, emerging complementarities
Markus Jaeger (DB Research) Jan 17, 2011
Historically, emerging economies characterised by a high degree of trade and/or financial openness were strongly affected by developments in advanced economies. Recent developments suggest that traditional one-way interaction is making way for a more complex and intensifying two-way interaction – or interdependence, if you will. The economic relationship between the G-3 and the BRIC countries (Brazil, Russia, India and China) is, by and large, a complementary one...
Europe Is Running Fast to Stand Still
Mohamed A. El-Erian (PIMCO) Jan 17, 2011
Enlarging the lending resources of Europe’s rescue fund would do nothing fundamentally to address the unsustainable stock of debt and its adverse impact on growth, investment and employment. More people are recognizing that the time has come for another approach, one that involves the orderly restructuring of some European sovereign debt on terms that allow a meaningful chance of re-accessing markets in the future at sustainable rates.
Portuguese Bailout Will Make Euro Crisis Worse
Matthew Lynn (Bloomberg) Jan 17, 2011
New year, new crisis. No sooner had Europe’s bond traders, politicians and central bankers gotten back to their desks than it was time to begin tussling over the fate of a small economy on the periphery of Europe.
Beijing feels that time is on its side
Gideon Rachman (FT) Jan 17, 2011
Things look different since the credit crisis. Americans, both as individuals and as a nation, are taking a less benign view of China.
US democracy has little to teach China
Francis Fukuyama (FT) Jan 17, 2011
The American system has become polarised and ideologically rigid. At present it shows little appetite for dealing with the long-term fiscal challenges the country faces.
China's Currency Isn't Our Problem
NYT Jan 17, 2011
A stronger renminbi won't save many jobs or help U.S. exports.
The Markets Prey on Debt-Laden Nations
Joergen Oerstroem Moeller (YaleGlobal) Jan 17, 2011
The world has gross savings of more than $61 trillion, reports the International Monetary Fund. Those holdings are highly imbalanced: China’s surplus is more than $4 trillion while the US owes $14 trillion. Investors relentlessly detect and predict trends in pursuit of higher profits. Japan, the US and many European nations carry high debt loads. The financial markets are impatient with low interest rates that spur government spending, debt and reckless investments that repeatedly threaten global economic stability. On the markets’ radar are European nations like Greece, Ireland and Spain. Quick, unified action on reform, austerity, along with modest growth, protects the eurozone, for now, explains researcher Joergen Oerstroem Moeller. The US – less quick to change its spending ways – is the next target for the markets. The US and Europe could ease, even control, a transforming world order, Oerstroem Moeller contends, by restoring fiscal prudence and initiating a fair distribution of power and influence in global institutions.
The puzzle of China’s rising household saving rate
Marcos Chamon, Kai Liu & Eswar Prasad (VoxEU) Jan 18, 2011
In an effort to reduce its sizeable current-account surplus, the Chinese government has made it a priority to “rebalance” growth in China by stoking private consumption. This column examines the determinants of the high household saving rate that keeps Chinese consumption so low.
The Latest American Export: Inflation
Ronald McKinnon (WSJ) Jan 18, 2011
In 2010, prices rose by more than 5% in major emerging markets such as China, Brazil and Indonesia.
The New Era of U.S.-China Rivalry
Aaron Friedberg (WSJ) Jan 18, 2011
Beijing's leaders have concluded that the U.S. is in decline and that now is the time to seek more global influence.
East and west are in it together
Martin Wolf (FT) Jan 18, 2011
The political and economic consequences of a breakdown in relations between China and the incumbent powers would be catastrophic.
China’s best way forward
Yu Yongding (FT) Jan 18, 2011
To avoid a risk of a “drift into escalating reciprocal demonisation” with the US, Beijing must face its responsibilities, but will demand that the world reciprocates.
Brace for a 'perfect storm' in gold
Thomas Kaplan (FT) Jan 18, 2011
After a long absence some asset managers and central bankers are readmitting gold back into the group of prudent asset classes.
Awaiting Davos, WTO Ag Negotiators 'Tread Water'
Bridges Weekly Trade News Digest Volume 15, Number 1 Jan 19, 2011
Despite plans to "hit the ground running" in January, farm trade negotiators in Geneva are "treading water" while they await a political signal from an upcoming meeting of influential trade ministers in Davos, officials have acknowledged.
WTO Members Look to Davos Meetings for Doha Revival
Bridges Weekly Trade News Digest Volume 15, Number 1 Jan 19, 2011
Ministers and top officials from major trading nations are set to meet next week to see if they can breathe new life into the long-struggling Doha Round of global trade negotiations.
Did the Poor Cause the Crisis?
Simon Johnson (Project Syndicate) Jan 19, 2011
The US continues to be riven by heated debate about the causes of the 2007-09 financial crisis, with Republicans blaming government policies that encouraged the poor to borrow more than they could afford. But if US politicians love the poor so much, why have they bailed out only the rich?
On the future of the euro
Thomas Mayer (DB Research) Jan 19, 2011
“...Estonia's accession undoubtedly illustrates that the euro is still an attractive EU project. However, the events of last year have also shown that adopting the euro requires careful consideration and thorough preparation...“
GDP Estimates: An Update and a Question for the IMF
Arvind Subramanian (PIIE) Jan 19, 2011
My posting last week on China's new purchasing power parity (PPP)-based estimates has elicited a number of questions. One theme was: What would my revisions imply for the GDP estimates of other countries?
Europe risks getting it wrong again on rate rises
Hugh Hendry (FT) Jan 19, 2011
Despite tight fiscal policy, investors are openly speculating a eurozone rate increase is just around the corner.
The United States and China: Global Economic Twins
Stephan Richter (Globalist) Jan 19, 2011
Can you count the ways in which the United States and China both struggle with economic fairness and political accountability?
Life after Capitalism
Robert Skidelsky (Project Syndicate) Jan 20, 2011
Perhaps socialism was not an alternative to capitalism, but its heir. It will inherit the earth not by dispossessing the rich of their property, but by providing motives and incentives for behavior that are unconnected with further – and unnecessary – wealth accumulation.
Sovereign risk: The impact of national numerical fiscal rules
Anna Iara & Guntram Wolff (VoxEU) Jan 20, 2011
The Eurozone crisis has whetted the appetite for economic governance reform in the EU, with one high-profile proposal aiming to strengthen national fiscal frameworks. With a unique data set, this column shows that stronger fiscal rules in Eurozone member states reduce sovereign risk, especially in times of high uncertainty. If followed, these rules could reduce sovereign yield spreads by up to 100 basis points.
Do capital controls work?
Eduardo Levy-Yeyati (VoxEU) Jan 20, 2011
The global crisis has reignited debate on the desirability of capital controls. This column examines evidence from Argentina and Chile and argues that capital controls can be effective, but that their effectiveness and efficiency varies. It adds that controls need to be considered as part of a macro-prudential toolkit to prevent asset inflation and overvaluation that is costly to revert in the down cycle.
Don't Bank on China 'Rebalancing'
Joseph Sternberg (WSJ) Jan 20, 2011
There are deeply rooted reasons--from banking habits to government policy--why Chinese are unlikely to increase consumption anytime soon.
China Goes to Nixon
Paul Krugman (NYT) Jan 20, 2011
China has stumbled into a monetary muddle that's getting worse with each passing month.
The rise of the redback
Economist Jan 20, 2011
China will have to open its financial market if it wants the yuan to rival the dollar
The global economy: Forecasting trouble
Economist Jan 20, 2011
Looking ahead in the dark.
Did inequality cause the crisis?
Economist Jan 20, 2011
The links between rising inequality, the Wall Street boom and the subprime fiasco.
Economist Jan 20, 2011
Inequality is rising. Does it matter—and if so why?
The rise and fall of the dollar: Go with the flows
Economist Jan 20, 2011
Lessons of history.
China Can Just Say `No' to One US Export
Caroline Baum (Bloomberg) Jan 20, 2011
At a joint press conference to welcome Chinese President Hu Jintao to the U.S. on Jan. 19, President Barack Obama downplayed contentious issues, such as China’s undervalued currency, and focused instead on areas of economic cooperation. We want to sell you all kinds of stuff,” Obama said. “We want to sell you planes, we want to sell you cars, we want to sell you software.” One thing not on his export list: inflation.
History is on the side of democracy
Philip Stephens (FT) Jan 20, 2011
Rising nations may decry US imperialism and European meddling. But freedom, the rule of law and human dignity have an appeal well beyond the west.
Only tough reforms can save the land of the rising debt
Takeo Hoshi and Anil Kashyap (FT) Jan 20, 2011
If Japan does not switich course voluntarily, it may soon find that financial markets will force changes upon it.
Risky Growth Engines
Otaviano Canuto (Project Syndicate) Jan 21, 2011
While the rich world puts its post-crisis house in order, developing countries as a whole are becoming the new engine of global growth. But switching locomotives is never free of risk.
Beyond China: Asia's Fastest Riser
Globalist Jan 21, 2011
Which Asian country’s living standards have improved the most over the last several decades?
Global: No, Minister
Manoj Pradhan (MS GEF) Jan 21, 2011
We think EM central banks are likely to look through the recent price increases and keep their focus on the domestic output gap.
Hu's dollar frustration
Hossein Askari and Noureddine Krichene (AT) Jan 21, 2011
Chinese President Hu Jintao and French President Nicolas Sarkozy are two of the more influential critics of the international reserve currency system. Yet the same US dollar-dominated system, while acting as a tax on other countries, has also hurt the industrial structure of the United States.
Tax competition vs. tax coordination: Revisiting the debate
Assaf Razin & Efraim Sadka (VoxEU) Jan 21, 2011
Does the free movement of factors of production lure tax authorities into a race to the bottom? This column argues that, when a group of host countries faces an upward supply of immigrants, tax competition does not lead to a race to the bottom; competition may actually lead to higher taxes than tax coordination.
We Have Your Number
Nandan Nilekani (YaleGlobal) Jan 21, 2011
Trade, technology and other facets of globalization have delivered wealth to India. But distribution of benefits is uneven in the nation of more than 1.1 billion, on track to exceed China as the most populous. The World Bank estimates that more than 35 percent of Indians live below the poverty line, and despite rapid job growth, the informal nature of most work excludes large numbers of poor from employment security, health care and economic opportunity. The poor lack the identity necessary to obtain credit or records and thus struggle to secure housing, bank accounts, education and even cell phones. To improve distribution of services, India has launched a program issuing unique identification numbers to residents, known as Aadhaar or foundation – a public-policy initiative unprecedented in scale, explains Nandan Nilekani, former CEO of Infosys and chairman of the initiative. Indians and other nations will watch closely if the web-based biometric ID system assists the poor by streamlining services while reducing corruption and bureaucracy and protecting privacy.
When is a Bric not a Bric? When it’s a Victim
Alan Beattie (FT) Jan 21, 2011
It is hard to keep a good acronym down, and the game of throwing countries into groups is unlikely to end. But still, it is worth remembering what diversity exists within unity, and that calling a country emerging doesn’t make it so.
Bric-like branding is a dangerous path to take
John Authers (FT) Jan 22, 2011
You get the branding dilemma when deciding whether to invest in what, until recently, were called emerging markets.
Maybe Japan Was Just a Warm-Up
NYT Jan 22, 2011
The trade tensions with China sometimes seem like a rerun of the 1980s rivalry with Japan. But can Washington use its old strategies?
Valuing longevity in the Human Development Index
Martin Ravallion (VoxEU) Jan 23, 2011
Measuring and comparing the level of human development across the world continues to be a highly contentious issue. This column argues that the new Human Development Index has – perhaps inadvertently – sharply reduced its valuation of longevity, raising doubts about whether it is sending the right signals to the governments of poor countries aiming to promote human development.
Who Killed the Economy?
Edmund Phelps (Newsweek) Jan 23, 2011
Left and right trade blows, but truth lies in the center.
A Tale of Two Currency Areas
Michael Boskin (Project Syndicate) Jan 24, 2011
The US and Europe both operate single-currency areas, but only Europe's faces uncertainty about its survival. Their similarities and differences, particularly with respect to internal labor mobility, productivity, and fiscal policies, suggest why – and provide clues about whether the eurozone can evolve into a stable monetary union.
The eurozone’s best solution is the least likely
Wolfgang Münchau (FT) Jan 23, 2011
The problem consists of squaring incompatible goals: German desire for limited liability; and debt relief that is effective.
Indebted America risks an age of austerity
Roger Altman and Richard Haass (FT) Jan 23, 2011
The president must break his silence and educate Americans on the cuts and tax increases that cannot be avoided.
Obama's Free Trade Opportunity
Thomas McLarty and Nelson Cunningham (WSJ) Jan 24, 2011
A full-throated campaign for passage of the Korea, Colombia and Panama agreements can help reset this presidency.
Davos Man and Khodorkovsky
WSJ Jan 24, 2011
Lawless states don't attract capital.
China's Next Buying Spree: Foreign Companies
Charles Wolf (WSJ) Jan 24, 2011
Beijing wants to diversify out of U.S. debt and it will have plenty of cash to make acquisitions.
China's new world order demands stronger U.S. response
Robert Samuelson (WP) Jan 24, 2011
America's encouraging China's new world order, with fateful consequences.
Nayan Chanda (Businessworld/YaleGlobal) Jan 24, 2011
In the US, big dreams fall by the wayside, leaving a trail of anger.
Human Traits Essential to Capitalism
Robert Shiller (The Browser) Jan 24, 2011
Rising inequality in the US was a major cause of the recent crisis, and little is being done to address it.
'Made in China' tells us little about global trade
Pascal Lamy (FT) Jan 24, 2011
iPod may have never existed if Apple had not known Asian companies could supply components, while Asian workers and Asian consumers would make and buy it.
World Still Needs to Fix Key Economic, Financial Problems
IMF Survey Jan 25, 2011
The global economy will grow by about 4½ percent in 2011, but action is still needed to address key problems, including high unemployment and banking issues in advanced economies and risks of overheating in emerging markets, according to new analysis released by the IMF.
Sub-Saharan Africa's Recovery Maintains Momentum
IMF Survey Jan 25, 2011
In its World Economic Outlook Update, the IMF says most countries in sub-Saharan Africa have recovered quickly from the global financial crisis, with the region projected to grow 5½ percent in 2011. Low income countries are expected to match pre-crisis growth rates of about 6 ½ percent in 2011.
Shell game: Zero-interest policies as hidden subsidies to bank
Axel Leijonhufvud (VoxEU) Jan 25, 2011
The shell game is a roadside con as old as civilisation. This column argues that the same swindle is being performed on a massive scale at the expense of the unsuspecting taxpayer. It says that, with their near zero interest rates, central banks are effectively subsidising the banking sector – with barely a pea passed on to the public.
Growth Agenda for World Economic Forum
Hugh Dixon (NYT) Jan 25, 2011
The economic forum should address the "too big to fail" bank problem, destabilizing capital flows, improving governance and liberalization to free markets.
Why China hates loving the dollar
Martin Wolf (FT) Jan 25, 2011
With inflation now a concern for Beijing, the case for allowing its currency to adjust much more rapidly upwards is surely overwhelmingly strong.
Asia has had enough of excusing the west
Kishore Mahbubani (FT) Jan 25, 2011
What truly frightens many Asians is that western leaders are still unwilling to tell their populations the hard truth – that the world has changed.
The big test of Africa’s brave new world
John Githongo (FT) Jan 25, 2011
Ivory Coast is much in need of a show of force. Laurent Gbagbo must go! This is not only for the sake of his country but for the whole continent.
Global: Current Account Reversals
Manoj Pradhan & Alan Taylor (MS GEF) Jan 25, 2011
Global rebalancing is underway, but still quite a distance from being done. We examine the dynamics of current account reversals.
Davos Moguls Adjust to Fast, Slow, Reverse
Mohamed A. El-Erian (PIMCO) Jan 25, 2011
Policymakers must navigate a multispeed world, and they must do so when too many short-term policy priorities conflict with longer-term realities.
Globalization Marches On
Jagdish Bhagwati (Project Syndicate) Jan 25, 2011
Today’s alarmism about the end of globalization is misplaced. In fact, the current crisis may actually shift policies in favor of more globalization, not less, as is suggested by remarkable commitment to efforts – largely successful – to prevent backsliding into protectionism.
Globalist Bookshelf: A New Monetary Order
Christopher Whalen (Globalist) Jan 25, 2011
Are the American people likely to embrace fiscal stringency if and when the other nations of the world demand it?
Long live BRIC, welcome MIST
Sreeram Chaulia (AT) Jan 26, 2011
Former Goldman Sachs chief economist Jim O'Neill came up with a great wheeze in coining the BRIC acronym to point investors to a potentially great growth story. Now he has corralled a few more countries into a catchy concatenation that may serve the same purpose, whatever the reality behind his MIST fabrication.
The world will regret its neglect of Doha
Peter Sutherland (FT) Jan 26, 2011
Failure would be catastrophic to the credibility not only of the World Trade Organisation but also of multilateralism as a mechanism to address many issues facing mankind.
Reforms need to nurture capital markets
Deven Sharma (FT) Jan 26, 2011
Capital markets thrive on certainty, which calls for comprehensive policies and the development of more efficient markets in high-growth regions.
Before the Great Divergence: The modernity of China at the onset of the industrial revolution
Jan Luiten van Zanden (VoxEU) Jan 26, 2011
China has been one of the world’s most dynamic economies in recent decades, but how did it fall so far behind? This column argues that the industrial revolution occurred in Europe rather than China because European entrepreneurs were eager to adopt machines to cut down on high labour costs. China didn’t “miss” the industrial revolution – it didn’t need it.
The new carry trade
Pasquale Della Corte, Lucio Sarno & Ilias Tsiakas (VoxEU) Jan 26, 2011
The carry trade in foreign currency has attracted considerable attention from academics and practitioners. This column presents evidence of a new carry trade strategy – this time speculating on the volatility of foreign exchange. This is done by buying or selling forward volatility agreements. It suggests that investors following the new carry trade can do extremely well – regardless of whether the value of these currencies go up or down.
What's fueling oil, food prices?
Hossein Askari and Noureddine Krichene (AT) Jan 26, 2011
During German hyperinflation early in the last century, the German central bank claimed that there was a shortage of money, while blaming inflation on consumer demand, speculation, and manipulation by profiteers. All nonsense, of course, but present and future oil and commodity price inflation is and will be explained in like fashion.
Food Price Volatility Dominates Farm Ministers' Summit
Bridges Weekly Trade News Digest Volume 15, Number 2 Jan 26, 2011
High and volatile food prices dominated discussions at a farm ministers' summit on trade and food security in Berlin this weekend. However, while participants reached broad agreement on the problem, they disagreed over its causes and preferred solutions, with the role played by financial market speculation proving particularly controversial.
Waiting for Davos, NAMA Negotiators Discuss NTBs
Bridges Weekly Trade News Digest Volume 15, Number 2 Jan 26, 2011
The mood music surrounding the Doha Round negotiations is once again sounding less despondent. It remains unclear, however, whether the better atmospherics will translate into tangible narrowing in the deep divisions that have long kept governments from an accord in the struggling global trade talks.
Preventing the Euro’s Next Crisis
Yves Mersch (Project Syndicate) Jan 26, 2011
Much dedication and energy are currently being devoted to institutionalizing a crisis-management mechanism for the eurozone – a good and important goal. But a far more significant challenge – largely ignored in the accompanying debate – is the need for crisis prevention.
Asia’s Inflation Trap
Stephen S. Roach (Project Syndicate) Jan 26, 2011
Asia has an increasingly alarming inflation problem, but its leaders are reluctant to address it decisively, worried that higher interest rates and stronger currencies will choke off export-led growth. But the longer they delay, the more wrenching the ultimate policy adjustment – and its consequences for growth and employment – will be.
Davos, Dakar and a ton of BRICS
Pepe Escobar (AT) Jan 27, 2011
After the ruling classes schmooze in Davos, "the rest" will be left with the World Social Forum - to be held in Dakar, Senegal. There could hardly be a better place to discuss inequality and the current crisis in capitalism, never mind its plethora of emerging catchy-named conclaves, than Africa - where hard-baked talk is likely to produce better solutions than any "problem solving" session apres-ski.
China shows way ahead
Kevin Gallagher (AT) Jan 27, 2011
Chinese investment in Latin America and China's demand for the region's commodities are proving a boon to the countries and companies involved. The challenge now is for Argentina, Brazil and their neighbors to convert these gains into economic development. For that, China also serves as a model.
The London gold market
Henry C K Liu (AT) Jan 27, 2011
The daily movements of the gold price mask an array of influences and interests well beyond those of the individual investor dipping into a market where the clearing volume in London each week can exceed the annual production of all the world's gold mines.
What's Behind China's Reverse IPOs?
Joseph Sternberg (WSJ) Jan 27, 2011
A dysfunctional financial system pushes companies toward awkward deals in America.
The threat of rising food prices
Luis AV Catão & Roberto Chang (VoxEU) Jan 27, 2011
Rising food prices once again pose central banks a tricky question. How far should they ignore food price inflation? This column suggests that food tends to have stronger predictive power on global inflation cycles than oil. The problem is more severe in emerging markets where consumption basket weights for food are two or three times larger than in rich nations. Central banks should pay close attention.
The crescent and the company
Economist Jan 27, 2011
A scholar asks some profound questions about why the Middle East fell behind the West.
America's financial-crisis commission: Take your pick
Economist Jan 27, 2011
A divided panel reaches three competing conclusions.
Chinese banks in America: Hu's coup
Economist Jan 27, 2011
Why a tiny deal by a Chinese bank in America matters.
Global trade: A deadline for Doha
Economist Jan 27, 2011
The agonies of trying to revive free-trade talks.
Government Deficits Mostly Fell in 2010, Pace Will Slow in 2011
IMF Survey Jan 27, 2011
As the global economy continues to recover, countries' fiscal performance in 2010 was slightly better than projected last November, but debt levels in many advanced economies remain high and are rising, the IMF said in its latest analysis of global debt and deficits.
Integrating the Maghreb
Larabi Jaidi (Project Syndicate) Jan 27, 2011
Tunisia’s “Jasmine Revolution” has thrown a spotlight on the consequences of stagnant economies and endemic youth unemployment for the region's authoritarian Arab governments. Less noticed is a key factor contributing to this malaise: the failure of the Maghreb – Algeria, Libya, Mauritania, Morocco, and Tunisia – to integrate.
Russia’s quasi-sovereign debt: A sizeable contingent liability
Maria Arakelyan & Thorsten Nestmann (DB Research) Jan 27, 2011
Several governments are adopting harsh austerity packages to reduce or at least to stabilise public-debt-to-GDP ratios. However, debt incurred by quasi-sovereigns, i.e. companies and banks of which the government is a shareholder, is seldom considered in the context of public debt analysis. As the government has historically owned a large part of corporates and banks in Russia, risks associated with public debt are underestimated when omitting quasi-sovereign debt. Against this background, we first provide an overview of corporate and quasi-sovereign debt in particular. Subsequently, we analyse fiscal sustainability in Russia in a broader framework. We provide scenarios for public debt developments until 2020, also taking into account the impact of quasi-sovereign debt on public debt sustainability.
Look for new links across the global south
Luis Alberto Moreno (FT) Jan 28, 2011
A new ‘south-south’ model of globalisation is binding emerging markets, with trade between Asia and South America steadily increasing over the past years.
Reforms need to nurture capital markets
Deven Sharma (FT) Jan 28, 2011
Capital markets thrive on certainty, which calls for comprehensive policies and the development of more efficient markets in high-growth regions
Rift and Mastery
Jean Pisani-Ferry (Project Syndicate) Jan 28, 2011
Europe and the US, which had fought depression jointly in 2009, begin 2011 with divergent positions on economic policy. That rift threatens to obscure the question that all should be addressing: how to manage a global economy in which the balance of power between advanced and emerging countries is shifting at great speed.
Food for All
Olivier De Schutter (Project Syndicate) Jan 28, 2011
World Bank President Robert Zoellick recently listed nine measures that the G-20 should adopt under its current French presidency in order to confront future food crises. But what is needed are measures that address the root causes of crises, rather than just the symptoms of the global food system’s weaknesses.
Global trade talks: Doha is doable this year
Richard Baldwin (VoxEU) Jan 28, 2011
The Doha Round is likely to conclude this year, as a burst of political leadership by G20 and APEC nations and deft diplomacy by the WTO have spurred talks that are rapidly narrowing the remaining gaps. This column reviews the progress and highlights what more is needed based on a newly released report written by the High Level Trade Experts Group.
The Seven Global Economic Spheres of 2020
Jean-Pierre Lehmann (Globalist) Jan 28, 2011
A possible portrait of the world's economic landscape in 2020.
The End of China’s Surplus
Martin Feldstein (Project Syndicate) Jan 28, 2011
The policies that China will adopt as part of its new five-year plan will shrink its trade and current-account surpluses, possibly moving them into deficit. This is exactly the outcome that US officials want, but they should be careful what they wish for.
Global: The Inflation Merry-Go-Round
Spyros Andreopoulos & Joachim Fels (MS GEF) Jan 28, 2011
Core developed economies’ and emerging economies’ monetary authorities are engaged in a global inflation merry-go-round.
WSJ Jan 28, 2011
The lesson of a new AA- bond rating.
China not all it seems
Benjamin A Shobert and Fraser J T Howie (AT) Jan 29, 2011
The Chinese are not playing by the rules and we have to engage them on that. While at a distance China looks impressive, up close there are many problems.
Time to get real on Europe's inflation target
Wolfgang Münchau (FT) Jan 30, 2011
When Germany exceeds the eurozone's inflation average, a target below 2 percent is as unrealistic as a no bailout clause.
Unrest in Egypt Unsettles Global Markets
NYT Jan 30, 2011
The instability could hinder oil shipments, raise energy costs and drive equity prices down.
A Cross of Rubber
Paul Krugman (NYT) Jan 30, 2011
The Fed and the European Central Bank are under a lot of pressure from bankers to do the wrong thing and raise interest rates.
Getting beyond the carry trade: What makes a safe-haven currency?
Maurizio Michael Habib & Livio Stracca (VoxEU) Jan 30, 2011
What makes a safe-haven currency? This column analyses a panel of 52 currencies in advanced and emerging countries over the past 25 years. It finds that safe-haven status is not determined by the interest rate spread, as emphasised in the carry trade literature, but by the net foreign asset position, which is an indicator of country risk and external vulnerability.
The Roar of the Democratic Wave
Álvaro de Vasconcelos (Project Syndicate) Jan 31, 2011
After a wave of democratization swept southern Europe in the 1970’s, Latin America in the late 1980’s, and Central and Eastern Europe in the 1990’s, it seems that now it is the Mediterranean region’s turn. For Europe, democratization immediately to its south is a vital interest – which it should assert in Egypt.
China’s Shrinking Trade Surplus
Fan Gang (Project Syndicate) Jan 31, 2011
Throughout 2010, China was criticized by the US Congress (and many others) for “manipulating” its currency in order to maintain an advantage for exports, and thus preserve its trade surplus. But China’s trade surplus has decreased by by more than half relative to GDP over the past two years, despite the slow pace of the renminbi's appreciation.
The Economic Roots of the Revolt
Zachary Karabell (WSJ) Jan 31, 2011
Few countries have been less integrated into the global economy than Egypt.
The Commission's Annual Growth Survey: Launching the European semester
Nicolaus Heinen (DB Research) Jan 31, 2011
One item on the agenda at the meeting of European Union economics and finance ministers (ECOFIN Council) held on January 18 was the European Commission’s Annual Growth Survey which had been published one week earlier. This Annual Growth Survey (AGS) kicks off the first European semester – and is thus the first step towards more binding economic policy coordination in the EU and the euro area...
The era of cheap capital draws to a close
Richard Dobbs and Michael Spence (FT) Jan 31, 2011
Worries about hot capital moving too quickly into emerging markets could soon be replaced by an era of financial protectionism.
Why investors have adopted teenage temperaments
Richard Milne (FT) Jan 31, 2011
Bullishness, especially for equities, is very much the consensus for this year, but probe an investor deeper and some fundamental doubts begin to surface.
Should U.S. Debt Be Downgraded to Below Japan’s?
Peter Morici (Globalist) Jan 31, 2011
Why Japan's ability to pay down its debt is much stronger than the United States'.
AAA Rating Is Tough to Defend as U.S. Debt Soars
Kevin Hassett (Bloomberg) Jan 31, 2011
Last week, Standard & Poor’s lowered Japan’s bond rating to AA-, the fourth-highest level. By that standard, the U.S. got away with a slap on the wrist from Moody’s Investors Service, which warned merely that "the probability of assigning a negative outlook in the coming two years is rising."