Searching for Global Demand
Laurence Neville (Global Finance) Sep 1, 2012
Where will spending and demand come from now that many large emerging economies are suffering from decreasing exports?
The Global Village Has Arrived
Kishore Mahbubani (F&D) Sep 1, 2012
Interconnectivity is growing by leaps and bounds.
Sino-Spending
Steven Barnett, Alla Myrvoda, and Malhar Nabar (F&D) Sep 1, 2012
China must boost household consumption even further to make its growth more inclusive.
A Change in Focus
Malhar Nabar and Olaf Unteroberdoerster (F&D) Sep 1, 2012
China’s external surplus is dwindling, with repercussions for its Asian trading partners.
World Economy: Convergence, Interdependence, and Divergence
Kemal Dervis (F&D) Sep 1, 2012
Growth in emerging market and developing economies is less dependent on advanced economies over the long run, but in the short run they dance together.
The Tiger and the Dragon
Murtaza Syed and James P. Walsh (F&D) Sep 1, 2012
India and China can learn a lot from each other as they advance in their development journeys.
Caught in the Web
Camelia Minoiu (F&D) Sep 1, 2012
Network analysis looks at financial connections in a globalized world and the risks they pose
AIG, Surprise Moneymaker
Holman W. Jenkins (WSJ) Sep 2, 2012
Its profits for taxpayers cast doubt on the notion that it behaved recklessly before the panic struck.
My one piece of advice for Mr Draghi
Wolfgang Münchau (FT) Sep 2, 2012
The ECB chief should not accept an unlimited bond purchasing programme without agreement on a credible banking union.
The foreign exchange market: Not as liquid as you may think
Loriano Mancini, Angelo Ranaldo & Jan Wrampelmeyer (VoxEU) Sep 3, 2012
The foreign exchange market facilitates international trade and investment and is central to the global financial system. Market participants, both public and private, commonly think of the foreign exchange market as highly liquid at all times. This column challenges this view by documenting significant declines in liquidity during the recent financial crisis.
Time for international monetary coordination
Paolo Manasse (VoxEU) Sep 3, 2012
The Eurozone crisis threatens not just European economies but economies all over the world. This column argues that a global problem calls for a global solution – and the solution this time round is monetary policy. The ECB needs to commit to keeping sovereign debt yields within reason while the Federal Reserve needs to work towards lowering long-term yields.
China’s Made-in-America Success Story
Brahma Chellaney (Project Syndicate) Sep 3, 2012
Since the 1970's, the US has pursued a conscious policy of aiding China’s rise. So, despite America’s “pivot” to Asia, it intends to stick to its two-track approach: seek to maintain a balance of power with the help of strategic allies and partners, while continuing to accommodate a rising China.
Can Draghi Be Believed?
Simon Tilford (Project Syndicate) Sep 3, 2012
Mario Draghi, the president of the European Central Bank, has repeatedly claimed that the ECB will do everything necessary to save the euro. Nothing has been formally agreed yet, but the ECB is expected to announce a new government bond-buying program following next week’s meeting of its Governing Council. Will it work?
Eurozone: Convergence in reverse
Ralph Atkins (FT) Sep 3, 2012
As private lending to weaker members dries up and the ECB fills the gap, imbalances threaten the bloc’s political foundations.
Time for a fightback in the currency wars
Fred Bergsten and Joseph Gagnon (FT) Sep 3, 2012
If multilateral remedies fail, aggrieved states should act together to induce aggressors to change.
Fed ready for further experimental easing
Mohamed El-Erian (FT) Sep 3, 2012
Chairman Ben Bernanke’s address at Jackson Hole implies that the US central bank will continue with its unconventional policy approach.
Put your money where your mouse is: How e-commerce can foster development
Andreas Lendle, Marcelo Olarreaga, Simon Schropp & Pierre-Louis Vézina (VoxEU) Sep 4, 2012
Geographic distance continues to encumber international trade despite advances in transportation and communication technologies. This column shows that eBay, an online market, reduces the effect of distance on trade by 65%, mainly by reducing information frictions. As consumers 'put their money where their mouse is', welfare gains are largest where they are most needed, i.e. in remote countries with bad institutions.
Africa gets hit by Eurozone crisis
Monica Eaton & Michael J Ferrantino (VoxEU) Sep 4, 2012
The Eurozone debt crisis is not simply a problem for industrialised countries. This column shows how its effects are being felt throughout Africa.
This Recovery is Different
Daniel Gros (Project Syndicate) Sep 4, 2012
The misguided belief that “this time is different” led policymakers to permit the credit boom of the early 2000’s to continue for too long, thus preparing the ground for the biggest financial crisis in living memory. But now, when it comes to recovery, the belief that this time should not be different might be equally dangerous.
Japan, where capital flows to yesterday’s companies
Henny Sender (FT) Sep 4, 2012
Many groups haven’t got to grips with the fact that Japan’s market is shrinking and the country as a production base is no longer competitive.
Regulators should keep it simple
Sebastian Mallaby (FT) Sep 4, 2012
If policy makers in the 1930s could glimpse half the GDP elephant, their descendants may see a smaller proportion.
Merkel’s good politics and bad economics
Josef Joffe (FT) Sep 4, 2012
The ECB is set to be a money machine, a lender of last resort, and damn the treaties that mandate a commitment to ‘price stability’.
Banking union is critical for eurozone
Erik F. Nielsen (FT) Sep 4, 2012
Monetary union cannot function with internal capital controls and large differences in financial conditions – a union is therefore urgently needed.
Rebalancing the Eurozone: Internal adjustments won’t be enough
Zsolt Darvas (VoxEU) Sep 5, 2012
The need to rebalance the debts of several Eurozone members is a major root of the current crisis. This column argues that a purely intra-euro rebalancing strategy has its limits and that a weaker euro would help. It urges the European Central Bank to adopt looser monetary policy, which is anyway justified in a highly recessionary environment.
Ping-Pong and Political Economy
Harold James (Project Syndicate) Sep 5, 2012
During the two decades prior to the financial crisis, most people – including most politicians – assumed that the market was supreme. Now the intellectual pendulum may be swinging back to the belief that state action can mop up markets’ messes – just as veneration of the state in the 1930’s followed market worship in the 1920’s.
The economic consequences of natural catastrophes
Ilan Noy (VoxEU) Sep 5, 2012
Over the last decade we have witnessed increasingly devastating natural disasters: south-east Asia, Katrina, Haiti, New Zealand, and Japan to name a few. While much of the focus is understandably on the immediate impact, this column argues that the long-term economic costs are often underestimated or even overlooked.
The renminbi won’t replace the dollar any time soon
David Pilling (FT) Sep 5, 2012
The overseas march of the Chinese currency is as much hype as reality even if Taiwan has become the latest centre where banks can clear ‘redback’ transactions.
Greek exit fears strengthen Draghi’s hand
Ralph Atkins (FT) Sep 5, 2012
Setting out plainly the horror scenario that results from an exit will help the ECB president in his confrontations with eurozone politicians.
Don’t Make Banks Too Small to Succeed
Phillip Swagel (Bloomberg) Sep 5, 2012
Calls by former Citigroup Inc. Chief Executive Officer Sanford Weill and others to break up the big banks reflect lingering public fear and anger toward financial institutions that seem too big to fail.
A Nobel Prize Winner Under Siege
George Shultz and Madeleine Albright (WSJ) Sep 5, 2012
The Bangladeshi government is moving to exert control over the celebrated Grameen Bank.
Is That All There Is? The Remarkably Small Costs of Quantitative Easing
Joseph E. Gagnon (PIIE) Sep 5, 2012
At Jackson Hole last week, Federal Reserve Chairman Ben Bernanke provided more detail on the "costs and risks" he had cited in his June Federal Open Market Committee (FOMC) press conference as the main reasons why the Fed has been slow to use more quantitative easing to fix the economy. But the details make it clear that these costs are very small indeed, even if Bernanke was not inclined to admit it. Bernanke did acknowledge that there have been enormous costs from the unusually weak recovery—costs that would have been reduced by more aggressive quantitative easing.
Germany is a euro victim
Gunnar Beck (AT) Sep 6, 2012
The euro crisis has pushed Germany into an increasingly dominant position in Europe, yet by its own past and current global standards the country's economic performance during the euro years has weakened. Germany has been the loser, not the winner in an iniquitous reallocation of capital.
European Exceptionalism
Jean-Claude Trichet (Project Syndicate) Sep 6, 2012
Fiscal and certain other economic policies in eurozone countries should be subject to activation of a “federation by exception.” Instead of imposing fines on countries that transgress rules and ignore recommendations, the European authorities should decide directly on measures to be implemented in the countries concerned.
Lessons from Slovenia's Curiously Unexpected Financial Crisis
Anders Åslund (PIIE) Sep 6, 2012
Unexpectedly, Slovenia is going through a financial crisis despite a record of sound behavior on many fronts. Its government bond yields surged above 7 percent in August, and the country is having trouble maintaining access to international financial markets. The question today is whether Slovenia will join the roster of countries needing a bailout program from the International Monetary Fund (IMF) and the European Union.
China, Japan, Korea: Will History and Politics Trump Economics?
Stephan Haggard (PIIE) Sep 6, 2012
While in Korea and Japan several weeks ago, sparks flared not only over the Senkakus/Diaoyu/Diaoyutai Islands and Dokdo/Takeshima but the highly emotional issue of comfort women. As a result, we are about to have one of those quasi-natural experiments that social scientists love. Will history and politics trump economics? Or will growing interdependence pull the parties back to their senses, as South Korea’s thoughtful finance minister, Bahk Jae-wan has recently argued they should?
Ending the Financial Arms Race
Kenneth Rogoff (Project Syndicate) Sep 6, 2012
As finance has become more complicated, regulators have tried to keep up by adopting ever more complicated rules. It is an arms race that underfunded government agencies have no chance to win, which means that it is time to change the nature of the contest.
The weakest will win in the euro battle
John Plender (FT) Sep 6, 2012
In the struggle between creditors and debtors, the strategy of moralistic fiscalism potentially sabotages the good intentions.
The ECB Wades In Deeper
WSJ Sep 6, 2012
At best, Italy and Spain get more time to reform.
How China's Approach in Africa Complements the West's
Stephan Richter (Globalist) Sep 6, 2012
As much as the West has pursued a democracy-building approach in Africa, the Chinese are pursuing a market-building approach. China's strategy might be the perfect complement to the West's quest for democracy.
Output effects of fiscal consolidations
Carlo Favero & Francesco Giavazzi (VoxEU) Sep 7, 2012
The austerity debate hangs on the question of how fiscal policy affects economic output – but answering that question is no easy task. This column presents a paper that, it argues, overcomes some of the problems with identifying cause and effect.
The Heart of the US Election
Raghuram Rajan (Project Syndicate) Sep 7, 2012
A real debate is emerging in America’s presidential election campaign. It is superficially about health care and taxes, but, more fundamentally, it is about the relationship between democracy and free enterprise.
An East European Perspective on the Euro Crisis
Anders Åslund (PIIE) Sep 7, 2012
The euro area continues to struggle with its crisis. In the eastern part of the European Union, however, an illustrative contrast has arisen that tells us a lot about how to act and not to act in a financial crisis. The contrast between successful Estonia and Latvia on the one hand, and struggling Hungary and Romania on the other could hardly be greater or more instructive.
The Brazilian Ego Falters Along With Country's Economy
Dom Phillips (Bloomberg) Sep 7, 2012
Just a few months ago, Brazil's government dreamed of a 4 percent economic expansion for 2012. With second-quarter statistics in -- GDP grew just 0.4 percent over the first quarter -- the Central Bank now says expectations are that the year will close on a figure of 1.64 percent.
The Philanthropist of Honest Government
Mohammed Ibrahim (WSJ) Sep 7, 2012
Africa's cellphone billionaire, Mohammed Ibrahim, is offering a rich payoff for African leaders who don't take payoffs. He says it'll do for development what foreign aid never has.
Five Myths about the Euro Crisis
C. Fred Bergsten (PIIE/WP) Sep 7, 2012
Europe's financial turmoil and the impact it could have on the rest of the world are the overriding focus of international financial markets. Will the euro survive? Would its failure spark a deep global recession? How would the fallout affect the United States—even the coming presidential election? To understand Europe's prospects, we must debunk several misconceptions that have emerged about the crisis. And we must understand that Europe's troubles may spark a deeper union—fiscal as well as political—that could protect the continent from similar crises in the future.
Why early sovereign default could save the euro
Harald Hau & Ulrich Hege (VoxEU) Sep 8, 2012
The recent announcement by the ECB that it will start to buy Spanish and Italian sovereign debt has been warmly welcomed throughout Europe. But this column argues that by doing so the ECB is digging the euro’s grave. It says the solution is default, either through inflation or debt restructuring – and that debt restructuring has many advantages if it is done early enough.
Why Germany Should Lead or Leave
George Soros (Project Syndicate) Sep 8, 2012
If Europe is to escape its crisis, its leaders must awaken Germany to the misconceptions that are guiding its policies. At this point, that will not happen unless they persuade Germany to make a choice: become a benevolent hegemon or exit the eurozone.
Goodbye Doha, hello Bali
Economist Sep 8, 2012
The Doha trade talks are dead. Replace them with a rapid new deal called the "Global Recovery Round"
International trade: Boxed in
Economist Sep 8, 2012
Global trade has turned down sharply this year. The outlook is pretty bleak, too.
Understanding bubbly episodes
Vasco M. Carvalho, Alberto Martin & Jaume Ventura (VoxEU) Sep 9, 2012
Over the last two decades, US aggregate wealth has fluctuated substantially. This column presents research that takes a first step towards measuring the reasons why. It finds that most recent fluctuations are driven by bubbles and argues that models of rational bubbles with financial frictions can improve our understanding of recent macroeconomic history.
Global economy: Not so different this time
Robin Harding and Chris Giles (FT) Sep 9, 2012
As central bankers begin to doubt activist policies still have power to boost demand, some economists are starting to call for radical measures.
Are Chinese Banks Hiding “The Mother of All Debt Bombs”?
Minxin Pei (Diplomat) Sep 10, 2012
China's massive bank financed stimulus was intended to keep the economy moving. It may instead lead to economic disaster.
How central banks contributed to the financial crisis
Michael Biggs & Thomas Mayer (VoxEU) Sep 10, 2012
Even before the crisis, there were some who stressed that monetary policy should keep an eye on asset bubbles and the growth of credit. This column argues that the policy of inflation targeting, used widely in the 1990s and 2000s, did indeed lead to excessive credit growth that eventually bred financial instability.
Melting on Top of the World
Stefan Rahmstorf (Project Syndicate) Sep 10, 2012
The Arctic sea-ice cap is now melting at an alarming rate, with recent data marking a new low in a decades-long decline. The meltdown, caused largely by human-induced global warming, will have far-reaching environmental, geopolitical, and economic consequences.
After the Millennium Development Goals
Dani Rodrik (Project Syndicate) Sep 10, 2012
In 2000, 189 countries collectively adopted the Millennium Declaration, which evolved into an ambitious set of concrete targets called the Millennium Development Goals, to be achieved by the end of 2015. As the deadline approaches, development experts are debating a new question: What comes next?
China in transition: Ascent of the bureaucrat
Kathrin Hille (FT) Sep 10, 2012
The new leadership appears more focused on factionalism within a fossilised party than on much-needed reform.
Democracy loses in struggle to save euro
Gideon Rachman (FT) Sep 10, 2012
For anyone with a sense of history, the sight of Germany’s representative on the ECB being isolated should be chilling.
Banking union must halt Balkanisation
Patrick Jenkins (FT) Sep 10, 2012
The breakdown of cross-border lending is clearly undesirable, but European remedies are doomed without federal deposit guarantees.
Bernanke risks creating a liquidity trap
Peter R. Fisher (FT) Sep 10, 2012
The more the Fed drags down interest rates, the more attractive cash becomes, leading to a portfolio rebalancing that resembles a liquidity trap
The Economic Fallout of the U.S. Financial Crisis
Dennis Keller (Globalist) Sep 10, 2012
Connecting the current concerns about unemployment in the United States to the need for stronger financial regulation — by detailing all the human and economic costs the financial sector caused during the last crisis.
Options Open on Economy
Eswar S. Prasad (NYT/IHT) Sep 10, 2012
For all the angst about its fading growth, the Chinese government has room to stimulate the economy through fiscal and monetary policies.
Tackling Too Big To Fail: The Most Important Rightsizing in U.S. History
John Prout and Stephan Richter (Globalist) Sep 11, 2012
Industrial firms have done it. They cleaned up their balance sheets and metastasizing operations. But won't financial firms do the same? This is all the more urgent, as the effects of failure are far bigger than "just" the collapse of a single company and the unemployment of its workforce.
Europe’s pre-Eurozone debt crisis: Faroe Islands in the 1990s
Jon Danielsson & Hermann Oskarsson (VoxEU) Sep 11, 2012
The current EZ crisis is not Europe’s first sovereign-debt crisis. This column shows parallels can be drawn from an all-but-forgotten episode, i.e. the 1990 Faroese crisis. Just like Greece, the Faroes got into difficulty because of excess borrowing facilitated by a currency union with an AAA-rated partner undeterred as the sovereign debt spiralled upwards. In the Faroese case, the crisis was eventually resolved when political necessities outweighed the cost of the bailout.
Fiscal policy in Latin America: Space to manoeuvre?
Christian Daude & Ángel Melguizo (VoxEU) Sep 11, 2012
Latin American economies performed remarkably well during the crisis – and the years before. This column compares the fiscal policies in the region with those of advanced economies and discusses the factors behind the differences, before outlining some areas for policy reform.
Audit the Fed?
Barry Eichengreen (Project Syndicate) Sep 11, 2012
The US Republican Party’s proposal to restore some kind of metallic monetary standard is so outlandish as to be an almost irresistible target. More serious, however, is the Republicans’ proposal for an annual audit of the Federal Reserve, which is a recipe for politicization of monetary policy and financial-market turmoil.
China’s Evolving Web
Andrew Sheng (Project Syndicate) Sep 11, 2012
A market economy can be understood as a web of public and private contracts that are linked with each other, with one default potentially triggering an avalanche of broken promises. To understand China’s socialist market economy, it is essential to examine these different forms of contracts and their institutional structures.
Another Eventful Week in the Euro Area
Jacob Funk Kirkegaard (PIIE) Sep 11, 2012
In the first week of September, the European Central Bank (ECB) introduced yet another new acronym into the mix of solutions in the euro area crisis—Outright Monetary Transactions (OMT), the name for the bank’s plan to buy up debt of troubled European countries. Now three other players in the euro area crisis must step up to the plate. First, the European Commission will publish its proposals for a European Banking Union. Second, the German Constitutional Court will rule on the constitutionality in Germany of the new European Stability Mechanism (ESM), which is to serve as another lending backstop. Third, the Dutch voters go to the polls. All three of these developments will likely contribute constructively to the longer-term solution of the euro area crisis.
Germany's Currency Nostalgia Is Badly Off the Mark
Clive Crook (Bloomberg) Sep 11, 2012
Let’s hope Germany thinks hard about George Soros’s proposal that it should lead the euro system or leave it. The more carefully Germans study this choice, the more eager they will be to make the present system work.
Draghi alone cannot save the euro
Martin Wolf (FT) Sep 11, 2012
Given the politics, the ECB has done what it can and has won some time but the main challenge remains daunting and victory far off.
Technology can help fight corruption
Frank Vogl (FT) Sep 11, 2012
In the age of instant and global communication, light is being shed on the practice that feeds poverty, injustice and organised crime.
In China We (Don't) Trust
Thomas L. Friedman (NYT) Sep 11, 2012
When there is trust in society, sustainable innovation happens. China is beginning to see the fruits of a little bit of that trust.
The Hidden Costs of Monetary Easing
Phil Gramm and John Taylor (WSJ) Sep 11, 2012
Inflation is not the only danger posed by the central bank's ballooning balance sheet.
Why Markets Need 'Naked' Credit Default Swaps
Stuart Turnbull and Lee Wakeman (WSJ) Sep 11, 2012
Anyone facing losses from a government default should be able to protect himself by hedging.
The wrong doctors
Richard Rahn (WT) Sep 11, 2012
Central banks are being pressured by their political masters to solve a problem they cannot solve.
What does trade have to do with climate change?
Harun Onder (VoxEU) Sep 12, 2012
As multilateral attempts for climate-change mitigation stall, the two-way relationship between trade and climate change is likely to come under further scrutiny. This column explains how liberalised trade has several climate-related consequences. It argues that trade policy could enforce mitigation policies but that multilateral conventions are crucial in preventing undesired protectionist consequences.
Helping poor farmers help themselves against drought
Karen Macours, Patrick Premand & Renos Vakis (VoxEU) Sep 12, 2012
Droughts in the US, India, and the Sahel are making headlines, with the farmers themselves often the first to lose out. This column presents findings from a randomised control trial exploring whether providing households with training and capital to diversify their incomes can cushion the shock of severe weather.
A few observations regarding BRIC economies’ foreign assets & liabilities
Markus Jaeger (DB Research) Sep 12, 2012
The emerging economies are playing an increasingly important role in the global economy. Their share of global GDP, trade and investment flows is increasing. They have already gained a greater say in multilateral financial institutions in recent years as well as a ‘seat at the table’ with the creation of the G20. The four largest emerging economies, the so-called BRICs, already rank among the world’s eleven largest economies.
Europe’s Vital French Connection
Kemal Dervis (Project Syndicate) Sep 12, 2012
In the debates raging over the future of the EU and the eurozone, Germany always takes center stage. But, in terms of influencing outcomes in Europe, France remains as important as Germany, for three reasons.
Michael Woodford's Unjustified Skepticism on Portfolio Balance (A Seriously Wonky Rebuttal)
Joseph E. Gagnon (PIIE) Sep 12, 2012
In his recent speech at the Federal Reserve’s annual Jackson Hole conference, Professor Michael Woodford of Columbia University attempted to pour cold water on the idea that the Fed’s purchases of long-term bonds (also known as quantitative easing) could lower bond yields. His contention was that the portfolio balance effect of such purchases would be minimal at best. I disagree, as do the bulk of central bankers. This debate matters because, if Woodford is right, the Fed’s only tool for delivering more stimulus now is to commit to future policy actions that may be viewed as undesirable when they occur—such as promising not to raise interest rates when inflation returns. If the market were to doubt such a commitment from the Fed, the Fed would lose its ability to steer the economy. In reality, the portfolio balance channel gives the Fed a tool to guide the economy without unduly restricting future policy choices. This is not to deny, however, that Fed statements about future policy intentions may have important effects.
APEC Leaders Clinch Environmental Goods List
Bridges Weekly Trade News Digest, Volume 16, Number 30 Sep 12, 2012
Asia-Pacific Economic Cooperation (APEC) leaders' meeting in Vladivostok, Russia last week agreed on a list of over 50 environmental goods for liberalisation by 2015, following up on a commitment made in 2011. The summit of leaders and ministers, which wrapped up on Sunday, also saw the 21-country grouping issue language discouraging protectionism – including export restrictions – amid discussions over the need to focus on growth in the Asia-Pacific during the ongoing eurozone crisis. On the sidelines, ministers and leaders of the proposed Trans-Pacific Partnership agreement also met to review progress in the negotiations.
Bangkok Sets Stage for Doha Climate Meet
Bridges Weekly Trade News Digest, Volume 16, Number 30 Sep 12, 2012
UN officials are praising delegates for the “concrete progress” made at an irregular negotiating session on climate change, which wrapped up last week in Bangkok. Advancements on key issues were notably more positive than expected and some negotiators say the upcoming Doha climate talks are in a better position to succeed than they were before the meeting. Critics, however, have been quick to point out that wide gaps still remain and that countries will have to do much more to achieve measureable progress on curtailing climate change.
Russia begins its slow pivot to Asia
David Pilling (FT) Sep 12, 2012
With prospects to the west looking bleak, Moscow has been looking to the east but has a lot of catching up to do.
Bears at the heart of the dragon
Jamil Anderlini (FT) Sep 12, 2012
Local pessimism on China’s economy contrasts with western hope.
Frederick the Great and the New Old Germany
Jacob Heilbrunn (NYT) Sep 12, 2012
A cultural and political shift in Germany exemplifies a rebirth of the Prussian values of thrift, independence and incorruptibility that Angela Merkel hopes to export.
A Fracking Good Story
Bjørn Lomborg (Project Syndicate) Sep 13, 2012
Carbon-dioxide emissions in the US have dropped to their lowest level in 20 years, owing to a rapid switch from coal to natural gas, which is now cheaper than it has been for 35 years. Gas extracted by new hydraulic-fracturing technology is not a panacea, but it really is by far this decade’s best green-energy option.
Fiddling at the Fire
Nouriel Roubini (Project Syndicate) Sep 13, 2012
Worldwide, political leaders are putting off the economic reforms needed to avoid a painful, if not catastrophic, endgame. But, as everyone kicks the can down the road, the can is getting heavier and, in the major emerging markets and advanced economies alike, is quickly approaching a brick wall.
Introducing The Latin Euro
Peter Boone and Simon Johnson (NYT) Sep 13, 2012
The verdict is now in. Traditional German values lost and the Latin perspective won. Germany fought hard over many years to include “no bailout” clauses in the Maastricht Treaty (the founding document of the euro currency area) and to limit the rights of the European Central Bank to lend directly to national governments.
The Cure for Baldness
Neel Kashkari (PIMCO) Sep 13, 2012
Rarely does one find market commentators offering moderate, balanced investment advice these days. More likely one will find extreme headlines designed to capture maximum attention. We believe it is worthwhile to take time to craft an investment strategy that can withstand a range of market outcomes. In a lower-return world, we look to buy companies that are attractively priced and that can grow faster than the market as a whole, and we actively manage downside risks.
Microfinance in evolution: An industry between crisis and advancement
Cédric Lützenkirchen & Christian Weistroffer (DB Research) Sep 13, 2012
For a long time it seemed that microfinance could accomplish social and financial goals simultaneously and without frictions. But following the international financial crisis and global recession, microfinance experienced its first serious setback starting in 2008. While initially it was assumed that the industry’s problems were triggered by the global crisis and the following recession, a consensus is now emerging that problems are rooted within the characteristics of the microfinance industry as they have developed over time. Problems emerged as some microfinance institutions expanded too quickly, rolled out new products or expanded into different markets without the required institutional capabilities and controls. In order to enter a sustainable growth path, client focus needs to be put back at the core of all operations. A new balance needs to be achieved between social and commercial objectives in microfinance.
The old colonialism
Hossein Askari (AT) Sep 13, 2012
In the first 50 years of oil output in the Persian Gulf, Western firms set terms on a "take it or leave it" basis, most vividly in British dealings with Iran, backed by very real threats of oil boycott and military intervention. This "old colonialism" was not to last - but a new form was to develop.
East holds out feeble recovery hope
Yong Kwon (AT) Sep 13, 2012
The recent Asia-Pacific Economic Cooperation meeting highlighted the region's potential to jumpstart the stagnating global economy. At the same time, the geographically vast, economically diverse, and politically polarized area faces obstacles that make economic growth anything but certain.
Fiscal consolidation and reforms: Substitutes, not complements
Coen Teulings (VoxEU) Sep 13, 2012
Many OECD countries suffer from high sovereign debts. Sooner or later, this problem must be addressed. Many argue that this will require some form of fiscal retrenchment or institutional reform or a combination of the two. This column argues that the two are not complements as many suggest – they are instead substitutes.
China is losing its manufacturing lead as a production hub
George Magnus (FT) Sep 13, 2012
It may no longer make sense for foreign companies to incur the cost of shipping materials and components in, and products out.
Foreign funds flow into Japanese property
Henny Sender (FT) Sep 13, 2012
Strong yen and steady market attract overseas investors to Japan real estate although domestic money is still wary of committing
Is India's Economic Growth Sustainable?
Lydia Powell (Globalist) Sep 13, 2012
Belief in economic growth has come to be seen as a solution for all of India's social and political problems. India's fixation on growth is facilitated by flawed measures of economic progress.
Paul Krugman's Baltic Problem
Anders Aslund (FP) Sep 13, 2012
Why is the Nobel Prize-winning economist mocking the countries that have escaped the eurocrisis?
Why Are Savings Patterns So Different?
Keyu Jin (Project Syndicate) Sep 14, 2012
While global imbalances have preoccupied many observers, few have sought to explain the divergence in world savings behavior. One reason may be that credit markets are more developed in advanced economies than they are in emerging countries, particularly in terms of the degree to which households are able to borrow.
Dhaka lets billions of aid dollars lie unused
Syed Tashfin Chowdhury (AT) Sep 14, 2012
Bangladesh is failing to use as much as US$16 billion in foreign aid even though it ranks among the world's poorest countries. Corruption and inefficiency are cited as just two of the reasons for much-needed cash being unused and important infrastructure projects being delayed. Meanwhile yet more foreign funds are heading to Dhaka.
Trade facilitation matters!
Gary Clyde Hufbauer, Martin Vieiro & John S.Wilson (VoxEU) Sep 14, 2012
Economists celebrate trade not only because they love watching ships cross the Pacific and cargo planes land at Paris Charles-de-Gaulle but also because increased trade demonstrably raises income and improves living standards. This column argues that a powerful way to boost trade is by focusing on trade facilitation, i.e. improving both hard infrastructure like ports and railways, and soft infrastructure such as shipping logistics.
A tale of two (China vs US) stimuli
Peter Lee (AT) Sep 14, 2012
The world is in a Dickensian dilemma, with two starkly different models of economic stimulus - China's and America's. Viewed rationally, China's favored path to prosperity is now riddled with too many hurdles to be navigable in the long term, while the US has its own, very different, problems. However, rationality is beside the point in both economies: Ideology is guiding the debate, not toward heavenly success but "direct the other way".
Hard Truths About Global Growth
Michael Spence (Project Syndicate) Sep 14, 2012
The world’s high-income countries are in economic trouble, mostly related to growth and employment, and now their distress is spilling over to developing economies. And, unfortunately, the likely policy responses are inappropriate to the factors underlying today’s problems.
India’s economic slowdown and what should be done about it
Sarah Chan (VoxEU) Sep 15, 2012
Optimism over India’s economy is fading. This column argues that India’s current economic slowdown reflects both cyclical and structural factors. It outlines the steps needed to get India back on course to reaching its growth potential.
World Hunger, the Problem Left Behind - Economic View
Tyler Cowen (NYT) Sep 15, 2012
Economic gains in many sectors have yet to solve the problem of feeding the world. In Africa alone, government policies and fertilizer costs are inhibiting agricultural progress.
The euro crisis: Game change?
Economist Sep 15, 2012
The euro zone’s leaders have turned a corner. Where to, is not yet clear
Will Germans Pick Up the Tab for Deutsche Bank, Too?
Simon Johnson (Bloomberg) Sep 16, 2012
Pity the German taxpayer.
U.S. Banks Ignore Europe's Lesson on Greed
William D. Cohan (Bloomberg) Sep 16, 2012
Four years after the collapse of Lehman Brothers Holdings Inc. and the near-total paralysis of capitalism’s central nervous system -- the moment fear completely overwhelmed greed on Wall Street -- we are starting to see a few glimmers of hope.
Venezuela: Up in smoke
Benedict Mander (FT) Sep 16, 2012
Hugo Chávez, facing an election next month, wins popularity by spending oil revenues but critics say he is squandering them.
QE would be right for Europe, too
Wolfgang Münchau (FT) Sep 16, 2012
Instead of a complex programme of conditional government bond purchases, the ECB should be delivering a broad-based stimulus.
The election’s global reach
E.J. Dionne Jr. (WP) Sep 16, 2012
Voters in capitalist democracies seek balanced approach.
On banking union, speak the truth
Charles Wyplosz (VoxEU) Sep 17, 2012
The European Commission presented their plan for a single EZ bank supervisor this weekend. While it is a good start, this column argues that it avoids the hard truth driving the process: the Eurozone needs a lender of last resort and the ECB is the only one that can play the role. Admitting this truth makes it clear that the Eurozone also needs an arrangement with member governments on bank-bailouts cost sharing and institutions to minimise the ultimate costs.
QED: QE3
Marco Annunziata (VoxEU) Sep 17, 2012
As the Fed announces a third round of quantitative easing, this column argues that it is unlikely to work. Investment and hiring are held back by huge uncertainty over the long-term outlook and the stimulus provides a monetary bridge over the election gap but little more.
China must act warily with Europe’s banks
Patrick Jenkins (FT) Sep 17, 2012
While it would be tempting from to want to make a splash and snap up a whole institution, this would almost certainly be folly.
Bond-buying plan will hurt risk assets
George Magnus (FT) Sep 17, 2012
Draghi’s plan is technically strong, and a smart way to leverage bailout funds, but it is also economically and politically unsound.
Is Europe’s Financial Crisis Over?
Gene Frieda (Project Syndicate) Sep 17, 2012
With the ECB taking on the characteristics of a lender of last resort, the eurozone's acute crisis is over for now. But the existential challenge – political agreement on the key elements of banking and fiscal union – is only just beginning, and, unless it is met, the eurozone’s financial disintegration will eventually resume.
Global House Prices Still Showing Down Trend
IMF Survey Sep 17, 2012
U.S. house prices have started to pick up but globally prices are still on a down trend, according to IMF research. Price trends vary widely between countries, with Ireland, Greece, Portugal, and Spain seeing the biggest falls in the past year and Brazil and Germany, substantial increases.
America in free-fall
Richard Rahn (WT) Sep 17, 2012
The annual Economic Freedom of the World report, including an index of country rankings, has just been released, and it should be a wake-up call.
As China Sneezes, Will the World Catch Cold?
Vikram Mansharamani (YaleGlobal) Sep 17, 2012
Slow growth could help China’s economy, but hurt mining, supply chain and investors.
How Germany can avoid wealth losses if the Eurozone breaks up: Limit conversion to German residents
Paul De Grauwe & Yuemei Ji (VoxEU) Sep 18, 2012
Germany’s large accumulation of TARGET2 claims has created fear that Germany stands to lose vast amounts of wealth if the Eurozone were to break down. After clarifying the issues using basic economic principles, this column shows that Germany could avoid large wealth losses by restricting euro-to-mark conversions to German residents.
Expectations and asset prices: Keynes meets Hayek
Giovanni Cespa & Xavier Vives (VoxEU) Sep 18, 2012
Is the ECB right to buy up sovereign bonds in southern Europe? This column argues that the answer depends on who is right: Keynes or Hayek.
New Oil? The Energy Revolution in Reverse
Ian Johnson (Globalist) Sep 18, 2012
Will the next revolution in energy involve solar, wind or some other renewable source? Or will it involve oil? The reality is that we may have already entered a new era of "uneconomic" oil where the full social, environmental and economic costs of extraction are far larger than the benefits.
Global Debt Crisis Is Far from Over, Conference Hears
IMF Survey Sep 18, 2012
The sources of the recent global financial turmoil, how best to detect a financial crisis before it is too late to take remedial action, and the consequences of an attendant surge in public debt are among key issues economists and policymakers ponder four years after the onset of the worst global financial crisis since the Great Depression.
Bankers In A Bind
Neil Sen (II) Sep 18, 2012
With capitalism's enablers hunkering down under a host of new regulations, it's unclear who will pick up the slack.
Africa: Funding on the frontier
Robin Wigglesworth (FT) Sep 18, 2012
Hopes are rising that the development of sub-Saharan capital markets could be a catalyst for faster, more sustainable growth across the region.
Tokyo and Beijing must step back from the brink
Minxin Pei (FT) Sep 18, 2012
It is inconceivable that Asia’s two economic giants, joined at the hip commercially, should prolong confrontation.
Retreat of China’s credit tide leaves a stench
Paul J. Davies (FT) Sep 18, 2012
Economy needs other sources of finance as banks face constraints on lending, but lack of a market for corporate bonds poses a problem
Euro or No, Economics of Everyday Greek Life Is Eroding
Liz Alderman (NYT) Sep 18, 2012
Even if Greece gets yet another lifeline from its European partners, many Greeks have reached their own conclusion: It doesn't matter, because of deep-seated problems.
Bernanke's 'Risk-On, Risk-Off' Monetary Policy
Benn Steil and Dinah Walker (WSJ) Sep 18, 2012
There is strong evidence that for more than a decade the Fed has been using interest rates to push investors toward or away from stocks and other assets.
The Archipalego Economy: Unleashing Indonesia's Potential
Raoul Oberman, Richard Dobbs, Arief Budiman, Fraser Thompson and Morten Rossé (McKinsey Quarterly) Sep 18, 2012
Indonesia must boost productivity growth by 60 percent to meet its GDP growth targets and stay on track to become the world’s seventh-largest economy.
Drowning in malinvestment
Martin Hutchinson (AT) Sep 19, 2012
Malinvestment in 1929 took more than a decade to overcome; the current gigantic swamp led by worldwide quantitative easing and its equivalents will doom the global economy for a generation. We can look forward to 2035 before we see the beginning of true recovery.
China faces double challenge
Benjamin A Shobert (AT) Sep 19, 2012
China's policymakers understand that new economic and political models are required for the country to continue its ascendancy. No less a challenge to its new leaders may be in how the established Great Powers - in particular the United States view China and its intentions. Misperceptions could lead unwittingly to disaster.
Immigration and voting for the extreme right
Martin Halla, Alexander Wagner & Josef Zweimüller (VoxEU) Sep 19, 2012
Extreme nationalist parties in several European countries have become increasingly popular. While many speculate as to the reasons, this column provides some economic analysis. It looks at the link not just with immigration but with the type of immigration.
One Europe, Many Tribes
Peter Coy (Bloomberg Businessweek) Sep 19, 2012
Italy, unified in 1870, is newer than Nevada. Spain was split down the middle by a civil war as recently as the 1930s. And reunited Germany, dating back only to 1990, is younger than two of the Jonas Brothers. Just a reminder that, for all their claims to antiquity, many of the nations of Europe have been nations for only the briefest of times. For most of history they were rivalrous territories, kingdoms, duchies, principalities, and city-states. They were bound by language and culture—and riven by tribalism.
Fed to Debase Dollar?
Axel Merk (Merk Funds) Sep 19, 2012
Is the Fed’s goal to debase the U.S. dollar? The Federal Reserve’s announcement of a third round of quantitative easing (QE3) might have been the worst kept secret, yet the dollar plunged upon the announcement. Here we share our analysis on what makes the FOMC tick, to allow investors to position themselves for what may be ahead.
The Next Task for China’s New Leaders
Ana Palacio (Project Syndicate) Sep 19, 2012
Despite continuing uncertainty surrounding China’s coming political transition, pragmatism – the common thread among its leaders after Mao – will most likely carry over to the new cohort. If so, the new leaders will see that their best strategy, both internally and internationally, is to strengthen China’s rule-of-law institutions.
Ground Zero
Tom Buerkle (II) Sep 19, 2012
Monetary policy appears to be losing its effectiveness. No matter what the Fed and other central banks do, low rates and slow growth are likely to persist for years.
EU Calls on Russia to Live up to WTO Commitments
Bridges Weekly Trade News Digest, Volume 16, Number 31 Sep 19, 2012
Recent tensions between Brussels and Moscow have taken on a trade dimension, with EU Trade Commissioner Karel De Gucht urging Russia to amend what the EU views as a series of restrictive trade practices. De Gucht reminded the recently-acceded country that it was now a part of the WTO and, as such, is required to operate under the established multilateral trade rules.
With US Election in the Background, Washington and Beijing Spar at WTO
Bridges Weekly Trade News Digest, Volume 16, Number 31 Sep 19, 2012
Trade tensions between Washington and Beijing flared up rapidly this week, as the two sides lodged WTO challenges against each other on Monday just weeks ahead of the US presidential election. In what represents the latest in a long-running series of disputes between the two trading giants, Washington launched proceedings over Chinese automobile and auto parts export subsidies, as Beijing filed its own complaint over US anti-dumping and countervailing measures on various Chinese exports.
Mexico: China’s unlikely challenger
Adam Thomson (FT) Sep 19, 2012
Latin America’s second-largest economy has emerged as a powerful exporter but must ensure that violence does not undermine its growing ability to compete with Asia.
Patience needed for Fed’s dual mandate
James Bullard (FT) Sep 19, 2012
‘Missing on both sides of its dual mandate’ is exactly what one would expect under an appropriate monetary policy.
Fund managers must break their silence
John C. Bogle (FT) Sep 19, 2012
It is essential to long-term investing, capitalism and national interest, that financial groups which own companies take governance seriously.
India’s Feet and Minds
Esther Dyson (Project Syndicate) Sep 20, 2012
Despite India’s complex political and economic situation, there is a growing focus on addressing problems' root causes, rather than just dealing (ineffectively) with bad outcomes. The challenge is to think of India's more than one billion people not just as mouths to feed, but also as minds to educate and skilled workers to employ.
The new colonialism
Hossein Askari (AT) Sep 20, 2012
The brute colonial rule that came with the initial stages of Middle East oil finds did not end with empire. It morphed into the present state where Gulf rulers exploit their people hand-in-glove with the former colonial masters, leaving religion as the only shelter for the masses. This is the 18th article in a special series on oil and the Persian Gulf.
Why hit-and-run exporting can be optimal
Gábor Békés & Balázs Muraközy (VoxEU) Sep 20, 2012
Trade relationships often last for a surprisingly short period of time. Previously this was explained by failed export efforts. Instead, this column shows that it may be optimal for firms to export a certain product to a country only every once in a while. This requires less investment at the beginning and this strategy is often used by firms which are less productive or face credit constraints; this is especially true for farther and smaller markets.
Banking union: A federal model for the European Union with prompt corrective action
Jacopo Carmassi, Carmine Di Noia & Stefano Micossi (VoxEU) Sep 20, 2012
The European Commission’s latest proposals for financial regulation are seen by many as the first steps towards a banking union. This column argues that there are a number of issues that need to be exposed and debated in public before the Commission decides on anything.
The Narrative Structure of Global Weakening
Robert J. Shiller (Project Syndicate) Sep 20, 2012
Recent indications of a weakening global economy have led many people to wonder how pervasive poor economic performance will be in the coming years. A fundamental problem in forecasting nowadays is that the ultimate causes of the slowdown are psychological and sociological, and relate to confidence and changing “animal spirits.”
Introducing the “reverse Volcker moment”
Mohamed A. El-Erian (FT) Sep 20, 2012
Is the US experiencing a “reverse Volcker moment” in which low and stable inflation gets subordinated to other economic objectives? Markets seems to hint this and an increasing number of central banks in the rest of the world appear concerned about it.
Return of animal spirits will benefit all
Martin Taylor (FT) Sep 20, 2012
Rather than lie low and wait for the crisis to pass, the financial services industry must figure out how to adapt to new conditions.
Spain: Unfinished business
Tony Barber (FT) Sep 20, 2012
Madrid is regaining some economic poise but still faces a long struggle with regional tensions, political cronyism, a slow-moving judiciary and weak education.
Europe's regulatory noose
Dalibor Rohac (WT) Sep 20, 2012
During his electoral campaign, Francois Hollande declared war on "unfettered capitalism," which he identified as the main contributor to the current economic crisis.
Five Questions to Save the Euro
Marc De Vos (Globalist) Sep 20, 2012
Is the European Central Bank's apparent willingness to finance the debt of the eurozone's weakest economies — provided they submit to a program of strict budgetary discipline — yet another pour into a bottomless barrel? Or is it the beginning of the end of the euro crisis?
Why micro success doesn’t guarantee macro success
Pieter Gautier, Paul Muller & Bas van der Klaauw (VoxEU) Sep 21, 2012
One recent trend in economics has been the use of randomised control trials, where policies are trialled on a sample of the population and the effects compared with a control group. But this column look at a policy in Denmark aimed at helping people find jobs and argues that success on a small scale doesn’t necessarily transfer once the policy is rolled out – especially when there are spillover effects.
The doomsday cycle turns: Who’s next?
Peter Boone & Simon Johnson (VoxEU) Sep 21, 2012
Industrialised countries today face serious risks – for their financial sectors, for their public finances, and for their growth prospects. This column explains how, through our financial systems, we have created enormous, complex financial structures that can inflict tragic consequences with failure and yet are inherently difficult to regulate and control. It explains how this has happened and why there are more and worse crises to come.
Small Farms’ Large Benefits
Kanayo F. Nwanze (Project Syndicate) Sep 21, 2012
By 2050, global food production will have to increase by 60% to meet demand from a growing world population with changing consumption habits. But the challenges that agricultural producers currently face, and the food-price volatility that results from these challenges, will not address themselves.
Why a Spanish Approach to the ESM Will Help
Jacob Funk Kirkegaard (PIIE) Sep 21, 2012
Several people have asked me in recent days about my assertion that a Spanish government and indeed the euro area as a whole would benefit from seeking a lending lifeline from European authorities, including the European Stability Mechanism/European Financial Stability Facility (ESM/EFSF) and the European Central Bank’s new Outright Monetary Transactions (OMT) facility.
Asia Poised To Emerge as Lynchpin of Global Economy
IMF Survey Sep 21, 2012
Asia is in a stronger position to tackle headwinds from the unsettled global economy, but the region must continue with structural reforms, and embrace greater integration if it is to meet its potential, an audience hear at a key conference held earlier this month in Tokyo.
Misdiagnosing the Eurozone crisis: Perspectives from Asia
Pradumna B. Rana (VoxEU) Sep 22, 2012
The Asian financial crisis of the late 1990s shows what can happen when economists misdiagnose a crisis. This column argues the Eurozone crisis may have been made worse by over-simplifying it as a debt crisis. The author suggests that the large institutional changes now afoot – the shift from Eurozone I to Eurozone II – are finally addressing the root causes, but they may be too little too late.
Beijing Spreads Its Wings
Allen T. Cheng (II) Sep 23, 2012
China is moving, slowly but surely, to use its financial clout to promote its economic interests beyond Asia.
Draghi is the devil in Weidmann’s eurozone drama
Wolfgang Munchau (FT) Sep 23, 2012
The ECB president is sabotaging the euro in the most effective way he can – reinforcing people’s innate fears.
The new Indian politics: no slowdown, no panic
Arvind Subramanian (FT) Sep 23, 2012
The modesty of reforms and the opposition they are generating suggest it will be hard to break the hold of fiscal populism.
Intellectual property: A new world of royalties
Alan Beattie (FT) Sep 23, 2012
Washington is pushing for tougher IP rules in new trade deals but emerging markets suspect the terms could be loaded against them.
How High Oil Prices Will Permanently Cap Economic Growth
Jeff Rubin (Bloomberg) Sep 23, 2012
For most of the last century, cheap oil powered global economic growth. But in the last decade, the price of oil has quadrupled, and that shift will permanently shackle the growth potential of the world’s economies.
Coal and Nuclear Power Can’t Substitute for Pricey Oil
Jeff Rubin (Bloomberg) Sep 24, 2012
About 40 percent of the world’s electric power is generated from burning coal, which is second only to oil in contributing to global energy use.
America’s Election and the Global Economy
Michael Boskin (Project Syndicate) Sep 24, 2012
With uncertainty plaguing Europe’s finances and China slowing, the last thing the global economy needs is a stagnant or shrinking US economy. But it will take strong leadership by the president-elect to avoid it.
Democracy’s Burning Ships
Luigi Zingales (Project Syndicate) Sep 24, 2012
According to legend, Hernán Cortés, in his quest to conquer Mexico, burned the boats that had brought his expedition from Spain in order to motivate his soldiers to win. But when elected governments try to adopt a similar "commitment" strategy to enhance long-term economic outcomes, they risk losing democratic legitimacy.
Banking on Financial Inclusion
Daniel Schydlowsky (Project Syndicate) Sep 24, 2012
Today, 2.5 billion people worldwide lack access to formal banking services, credit facilities, or savings instruments. Bringing this largely ignored “missing market” into the formal financial system would benefit developed and developing countries alike, and lead to innovation and growth in every industry.
The Financial Crisis and Inflation Expectations
Bharat Trehan and Oskar Zorrilla (FRBSF Letter) Sep 24, 2012
One measure of a successful monetary policy is its ability to anchor expectations about future inflation rates. Financial crises, such as that of 2008–09, can be considered natural experiments that test this anchoring. The effects of the crisis on inflation expectations were largely temporary in the United States, but longer-lasting in the United Kingdom. That is surprising because the United Kingdom had a formal inflation target during this period. Expectations may have been affected more because inflation stayed above the central bank’s target for extended periods following the crisis.
India is part of an upside-down world
Gideon Rachman (FT) Sep 24, 2012
With more poor people than Africa and more billionaires than Britain, the country is simultaneously rich and poor.
Eurozone should fix its banks US way
Philipp Hildebrand and Lee Sachs (FT) Sep 24, 2012
Waiting seven years to address the financial system’s weaknesses runs the risk of seven years of weak growth.
Basel naysayers delve into detail
Brooke Masters (FT) Sep 24, 2012
Industry groups fighting to dilute reforms are commissioning research to show particular subsections of the rules could have pernicious effects.
The case for euro deposit insurance
Daniel Gros & Dirk Schoenmaker (VoxEU) Sep 24, 2012
As the EZ takes its first steps towards banking union, this column warns that such an approach – with banking supervision first and resolution and deposit insurance postponed to some undefined later stage – will lead to an unstable banking union. It adds that a strong European supervisor and a credible European resolution and deposit insurance authority should be introduced as part of the package.
Global Rebalancing 2.0
Linda Lim & Ronald U Mendoza (VoxEU) Sep 24, 2012
There has been much talk among economists of ‘global rebalancing’, with the focus on China and the US rebalancing their current accounts. But this column argues that the type of rebalancing that will bring real gains to the global economy is one that will be shaped by many countries, both industrial and developing.
Poorer without aid
Emmanuel Frot & Maria Perrotta (VoxEU) Sep 24, 2012
If there seems to be near unanimity among policymakers about the positive role of aid, the academic community has not found any robust evidence that aid contributes to development. This column presents a new empirical strategy that isolates the causal effect of aid on growth. The effect is found to be larger than previously estimated. The average developing country citizen would be about 15% poorer today had aid never been disbursed.
Europe's hold on economic institutions must be broken
Lanre Akinola (The Banker) Sep 24, 2012
Former Brazil president Luiz Inácio Lula da Silva says the rapid growth of emerging economies such as Brazil is changing the global economic order, but this reality is yet to be acknowledged by the world's major economic institutions, where Europeans hold a disproportionate amount of power.
Global Citizens and the Global Economy
Nancy Birdsall (Globalist) Sep 24, 2012
Since 2008, the credibility of the U.S. model of minimally managed markets has been damaged. What global citizens and international institutions can do to forge a new model for inclusive and sustainable global growth.
Riding a New Wave of Wealth
Loch Adamson (II) Sep 25, 2012
Resource-rich countries such as Australia and Chile seek to capitalize on the commodities supercycle by creating their own sovereign wealth funds — and charting their own fiscal destinies.
On Keystone, Environmentalists Lose by Winning
Jeff Rubin (Bloomberg) Sep 25, 2012
TransCanada Corp. (TRP)’s proposed $7.6 billion Keystone pipeline system, which would take crude from Alberta’s tar sands down through the Midwest and on to Texas and the Gulf Coast refineries, could be scuttled because of concerns about its potential impact on a major aquifer in Nebraska.
Learning from past crises: Into the safety zone
Caroline Van Rijckeghem & Beatrice Weder di Mauro (VoxEU) Sep 25, 2012
Lessons from the past suggest democracies with strong economic fundamentals do not default on their debt. This column suggests high growth and low deficits are key but that growing discontent as the result of austerity may be the most important factor yet in influencing the probability of default. Eurozone countries, therefore, need to build a higher safety buffer of good fundamentals to ensure safety from default.
Last Tango in Argentina?
Sin-ming Shaw (Project Syndicate) Sep 25, 2012
The passion that Argentines bring to tango has once again brought the country an international championship. But the same attitude, summed up by a leading teacher as “impudence, danger, manliness, mischief, and shamelessness,” may be the best explanation of Argentina's decline toward the Third World.
Central Banks on the Offensive?
Jean Pisani-Ferry (Project Syndicate) Sep 25, 2012
Recent actions by the Federal Reserve, the ECB, and the Bank of Japan look like a coordinated effort to fight renewed recession. In fact, they have no common stance, let alone a common plan.
Safer Global Financial System Still Under Construction, Says IMF
IMF Survey Sep 25, 2012
A host of regulatory reforms are under way around the world to make the financial system safer, but a study by the International Monetary Fund shows that there is still a lot of work to do by regulators, supervisors, and the private sector to put the system on a firmer footing.
Possible Trade-off Between Growth, Safety in Financial Sector
IMF Survey Sep 25, 2012
With policymakers aiming for safer financial systems in the wake of the global crisis, the International Monetary Fund examines in a new study the extent to which safer financial structures are tied to good economic growth outcomes.
Indonesian Domestic Demand Likely to Sustain Robust Growth
IMF Survey Sep 25, 2012
Prudent macroeconomic policy and structural reforms over the last decade, on top of solid fundamentals, have placed Indonesia in a strong position to deal with the continuing uncertainty in the global environment, say IMF economists in their regular assessment of one of Asia’s largest economies.
Man Vs. Machine
Leah McGrath Goodman (II) Sep 26, 2012
High-tech trading has caused turmoil in equity markets, but regulators and buy-side firms are starting to fight back with new tools to contain risk.
Credit Swaps – A Travesty of a Mockery of a Sham
Vincent Ryan (CFO) Sep 26, 2012
In May 2011, I wrote, “Despite their flaws, [credit default swap] spreads can help treasurers differentiate relative credit quality across a collection of entities, especially nonfinancial companies.” Your honor, members of the jury, I’d like to retract that statement. I now believe that the credit default swap market may not be a reliable indicator of anything – it’s completely flawed, and serves very little economic purpose.
Banking integration: Friend or foe?
Sebnem Kalemli-Ozcan & Elias Papaioannou (VoxEU) Sep 26, 2012
Is a banking union the answer to Europe’s woes? This column argues that banking union is no panacea – and it may actually make monetary policy harder. It urges Europe’s policymakers to re-evaluate their proposals.
Finding the Keys to National Prosperity
Jeffrey D. Sachs (Project Syndicate) Sep 26, 2012
Most successful economic reforms emulate policies that worked elsewhere and were reconfigured for local conditions. Wherever we live, by opening our eyes to policy successes abroad, we would surely speed the path to national improvement at home.
China’s Rebalancing Act
Yu Yongding (Project Syndicate) Sep 26, 2012
China’s 12th Five-Year Plan calls for a shift in the country’s economic model from export-led growth toward greater reliance on domestic demand, particularly household consumption. But, while China’s current-account surplus as a share of GDP has indeed fallen, is the economy's adjustment on track?
Developed Country Monetary Policy Fuelling “Currency War,” Brazil Says
Bridges Weekly Trade News Digest, Volume 16, Number 32 Sep 26, 2012
Warnings that the global economy is embroiled in a "currency war" were again raised by Brazilian Finance Minister Guido Mantega last week, following the US Federal Reserve's announcement earlier this month that it would be undertaking another round of monetary stimulus. Brasilia's plan to temporarily raise import tariffs on various goods has also ramped up tensions between the trading partners, as Brazilian officials – including the country's president – argue that the measures are both WTO-consistent and necessary to counter the currency effects of developed country policy, amid Washington's claims that the tariffs are protectionist.
Multilateralism is Struggling, WTO Chief Warns
Bridges Weekly Trade News Digest, Volume 16, Number 32 Sep 26, 2012
Civil society descended on WTO headquarters this week to address a question familiar to anyone who has attended a multilateral negotiating session in recent years: is multilateralism in crisis? The WTO is, perhaps, one of the most appropriate venues for addressing such a question, where – given the continued Doha Round impasse – some delegates concede that they feel as though they are merely treading water.
Banking integration: Friend or foe?
Sebnem Kalemli-Ozcan & Elias Papaioannou (VoxEU) Sep 26, 2012
Is a banking union the answer to Europe’s woes? This column argues that banking union is no panacea – and it may actually make monetary policy harder. It urges Europe’s policymakers to re-evaluate their proposals.
Rule of law can rid the world of poverty
George Soros and Fazle Hasan Abed (FT) Sep 26, 2012
Gains made improving the lot of the poor will be safeguarded when they are made aware of their rights.
Anti-corruption dream split down the middle
Sudha Ramachandran (AT) Sep 26, 2012
Those wishing to battle the rampant graft in Indian politics by the establishment of a Lokpal, or independent ombudsman, have been opposed at every turn by the political class. Now the latest pro-Lokpal crusade, India Against Corruption, has been put in jeopardy by a rift between social activists Anna Hazare and Arvind Kejriwal that will likely ease pressure on the government.
First birthday for the Swiss franc floor against the euro: Unorthodox intervention to tackle huge capital inflows
Thomas Meyer (DB Research) Sep 27, 2012
Over a year ago the Swiss National Bank (SNB) took drastic action to halt the massive appreciation of the Swiss franc, by introducing an explicit floor of CHF 1.20 per euro. With its measure the SNB has sought to stem the huge tide of capital inflows. This policy may offer an interesting insight into the also increasingly unorthodox policies being pursued to address the crisis in the euro area.
Stage Three for the Euro Crisis?
J. Bradford DeLong (Project Syndicate) Sep 27, 2012
The first two components of the euro crisis – a banking crisis that resulted from public and private over-leverage, followed by a sharp fall in confidence in eurozone governments – have been at least partly addressed. But that leaves the most dangerous component: the structural imbalance between the eurozone’s north and south.
Emerging, Developing Economies Now More Resilient
IMF Survey Sep 27, 2012
Many emerging and developing economies did well over the past decade and through the global financial crisis. Analysis in the IMF's latest World Economic Outlook (WEO) suggests this resilience is likely to continue, but governments will need to ensure adequate policy space.
The value of the revolving door: Political appointees and the stock market
Simon Luechinger & Christoph Moser (VoxEU) Sep 27, 2012
The presidential election campaign is in full swing in the US. Whoever wins the presidential race will face the challenge of filling top positions in the federal administration. Since some political appointees traditionally come from the private sector, allegations of conflicts of interest will emerge. But are connected firms really expected to profit? This column sheds light on this issue.
The Race for the World
David P. Goldman (WSJ) Sep 27, 2012
To triumph in today's winner-take-all market, entrepreneurs need deep pockets--and deep insights into technology.
When Growth Outpaces Happiness
Richard A. Easterlin (NYT) Sep 27, 2012
It is startling to find that Chinese people's feelings of well-being have declined in a period of such momentous improvement in their economic lives.
Fed joins ECB in a high-risk move
Martin Feldstein (FT) Sep 27, 2012
An open-ended strategy that focuses on labour market weakness raises the spectre of high inflation and asset bubbles.
All Negotiating is Domestic
Pascal Lamy (Globalist) Sep 27, 2012
The lingering economic crisis has weakened the ability of the international system to produce meaningful cooperation on a host of vital issues. But the international system cannot be in good shape if national systems are in bad shape, writes Pascal Lamy, director-general of the World Trade Organization.
The World Bank and the development delusion
Jason Hickel (Aljazeera) Sep 27, 2012
The World Bank can be an effective tool in the fight against poverty with fundamental changes in its power structure.
Finance Theory: Unlocking The Economy Of The Mind
Ben Baris, Frances Denmark & Michael Peltz (II) Sep 27, 2012
Researchers are using new approaches and tools to try to reconcile the differences between neoclassical and behavioral finance.
No clash of civilizations
Hossein Askari (AT) Sep 27, 2012
The ease with which the West portrays extreme groups in the Middle East as "Islamists" ties in with its support of the region's tyrants and the myth that oil supplies will be lost if suppression is not maintained. Oil will always flow and there are ways out of this cycle of nonsense and violence.
The Tragedy of the European Union and How to Resolve It
George Soros (NYRB) Sep 27, 2012
If and when the euro eventually breaks up it will destroy the common market and the EU. Europe will be worse off than it was when the effort to unite it began, because the breakup will leave a legacy of mutual mistrust and hostility. That is such a dismal prospect that it is time to consider alternatives that would have been inconceivable until recently.
The politics of central banking
Dan Hind (AlJazeera) Sep 28, 2012
Central banking is unavoidably political, no matter how much bankers and elected politicians tell us, that isn't.
The Myth of Fixing the Libor
Floyd Norris (NYT) Sep 28, 2012
It is unlikely that the London interbank offered rate can be repaired, no matter what Britain's top financial regulator asserts.
The Next Debt Restructuring in Greece?
Mohamed A. El-Erian (PIMCO) Sep 28, 2012
If you want to cause major discomfort at a meeting of European policymakers, just try mentioning “OSI”, or official sector involvement. The notion that official creditors, and by that I mean governments and regional/multilateral institutions, may need to accept a reduction in their contractual claims on Greece is anathema to many. Yet the issue will surface repeatedly, and more frequently, given the current overly-constrained approach to solving Greece’s deep problems.
Financial Innovation: The Next New Thing
Jeffrey Kutle (II) Sep 28, 2012
The crisis gave financial engineering a bad rap, but the industry continues to develop new securities and technological tools to gain a competitive edge.
Latin America’s Tale of Two Crises
Jorge G. Castañeda (Project Syndicate) Sep 28, 2012
Are good things in the offing in Latin America? In Venezuela, the October 7 presidential election may end Hugo Chávez’s 14 years of misrule. In Colombia, peace talks with the FARC guerrillas may end 40 years of war. Sadly, neither outcome is likely.
Europe’s Trial by Crisis
Joschka Fischer (Project Syndicate) Sep 28, 2012
Fortunately, war between world powers is no longer a realistic option, owing to the threat of mutual nuclear destruction. But major international crises, such as the ongoing crisis in the eurozone, remain with us – which might not be an entirely bad thing.
The end of the euro’s Indian summer
Economist Sep 29, 2012
After a few sunny weeks, a political and economic storm is battering the euro zone once again.
Who lives longer and why
Josep Pijoan-Mas & Víctor Ríos-Rull (VoxEU) Sep 30, 2012
What explains differences in life expectancy at age 50? This column looks at the effect of wealth, education, and marital status. It finds that by far the most important factor is education, and explores what this might mean for policy.
Macro Malpractice
Stephen S. Roach (Project Syndicate) Sep 30, 2012
As the global economy has gone from crisis to crisis in recent years, the cure has become part of the disease. In an era of zero interest rates and quantitative easing, untested medicine is being used to treat the wrong ailment, and the patients – over-leveraged consumers – have been forgotten.