IMF boardroom crisis: Europeans stubbornly cling to chairs
Bretton Woods Update 72 Sep/Oct 2010
IMF governance reform was thrown into disarray in August by a fight between the US and Europe over reducing European board seats. Other promised reforms, including to voting shares and leadership selection appear to be going backwards. Plus: Climate sabotage: Bank undermines Philippines' direct access to the UN Adaptation Fund; Gender-blindness and conditionality cast shadow over record World Bank lending; and more.
Stan Druckenmiller is Leaving
Bill Gross (PIMCO) Oct 2010
The New Normal has a new set of rules. What once pumped asset prices and favored the production of paper, as opposed to things, is now in retrograde. The hard cold reality from Stan Druckenmiller’s “old normal” is that prosperity and overconsumption was driven by asset inflation that in turn was leverage and interest rate correlated. Investors are faced with 2.5% yielding bonds and stocks staring straight into new normal real growth rates of 2% or less. There is no 8% there for pension funds. There are no stocks for the long run at 12% returns.
Betting on hunger
Martine Bulard (Le Monde Diplomatique) Oct 2010
"For the first time in history more than a billion people go to bed hungry each night." Surprisingly, this shocking fact was brought to our attention by the president of the World Bank, Robert Zoellick, who reports that the Millennium Development Goal of eradicating hunger by 2015 "will not be achieved" but that "growth can contribute to overcoming poverty."
The Future of the Euro
Lorenzo Bini Smaghi (Foreign Affairs) Oct 2010
Many observers think the entire European construct -- its institutions and currency -- has been so damaged by the Greek financial crisis that it might not survive. But is forecasting the euro’s demise premature?
Competitive Depreciation: Modern Economic Warfare
II Oct 2010
Today, China has too much savings. The U.S. has too little. In the long-run such savings imbalances cannot continue. As with all excesses, they come to an end.
Emerging Markets: Investment Opportunities in the New Normal
Curtis Mewbourne (PIMCO) Oct 2010
Many emerging economies are undergoing a secular move to greater economic importance and increasing wealth. In many cases, EM-based companies are benefitting from the increase in domestic demand, which is brought on by a combination of factors: the size of the economies, lower interest rates and increasing availability of credit. For investors looking for government exposure as opposed to private companies, there are two alternatives, namely local currency and dollar-denominated government bonds. Given current conditions we think the highest probability is that EM currencies will appreciate vs. the U.S. dollar.
Is Financial Innovation Over?
Jeffrey Kutler (II) Oct 2010
The creativity that brought us disastrous derivatives is looking for a new outlet.
Global: Inflation Targeting 2.0
Spyros Andreopoulos (MS GEF) Oct 1, 2010
A new ‘macroprudential’ tool for policymakers involves the pursuit of financial stability, while using the short-term interest rate to control inflation
Harold James (Project Syndicate) Oct 1, 2010
The most noteworthy commemoration of the second anniversary of Lehman Brothers’ collapse was Japan’s unilateral intervention to weaken the yen. That move marks a shift in the character of the global financial crisis, away from concern with banking problems and toward a focus on the world’s supposedly dysfunctional exchange-rate system.
Kenneth Rogoff (Project Syndicate) Oct 1, 2010
Now that gold has crossed the magic $1,000 barrier, some investors evidently believe that, like the stock market when the Dow Jones index hit 1,000, the price can increase ten-fold. What was true for the alchemists of yore remains true today: gold and reason are often difficult to reconcile.
American dream made in Brazil
Pepe Escobar (AT) Oct 1, 2010
Brazil is touted as becoming the fifth-largest global economy. This American dream - as in an empowered lower-middle class consuming homes, cars, televisions and computers like there's no tomorrow - will be the inheritance of Dilma "Iron Lady" Rousseff, the most likely next president. She'll be aware that relying on the non-stop sale of commodities to China is not a recipe for sustainable growth.
Product margin adjustment to the great trade collapse
Andreas Moxnes & Karen-Helene Ulltveit-Moe (VoxEU) Oct 1, 2010
The great trade collapse during the global crisis has opened a new chapter in trade debate. This column uses evidence from a real-exchange-rate shock in Norway to show how firms initially slowed down or postponed the introduction of new products to the market. It argues that this sort of response suggests a long and difficult recovery from the global trade collapse – unless policymakers intervene.
Beggar the World
WSJ Oct 1, 2010
Monetary instability is a threat to the global recovery.
How China and the U.S. can aid growth
Mohamed A. El-Erian (WP) Oct 1, 2010
In the interest of sound U.S.-China relations, both nations must resist the attraction of brinkmanship.
Fiscal Keynesianism for the Upper Classes
Stephan Richter (Globalist) Oct 1, 2010
The economic schemes of Mr. Keynes, so it is widely believed in the U.S. political debate, primarily accrue to the benefit of the lower classes, those without jobs, or those with marginal jobs that are in danger of disappearing in tough economic times. But that would be far too narrow an understanding of the economic reach — and attractiveness — of Mr. Keynes's precepts.
Ambitious? Yes. Effective? Perhaps. The Commission’s Proposals on the Stability Pact
Nicolaus Heinen (DB Research) Oct 1, 2010
On September 29, following consultation with the van Rompuy Task Force, the May and June Commission communications on economic governance culminated in several legislative proposals. If adopted, the total of five regulations and one proposal for a directive are likely to change the face of European economic governance more comprehensively than any other reforms since the launch of EMU...
Circular firing squad
Chan Akya (AT) Oct 2, 2010
Competitive devaluations of the sort being enforced by Japan, the United States, China and now Europe spell the end of the camaraderie the Group of 20 attempted to enforce to usher in globally coordinated economic growth. Trade wars are the tip of the iceberg; what lies beneath in terms of stock and bond market destruction represents the more credible threat to global prosperity.
EU fiscal consolidation after the global crisis: Lessons from past experiences
Salvador Barrios, Sven Langedijk & Lucio R Pench (VoxEU) Oct 2, 2010
Europe’s policymakers are trying to balance fiscal consolidation with economic recovery. This column examines financial crises in EU and OECD countries from 1970 to 2008 and finds that countries facing high debt levels or those at risk of low GDP growth would be better off with quick, “cold-shower” fiscal consolidations. Other countries might benefit from a more gradual approach.
Brazil: A power of the present
Javier Santiso (VoxEU) Oct 2, 2010
Brazil's elections this weekend are not expected to trouble financial markets, unlike some of the country's previous electoral episodes. This column attributes that to Brazil's embrace of pragmatic policymaking and stable democracy, which have made it a major player in the international economic and political arenas. Brazil is a power of the present.
What nominal anchor should commodity exporters’ monetary policies target?
Jeffrey Frankel (VoxEU) Oct 2, 2010
Over the last decade, the volatility of commodity prices has led many Latin American and Caribbean countries to demand a currency regime that accommodates terms-of-trade shocks. This column compares proposals for “product price targeting” with exchange-rate and CPI targeting. It finds that product price targeting would be more effective at stabilising the real domestic prices of tradable goods.
A New Book Traces the Intellectual Path of Adam Smith
Nancy F. Koehn (NYT) Oct 2, 2010
A new book by Nicholas Phillipson traces the intellectual development of Adam Smith, founder of modern economics.
China as a Superpower
Joschka Fischer (Project Syndicate) Oct 3, 2010
Given its rapid and successful development, there can be no doubt that China will become one of the dominant global powers of the twenty-first century. But its behavior will not resemble that of any superpower that has gone before it.
How an unloved bail-out saved America
Steven Rattner (FT) Oct 3, 2010
Without Tarp, institutions that dwarfed Lehman in size – potentially, AIG, Citigroup and Bank of America – would certainly have collapsed.
Ireland’s taxpayers have shouldered too much
Wolfgang Münchau (FT) Oct 3, 2010
This is not just an Irish problem. European governmentseverywhere are scared of touching bondholders.
We can fight fire with fire on the renminbi
Fred Bergsten (FT) Oct 3, 2010
When China or Japan buy dollars to keep their currency undervalued, the US should sell an equivalent amount.
What explains the 2007 interbank market shock?
Paolo Angelini & Andrea Nobili (VoxEU) Oct 3, 2010
Financial markets were in a state of fear during the summer of 2007. The spread between interest rates on unsecured and secured deposits recorded an unprecedented rise. This column examines trading data from European banks to argue that the widening spread was driven by aggregate factors – risk aversion and accounting practices – rather than bank-specific concerns.
Why a tougher Stability and Growth Pact is a bad idea
Paul De Grauwe (VoxEU) Oct 4, 2010
The European Commission has just presented its proposals to strengthen the Stability and Growth Pact. This column argues it is a very bad idea as it is based on a wrong diagnosis of the causes of the debt crisis in the Eurozone and because there cannot be taxation without representation. It suggests reforms should not only focus on the responsibilities of national governments but also on those of the ECB.
When did the Eurozone recession end?
Harald Uhlig (VoxEU) Oct 4, 2010
Identifying recessions is crucial to guiding policymaking. This column reports the findings of the CEPR Business Cycle Dating Committee for the Eurozone for the last recession. It reports that the trough in economic activity occurred in the second quarter of 2009, marking the end of the recession that began in the first quarter of 2008. The recession lasted 6 quarters and the total decline in output from peak to trough was 5.5%. April 2009 marked a clear trough in industrial production, following the peak in January 2008.
Eurozone reform: Not yet fiscal discipline, but a good start
Charles Wyplosz (VoxEU) Oct 4, 2010
Can the Eurozone’s Stability and Growth Pact be made to work? This column argues that the European Commission’s reform proposals for the pact include some good ideas but many bad ones. If adopted, it says the pact will not significantly advance fiscal discipline in the Eurozone but it could turn out to be a transition to an effective framework.
Improving human development: A long-run view
Leandro Prados de la Escosura (VoxEU) Oct 4, 2010
As highlighted by the Millennium Development Goals, measuring development is crucial. This column presents a new human development index challenging the UN measure. It shows that the global average level of human development is “low” and that even by 2007 the level of human development outside of the OECD was similar to that of the richest countries in 1938.
The Trade and Tax Doomsday Clocks
Donald Luskin (WSJ) Oct 4, 2010
Tariffs against China and failure to extend the Bush-era tax cuts would repeat the worst mistakes of the Great Depression.
Basel III Critique Emerging
Jeffrey Kutler (II) Oct 4, 2010
Columbia University professor Charles Calomiris offers up his own slate of regulatory reform measures.
Is Germany the new China? A sceptical view
Joshua Aizenman & Rajeswari Sengupta (VoxEU) Oct 5, 2010
Are China and Germany both responsible for the global imbalances? Using four decades of current-account data, this column argues that the role of the US should not be overlooked. A rise in the US’ current-account deficit is matched one for one with a rise in China and Germany’s surpluses. But this relationship – and the global imbalances with it – may well be coming to an end.
The Battle of the Billionaires: China Vs. India
Joseph Chamie (Globalist) Oct 4, 2010
What will major differences in the population patterns of the globe's two billion-people countries mean for the world as a whole? Joseph Chamie, former director of the UN Population Division, takes a closer look.
Call for new global currencies deal
FT Oct 4, 2010
The Institute of International Finance, which represents more than 420 of the world's leading banks and finance houses, has warned a lack of such co-ordinated rebalancing could lead to more protectionism.
Alarm bells must ring when banks welcome regulation
Francesco Guerrera (FT) Oct 4, 2010
Until authorities flesh out the new financial law with detailed regulations, the rule of thumb has to be: beware of bankers bearing PR gifts and easily giving up businesses they once loved.
Ignore the rumpus the Indian race has not begun
Gerard Lyons (FT) Oct 4, 2010
The Institute for International Finance is soon to host the great debate: India versus China. Perhaps the clever bet is to believe in both. China has shown its potential, but do not underestimate India.
The global implications of QE2
Gavyn Davies (FT) Oct 4, 2010
On the global effects of another round of quantitative easing from the Federal Reserve
EU takes on Chinese currency
Antoaneta Becker (AT) Oct 5, 2010
European Union officials this week have the opportunity to press Chinese Prime Minister Wen Jiabao directly on China's currency policy, adding their voices to those in the United States demanding, albeit more stridently, that Beijing show less restraint in letting the yuan strengthen.
George Soros (Project Syndicate) Oct 5, 2010
The Obama administration’s insistence on fiscal rectitude is dictated not by financial necessity, but by political pressure. While consumption cannot be sustained indefinitely by running up debt, to cut government spending at a time of large-scale unemployment would be to ignore the lessons of history.
Europe in the IMF
Daniel Gros (Project Syndicate) Oct 5, 2010
Europe’s leaders never tire of repeating the mantra that the major emerging-market countries are overturning the existing global economic order. But when it comes to recognizing reality nowadays and weakening their representation in the world’s international financial institutions, they adopt a different tune.
Reforming the Stability Pact: Focus on financial supervision
Guido Tabellini (VoxEU) Oct 5, 2010
The current European economic governance needs reform. This column argues that rather than trying to invade national governments’ autonomy in economic policy, the European authorities should focus on the transfer of sovereignty in the field of financial supervision.
China and the Weak Yuen
John Berthelsen (Asia Sentinel) Oct 5, 2010
US legislation to punish the Chinese for their undervalued currency is unlikely to have much impact
Financial Sector the "Achilles' Heel" of Global Recovery
IMF Survey Oct 5, 2010
Progress to restore global financial stability has suffered a setback in advanced economies, the International Monetary Fund said in its latest Global Financial Stability Report released on October 5, with financial markets still sensitive to negative surprises.
Follow the Swiss lead to avoid another Lehman
Philipp Hildebrand (FT) Oct 5, 2010
It is in the long-term interest of banks to operate in an environment where market discipline can function.
Fundamental differences on central bank role
Mure Dickie (FT) Oct 5, 2010
There is a risk that enthusiasm about the policy shift could quickly turn to disappointment.
Governments must focus on exchange opportunity
Kevin Brown (FT) Oct 5, 2010
Asia’s pampered, protected and pricey stock markets need a wave of regulatory reform followed by a dose of stiff competition from new entrants.
Co-operation is victim in currency markets shoot-out
John Plender (FT) Oct 5, 2010
Rhetoric about quantitative easing is the weapon of choice in an escalating global currency war.
Barbarians at the gates of complexity
John Kay (FT) Oct 5, 2010
Trading in securities naturally invites trading in derivatives. Wherever there is a collateralised debt obligation there will soon be a CDO squared.
How to fight the currency wars with stubborn China
Martin Wolf (FT) Oct 5, 2010
The post-crisis world economy will not work so long as its most dynamic economy is also its largest capital exporter. Policies that would turn China into a net importer would benefit both its own people and the rest of the world/
Martin Hutchinson (AT) Oct 6, 2010
For a decade, the surging economic growth of Brazil, Russia, India and China has helped to reshape the global outlook. The picture of dynamic emerging prosperity is starting to darken, with political ambition, mismanagement and corruption threatening to undermine hard-won gains.
Protectionism by stealth
Kunal Kumar Kundu (AT) Oct 6, 2010
Since the late 2008 crisis summit of the Group of 20 nations pledged to oppose protectionism, all bar two of those countries have taken steps that restrict trade, through nearly 600 measures to date. Now currency devaluation, once considered the refuge of the developing world, is the dangerous fashion, with even the Swiss joining in the intervention game.
The Dangers of Insufficient Stimulus
Adam S. Posen (PIIE) Oct 6, 2010
My basic argument is that the current macro policy discussion is mostly missing the point. Our situation (in the U.K., the U.S., and arguably in most of the major Western economies) is one where policy makers face a long uphill battle, in which monetary ease has an ongoing role to play, even if it may not deliver recovery on its own. Insufficient monetary action risks turning sustained low growth and near deflation into a self-fulfilling prophecy. This happened in Japan in the 1990s, and in U.S. and Europe in the 1930s. I don't think things will be "that bad" in the sense of an outright depression, but we face a real risk of long-term stagnation with some distracting upward blips and slowly eroding capacity.
Peter Singer (Project Syndicate) Oct 6, 2010
It looks very much as if, when the 2015 target for achieving the UN's Millennium Development Goals arrives, the world’s leaders will have failed to keep their (watered-down) promises. That means that they will be responsible for permitting the needless deaths, every year, of millions of people.
Finance for all? Banking structure reform may not be the way
Thorsten Beck & Martin Brown (VoxEU) Oct 6, 2010
Access to financial services is viewed as a key determinant of economic wellbeing, especially for households in low-income countries. This column examines how the banking structure affects access to finance in 29 transition countries. It finds that changing bank ownership, deposit insurance, payment systems, and creditor protection help the wealthiest households and have little effect on the low-income, rural, or minority households.
The effect of a renminbi appreciation on the US-China trade balance
Willem Thorbecke (VoxEU) Oct 6, 2010
The US-China currency dispute remains heated. This column argues that if a real appreciation in the Chinese currency is not achieved through exchange rate adjustment, it will happen through inflation in China and deflation in the US. It says a better Chinese policy mix would involve nominal appreciation of the renminbi combined with absorption-increasing policies such as developing human infrastructure.
Global Economy Remains Fragile, Says IMF
IMF Survey Oct 6, 2010
The world economy, led by emerging market and developing countries, is forecast to grow by 4.8 percent in 2010 before falling back to 4.2 percent next year, but a sharper global slowdown is unlikely, the IMF says in its latest forecast.
Fear undermines America’s recovery
Alan Greenspan (FT) Oct 6, 2010
The continuance of uncertainty since the recovery took hold is attributed to the widespread major restructuring of our financial system and the burgeoning federal deficit.
How being big helps and hinders China
David Pilling (FT) Oct 6, 2010
A huge internal market gives it the economies of scale to develop globally competitive industries from cars to high-speed rail.
Crash course on flash trading perils needed
Jeremy Grant (FT) Oct 6, 2010
Ordinary investors worry that they are being sidelined in a market structure that values technology and speed over everything else. The flash crash shattered confidence in market structures.
Japan is facing an uphill struggle to weaken yen
Tadashi Nakamae (FT) Oct 6, 2010
A stronger yen policy should be adopted by accelerating structural reform.
Gold And Silver Shine Brightly As Currencies Race To The Bottom
Robert Lenzner (Forbes) Oct 6, 2010
Don't keep hoping quantitative easing will cure the world's financial ills.
Financial Shock and Awe
Barry Eichengreen (FP) Oct 6, 2010
The world's central banks are at war. What does that mean for the rest of us?
IMF Urges Global Cooperation to Meet 4 Key Challenges
IMF Survey Oct 7, 2010
IMF Managing Director Dominique Strauss-Kahn, speaking ahead of the 2010 IMF-World Bank Annual Meetings, outlines four key challenges for the global economy, urging advanced countries and emerging markets to revive their cooperation to avoid competitive currency adjustments and rebalance the still-fragile world economy.
Anti-Counterfeiting Trade Pact '99 Percent' Complete
Bridges Weekly Trade News Digest, Volume 14, Number 34 Oct 7, 2010
Talks on a controversial "Anti-Counterfeiting Trade Agreement" are very nearly complete, following what participating nations described as the "final" round of negotiations in Tokyo last week.
Medicines Patent Pool Receives License, Backing from US Government
Bridges Weekly Trade News Digest, Volume 14, Number 34 Oct 7, 2010
The US government's health research agency has shared intellectual property for an HIV/AIDS drug with the Medicines Patent Pool, becoming the first patent-holder to participate in the new UN-backed initiative to reduce drug costs and promote innovation.
Russia Resolves Key Issues with US over WTO Accession
Bridges Weekly Trade News Digest, Volume 14, Number 34 Oct 7, 2010
Russia and the United States have reached bilateral resolutions on several trade issues, removing another set of hurdles facing the entry to the WTO of the world's largest economy that is not already a member of the global trade body.
Banking sector stability and the real economy
Terhi Jokipii & Pierre Monnin (VoxEU) Oct 7, 2010
Does banking sector instability damage the real economy? Or the other way round? This column presents data from 18 OECD countries between 1980 and 2008. It finds that banking sector stability appears to be an important driver of GDP growth in subsequent quarters. It argues that monetary policy should therefore pay more attention to banking sector soundness.
Inflation targeting matters in Asia
Stefan Gerlach & Peter Tillmann (VoxEU) Oct 7, 2010
Following the Asian financial crisis of 1997-98, many of the region’s countries adopted inflation targeting. This column compares the persistence of inflation between those with inflation targeting and those without, finding that inflation persistence falls in the former. Nevertheless, the behaviour of inflation still varies across inflation-targeting economies.
The Protectionist Instinct
Paul H. Rubin (WSJ) Oct 7, 2010
Political support for free trade is a remarkable achievement of civic education--one threatened by our weak economy.
Liberalism's crisis on trade
Matt Miller (WP) Oct 7, 2010
The trade debate will bring special agony for progressives.
Forget the FTA fix
Christine Ahn and Martin Hart-Landsberg (AT) Oct 8, 2010
The United States-South Korea free-trade agreement, signed but awaiting ratification by the legislatures of both countries, is predicated on the principle that corporate interests should be privileged over all other things. There is no way to repair an agreement that is, by design, destructive of the public interest.
A dragon-tailed Trojan horse?
Sebastian Bruck (AT) Oct 7, 2010
Beijing's recent investments in Greece offer a rare beacon of hope for the debt-ridden country. The geostrategic implications of China's increasing presence on Europe's periphery, however, are far from a win-win situation. The European Union should be wary and watchful.
Perils of forgetting why China matters
Benjamin A Shobert (AT) Oct 7, 2010
For Americans who believe China's growth has largely come at an unacceptable expense of US jobs, the passing of the Currency Reform Act through congress is a victory. Many Americans are wondering what the world would look like if China were not a participant in globalization. We are forgetting why China matters, and that amnesia is dangerous for everyone.
Beggaring the World Economy
Raghuram Rajan (Project Syndicate) Oct 7, 2010
As low interest rates in industrial countries send capital around the world searching for higher yields, developing and developed countries alike are intervening heavily to keep their currencies from appreciating. But, rather than competing for a slice of shrinking global demand, countries should focus on re-balancing their economies.
Wanted: Chinese Leadership on Currencies
George Soros (Project Syndicate) Oct 7, 2010
If China fails to live up to the responsibilities of leadership, the global currency system is liable to break down and take the world economy with it. Either way, the Chinese trade surplus is bound to shrink, but it would be much better for China if that happened as a result of rising living standards rather than global economic decline.
Euroland: The Reality of Rebalancing
Elga Bartsch (MS GEF) Oct 7, 2010
The euro area is in the midst of rebalancing its landscape in the face of a massive rotation in the growth performance of individual countries.
China’s unbalanced growth has served it well
Yukon Huang (FT) Oct 7, 2010
Realistically, a country of China’s size could not have sustained double-digit growth for three decades without an unusually high investment rate.
Stalled post-crisis reforms must be restarted
Mohamed El-Erian (FT) Oct 7, 2010
A growing void at the centre of the international system. Multilateral institutions, and especially the IMF, must step up to fill it.
The impoverished fiscal debate
Samuel Brittan (FT) Oct 7, 2010
It is not so urgent to cut the deficit when recovery is far from assured. But public expenditure is still probably too bloated.
Swiss finish for big banks wins over some converts
Haig Simonian (FT) Oct 7, 2010
A popular German idiom goes: “Trust is good, but control is better.” The phrase could just as well stand for Switzerland’s proposal for supplementary national requirements on top of the forthcoming Basel III capital rules for big banks.
Solving deleveraging puzzle will calm investors
Gillian Tett (FT) Oct 7, 2010
Much remains crucially uncertain – we do not know how far along we are into this 'deleveraging' process, nor what this might mean for growth or asset prices.
The world economy: The quest for growth
Economist Oct 7, 2010
Structural reforms needed, plus prudent macroeconomic policy.
Missed Trade Opportunity
WSJ Oct 7, 2010
The European Union capitalizes on U.S. protectionism.
Bouncing Between Floors? Globally, House Prices are Up and Down
IMF Survey Oct 8, 2010
Real estate markets have been a source of strength during past economic recoveries, but this time is different, according to IMF research.
Central Banks Should Also Be Wary of What They Buy
Jacob Funk Kirkegaard (PIIE) Oct 8, 2010
As the recovery stalls in advanced countries, central banks are leaning more and more toward quantitative easing, a form of monetary stimulus that could provide a tool to help the economy as public opinion turns against more government spending. Japan implemented its plan in early October, and in the United Kingdom Adam Posen, senior fellow at the Peterson Institute for International Economics, has forcefully advocated a similar approach as a member of the Bank of England's Monetary Policy Committee. In the United States, the Chicago Fed governor is also now in favor.
Global: No 'Currency War'...Yet
Manoj Pradhan (MS GEF) Oct 8, 2010
One crucial ingredient that would suggest we are in a currency war still seems to be missing – retaliation. Rather, it seems that EM policymakers are battling the Trilemma.
Can Developing Countries Carry the World Economy?
Dani Rodrik (Project Syndicate) Oct 8, 2010
In the early days of the global financial crisis, there was some optimism that developing countries would avoid the downturn that advanced industrial countries experienced. That hope died as credit dried up, but now, as international trade and finance revive, it is being resurrected, in an even more ambitious form.
The Future of Power
Joseph S. Nye (Project Syndicate) Oct 8, 2010
Institutions of global governance - which allow the world to regulate interstate behavior involving everything from telecommunications, civil aviation, ocean dumping to trade and the proliferation of nuclear weapons – require the leadership of great powers. It remains to be seen whether this century’s great powers will live up to this role.
How to avoid trade war: A reciprocity requirement (Update)
Daniel Gros (VoxEU) Oct 8, 2010
With the US threatening to label China a “currency manipulator”, this column presents a plan to address global imbalances without risking a trade war. It proposes a “reciprocity” requirement – if the US can’t buy Chinese government bonds, then China can’t buy US bonds either.
Global imbalances: Are we measuring the right thing?
Yan Chen, Chunding Li & John Whalley (VoxEU) Oct 8, 2010
As the debate over global imbalances develops, this column asks whether the discussion is based on faulty data. Using data from the US, Japan, Germany, and the Czech Republic, it argues that not taking due account of foreign affiliate sales leads to a warped view of trade in goods and services.
Currency Debate Seen As Symptom of Deeper Problem
IMF Survey Oct 8, 2010
The head of the IMF's policy steering committee, Youssef Boutros-Ghali, said the current debate on exchange rates is a symptom of deeper problems in the world economy that need to to be resolved through quiet diplomacy and global cooperation.
China Central Bank's Chief Backs Gradual Rise in Currency
NYT Oct 8, 2010
Zhou Xiaochuan, the governor of the People's Bank of China, said that China "needs a market-based exchange-rate regime" but "in a gradual way rather than shock therapy."
Euro's Rise Puts Recovery At Risk
Tom Buerkle (II) Oct 8, 2010
Europe's currency policy appears to be adopting a policy of unilateral disarmament. This stance looks set to fuel a further rise in the euro, and put pressure on European policymakers at the IMF-World Bank annual meetings.
'Currency Wars' Seize IMF Stage
Tom Buerkle (II) Oct 8, 2010
Tensions over currency policy are rising fast among developed and emerging economies, and they risk bubbling over at the IMF-World Bank annual meeting later this week.
The Eurozone Must Shrink or Go
Vincent J. Truglia (II) Oct 8, 2010
The peripheral countries of the monetary bloc should leave the Eurozone. The whole idea of monetary union was driven by politics not economics.
IMF Stepping Up Focus on Global Systemic Stability
IMF Survey Oct 9, 2010
The IMF will step up its focus on global systemic stability and is closer to wrapping up a package of reforms that will make the 187 member institution more representative, IMF Managing Director Dominique Strauss-Kahn says after a meeting of the IMF's policy-setting body.
Goodbye, Free Trade?
Douglas A. Irwin (WSJ) Oct 9, 2010
High tariffs and currency wars cost us big in the 1930s. We can avoid making the same mistakes again.
Currency wars: China should impose green taxes on its exports
Gérard Roland (VoxEU) Oct 9, 2010
How should China respond to the threat of tariffs from the US? This column provides a solution that could result in the desired appreciation of the renminbi and at the same time allow China to take the lead on climate change.
Regional development policies: Place-based or people-centred?
Indermit Gill (VoxEU) Oct 9, 2010
Economic development is not evenly spread, and in some places it is still yet to arrive. This column looks at suggestions from the World Bank’s World Development Report to combat this inequality. It argues that economic growth will be unbalanced, and to try to spread it out – too much, too far, or too soon – is to discourage it. Instead, policymakers should focus on economic integration.
Top Policy Challenge for Asia: Exiting from Stimulus
IMF Survey Oct 9, 2010
Asia will continue to lead the global recovery over the short term, with the region expected to grow by 8 percent this year; but the main challenge for Asian policymakers remains managing the exit from the stimulus, say IMF economists.
Social policy in times of crisis
Megan Gerecke & Naren Prasad (VoxEU) Oct 10, 2010
Financial crises, such as that of 2008-2009, cause GDP to decline, trade to shrink, unemployment to rise, and social problems to increase. What is the link between financial crises and social security spending? This column examines the trends in social security spending in the aftermath of a financial crisis, advising that now is the time for developing countries to expand their social spending.
Bankers Battle Basel III
Tom Buerkle (II) Oct 10, 2010
The ink has barely dried on the new Basel III accord on capital standards before bankers opened a new lobbying campaign to soften the impact of the new rules — or at least prevent them from being tightened further.
The eurozone is wrong to look for the exit
Wolfgang Münchau (FT) Oct 10, 2010
At a time when the Federal Reserve and the Bank of England are contemplating another round of quantitative easing, it would be folly for the ECB to tighten policy.
Time to get tough with China
Clive Crook (FT) Oct 10, 2010
This weekend’s IMF meetings made no real progress on the issue of currency policy. Stronger action, despite the risks, ought now to follow. The emphasis should still be on orderly multilateral arrangements rather than unilateral action.
Why Target Big Banks?
Avinash Persaud (Project Syndicate) Oct 11, 2010
The financial crisis held a lesson that many have ignored: it is the contagiousness of financial crises, not banks’ size, that matters. After all, any list conjured up in 2006 of institutions that were “too big to fail” would not have included Northern Rock, Bradford & Bingley, IKB, Bear Sterns, or even Lehman Brothers.
China Needs to Move Slowly on Yuan Revaluation
Michael Pettis (Bloomberg) Oct 11, 2010
The world must be patient with China. For years, the nation of 1.3 billion has dragged its feet on rebalancing its economy, raising anger around the globe.
The genie of global finance is out of the bottle
Sebastian Mallaby (FT) Oct 11, 2010
However cogent the case for restraining the cross-border flow of capital, sheer momentum will carry it forward.
G20 currency fist fight rolls into town
Alan Beattie (FT) Oct 11, 2010
Instead of a new Bretton Woods, the South Koreans seem likely to preside over a rumble in Seoul’s concrete jungle.
'Animal spirits' need to be anchored
Hans Blommestein (FT) Oct 12, 2010
Borrowing activities by Organisation for Economic Co-operation and Development governments look set to remain very strong. In 2011, borrowing needs of OECD governments are projected to hit almost $19,000bn.
How to Prevent a Currency War
Barry Eichengreen and Douglas Irwin (Project Syndicate) Oct 12, 2010
Three years into the financial crisis, one might think that the world could put Great Depression analogies behind it. But they are back, and now the fear is that currency warfare, leading to tariffs and retaliation, could cause disruptions to the international trading system as serious as those of the 1930’s.
The two rebalancing acts
Olivier Blanchard (VoxEU) Oct 12, 2010
A “strong, balanced, and sustained world recovery” as demanded by the G20 is a daunting challenge for policymakers. This column argues that two rebalancing acts are required: internal rebalancing – replacing government spending with private-sector demand, and external rebalancing – addressing the global imbalances between exporting and importing countries. These two rebalancing acts, it adds, are taking too long.
Currency – The Weapon of Choice in Trade Wars in a World of Lower Demand
Satyajit Das (EuroIntelligence) Oct 11, 2010
An emerging toxic combination of inflexible global currency arrangements, a destructive cycle of currency devaluations, trade restrictions and the need of governments to rein in spending to balance budgets is reminiscent of the 1930s. They threaten a period of prolonged global economic stagnation.
Once a Winner, China Sees Globalization's Downside - Part I
David Dapice (YaleGlobal) Oct 11, 2010
China's giant export engine, built with foreign investment and currency controls, now faces the music
Why America is going to win the global currency battle
Martin Wolf (FT) Oct 12, 2010
US policymakers will do whatever is required to avoid deflation. Indeed, the Fed will keep going until the US is satisfactorily reflated. What that effort does to the rest of the world is not its concern.
How to spot a good from a bad quango
John Kay (FT) Oct 12, 2010
Dislike of quangos partly reflects dislike of the people who are often in them – the modern class of quangocrats.
America should open its vaults and sell gold
Edwin Truman (FT) Oct 12, 2010
For 30 years the US has had a no-net-sales policy for reasons ranging from resistance by US gold-producing interests to concerns about the international monetary system. The administration has an obligation to re-examine its policy.
Discipline sets Greece on path to recovery
Michael Massourakis (FT) Oct 12, 2010
If a good beginning is half the work done, the Greeks have risen to the occasion. In 2010, the first year of the fiscal consolidation effort the budget deficit seems to have been halved, currently standing south of 8 per cent of gross domestic product
The BRIC and the Beijing consensus
Markus Jaeger (DC Research) Oct 12, 2010
After suffering significant political and/or economic crises all four BRIC countries embarked on a course of fundamental reforms during the 1980s and 1990s that transformed their economies and succeeded in boosting growth, largely by fomenting greater private-sector activity. By contrast, the financial crisis has strengthened the influence of the "statists" and increased the allure of what critics have labelled the "Beijing consensus". The urge to extend the role of the state without a thorough analysis of the potential costs and benefits of doing so should be resisted.
Global: IMF/G7 Meetings: No Resolution for Currency Tensions
Ronald Leven, Richard Berner & Rashique Rahman (MS GEF) Oct 13, 2010
The one clear conclusion from the IMF meetings is that the dollar is likely to be biased to weakness over coming months – and probably years.
Bernanke sets the world on fire
Hossein Askari and Noureddine Krichene (AT) Oct 13, 2010
The beneficiaries of the US Federal Reserve's quantitative easing are bond sellers, speculators, and borrowers in subprime markets. The losers are workers and pensioners on fixed incomes, creditors, and holders of US dollars. Add to these, another round of easing will reduce the savings that are needed for job-creation.
Once a Winner, China Sees Globalization's Downside - Part II
Jeffrey Wasserstrom (YaleGlobal) Oct 13, 2010
China's attempt at gaining soft power is tripped up by clash over human rights
The Impact of the Financial Crisis on Development Thinking
John Williamson (PIIE) Oct 13, 2010
A major impact of the crisis has been to discredit Western views of development—what I once tried to summarize under the somewhat unhappy term of the "Washington consensus"—and to fortify what has sometimes been referred to (by Westerners rather than the Chinese) as the "Beijing consensus" instead. This Beijing consensus has never been codified in the form of a series of propositions similar to those that I originally termed the Washington consensus, but assuming that it basically means the Chinese way of doing things I shall argue that it would be a mistake for the West to endorse this and abandon the stance that it has now developed. Hence the first theme of this lecture is the contrast between mainstream Western versus Chinese views: which has delivered the goods up to now, what the contrasts are, and which holds more promise for the future.
The Next Bubble
NYT Oct 13, 2010
Wall Street is snapping up assets of the "emerging economies." Financial regulators in these countries need to pay close attention.
Raising the Barricades Against a Rush of Capital
NYT Oct 13, 2010
Emerging countries are looking to protect themselves against what is turning into a currency and trade war between the U.S. and China.
Who Caused the Currency Wars?
Simon Johnson (Project Syndicate) Oct 13, 2010
The “currency wars” so much in the news these days are merely a skirmish. The big problem is that the core of the world’s financial system has become unstable, and reckless risk-taking will once again lead to great collateral damage.
The Euro Catalyst
Edmond Alphandéry (Project Syndicate) Oct 13, 2010
With structural reforms underway in the eurozone countries hardest hit by the global financial crisis, Euroskeptics say that the crisis itself, not the euro, catalyzed change. But, given past European experience, there is serious reason to doubt that, in the absence of the euro, the crisis alone would have provided the necessary impetus to reform.
Systemic liquidity risk and bankruptcy exceptions
Enrico Perotti (VoxEU) Oct 13, 2010
How did the bank-funding system get so fragile to mletdown and lead to the worst crisis since WWII? In a new CEPR Policy Insight, Enrico Perotti argues that an important part of the answer lies in the bankruptcy privileges granted in 2005 to overnight secured credit and derivatives by the US authorities. These privileges made such lending safe for the lenders and thus cheap for the borrowers. The result was fantastic growth in this market to the detriment of stability.
Can financial reform reduce tax evasion?
Thorsten Beck, Chen Lin & Yue Ma (VoxEU) Oct 13, 2010
Can financial sector reform help bring informal firms into the formal sector? This column examines over 22,000 firms from 43 countries. Firms in countries with a credit registry are 20% less likely to evade taxes, and the tax evasion ratio in such countries is 11% lower.
Ensuring globalisation after the global crisis
Gary Clyde Hufbauer & Kati Suominen (VoxEU) Oct 13, 2010
The global crisis has rocked people’s faith in globalisation. This column introduces a new book arguing that, despite taking a step back, globalisation is one of the most travelled routes the world has known for spreading growth and prosperity. It provides policy recommendations for renovating that road dealing with the WTO, social security, global imbalances, and foreign direct investment.
WTO Fisheries Negotiations 'On' Again
Bridges Weekly Trade News Digest Volume 14, Number 35 Oct 13, 2010
Negotiators at the WTO are hailing a "new environment" in ongoing talks on how to discipline government payments to the fisheries sector, a major factor contributing to declining fish stocks in the world's oceans.
Tianjin Climate Meeting Delivers Little, Overshadowed by US-China Spat
Bridges Weekly Trade News Digest Volume 14, Number 35 Oct 13, 2010
The latest round of United Nations climate change talks in Tianjin, China made little headway before closing last Saturday, casting further doubt onto whether governments will be able to take meaningful steps towards a global treaty on reducing greenhouse gas emissions when they meet in Cancun next month.
The best bet to curb too big to fail
John Gapper (FT) Oct 13, 2010
The best outcome would be for all countries to have clear resolution regimes and for regulators to be able either to liquidate troubled banks and sell the good assets.
Do not overreact to China’s currency delays
Michael Pettis (FT) Oct 13, 2010
The world also needs to understand that China cannot adjust quickly without damaging internal consequences.
Oil prices have stabilised – for the moment
Ian Taylor (FT) Oct 13, 2010
Prices have remained remarkably range bound for the past year – within $70 to $80 a barrel. The oil industry has surplus capacity, thus reducing potential for price spikes.
Jean Pisani-Ferry (Project Syndicate) Oct 14, 2010
The controversy over China’s exchange-rate policy has morphed into a global macroeconomic clash between advanced and emerging countries, owing to a lack of global coordination. This suggests that the solution to currency wars is not to declare a truce, but to recognize the nature of the issue and overcome the problems that block an adjustment that is in everyone's interest.
Only the Weak Survive
Nouriel Roubini (Project Syndicate) Oct 14, 2010
The risk of global currency and trade wars is rising, with most economies now engaged in competitive devaluations. But, because not all currencies can be weak at the same time, and not all countries can boost their exports simultaneously, this is a game that some must lose.
Your new composite index has arrived: Please handle with care
Martin Ravallion (VoxEU) Oct 14, 2010
Policymakers and commentators are constantly looking for new ways to measure development. This column warns against embracing new composite indices with little guidance from economic or other theories. It provides a critical overview of the strengths and weaknesses of using such “mashup” indices of development.
The IMF as an International Lender of Last Resort
Edwin M. Truman (PIIE) Oct 14, 2010
The G-20 leaders' meeting in Seoul should endorse a series of steps to move the International Monetary Fund (IMF) closer to becoming an international lender of last resort. The classic lender of last resort has the capacity (1) to lend unlimited amounts of funds to solvent institutions (2) on appropriate terms. Thus, to transform the IMF into a more effective international lender of last resort involves two components: design of the appropriate terms and financing.
Basel III is bad news for emerging economies
Michael Taylor (FT) Oct 14, 2010
Developing countries need an alternative ‘Basel III-lite’ standard tailored to the needs.
Global Rules Make Financial System Safer to Sustain Growth
IMF Survey Oct 15, 2010
New rules designed to strengthen the global financial system are one way to boost economic growth in a fragile recovery, but how far regulation should go is still under debate, experts assembled during the World Bank-IMF Annual Meetings said.
The Future of the Global Fund
NYT Oct 15, 2010
A global fund that is fighting three of the world's most devastating diseases can't meet all the health needs in developing countries.
Currency Chaos: Where Do We Go From Here?
WSJ Oct 16, 2010
'The most important initiative you could take to improve the world economy would be to stabilize the dollar-euro rate.'
Both China and US are at fault in currency war
Felipe Larraín (FT) Oct 17, 2010
If the exchange rate between China and America moves very little, emerging markets bear the brunt.
Few silver linings when gold bubble bursts
Mark Williams (FT) Oct 17, 2010
This bubble will be pricked when US unemployment figures drop below 8 per cent. This might come in 2011.
Income Inequality: Too Big to Ignore
Robert Frank (NYT) Oct 17, 2010
Economics was founded by moral philosophers, and links between the two disciplines remain strong. So why won't economists make judgments on the gap between rich and poor?
For Our China Trade Emergency, Dial Section 301
Sherrod Brown (NYT) Oct 17, 2010
Obama must use tariffs to counter Beijing's unfair export subsidies.
The European Union Has Not Yet Solved Its Banking Problem
Nicolas Véron (PIIE) Oct 18, 2010
The chaos that followed Lehman Brothers' collapse two years ago hit financial systems in the United States and Europe with similar violence. But the consequences were not symmetrical. Several large financial institutions disappeared in the United States, partly because of stringent disclosure requirements, leading to immediate restructuring of the financial landscape. In the spring of 2009, public "stress tests" forced weaker banks to recapitalize, and soon the institutions at the core of the US financial system started regaining investors' confidence, in spite of much pain still to come among smaller local banks. The United States faces major economic and social challenges, but its financial crisis appears to have essentially ended more than a year ago.
Focus on Fixing Financial System, Avoiding Next Crisis
IMF Survey Oct 18, 2010
Central bankers and other senior financial officials from around the world discussed in Shanghai ways of reinforcing the stability of a global banking and financial system still vulnerable to the shocks that triggered the recent international financial and economic crisis.
Foreign Exchange Rates – The "New" "Old" Weapon of Choice in Trade Wars
Satyajit Das (RGE) Oct 18, 2010
During the European debt crisis, in a matter of days, the dollar strengthened by around 10%. The weakness of the Euro and resultant appreciation of the Renminbi by over 14% reduced Chinese exporter’s earnings and competitiveness. Some of the moves reversed equally quickly when markets stabilised. Volatility of currency exchange rates has increased markedly in recent months.
Burden sharing in the Eurozone
Dirk Schoenmaker (VoxEU) Oct 18, 2010
The financial crisis has shown that countries put national interests first. On the banking side, the handling of Fortis, Lehman and the Icelandic banks are clear examples of coordination failure. On the sovereign side, the Greek saga illustrates the damage of ad hoc attempts to coordinate. This column explores how burden sharing can be made to work in practice.
All banks should face the same tests on risk
Alfredo Sáenz (FT) Oct 19, 2010
The danger of a surcharge on institutions deemed ‘too big to fail’ is that it would punish some that do not pose much risk while ignoring many that do.
Why you can have an economy of people who don’t sweat
John Kay (FT) Oct 19, 2010
We feel instinctively that real work has to be physically demanding, based on manufacturing, agriculture and mining. But perhaps it is time for manufacturing fetishists to move beyond categories set by Stone Age man’s requirements for food and shelter.
Four steps on the route out of crisis
Thomas Huertas (FT) Oct 19, 2010
The crisis global economic crisis is receding, and accordingly, policymakers are developing a strategy that will reduce the possibility of future crises
A currency war the US cannot win
Yiping Huang (VoxEU) Oct 19, 2010
The ongoing global imbalances has strengthened calls for the US to declare trade war with China. This column argues that the US did not emerge victorious from the last currency war with Japan, and against China the chances are even slimmer. Instead the upcoming G20 meeting should focus on a broad range of structural adjustments from both sides.
Feasible global rebalancing: A case for monitored and temporary dual exchange rates
Ricardo Caballero (VoxEU) Oct 19, 2010
Emerging markets with large trade surpluses are reluctant to heed calls for them to help with global aggregate-demand rebalancing by appreciating their currencies. They fear harm to their export-led development and sudden reversals of capital inflows in the future. Here one of the world’s most innovative macroeconomists suggests a way to square the circle: A dual exchange-rate system that would shield their exporters while fostering imports.
Capital controls will follow the weak dollar
Michael Hudson (FT) Oct 19, 2010
We face a world broken into two competing financial blocs – one centred on the dollar, the other on the Bric nations of Brazil, Russia, India and China.
Emerging markets at risk from a gigantic bubble
Peter Tasker (FT) Oct 19, 2010
Leaving the Chinese currency where it is risks creating a gigantic asset bubble that would put a spectacular end to the swelling fortunes of emerging markets.
The Renminbi Goes Forth
Yu Yongding (Project Syndicate) Oct 20, 2010
For both China and America, the RMB-dollar exchange rate is important for achieving growth and a more balanced current account. But that dual objective requires structural change in the Chinese and US economies.
The Carry Trade Carries On
Hans-Joerg Rudloff & Paul Robinson (Project Syndicate) Oct 20, 2010
The Bank for International Settlements recently reported that $4 trillion a day is traded in global foreign-exchange markets, up from $3.3 trillion in 2007. But, while the size of the FX business always grabs headlines, the way that currencies are traded also matters – and this has evolved mightily over the years.
Africa’s Misplaced Monetary Ambitions
Sanou Mbaye (Project Syndicate) Oct 20, 2010
Sub-Saharan African is in the grip of currency-union mania, with regional groups of countries in eastern, southern, and western Africa all giving priority to the idea of creating a common monetary area. But, at this stage of their economic development, Africa’s countries should prioritize long-term economic integration, not currency union.
Europe and the Euro
Christine Lagarde (Project Syndicate) Oct 20, 2010
For anyone living in the 16 eurozone member states, the euro’s enduring success is both a technical and an emotional issue; both hearts and minds are involved. Indeed, it is axiomatic that the euro is vital to Europe's future.
Dollar Diplomacy and Japan’s Lost Decades
Takatoshi Ito (Project Syndicate) Oct 20, 2010
American pressure on the Chinese authorities over their currency policy is reminiscent of US pressure on Japan to revalue the yen in the second half of the 1980’s and the first half of the 1990’s. But, while the Chinese believe that currency appreciation caused Japan's long-term deflation and stagnation, they may be misinterpreting what happened.
The Future of the Dollar
Martin Feldstein (Project Syndicate) Oct 20, 2010
While the turmoil in Europe and the uncertain future of the euro have caused a pause in the shift from dollars to euros, countries with large reserves are now overweight dollars, and their effort to balance risks will cause the euro to rise again relative to the dollar. The dollar's salvation will be policies that reduce the growth of the US national debt.
A World of Multiple Reserve Currencies
Barry Eichengreen (Project Syndicate) Oct 20, 2010
The world economy of the twenty-first century is becoming more multipolar, and there is no reason why the same should not be true of its international monetary system. In the end, that will be a good thing.
Can Central Banks Still Influence Exchange Rates?
Howard Davies (Project Syndicate) Oct 20, 2010
For almost two decades, ever since George Soros forced the Bank of England to abandon its exchange-rate target for sterling, conventional wisdom has held that countries’ monetary policy should focus on domestic price stability while letting exchange rates float freely. But that wisdom is now being challenged.
Latin America’s Currency Roller Coaster
Mario I. Blejer (Project Syndicate) Oct 20, 2010
The collapse of Latin America’s currency pegs in the financial crises of the 1990’s led most countries to adopt a floating exchange rate. But authorities throughout the region have maintained the flexibility to intervene in order to preserve competitiveness - a policy that has insulated their economies from the worst effects of the recent crisis.
We need new rules for a multipolar Europe
Ivan Krastev and Mark Leonard (FT) Oct 20, 2010
Russia, Turkey and the EU are all developing ‘neighbourhood policies’ in their overlapping spheres of influence.
America cannot win the currency wars alone
Arvind Subramanian (FT) Oct 20, 2010
Multilateral action to induce Chinese co-operation is necessary. Mobilising a broad coalition of the “affected but as yet unwilling” countries before the upcoming G20 summit in Seoul should be America’s priority.
New WTO Agreement on Government Procurement Within Reach by December
Bridges Weekly Trade News Digest, Volume 14, Number 36 Oct 20, 2010
A deal that would liberalise access to billions of dollars worth of public procurement contracts among over forty WTO members is within reach by the end of the year, Geneva-based trade officials said. However, it remains unclear whether China will become part of the optional scheme in the foreseeable future; major trading powers like the US and the EU want China to join, but not on the terms Beijing has offered thus far.
Leaked EU Proposal for Ag Subsidy Reform Criticised by Farm Groups, Development Campaigners
Bridges Weekly Trade News Digest, Volume 14, Number 36 Oct 20, 2010
Leaked draft proposals from the European Commission for post-2013 farm spending have drawn fire from environmentalists, development agencies and others seeking more ambitious reforms, as well as from farm groups fearing increased costs resulting from new environmental requirements.
Lamy: Uncooperative Currency Policies Could Jeopardise Economic Recovery
Bridges Weekly Trade News Digest, Volume 14, Number 36 Oct 20, 2010
Global economic recovery could be "put in serious jeopardy" if governments do not cooperate on exchange rate policies, WTO Director-General Pascal Lamy warned this week. The WTO chief said Tuesday that while major economies had done a good job at resisting protectionist pressures through the worst economic downturn in decades, he had "heard recently warnings that this stability could be put at considerable risk" by disorderly currency movements that "some perceive as a pursuit of an exchange-rate-induced comparative advantage."
Surprising But True, US Exports Are Growing
Edward Gresser (YaleGlobal) Oct 20, 2010
Despite China's mounting surplus, the US makes strides in growth with exports.
The Structure of Institutional Reforms
Jurgen Stark (Project Syndicate) Oct 21, 2010
Despite much talk in Europe these days, we are not dealing with a crisis of the euro. We are dealing, instead, with a sovereign-debt crisis and the consequences of inadequate economic reform in the eurozone.
Big Ideas from Small Countries
Jeffrey Frankel (Project Syndicate) Oct 21, 2010
Once upon a time, Japanese capitalism was the model of economic success that other countries should and would emulate – a role subsequently filled by the US. With American-style capitalism now attracting few takers, perhaps countries should look for new models on the periphery of the world economy.
China’s Fair-Weather American Friends
Hans-Werner Sinn (Project Syndicate) Oct 21, 2010
The US accepted the undervaluation of the renminbi as long as China returned the dollars that it earned from bilateral trade by financing America’s budget deficit. Now that the Chinese prefer to invest that money in raw materials in Africa and elsewhere, they have aroused the full ire of American policymakers.
Boosting Demand and Investment Are Keys to Asian Rebalancing
IMF Survey Oct 21, 2010
Ensuring stable growth in the post-crisis world economy will require a rebalancing of economic activity in several different countries, whether boosting consumption, raising investment, or reorienting to more domestically oriented sectors
Global house prices: Floor to ceiling
Economist Oct 21, 2010
Our latest round-up shows that prices are on the rise in most markets.
From the Great Moderation to the global crisis: Ten years of exchange-market pressure
Joshua Aizenman, Jaewoo Lee & Vladyslav Sushko (VoxEU) Oct 22, 2010
Exchange-rate policy is emerging as one of the most controversial issues from the global crisis. This column looks at how emerging markets have responded to exchange-rate pressures over the last decade. Among its findings is that emerging markets’ hoarding of international reserves is far better explained by financial factors than by trade concerns, both before and during the crisis.
The Mystery of Economic Growth
Akash Kapur (NYT) Oct 21, 2010
One of the central questions facing India - and, indeed, the developing world as a whole - is why some people, or countries, move ahead, while others fall behind.
Overhaul the G20 for the sake of the G172
Robert Wade and Jakob Vestergaard (FT) Oct 21, 2010
In the eyes of many, the Group of 20 is a self-appointed and barely legitimate body with no authority to assume its current role.
Beyond the Global Brain Drain: The Global Care Drain
Sonya Michel (Globalist) Oct 21, 2010
What problems arise from women in developing countries emigrating to the West to work in the care industry.
Too much focus on the yuan?
Alan J Auerbach & Maurice Obstfeld (VoxEU) Oct 23, 2010
As the debate over China’s exchange-rate policy and the US response intensifies, this column argues that a large Chinese revaluation – whether forced of voluntary – will not be a free lunch for the US. Drawing on a theoretical cost-benefit analysis, it suggests that if the US wants to create jobs at the lowest costs, it should first consider further fiscal expansion.
What will the world look like in 2030? Maddison’s forecasts revisited
Andrew Mold (VoxEU) Oct 24, 2010
Developing countries have enjoyed strong economic performance over the past decade – often growing twice as fast as OECD economies. This column asks whether developing countries will continue to outpace rich countries over the coming two decades. Updating Angus Maddison’s famous projections, it forecasts a world starkly different from today’s. The worlds’ poor countries will account for nearly 70% of global GDP in 2030.
This stability pact obsession is not helpful
Wolfgang Münchau (FT) Oct 24, 2010
The real irony is that the pact, in whatever form, is not even relevant to the eurozone’s future. This may be a shocking statement. But look at the evidence.
Location, location, location: Why geography matters for R&D
Sergey Lychagin, Joris Pinkse, Margaret E Slade & John Van Reenen (VoxEU) Oct 25, 2010
Why do local policymakers fight so hard to attract research and development labs to their area? This column provides a possible explanation. Using patent data, it finds a strong link between R&D and growth caused by knowledge spillovers between firms.
China can no longer plead poverty
Gideon Rachman (FT) Oct 25, 2010
In important ways, China is now a rich nation. But its insistence that it is still a ‘developing country’ has become a shield to protect itself against vital political and economic changes that matter profoundly to the rest of the world.
The G-20's 'Rebalancing' Act
WSJ Oct 24, 2010
Dollar devaluation is not a global growth strategy.
Refugees of the Currency War, Unite!
Mario I. Blejer & Eduardo Levy Yeyati (Project Syndicate) Oct 25, 2010
Today’s global currency war resembles real war in two important respects: a face-off over the structural imbalances between two large opponents – China and the United States – has forced uncomfortable smaller allies to take one side or the other, and third parties that may not be directly engaged are suffering collateral damage from both sides of the dispute.
Why capital controls are not all bad
Ilene Grabel and Ha-Joon Chang (FT) Oct 25, 2010
Countries need to be able to impose capital controls to promote stability and rapid growth. It is a relief to see them gaining the freedom to do so after a long period of debilitating neoliberal ideology.
Basel rules risk punishing the wrong banks
Jacques de Larosière (FT) Oct 25, 2010
A European banking model that favours growth and stability could be the chief victim of the new framework.
Emerging nations: a beacon of opportunity
Jerome Booth (FT) Oct 25, 2010
It is the US and Europe that remain a huge super-bubble. Emerging markets are in a very different cycle to the developed world now, with inflationary not deflationary pressures.
Geithner's Global Central Planning
John Cochrane (WSJ) Oct 26, 2010
The Chinese government's accumulation of U.S. debt represents a tragic investment decision, not a currency-manipulation effort.
Global: A Step Away from the Wrong Direction
Manoj Pradhan & Rashique Rahman (MS GEF) Oct 26, 2010
No news on any policy measures aimed at capping current account balances at the G20 Finance Ministers’ summit in Seoul is good news.
Don't blame speculators for rising soya prices
Hussein Allidina (FT) Oct 26, 2010
Global supply is not keeping pace with rising demand.
Geithner's hidden G-20 agenda
Hossein Askari and Noureddine Krichene (AT) Oct 27, 2010
US Treasury Secretary Timothy Geithner's nonsensical call on the Group of 20 to institute surplus and deficit caps to "fix" trade imbalances betrays his real agenda - to support US growth by short-circuiting the market at the expense of East Asian and other economies.
Is there a bubble in the bond market?
John Y Campbell, Adi Sunderam & Luis M Viceira (VoxEU) Oct 27, 2010
The historically low yields on Treasury bonds are the hallmark of a bubble, according to some commentators. This column analyses the relationship between bond yields, the stock market, and inflation over the past 50 years. It finds that the riskiness of nominal bonds changes over time and that investors and policymakers can use the changing stock-bond correlation as a real-time measure of inflation expectations.
A New Path to a Low-Carbon Economy
Jeffrey D. Sachs (Project Syndicate) Oct 27, 2010
The time has come for the US, China, India, and other major economies to declare how they will foster their transition to a low-carbon economy. A small and gradually rising carbon tax that funds a feed-in tariff system could win political support in the US, and could help to foster consensus among the major coal-based economies, including China and India.
With Talks Fraying, Nagoya CBD Meet Looks to Ministers for Compromise
Bridges Weekly Trade News Digest, Volume 14, Number 37 Oct 27, 2010
With only two days of negotiations left at the Convention on Biological Diversity's summit in Japan, all eyes are on the ministers and top officials from 110 countries that have arrived in Nagoya to try to hammer out a compromise.
G-20 Pledges Cooperation on Reducing Trade Imbalances, But Offers Few Specifics
Bridges Weekly Trade News Digest, Volume 14, Number 37 Oct 27, 2010
Officials from the world's leading economies, meeting in South Korea, agreed over the weekend to cooperate on reducing global trade imbalances and calming exchange-rate tensions, but stopped short of establishing numerical targets for countries' current account surpluses and deficits. They instead pledged to work towards an agreement on "indicative guidelines" for identifying "persistently large imbalances" and their causes, as well as to "refrain from competitive devaluation of currencies."
China has every right to cheat, but shouldn’t
David Pilling (FT) Oct 27, 2010
To continue along the current path risks bringing down the free-trade system that has served China so well.
IMF must do its duty on currency wars
Terrence Keeley (FT) Oct 27, 2010
Excessive currency intervention that works against balanced, sustainable global growth needs to be policed – and it is the IMF not the G20 that should be doing this. The IMF already has the mandate and technical capability. So why is it failing to act.
China is key to next rally in gold prices
David Hale (FT) Oct 27, 2010
Bullion holdings to be ramped up to lessen vulnerability to dollar devaluations.
Patience and the Currency Wars
Gary Clyde Hufbauer (PIIE/National Interest) Oct 27, 2010
What a curious world we live in. Communist leaders in Beijing desperately need capitalist growth to maintain political control. They fear anything that might slow their export engine—an engine that has delivered nearly 10 percent growth year after year. They adore what Professor Ronald McKinnon of Stanford has to say: Don't change the peg between the dollar and the yuan, because on that path lies more than a decade of misery, just as Japan has suffered since 1990. And, by the way, Chinese leaders love the prestige and power that comes with a treasure trove of $2.7 trillion in foreign-exchange reserves. From Beijing's perspective, all is well in the Middle Kingdom.
Gold vs. The Fed: The Record Is Clear
Charles W. Kadlec (WSJ) Oct 28, 2010
There were no world-wide financial crises of major magnitude during the Bretton Woods era from 1947 to 1971.
To Stabilize The Economy, Fix The U.S. Dollar
Reuven Brenner (Forbes) Oct 28, 2010
Anchoring the dollar to gold would be the best solution for the U.S., China and the rest of the world.
Sinodependency: The indispensable economy?
Economist Oct 28, 2010
China may not matter quite as much as you think.
Price-level targeting: Level worship
Economist Oct 28, 2010
Price-level targeting could make monetary policy more potent—or just more confusing.
Global: Money, Bubbles and Ersatzgold
Joachim Fels (MS GEF) Oct 29, 2010
While the Fed’s additional bond purchases are welcome, they increase the risk of trade wars, bubbles in commodities and emerging markets, and global inflation.
How the Brain Reacts to Financial Bubbles
Jonah Lehrer (NYT) Oct 29, 2010
Can neuroscience predict financial bubbles?
China’s War on Inequality
Fan Gang (Project Syndicate) Oct 29, 2010
A major new target in the five-year plan that China just unveiled is to boost the growth rate for household income so that it equals the growth rate of GDP. The reason is simple: over the past 10 years or so, China’s household income grew more slowly than GDP, giving rise to significant structural problems.
A proposal for countercyclical contingent capital instruments
Giuseppe De Martino, Massimo Libertucci, Mario Marangoni & Mario Quagliariello (VoxEU) Oct , 2010
Contingent capital requirements may reduce the problems of low-quality bank capital and excessively leveraged institutions, but they also risk being too complex. This column aims to strike an appropriate balance by presenting a proposal based on both macroeconomic and bank-level triggers for debt-to-equity conversion. It assesses how such a rule would have performed in identifying stressed banks in recent years.
NYT Oct 30, 2010
Beijing has resisted demands to allow its currency to rise against the dollar, but a new proposal could offer a way out.
Immigrants Can Help Create More Jobs
Tyler Cowen (NYT) Oct 30, 2010
Evidence is growing that immigration encourages more business activity.
An EU treaty change is necessary but hazardous
Wolfgang Münchau (FT) Oct 31, 2010
If Europe gets a bail-out mechanism in whichever form, it may well provoke the German justices to rule it unconstitutional.