Lie of the Tiger
Clyde V. Prestowitz (FP) Nov 2010
How the United States really tamed the Japanese economy -- and why China's a much meaner cat.
Reluctant Warriors
Evan A. Feigenbaum (FP) Nov 2010
Assertive Chinese and job-hungry Americans are gearing up for a trade war across the Pacific. Fortunately, cooler heads will likely prevail.
Currency Wars?
William Cline and John Williamson (PIIE) Nov 2010
Over a dozen countries, including Brazil, China, India, Japan, and Korea, have been intervening in the foreign exchange market to prevent their currencies from appreciating. It is feared that the second dose of quantitative easing in the United States (dubbed QE2) may worsen currency appreciation. All this raises the prospect of a currency war, which the Group of Twenty (G-20) fears is gathering steam. Because many countries are simultaneously seeking to improve their balance of payments position, many are seeking a more competitive exchange rate. The laws of mathematics mean that some must be disappointed: A weaker exchange rate of one country implies a stronger rate of some other country or countries.
Euro, Yen Taking Heat from QE2
Andrew Balls (PIMCO) Nov 2010
With China and a number of important emerging market countries unwilling to allow their currencies to appreciate substantially, the euro has again been absorbing the pressure. The Bank of England faces the same problem as the Fed; that is, it is very hard to judge whether more QE will help to improve the economy's performance, other than via the impact on the price of risk assets. In the absence of a positive surprise from the G-20 on the ability to promote coordinated adjustment, it appears that current market trends may continue for some time.
Global Transaction Costs Decline Despite High Frequency Trading
II Nov 2010
Many investors contend that high frequency traders put long-term investors at a disadvantage by front-running their orders and fueling market volatility, but transaction costs trend lower still.
Irish Crisis Demands New EU Response
Mohamed El-Erian (PIMCO) Nov 2010
Advanced economies are not wired to operate at elevated levels of sovereign risk. The longer these spreads persist, the greater the decline in investment activity and employment. If things are left as they are the risk of further social unrest will rise, while tax revenues will collapse at a time when budgets are already under enormous strain. The policy responses of eurozone governments were supposed to buy a few years of calm, but ended up by delivering only a few months. A more effective and credible approach is now needed.
Capitalism reset
Anatole Kaletsky (PWC View Issue 13) Nov 2010
A perspective on the resilience of capitalism and on the current state of our economy and its prospects for the future.
India and China Take Different Roads to World Leadership – Part I
Shyam Saran (YaleGlobal) Nov 1, 2010
An old master of globalization, India leads developing nations.
Europe in the Back Seat
Pedro Solbes & Richard Youngs (Project Syndicate) Nov 1, 2010
The reform of global economic governance is still firmly on policymakers’ agenda, but the EU has done little to develop a coherent approach to the new forms that the G-20 has committed itself to establishing. Instead, the EU has been reduced to taking a series of rearguard positions aimed at tempering its own loss of stature.
Germany’s Will to Compromise
Michael Bolle & Cordelia Friesendorf (Project Syndicate) Nov 1, 2010
“Confront, then compromise” could well become Germany’s mantra for successful negotiation at the EU. That seems to be Chancellor Angela Merkel’s purpose in demanding permanent EU crisis-resolution mechanisms, together with changes to the Lisbon Treaty.
The Weary Titan
Pierre Buhler (Project Syndicate) Nov 1, 2010
Many people still look at the American economy, towering over the rest of the world with its $14 trillion GDP, as the engine of global recovery. But an increasingly uncompetitive civilian industry, the burden of military commitments overseas, and wage stagnation all signal that the American titan might be wearying.
China’s currency and the US economy
Fred Bergsten (VoxEU) Nov 1, 2010
Yiping Huang recently argued that the US would not win a currency war over global imbalances. This column agrees that a currency or trade war would be lose-lose. But it says that such a conflict is inevitable unless the root causes of the growing imbalances are addressed
Global imbalances, the renminbi, and poor-country growth
Helmut Reisen (VoxEU) Nov 1, 2010
The debate over global imbalances has a sharp focus on China. But this column says the debate is missing a crucial point: that China’s growth has been good for poor countries, so that a renminbi appreciation slowing Chinese growth will also hurt many other poor economies.
Estimating the Impact of the Exchange Rate on the Trade Balance and Jobs
William R. Cline (PIIE) Nov 1, 2010
As pressure mounts on China to let the value of its currency appreciate, a debate has occurred among some economists over the potential effect of such a revaluation on the US current account deficit—or on the number of jobs in the United States. In recent congressional hearings, C. Fred Bergsten (2010), director of the Peterson Institute for International Economies, testified that a correction of China's exchange rate undervaluation would produce approximately 500,000 American jobs. The purpose of this note is to set forth calculations that provided part of the basis for this estimate, in particular, and to further clarify estimations of the impact of the exchange rate on trade and jobs more generally.
Rising Brazil must explain what it wants
Marco Vicenzino (FT) Nov 1, 2010
After a campaign that was largely silent on foreign policy, Dilma Rousseff needs to use her presidency to remove the ambiguity that surrounds her country’s diplomacy.
Redressing global imbalances: Evidence from the Eurozone
Helge Berger & Volker Nitsch (VoxEU) Nov 2, 2010
What can policymakers do to redress the global imbalances? This column presents evidence from 18 European countries over the past 60 years. It finds that while permanently fixed nominal exchange rates often result in large and lasting trade imbalances, these imbalances usually reflect a difference in trade competitiveness that can be addressed through structural and macroeconomic policies.
Current account targets are a way back to the future
Martin Wolf (FT) Nov 2, 2010
Tim Geithner has offered an imaginative alternative to endless friction over exchange rates. China's president should seize the escape the US has offered him.
QE2 is risky and should be limited
Martin Feldstein (FT) Nov 2, 2010
The Fed’s proposed policy of quantitative easing is a dangerous gamble with only a small potential upside benefit and substantial risks of creating asset bubbles that could destabilise the global economy.
South Korea in the G-20 Spotlight
Jeffrey Frankel (Project Syndicate) Nov 2, 2010
South Korea views its role as host of November's G-20 summit as another opportunity to mark its arrival on the world stage. But it should make more of its opportunity than this, and instead exercise substantive leadership.
Beware of Wounded Lions
Kenneth Rogoff (Project Syndicate) Nov 2, 2010
G-20 leaders who scoff at America's proposal for numerical trade-balance limits should know that they are playing with fire. The US is not making a demand as much as it is issuing a plea for help.
The US economic policy mix is a threat to the world
Philippe Legrain (VoxEU) Nov 2, 2010
While the debate over global imbalances often focuses on China, this column argues that the biggest threat to the world economy comes from the other side of the seesaw – the US.
Lessons in regionalism: What can the WTO teach the IMF?
Kati Suominen (VoxEU) Nov 3, 2010
Will financial regionalism damagingly fragment the global financial architecture precisely at the time when sturdy system-wide management is needed? This column points to the world trading system’s engagement with regional trade agreements as a source of lessons for how to harmonise regional and global approaches to international finance.
The Cost of America’s Free Lunch
Daniel Gros (Project Syndicate) Nov 3, 2010
For decades, the world has complained that the dollar’s role as global reserve currency has given the US guaranteed access to cheap money. But there is no free lunch; the US must choose between job creation, which requires a more competitive exchange rate, and cheap financing of its external and fiscal deficits.
CBD Reaches Agreement on Access and Benefit Sharing, But Some Question Its Effectiveness
Bridges Weekly Trade News Digest, Volume 14, Number 38 Nov 3, 2010
In the wee hours of Saturday morning in Nagoya, Japan, a UN biodiversity summit was gavelled to a close. Thousands of participants rose to their feet in applause, despite some misgivings about the agreement that had just been reached.
TRIPS Council: Debate over Effectiveness of System for Access to Medicine
Bridges Weekly Trade News Digest, Volume 14, Number 38 Nov 3, 2010
A rarely-used system intended to help poor countries import generic versions of patent-protected drugs was at the centre of discussions at the WTO last week, as members debated whether the system needed modification to make it more usable.
Yen has further surprises
Kieran Osborne (AT) Nov 4, 2010
Japan's currency has a strength that appears to defy the country's dismal economy (and deteriorating outlook), weak political leadership, and poor demographics. Unravel the mystery, and it is clear Japan faces a very scary future and the yen a quite different value.
Currency wars and the emerging markets
Richard Portes (VoxEU) Nov 4, 2010
The threat of a currency war between the US and China is one of the main concerns for the G20 ahead of this month’s meeting in Seoul. This column say that while policymakers appear to grasp some of the issues, they underestimate the impact of quantitative easing by large economies on exchange rates worldwide.
Governments Launch Plans to Reduce Debt and Boost Growth
IMF Survey Nov 4, 2010
Governments have set out their plans over the next few years to help reduce their countries' deficits and improve prospects for long-term economic growth. Some countries have already begun to cut back, and by next year nine out of ten will be reducing their deficits, the IMF says in a new study.
QE2 blunderbuss likely to backfire
Mohamed El-Erian (FT/PIMCO) Nov 4, 2010
Easing is unlikely to sustain high growth and job creation in the US, but will certainly complicate life for other countries.
The futile attempt to save the eurozone
Samuel Brittan (FT) Nov 4, 2010
Even if eurozone fiscal and debt obligations could be negotiated away, we are far from out of the woods.
Human Development Report for 2010 Released by U.N.
NYT Nov 4, 2010
The United Nations report charted global progress in income, health and education since 1970.
Orderly sovereign-debt defaults: Fail safe
Economist Nov 4, 2010
What do German calls for an orderly sovereign-default scheme mean in practice?
The real yuan-dollar exchange rate: Nominally cheap or really dear?
Economist Nov 4, 2010
China's exchange rate has risen faster than you think. Really.
Quantitative easing is working: Down the slipway
Economist Nov 4, 2010
"Quantitative easing" is unloved and unappreciated—but it is working.
The global monetary system: Beyond Bretton Woods 2
Economist Nov 4, 2010
Is there a better way to organise the world's currencies?
Globalization
Frederick E. Allen (Forbes) Nov 4, 2010
As the world keeps getting flatter, the challenges of a running a business and managing a workforce that span the globe keep growing.
Trade Adjustment Assistance: Lost in the Shuffle
Greg Mastel and Howard F. Rosen (PIIE) Nov 5, 2010
A great deal of legislation has passed in the last two years so it is understandable that many may not have noticed that one important piece of legislation that became law in 2009 was a major update of the Trade Adjustment Assistance (TAA) program. Unfortunately, that long-needed revision is due to expire on New Year's Eve unless the Congress acts to extend it.
The Big Blink
Raghuram Rajan (Project Syndicate) Nov 5, 2010
Although the source of future global demand is clearly the billions of consumers in Africa, China, and India, policies being pursued in the advanced countries are jeopardizing the adjustment process. The showdown between advanced and emerging-market economies should end with all sides blinking simultaneously and embracing commonsense compromises.
Five Imperatives for the G-20
Jamie F. Metzl (Project Syndicate) Nov 5, 2010
To prevent another recession or worse, the leaders of the 20 wealthiest nations must take aggressive action at the G-20 summit in Seoul to develop a broad agenda for more balanced, equitable, and sustainable global growth. Five principles should guide their thinking.
Why is China Lashing Out?
Ian Buruma (Project Syndicate) Nov 5, 2010
China's recent bullying of its neighbors, and its refusal to allow the renminbi to appreciate, stand in sharp contrast to the deftness of its foreign policy over the last decade. So, is China drunk on its new great-power status, or is its assertiveness abroad a symptom of weakness at home?
Corruption as a barrier to entry
Nauro F. Campos, Saul Estrin & Eugenio Proto (VoxEU) Nov 5, 2010
Conventional wisdom says that corruption hurts the economy because it taxes investment and weakens public services. This column presents evidence from interviews with CEOs in Brazil. It argues that corruption acts as a barrier to entry, with potential entrants put off by the uncertainty over what bribes to pay and when to pay them.
The ageing, crisis-prone welfare state is bad news for welfare migration
Assaf Razin (VoxEU) Nov 6, 2010
The growing voice of skilled workers and the retired in industrialised countries is calling out for politicians to further restrict immigration in order to allay fears of stealing jobs and scrounging off benefits. This column explores the political process behind constraints to migration and describes the importance of cross-country coordination in a post-crisis world of ageing generous welfare states.
Funding the Low-Carbon Revolution
Trevor Manuel & Nicholas Stern (Project Syndicate) Nov 6, 2010
With international collaboration and sound policies, we can launch a new era of low-carbon economic growth while adapting to the climate change that is on the way. A new report shows how.
The G20 must look beyond Bretton Woods II
Robert Zoellick (FT) Nov 7, 2010
Advice on how to save the world’s economy – even by a return to the gold standard – in advance of the G20 meeting this week.
Fiscal fragility: What the past may say about the future
Joshua Aizenman & Gurnain Kaur Pasricha (VoxEU) Nov 7, 2010
Amid government concern over public debt, one measure – the debt-to-GDP ratio – has gained prominence above all others. This column presents forecasts of the fiscal burden of debt for each OECD country. Looking at past as well as current data, it argues that prudent fiscal policy should involve both short-term stabilisation and forward-looking fiscal reforms. Finding a balance between the two is crucial.
Don’t Count on Global Governance
Dani Rodrik (Project Syndicate) Nov 7, 2010
Many of the world economy’s troubles today originate from our unwillingness to recognize that domestic policy objectives will ultimately trump global responsibilities. We can no longer afford to pretend that parochial interests can be subsumed under international commitments.
As G-20 summit nears, China is unlikely to budge on currency
Robert Samuelson (WP) Nov 8, 2010
Beijing's controlled currency rate hurts more than just the U.S. economy.
Euro Crisis Enters New Phase With Credit Squeeze
Daniel Gros (Bloomberg) Nov 8, 2010
The life-support system for Greece, Ireland, Portugal and Spain is now under threat. The highly indebted nations of the euro area can’t survive the deficit crisis without access to central-bank credit.
The G-20, the IMF, and Global Imbalances
Juan Carlos Martinez Oliva (PIIE) Nov 8, 2010
Meeting in St. Andrews a year ago, at the depths of the global economic downturn, the G-20 finance ministers and central bank governors initiated a "mutual assessment process" (MAP) to evaluate their objectives and the global consistency of their policies.
The G20’s seven pillars of friction
Gideon Rachman (FT) Nov 8, 2010
While the central tension on most issues is between the US and China, the world is not splitting into a pro-American and pro-Chinese camp. Instead, there are now seven major axes that divide the world.
Keep the faith: the G20 can stop the war
Kemal Dervis (FT) Nov 8, 2010
Behind the fanfare and excessive theatrics of the summits, a global network is growing that could become the backbone of international economic co-operation.
No markets were hurt in making this coffee
Michael Skapinker (FT) Nov 8, 2010
Fairtrade gives its beneficiaries more of a lift than free trade does on its own. And it doesn’t appear to do any harm.
Infatuation with strong euro looks to be waning fast
Paul Robinson (FT) Nov 8, 2010
With US uncertainties over QE and midterms behind us, euro strength relative to the dollar may be approaching its end.
Protectionism on the eve of the Seoul G20 summit
Simon J Evenett (VoxEU) Nov 8, 2010
The Korean hosts of this week's G20 summit are apparently keen to raise the profile of protectionism and to develop a development-friendly trade initiative. With these possible goals in mind the Eighth Report of the Global Trade Alert, published today, assesses the global state of protectionism, the quality of G20 leadership on trade, and the harm done to the most vulnerable developing countries by other country's beggar-thy-neighbour policies.
The Fed is right to turn on the tap
Martin Wolf (FT) Nov 9, 2010
The policy known as quantitative easing is far more likely to prove ineffective than lethal. It is a leaky hose, not a monetary Noah’s Flood.
China can afford to stand firm in Seoul
Yao Yang (FT) Nov 9, 2010
China’s leaders believe Americans will come to see they benefit from the cheap goods a weak renminbi provides.
A golden opportunity for monetary reform
Robert Skidelsky (FT) Nov 9, 2010
Global imbalances lie at the heart of the current recession; failure to address them will abort recovery and lead to currency wars.
Eurozone bond haircuts must look appealing
Erik F. Nielsen (FT) Nov 9, 2010
The eurozone needs to address the legal and practical complexities of existing peripheral debt, otherwise these countries' borrowing costs could hit levels not seen since the Greek rescue.
The Fed vs. the G-20
NYT Nov 9, 2010
Rather than criticize the Federal Reserve's plan to pump money into the weak American economy, the G-20 should work on complementary policies.
A Recovery for All
Isabel Ortiz (Project Syndicate) Nov 9, 2010
As the global recession ebbs, the most urgent imperative is recovery for all – a recovery that is inclusive, expands employment opportunities, reduces inequalities, and sustains development processes. Instead, the world's poor face the prospect of bearing the brunt of the global drive for fiscal consolidation.
New Green Drivers of Growth
Caio Koch-Weser & George Soros (Project Syndicate) Nov 9, 2010
At a time of insufficient global demand and fiscal constraints in the developed countries, there is an urgent need for new drivers of growth. The initiatives described in a new UN report offer a major opportunity to reorient the global economy towards resource-saving, low-carbon growth by using limited public resources to stimulate large-scale private investment.
Is America Catching the “British Disease?”
Barry Eichengreen (Project Syndicate) Nov 9, 2010
In the US, the scent of decline is in the air, as imperial overreach, political polarization, and a costly financial crisis weigh on the economy. Indeed, some now worry that the US, doomed to slow growth, will, like the exhausted Britain that emerged from World War II, be forced to curtail its international commitments.
Export restrictions and food market instability
Kym Anderson, Will Martin & Signe Nelgen (VoxEU) Nov 9, 2010
The recent rise in the price of wheat has brought the issue of food security back to public attention. This column discusses how policymakers can avoid the temptation to place restrictions on exports and imports that exacerbate price spikes.
G-20 summit shouldn't overlook the poorest countries
Lee Myung-Bak (WP) Nov 9, 2010
We shouldn't overlook the world's poorest countries when fixing the global economy.
Palin's Dollar, Zoellick's Gold
WSJ Nov 9, 2010
An unlikely pair elevate the monetary policy debate.
Euroland: Life on the Edge of the EFSF
Elga Bartsch & Daniele Antonucci (MS GEF) Nov 9, 2010
In this note, we discuss political deliberations on tapping the European Financial Stability Fund (EFSF).
Global: Sense and Sustainability
Arnaud Mares (MS GEF) Nov 9, 2010
The fact that outright default in the European periphery is more likely does not mean that it is the most likely outcome.
Narrative and Reality on the Chinese Currency Issue
Homi Kharas (Brookings) Nov 10, 2010
One of the big stories of the G-20 meeting this week is the on-going narrative of unfair currency manipulation especially by China. Homi Kharas discusses new data that shed a different light on the problem than is commonly understood.
The eurozone’s stark lessons for the G20
Alan Greenspan (FT) Nov 10, 2010
If the G20 is serious in pledging to sustain open multilateral trade and the international financial system that fosters it, it should be willing to forgo an element of sovereignty to achieve net gains for all.
We must rethink Basel, or growth will suffer
Vikram Pandit (FT) Nov 10, 2010
In crucial areas the Basel III capital architecture is silent, does not go far enough or makes the problem worse.
Stop complaining and embrace the positives of QE2
Tim Bond (FT) Nov 10, 2010
On the benefits of the Fed's stimulus measures
A Better G-20 Agenda
WSJ Nov 10, 2010
The real source of global 'imbalances' and how freer trade can help.
Emerging markets capital flows – how are the BRIC countries faring and coping?
Markus Jaeger (DB Research) Nov 10, 2010
The last two “super-cycles” in private capital flows to emerging markets lasted almost exactly seven years. This suggests that the current upswing in capital flows may only be in its early stages. The level of capital flows to the BRICs differs markedly, as do their policy responses in terms of currency appreciation, reserve accumulation and capital controls. Brazil will continue to face a far greater temptation to tighten capital controls – and prevent currency appreciation – than the other BRIC countries...
Low-Income Countries Coped Well During Crisis, IMF Study Finds
IMF Survey Nov 10, 2010
The world's low-income countries coped much better during the global economic crisis than in past global recessions, according to a new IMF study covering 64 countries in sub-Saharan Africa, the Middle East, Europe, Asia, Latin America and the Caribbean.
Japan’s Options
Joseph S. Nye (Project Syndicate) Nov 10, 2010
The current tensions between China and Japan have revived talk about how far Japan has fallen since its glory years of the 1980’s. But, despite its poor economic performance in recent years, Japan retains impressive power resources, and has an impressive record of reinventing itself.
A Return to Reason
Bjørn Lomborg (Project Syndicate) Nov 10, 2010
Common sense was an early loser in the scorching battle over the reality of man-made global warming. Fortunately, there finally seems to be an emerging cadre of influential scientists, economists, and politicians who represent a more sensible approach to the issue.
The first global recession in decades
Jean Imbs (VoxEU) Nov 10, 2010
What makes the global crisis global? This column argues that the interdependence of the global economy, brought about by financial linkages between developed countries as well as goods trade ties with developing countries, has made the global crisis the first global recession in decades.
Who's Really Running the G-20?
Otaviano Canuto and Marcelo Giugale (FP) Nov 10, 2010
In the post-recession era, developing countries (aka the BRICs) have come out on top. And they're going to stay there.
Fool's Gold
Mark T. Williams (FP) Nov 10, 2010
Why the idea of a gold standard is best relegated to the dustbin of history.
China and antidumping
Chunding Li & John Whalley (VoxEU) Nov 11, 2010
Over the last decade, China has been the target of more antidumping measures than any country in the world. This column examines the impacts and argues that China should be paying more attention to measures that come from its main trading partners.
WTO, OECD, UNCTAD Urge G-20 to Cooperate on Macroeconomic Imbalances
Bridges Weekly Trade News Digest Volume 14, Number 39 Nov 11, 2010
Tensions over exchange rates, macroeconomic imbalances and unemployment are symptoms of "intensifying protectionist pressures" that will challenge the world's leading economies, the WTO, the United Nations Conference on Trade and Development, and the Organization for Economic Cooperation and Development warned last week. They urged the upcoming summit of leaders from the Group of 20 industrialised and developing nations to cooperate on addressing macroeconomic imbalances, since doing so would bolster support for open trade and investment.
US Elects More Pro-Trade Lawmakers, But Will It Make for a More Pro-Trade Congress?
Bridges Weekly Trade News Digest Volume 14, Number 39 Nov 11, 2010
The United States Congress elected last week will include more influential lawmakers inclined to look favourably upon open trade and negotiated trade agreements than its predecessor. This much is clear based on incoming members' views and voting records. Despite record low levels of public support for trade agreements, pro-trade Republicans were elected even in Pennsylvania, Ohio, and Illinois, states well known for skittishness about trade. Whether this shift will translate into Congressional support for new initiatives on trade by the Obama administration, let alone pro-development trade policies, remains to be seen.
French Ecology Ministry Enrages Farmers with Proposal for Sweeping Subsidy Reform
Bridges Weekly Trade News Digest Volume 14, Number 39 Nov 11, 2010
Days after calling for a dramatic reorientation of European farm subsidies towards environmental protection, the French ministry for ecology and sustainable development has taken the controversial proposal off its website, following a firestorm of protest from the country's farm lobby.
A Four-Point Plan for the G-20
Timothy Geithner, Tharman Shanmugaratnam and Wayne Swan (WSJ) Nov 11, 2010
Strengthen global growth, keep it balanced, let currencies adjust, avoid protectionism.
Commodity speculators: Dr Evil, or drivel?
Economist Nov 11, 2010
The charge-sheet against commodity speculators is flimsy.
Clarity about Diamonds
Peter Singer (Project Syndicate) Nov 11, 2010
When diamonds’ role in fueling violent conflict in Africa gained worldwide attention, the industry established the Kimberley Process to prevent trade in “blood diamonds." But now many, even within the industry, argue that the Kimberley Process has lulled consumers into believing that all ethical problems with diamonds have been resolved.
New Rules for Hot Money
Nouriel Roubini (Project Syndicate) Nov 11, 2010
When justified by economic fundamentals, a currency's exchange rate should be allowed to rise gradually. But when a currency’s appreciation is triggered by capital inflows that represent the asset-diversification preferences of advanced-economy investors, it can and should be resisted.
Gold: The Market's Global Currency
Robert P. Murphy (Mises Daily) Nov 11, 2010
World Bank president Robert Zoellick has stirred up a hornet's nest with his recent call for a return to a gold anchor[1] in the global financial system.
Rethinking Western Capitalism
John Bruton (Globalist) Nov 11, 2010
In light of this week's G20 summit, an examination of how the financial crisis reveals problems — but also creates the political space to solve them.
The IMF is giving some good fiscal advice
Martin Wolf (FT) Nov 11, 2010
The Fund makes it clear that fiscal authorities should stand ready to support the economy, when and if necessary.
History lessons for a world out of balance
John Plender (FT) Nov 11, 2010
The experience of the 1930s suggests that competitive devaluations and capital controls are inevitable when surplus countries fail to take responsibility for global payments imbalances.
How the G20 glasshouse is under attack
Mark Malloch-Brown (FT) Nov 11, 2010
The G20 risks being reduced to the sum of its feuding parts as trade imbalances and currency wars drive stakes into the enterprise.
Ireland has shown grit but must find a magic formula
Gillian Tett (FT) Nov 11, 2010
Pity the Irish. Dublin has repeatedly unveiled commendably bold measures to fight financial crisis, but instead of being rewarded by the markets it has been quite the opposite.
Debt and democracy
Chan Akya (AT) Nov 11, 2010
A full-scale revolt appears on the cards between the demands of markets and those of citizens facing either austerity or spiraling deficits in developed democracies. Creditors may well start preferring the debt issued by dictatorships to that issued by democracies as a simple means of avoiding uncertainty.
QE and the South Sea bubble
Economist Nov 11, 2010
An early attempt to buy government bonds by creating money.
Assessing the G-20: the Luxury of Squabbling
William R. Cline (PIIE) Nov 12, 2010
The bizarre development at the G-20 summit in Seoul this week was the swing from a relatively generalized coalition critiquing the undervalued renminbi in the run-up to the G-20 session in Toronto in June—which prompted China to make its rate “flexible” again—to the specter of Germany and Brazil united with the Chinese in critiquing the United States because of the Federal Reserve’s announcement on quantitative easing, or QE2. (Brazil had been one of the prominent renminbi critics pre-Toronto).
The Case for Re-Regulating Capital Accounts
Jose Antonio Ocampo (Project Syndicate) Nov 12, 2010
A serious discussion of global capital-account regulations would benefit both advanced and emerging-market economies. Inded, this would adhere to the IMF’s founding principle: it is in the best interest of all members to allow countries to pursue their own full-employment macroeconomic policies, even if this requires regulating capital flows.
America’s Employment and Growth Challenges
Michael Spence (Project Syndicate) Nov 12, 2010
Elevated savings and reduced consumption relative to pre-crisis levels are likely to be permanent in the US, even after households reduce leverage and restore retirement savings. To make up the difference, Americans must focus on competing effectively for a portion of global demand.
Gold standard or political discipline?
Stan du Plessis & Andreas Freytag (VoxEU) Nov 12, 2010
President of the World Bank, Robert Zoellick, caused a stir this week by hinting at a need to return to the gold standard. While supporting the drive for pro-growth policies and the desire to maintain an open international trade system, this column argues that a return to gold would struggle to achieve this and could even be a destabilising force.
Fiscal adjustments and the recession
Alberto Alesina (VoxEU) Nov 12, 2010
Many nations are in the middle of painful fiscal retrenchments. This column presents recent research on the impacts of these policies. It argues that spending cuts are less recessionary than tax increases when deficits are reduced and responds to criticisms of these findings in the recent IMF World Economic Outlook.
What can we realistically expect from the G20?
Simon J Evenett (VoxEU) Nov 12, 2010
The Seoul summit marks the end of the second year of the G20's crisis-related activities. This column takes stock of the G20's accomplishments and methods of operation, identifying what can reasonably be expected of the G20 over the medium term. It argues that a series of evolving accommodations – articulated imprecisely to outsiders – is the most that governments and analysts should expect.
Throwing Free Trade Overboard
NYT Nov 12, 2010
Will the Tea Party demand a new wave of protectionism?
World economy: In gold they rush
Robin Harding, Javier Blas and Alan Beattie (FT) Nov 12, 2010
Bullion's sharp rise in price is prompting a rethink for the first time in four decades about whether the metal should have a monetary role.
Global: Concerning Capital Inflows
Manoj Pradhan (MS GEF) Nov 12, 2010
Capital inflows remain a major problem for EM policymakers. Concerns about a currency war have thus remained prominent.
The euro zone: Those nice chaps at the IMF
Economist Nov 12, 2010
Ireland wonders whom to turn to in a crisis.
The G20: The ghost at the feast
Economist Nov 12, 2010
The summit in Seoul forged a compromise between the world's most powerful leaders. But a decision made in Washington made a bigger splash.
Bailouts, Reframed as 'Orderly Resolutions'
Robert J. Shileer (NYT) Nov 13, 2010
The government needs weapons for battling the next financial crisis, but also needs the public to buy into them.
US allies take hit from QE2
Peter Lee (AT) Nov 13, 2010
The most likely target of the United States' latest round of quantitative easing, or QE2, is China - the one country best placed to withstand the pressure of a devaluing dollar. The hardest-hit victims will be America's free-market allies, notably in Asia, now being given every reason to move closer to Beijing.
Embarrassment in Seoul
WSJ Nov 13, 2010
The world won't follow slow-growth, weak-dollar America.
Now, Will China Get It?
NYT Nov 13, 2010
No amount of bluster, or fearfulness, can paper over the damage caused by the cheap renminbi policy.
Seasonal migration schemes
John Gibson & David McKenzie (VoxEU) Nov 13, 2010
The debate over immigration often highlights the effects on the native population. This column instead looks at the country that immigrants leave behind. It presents a multi-year evaluation of New Zealand’s seasonal migration programme. In its first two years, the main developing countries supplying workers to the programme have seen a large improvement in household wellbeing.
Trade in loot
Thorvaldur Gylfason & Per Magnus Wijkman (VoxEU) Nov 13, 2010
Since discovering oil in 1990, Equatorial Guinea has experienced massive growth that multiplied its GDP per capita many times over. But its oil wealth has not improved the well being of most of its inhabitants. This column argues that such resources belong to the citizenry under international law, and unelected governments that expropriate natural wealth are violating human rights.
Europe’s Monetary Cordon Sanitaire
Simon Johnson & Peter Boone (Project Syndicate) Nov 14, 2010
German Finance Minister Wolfgang Schäuble likes to criticize other governments, including that of the United States, for what he regards as their “irresponsible” policies. Ironically, it is the German government’s loose talk that has brought Europe to the brink of another debt crisis.
How to prevent a fiscal crisis: Vote-share bonds
Hans Gersbach (VoxEU) Nov 14, 2010
How can excessive public debt be avoided? This column proposes a novel solution: “vote-share bonds”. These government bonds are tied to the share of the vote that the adoption of the underlying deficit has received in parliament. A bond with a higher vote-share is considered senior. Vote-share bonds inspire fiscal responsibility, while retaining the flexibility to stabilise negative macroeconomic shocks.
The historical roots of inequality: Evidence from slavery in the US
Graziella Bertocchi & Arcangelo Dimico (VoxEU) Nov 14, 2010
US commentators regularly lament the country’s racial and ethnic inequality. This column presents data from 1870 and 1940-2000 to argue that the divide has its roots in the slave trade and that its legacy persists today through the racial inequality in education.
Fiscal union is crucial to the euro’s survival
Wolfgang Münchau (FT) Nov 14, 2010
Angela Merkel’s bail-in proposals cannot work in a monetary union with strong and persistent imbalances. One of the two will have to give, or the eurozone will break up.
Divide and rule or the rule of the divided? Under-development in Africa
Stelios Michalopoulos & Elias Papaioannou (VoxEU) Nov 15, 2010
How much influence did colonisation have on Africa’s development? This column examines data from before colonisation up to the modern day and argues that differences in colonial institutions do not explain differences in regional economic performance. Instead, it finds that pre-colonial political centralisation and ethnic class stratification have a significantly positive impact on local development.
Unbalanced Europe
Benedicta Marzinotto (Project Syndicate) Nov 15, 2010
The unwinding of today’s global imbalances – led by revaluation of the renminbi and China’s shift to a growth model based on stronger domestic demand – might be only a matter of time. Europe’s internal imbalances, however, are a much knottier problem.
Vietnam’s Chinese Lessons
Yuriko Koike (Project Syndicate) Nov 15, 2010
Vietnam’s strategic position – as a neighbor of China, situated parallel to the great sea trade routes of Asia – always made the country tremendously important. In recent years, however, Vietnam’s strategic significance has increased dramatically, owing to huge transformations in its economic performance and foreign-policy orientation.
The Plaza Accord Worked... and China shouldn't use it as an excuse to keep its currency undervalued
Philip Bowring (Asia Sentinel) Nov 15, 2010
Some billed the G20 meeting in Seoul as Plaza II, where a "grand bargain" to reset currency rates would lead to a more balanced world just as the 1985 Plaza Accord tried to do. But that world has grown too complicated, US influence less and facing a China which knows no rules other than its own. So the G20 concluded with some bland statements papering over deep divides...
China's Trade Clout
Saransh Sehgal (Asia Sentinel) Nov 15, 2010
Hosting the Dalai Lama can be bad for your export health.
In Defense of Ben Bernanke
Alan Blinder (WSJ) Nov 15, 2010
To create the fearsome inflation rates envisioned by the more hysterical critics, the Fed would have to be incredibly incompetent, which it is not.
Currency warriors should consider India
Sebastian Mallaby (FT) Nov 15, 2010
Leaders in New Delhi see that the best way to staunch inflows of hot money may be to allow the rupee to appreciate.
Crisis with victims but no perpetrators
Francesco Guerrera (FT) Nov 15, 2010
The meltdown of the financial system wiped out companies, leaving millions of people without jobs or homes. Surely someone must be at fault.
Big currency bargain risks emerging market bubble
Karim Abdel-Motaal and Bart Turtelboom (FT) Nov 15, 2010
The asset pricing implications of the US and China's quid pro quo are clear; emerging markets are being flooded with freshly minted dollars.
China's G-20 Victory Rules Out Revaluation
Gordon G. Chang (Bloomberg) Nov 15, 2010
The Group of 20 meeting in Seoul was a debacle in many respects. But it had a big winner: China.
U.S. Earns Blame for Trade Mess
Uri Dadush and Moises Naim (Bloomberg) Nov 15, 2010
Following the slim pickings in Seoul, the U.S. may soon have to choose between making hard decisions concerning its tax and spending policies or endangering a pillar of its post-war prosperity: the open, rules-based trading system which has served it so well.
Euro Dominos Will Fall Until Currency Is Split
Matthew Lynn (Bloomberg) Nov 15, 2010
Who’s next? First Greece went bust. Now Ireland is on the brink of a bailout from the European Union and the International Monetary Fund.
Turmoil in European Bond Markets, but the Sky Is Not Falling
Jacob Funk Kirkegaard (PIIE) Nov 15, 2010
After a period of relative stability over the summer and early fall, the jitters have again arrived in the European financial landscape. Markets for peripheral sovereign debt in the eurozone are now back to the levels seen in early May, before "Europe's Grand Bargain" in which Greece was awarded a lifeline from both the European Union (EU) and the International Monetary Fund (IMF) in return for austerity measures. But it is important not to get distracted by the problems of Greece, Ireland, and Portugal. The eurozone as a whole today remains a much more stable place than in early May 2010. The sky is not falling.
The Global Unemployment Crisis: Costs, Causes, Cures
Prakash Loungani (Globalist) Nov 15, 2010
What's the most effective way to fight the "misery index" — especially stubbornly high unemployment rates?
The Economic Consequences of America’s Elections
Michael Boskin (Project Syndicate) Nov 16, 2010
America’s lurch toward a European-style social-welfare state in Obama’s first two years appears to have been delayed, if not permanently ended or reversed. That is good news for the US – and for the global economy.
How to save the euro? Lessons from the US
Jacques Melitz (VoxEU) Nov 16, 2010
Earlier this year, the fiscal situation in Greece caused turmoil across Europe. This column examines why the financial difficulties of several state governments in the US are not having similar impacts on its economy.
Are post-conflict aid projects more successful than others?
Lisa Chauvet, Paul Collier & Marguerite Duponchel (VoxEU) Nov 16, 2010
The end of war is the beginning of a new set of challenges for aid workers. This column asks whether this is the best time to start aid projects. Examining project-level data from the World Bank, it finds that post-conflict aid is more effective, though this is not true for all projects and the advantage erodes over time.
Emerging Europe: Lessons from the boom-bust cycle
Bas Bakker & Ajai Chopra (VoxEU) Nov 16, 2010
The crisis in Europe is more commonly used to refer to debt crises in southern Europe than elsewhere. This column focuses on central and eastern Europe, arguing that while the crisis there was triggered by external shocks, it is clear that domestic imbalances and policies also played a key role.
China's African safari strictly business
Kent Ewing (AT) Nov 16, 2010
Unlike earlier European colonialists in Africa, China doesn't pretend to be on a civilizing mission as it invests in the impoverished continent. But many African workers see the practices of Chinese firms as part of the same tradition of foreigners looting the riches of the "Dark Continent".
A model for scrimping - in Europe?
Anne Applebaum (WP) Nov 16, 2010
The U.S. is a great propagandist for free markets, but it hasn't practiced what it preaches.
Middle East: GCC: Time to Roll Out the Revaluation Bandwagon?
Mohamed Jaber, James Lord & Meena Bassily (MS GEF) Nov 16, 2010
We take a look at the current exchange rate policies of GCC countries, in light of the heightened focus on surplus countries.
Eurozone lifeboat strains under pressure of bail-outs
John Plender (FT) Nov 16, 2010
The European Central Bank has taken a disproportionate share of the firefighting burden while politicians have struggled to reach agreement on propping up monetary union.
Europe’s fiscal laggards must pay a premium
Anders Borg (FT) Nov 16, 2010
A credible crisis resolution mechanism for the European Union would minimise moral hazard by making risky fiscal behaviour more costly.
How to chart a course out of the Sino-American storm
Martin Wolf (FT) Nov 16, 2010
The big economic point that has emerged from the G20 summit in Seoul is that the world needs to manage a post-crisis adjustment, in which capital flows turn around.
The price of German leadership
Charles Grant (FT) Nov 16, 2010
Divisions among Europe’s leaders, and their inability to stabilise the euro, have damaged the EU’s reputation. European leadership at a time of peril for the euro.
Goldilocks and the China Bears
WSJ Nov 16, 2010
Rising inflation exposes the Achilles' heel of the Chinese growth model.
The Real Euro Danger
WSJ Nov 16, 2010
Forcing Ireland to accept a bailout won't save the currency.
Three Reasons Global Talks Hit Dead End
Mohamed A. El-Erian (Bloomberg) Nov 15, 2010
“Obama’s Economic View Is Rejected on World Stage,” the New York Times declared on its front page. The Financial Times’ headline was “G-20 Shuns U.S. on Trade and Currencies,” while the Wall Street Journal proclaimed “U.S. Gets Rebuffed at Divided Summit.” In short, the media’s reporting on the Group of 20 summit in Seoul was brutal.
Outlook for the Global Economy after the G-20 Meeting in Seoul
C. Fred Bergsten (PIIE) Nov 16, 2010
The outlook for the global economy is surprisingly strong despite the failure of the G-20 at Seoul to do much to support it. World growth should average 4.5 percent this year and in 2011.
G-20 Falls Short of Agreement on Trade Balances, Makes New Plug for Doha
Bridges Weekly Trade News Digest Volume 14, Number 40 Nov 17, 2010
The Group of 20 major economies last week failed to reach an agreement on how to ease trade imbalances and soothe tensions over exchange rates, diminishing hopes for a coordinated policy response for rebalancing the global economy.
WIPO Copyright Body to Negotiate on Limitations and Exceptions
Bridges Weekly Trade News Digest Volume 14, Number 40 Nov 17, 2010
The World Intellectual Property Organization's copyright committee agreed late last Friday on a work programme for 2011-2012 focusing on limitations and exceptions to the protection of copyrighted material. The eleventh-hour agreement, reached at midnight after a week of talks, should pave the way for "real negotiations" and not just mere discussions.
Government Internet Censorship Violates WTO Rules, Says Google
Bridges Weekly Trade News Digest Volume 14, Number 40 Nov 17, 2010
China and other governments that engage in internet censorship that restricts access to information from other countries are violating their WTO commitments, Google has argued in a new position paper.
Pay up, or wiggle out
Chan Akya (AT) Nov 17, 2010
The debt loads carried by democracies can be hard to confront when externalities are altered, so a little discipline is no bad thing. When it comes to seeing their savings disappear or banks being rescued, aging voters in particular know the decision they will back.
After the G-20: Time for Realism in Global Financial Regulation
Nicolas Véron (PIIE) Nov 17, 2010
While the noisy arguments about macroeconomic imbalances and exchange rates dominated the publicity at the recent G-20 Summit, the participants in Seoul also marked an important milestone for financial regulation. They symbolically closed a cycle of intense global discussions that started two years earlier with the first G-20 Summit in Washington. The most prominent item was the endorsement of the Basel III Accord on bank capital and liquidity, which was completed in September. That agreement significantly tightens earlier requirements and provides a convenient opportunity for world leaders to declare "mission accomplished" and move on to other topics.
Euro's Recipe for Redemption Needs Two Ingredients
Andre Sapir (Bloomberg) Nov 17, 2010
A decade after the euro’s birth, Greece revealed glaring defects in the design of the common currency. Existing rules failed to prevent the buildup of sovereign debt, and there were none to manage or resolve crises.
Sovereign defaults, banks and financial institutions
Nicola Gennaioli, Alberto Martin & Stefano Rossi (VoxEU) Nov 17, 2010
Recent sovereign defaults in developing countries have put severe strain on the defaulting country’s banking system. This column argues that these events teach us how the development of private financial markets plays a critical role in reducing the risk of government default and thus in supporting public borrowing.
Debt, deleveraging, and the liquidity trap: A new model
Paul Krugman (VoxEU) Nov 18, 2010
Debt is the crux of advanced economies’ current policy debates. Some argue for fiscal expansion to avoid recession and deflation. Others claim that you can’t solve a debt-created problem with more debt. This column explains the core logic of a new model by Eggertsson and Krugman in which debt shocks and policy reactions can be examined. Relying on heterogeneous agents, the model naturally produces the paradox of thrift but also finds new supply-side paradoxes, those of toil and flexibility. The model suggests that most economists have been misthinking the issues and that actual policy in the US and EU is misguided.
Shorting Fiscal Consolidation
Robert J. Shiller (Project Syndicate) Nov 18, 2010
Real long-term interest rates have fallen to historic lows in much of the world. This is an economic fact of fundamental significance, for the real long-term interest rate is a direct measure of the cost of business financing – and because current levels fly in the face of all the talk about the need to slash government deficits.
The G20: Captive in the prison of mercantilism
Ernesto Zedillo (VoxEU) Nov 18, 2010
How should we judge the 2010 Seoul G20 meeting? A failure, according to this column. It argues that the G20’s failure to take action on coordinating economic policies risks global stability and that there is little in the G20 Seoul Action Plan reassuring the world that the tensions preceding the summit won’t re-emerge and worsen anytime soon.
Immigration, offshoring and US jobs: New evidence
Gianmarco I.P. Ottaviano, Giovanni Peri & Greg C Wright (VoxEU) Nov 18, 2010
Manufacturing production and employment in the US has been in decline over recent decades, often with the finger pointed at immigration and globalisation. This column presents evidence from the US between 2000 and 2007 to show that immigrant and native workers are more likely to compete against offshoring than against each other, but that offshoring brings higher productivity that can help offset these effects.
Foxconn’s milestone for a rising China price
David Pilling (FT) Nov 18, 2010
The scene may be set for the rebalancing that everyone has been screaming for – only via higher wages rather than a higher exchange rate.
Fed keeps its focus amid the criticism
Karen Dynan and Donald Kohn (FT) Nov 18, 2010
A prolonged period of weak US growth would constrain markets for others’ exports and lead to protectionist pressures.
Don’t blame the euro for Ireland’s mess
Philippe Legrain (FT) Nov 18, 2010
Far from precipitating the crisis, the single currency has given Ireland breathing space. Sadly its government has not make good use of it.
The Austrian school
Economist Nov 18, 2010
Why is the Austrian explanation for the crisis so little discussed?
Data birth
Economist Nov 18, 2010
Fifty years after the dawn of empirical financial economics, is anyone the wiser?
An assertive China stirs an anxious conversation
Philip Stephens (FT) Nov 18, 2010
The harsher China’s tone, the more eager its neighbours are to get closer to the US. There must be a moral there for policymakers in Beijing.
Inflation scare will hurt China’s economy
Minxin Pei (FT) Nov 18, 2010
Fresh attempts to control prices will derail growth.
Understanding the Puzzling Nature of Poverty
Akash Kapur (NYT) Nov 18, 2010
A scholarly study reveals that poverty is a constantly churning pool of deprivation, with those who escape being replenished by a new population that has fallen from relative prosperity.
China and India Exposed
Pranad Bardhan (Project Syndicate) Nov 19, 2010
Chinese Premier Wen Jiabao’s forthcoming trip to India, following hard on the heels of President Barack Obama’s visit there, will provide another opportunity for the media to gush about the growing global economic clout of China and India. We can be sure that the obtrusive underbellies of both economies will be kept hidden from view.
Global: Seventies Revival
Spyros Andreopoulos (MS GEF) Nov 19, 2010
We see several parallels to the 1970s in today’s situation.
Europe Needs Reforms to 'Break Shackles of Low Growth'
IMF Survey Nov 19, 2010
Europe needs collaborative and far-reaching reforms to restore strong and balanced growth across the region and safeguard the European social model, IMF chief Dominique Strauss-Kahn tells bankers and officials in Frankfurt.
Eastern Europe’s Tito Option
Andrew Wilson (Project Syndicate) Nov 19, 2010
Eastern Europe's leaders are modern-day Titos, unable or unwilling to join either Europe or Russia. The EU should recognize the reality of each individual game of balance, and work within the limits of what is possible in order to promote its interests.
External debt relief but increasing domestic debt
Andrea F Presbitero (VoxEU) Nov 19, 2010
The global crisis and expansionary government reactions that followed revived the attention of policymakers and academics on the adverse effects of large public debt. This column examines the case of Heavily Indebted Poor Countries. It argues that a focus on the consequences of external debt is outdated as the share of domestic debt in total public debt in increased from 11% to 37% from 1991 to 2008. A new framework to deal with total public debt is now required to take into account domestic interest payments.
After the G20: Time for realism in global financial regulation
Nicolas Véron (VoxEU) Nov 19, 2010
The endorsement of the Basel III accord on financial regulation at the recent G20 meetings in Seoul represents one of the event’s main outcomes. This column argues that while this initiative should be welcomed, global finance cannot realistically be submitted to a single rulebook and significant challenges remain.
Trading ain’t easy: How complex is it to trade goods?
Carlo Altomonte & Gábor Békés (VoxEU) Nov 19, 2010
The export performance of domestic firms is at the centre of many policy debates on growth and development. This column argues that in a world with global value chains and vertical specialisation, competitiveness also derives from a proper integration into international networks of production. Policymakers should care about both the import and the export capacity of their firms, and the complexity of these activities.
Why policies may need to be place-based in order to be people-centred
Jose Enrique Garcilazo, Joaquim Oliveira Martins & William Tompson (VoxEU) Nov 20, 2010
The World Bank's Indermit Gill recently argued that economic growth will naturally be spatially unbalanced and that to try to spread it out – too thinly or too soon – would discourage it. This column responds by pointing out that economic concentration is neither necessary nor sufficient for growth.
Adjustment in the Eurozone: Can reforms help?
Gilles Mourre & Alessandro Turrini (VoxEU) Nov 20, 2010
The latest developments in Ireland are putting further strain on the Eurozone, with some calling in to question the future of the single currency. The column looks at what the countries on the periphery of the Eurozone, Greece, Ireland, Italy, Portugal, and Spain can do to restore competitiveness.
How to stop Ireland’s financial contagion
Wolfgang Münchau (FT) Nov 21, 2010
An Irish bank default would affect the German and British banking systems directly, and would spread through the capital markets like wildfire.
Time to end the myth of currency wars
Jim O’Neill (FT) Nov 21, 2010
There is no ‘war’, just normal markets responding to events. Further Chinese growth will reverse the global imbalances at the heart of the currency debate.
Major public debt reductions: Lessons from the past, lessons for the future
Christiane Nickel, Philipp Rother & Lilli Zimmermann (VoxEU) Nov 21, 2010
Record levels of government debt in the EU have forced some countries to call for help. This column presents data from the EU between 1985 and 2009 covering episodes when governments have tried to rapidly lower public debt. It shows that appropriate policies, especially on the expenditure side, can help make this reduction sustainable.
Who Cares About Haiti?
Mary Anastasia O'Grady (WSJ) Nov 21, 2010
Extortionists drain the country's economic lifeblood while the U.N. stands by idly.
Finance: The ultimate carry trade
Economist Nov 22, 2010
How to turn a country into a hedge fund.
The Closing of the European Mind
Dominique Moisi (Project Syndicate) Nov 22, 2010
In Asia today, the European example of a continent where the prospect of war between traditional enemies – or contemporary rivals – has simply disappeared is more attractive than ever. Europeans, unfortunately, lack any reciprocal curiosity about Asia.
How Germany could come to kill the euro
Gideon Rachman (FT) Nov 22, 2010
If the Germans become convinced that their eurozone partners were simply impossible to deal with – and that therefore the whole single currency experiment could not work – they might decide to quit.
It's not the capital ratios, stupid
Patrick Jenkins (FT) Nov 22, 2010
There is an understandable keenness among Irish regulators and politicians to stabilise the Irish banks, but they cannot confuse themselves with Switzerland.
Strong euro will make it hard to stabilise regional debt
Mansoor Mohiuddin (FT) Nov 22, 2010
Trigger for the crisis in both Greece and Ireland is insufficient growth to service their debts.
The Hot Money Trap
Dan Steinbock (Project Syndicate) Nov 23, 2010
America's unilateral economic policies may have the same impact as its unilateral security policies under George W. Bush. In a world where the G-7 no longer drives global growth, the Fed's decision to print money is like playing with fire.
The Dangerous Myth of the Hero Entrepreneur
Esther Dyson (Project Syndicate) Nov 23, 2010
All over the world, children study math and science in the hope of becoming Bill Gates. But the hero-entrepreneur myth can be dangerous, because what healthy economies really need is not more entrepreneurs, but rather enough people who are willing to work for them.
Bear trap set for Kyrgyzstan
Cholpon Orozobekova (AT) Nov 23, 2010
Russia, having tried in vain for 17 years to join the World Trade Organization, is now forging its own trade bloc with former Soviet neighbors. WTO member Kyrgyzstan appears set to join the Kremlin concoction, with consequences that could prove disastrous for the small country's economy.
Fixing the flaws in the Eurozone
Stanley W Black (VoxEU) Nov 23, 2010
With news that Ireland has applied for a bailout worth tens of billions or euros, the dark predictions for the future of the Eurozone grow ever bleaker. This column argues that the problems in the Eurozone’s periphery expose a flaw in its design. It proposes that the ECB set different interest rates for different member countries to help make matters better before they get any worse.
The Irrepressible 1930’s
Robert Skidelsky (Project Syndicate) Nov 23, 2010
The just concluded G-20 meeting in Seoul broke up without agreement on either currencies or trade. Despite global leaders’ vows to the contrary, it seems that the dreadful protectionist precedent of the 1930’s is about to be revived.
The American Dream Is Alive and Well...In China
Stephan Richter (Globalist) Nov 23, 2010
Could it be that the Chinese now believe more in the American Dream than do Americans themselves?
The Politics of Monetary Policy
William H. Hutt (Mises Daily) Nov 23, 2010
Suppose an economist is convinced that the most appropriate international monetary system in a civilized age is one in which the measuring rod of money in every country has a common, defined value; and, further, that the ideal money unit in such a system will have a value consistent with stability in a price index weighted, as far as practicable, so as to give equal proportionate importance to all components of real income (the flow of productive services). He could at the same time hold that, governments and politics being as we know them to be in the present century, the old-fashioned gold standard would be a more expedient system solely because, under the kind of convertibility obligation that standard requires, politicians in office could be subjected to a simple understandable monetary discipline.
Ireland refutes the German perspective
Martin Wolf (FT) Nov 23, 2010
Berlin’s emphasis on deflationary adjustment in weaker countries risks turning the eurozone as a whole into a gigantic Germany, dependent on importing.
Banks fail to convince crying foul over Basel reforms
David Miles (FT) Nov 23, 2010
The Modigliani Miller logic is powerful. It shows that if a company has a lot of assets, but is funded with only a little bit of equity, then small shifts in asset values create big shifts in equity value.
A Dangerous Bubble Is Emerging In China
Shaun Rein (Forbes) Nov 23, 2010
The country is getting its own version of the dot-com boom and bust.
Under Threat of Higher Food Prices, WTO Members Debate Export Restrictions, Subsidies
Bridges Weekly Trade News Digest, Volume 14, Number 41 Nov 24, 2010
With prices for many agricultural commodities nearing the records set in 2008, the UN Food and Agriculture Organization is warning farmers worldwide that they may need to produce more. Although recent bumper crops have bolstered stocks, prices continue to climb as some exporters institute bans or controls on what they sell abroad. Some of these trends sparked intense debate at the WTO’s Agriculture Committee last week.
European Commission Publishes Long-awaited Farm Policy Proposal
Bridges Weekly Trade News Digest, Volume 14, Number 41 Nov 24, 2010
The European Commission has published a long-awaited proposal outlining how the bloc’s substantial farm subsidy scheme could be maintained in the post-2013 seven year budgetary cycle, but refocused on more clearly-defined policy outcomes such as environmental goals. The communication is intended to initiate a discussion process amongst EU institutions about the future of Europe’s farm policy in the years ahead.
Greece, Ireland, and Then?
NYT Nov 24, 2010
The bailout recipe for Greece and now Ireland has a fundamental problem.
Can the Chinese Become Big Spenders?
David Leonhardt (NYT Magazine) Nov 24, 2010
Building a consumer society in China won't be easy, but the health of the world economy depends on it.
The Crooked Path of Financial Reform
Jean Pisani-Ferry (Project Syndicate) Nov 24, 2010
Two years ago, governments saved the necks of the world's financial markets, while today those same markets intimidate governments, or at least some of them. But, while no one is proclaiming, "mission accomplished," it is not true that nothing has been done to reform finance.
Dodd-Frank: A critical assessment
Viral Acharya, Thomas F. Cooley, Matthew Richardson, Richard Sylla & Ingo Walter (VoxEU) Nov 24, 2010
Of the recent reforms to make financial systems more robust, the US Dodd-Frank Wall Street Reform and Consumer Protection Act stands out. Despite being broadly in favour of its proposals, this column identifies flaws in its design that fail to deal with the main causes of the crisis and that will lead to further implicit government guarantees.
Chinese networks and tariff evasion
Lorenzo Rotunno & Pierre-Louis Vézina (VoxEU) Nov 24, 2010
Smuggling is a pervasive phenomenon that often results in violence, distorted competition, and loss of tax revenue. This column argues that international migrant networks facilitate smuggling across borders, showing that the presence of Chinese-born migrants abroad increases tariff evasion in both China and host countries.
Ireland’s plan will drive it out of the crisis
Brian Lenihan (FT) Nov 24, 2010
We appreciate the solidarity that Europe has shown us during this financial crisis but the task of rebuilding the economy is ours.
The ECB must do something radical to avert crisis
Richard Milne (FT) Nov 24, 2010
If fiscal union is out, then some real Fed-style quantitative easing – buying huge amounts of Spanish and Italian debt should the risk of contagion intensify – may be in order
The Irish Domino
Geoffrey Wood (WSJ) Nov 24, 2010
If Dublin's problem was too much debt, how can it help to take on more?
The sweet spot
Matt Miller (The Deal) Nov 24, 2010
After years of turmoil and trouble, initial public offerings in some emerging nations have put the West into the shade. Is this a bubble or a sign of growth prospects to come?
Can China Afford to Confront the World? – Part I
Jonathan Fenby (YaleGlobal) Nov 25, 2010
China’s emersion into free-market capitalism, starting in 1978 under Deng Xiaoping, was gradual and cautious. Now the world’s second largest economy, China often clashes with its largest trade partner, the United States, most recently over currency revaluation measures at the G20 meeting in Seoul. This two-part YaleGlobal series analyzes China’s new assertiveness, both regionally and with the US, and the directions this can take. The Chinese bristle at US criticisms and contend that the US struggle with high unemployment rates, bubbles and wage inequality can’t be pinned on China.
Spreading from Ireland to Iberia
Economist Nov 25, 2010
To stop the euro’s meltdown, Zapatero must revive Spanish reform.
A contagious Irish disease?
Economist Nov 25, 2010
The proposed Irish bail-out has not calmed the financial markets. And now their attention is moving on to new victims in the Iberian peninsula.
Stumbling towards infinity
Economist Nov 25, 2010
How the IMF was stumped by Russia.
Plugging the hole
Economist Nov 25, 2010
It is easy to put money into Irish banks, but tempting to take it out.
Foreign Aid for Scoundrels
William Easterly (NYRB) Nov 25, 2010
The international aid system has a dirty secret. Despite much rhetoric to the contrary, the nations and organizations that donate and distribute aid do not care much about democracy and they still actively support dictators. The conventional narrative is that donors supported dictators only during the cold war and ever since have promoted democracy. This is wrong.
The euro debt crisis - similarities and differences
Jan Schildbach (DB Research) Nov 25, 2010
The reasons for the current problems of some euro-area sovereigns on the capital markets differ from country to country. In the case of Greece, it was mainly a persistently unsound fiscal policy that led to a loss of confidence among investors, while in Ireland this was primarily due to a credit bubble which had inflated the size of the financial sector...
Eating the Irish
Paul Krugman (NYT) Nov 25, 2010
That "bailout" for Ireland mostly seems to be about the government imposing even more pain on its people, in exchange for a credit line. It's not a workable strategy.
Defying the Garden of Eden Syndrome
Kandeh K. Yumkella (Project Syndicate) Nov 25, 2010
Many African countries – most prominently Ghana, Sierra Leone, Chad, Guinea, Liberia, Mauritania, and Sudan – are wrestling with the impact of the recent discovery of huge deposits of mineral wealth on their economies and politics. They can look to many successful development models implemented by resource-rich countries around the world, including one in their own backyard.
The Retreat of Macroeconomic Policy
J. Bradford DeLong (Project Syndicate) Nov 25, 2010
Until recently, no government could or would tolerate any prolonged period in which the unemployment rate was kissing 10% and inflation was quiescent without doing something major about it. So why is that precisely what is happening today in the US?
Fixing trade finance for low-income nations: The G20 mandate
Marc Auboin (VoxEU) Nov 25, 2010
While liquidity has returned to the main routes of international trade, at the periphery a group of developing countries, particular low income one, are still suffering from lack of affordable trade financing. This column outlines how the recent G20 meeting in Seoul has provided a mandate to multilateral institutions to address this problem.
Assets matter just as much as debt
Martin Wolf (FT) Nov 25, 2010
Borrowing is no sin, provided we use the funds to ensure that we bequeath a better infrastructure to the future.
Goodbye moderation, hello to the ad hoc age
Gillian Tett (FT) Nov 25, 2010
US economist says crisis has pushed policymaking too far in the direction of discretion and it is time for the pendulum to swing back towards
Global: EMflation
Manoj Pradhan (MS GEF) Nov 26, 2010
We surveyed our EM teams on the severity of the inflation problem and the source of inflation concerns.
Dubai, a new locus of entrepreneurial energy
Christopher M. Schroeder (WP) Nov 26, 2010
The sold-out gathering had the earmarks of a typical Silicon Valley event: more than 2,400 hungry entrepreneurs and investors, most young adults, tethered to their mobile devices - sharing, debating and connecting. There was the requisite hip music. Speakers who had "been there" were mixing with kids new to the game, dashing out ideas on white boards and rallying each other to new ventures. That's where "typical" ended.
Quantitative Easing and the Renminbi
Martin Feldstein (Project Syndicate) Nov 26, 2010
The US Federal Reserve’s policy of “quantitative easing” is reducing the value of the dollar relative to other currencies that have floating exchange rates. But what does the new Fed policy mean for one of the most important exchange rates of all – that of the renminbi relative to the dollar and to other currencies?
Pricing Corporate Governance
Lucian Bebchuk (Project Syndicate) Nov 26, 2010
Once upon a time, in the 1990's, investors could out-perform the market by trading solely on firms' anti-takeover provisions. Nowadays, investors have learned to price these provisions - rewarding firms whose managers are exposed to the market for corporate control - but there might be other features of governance on which they could trade profitably.
European debt restructuring mechanism as a tool for crisis prevention
Beatrice Weder di Mauro & Jeromin Zettelmeyer (VoxEU) Nov 26, 2010
The bailout of the Irish government has turned up the heat on Europe’s leaders. This column argues that it is time for a serious debate over one possible solution: A European Sovereign Debt Restructuring Mechanism.
Fighting corruption through performance-based aid
Axel Dreher, Peter Nunnenkamp & Hannes Öhler (VoxEU) Nov 26, 2010
Performance-based aid provides a promising alternative to the failed traditional approach but hardly any empirical evidence exists on its effectiveness in inducing reforms. This column provides new evidence from the Millennium Challenge Corporation’s impact on corruption. It suggests performance-based aid can lead to reforms but only if uncertainty about the timeliness and amount of aid rewards is avoided.
They Are Not Like Ireland. Really.
Landon Johnson Jr. (NYT) Nov 27, 2010
Europe's leaders and its top thinkers have argued that other countries would not follow in Greece and Ireland's path. Not always convincingly.
China's price problems are a monetary problem
Yiping Huang (VoxEU) Nov 27, 2010
China recently issued a set of new policy documents with the aim of stabilising prices in the country. This column asks whether these proposals are just dusted down manuscripts from the 1980s, disregarding thirty years of market-oriented reform. The term “monetary policy” is not even mentioned once.
The cost of democratic elections in financial markets
Emmanuel Frot & Javier Santiso (VoxEU) Nov 27, 2010
Do emerging-market democracies risk destabilising financial markets every time their voters go to the polls? This column presents new evidence on the effects of elections on portfolio flows. It finds that elections diminish equity flows when they bring political uncertainty.
Time for 'Demographic Stress Tests'
Nicholas Eberstadt and Hans Groth (WSJ) Nov 27, 2010
By 2030, Germany's ratio of public debt to GDP could be twice what Greece's is today. Japan, the United States and others face similar challenges.
Managing credit booms and busts
Olivier Jeanne & Anton Korinek (VoxEU) Nov 28, 2010
The damage caused by the global crisis and fiscal crises in several developed countries has rejuvenated support for regulation and has reignited research interest. This column presents one recent proposal: A Pigouvian tax to help bring the amount of debt and capital held by the financial sector closer to the socially optimal level.
Europe is edging towards the unthinkable
Wolfgang Münchau (FT) Nov 28, 2010
If we had the luxury of not starting from here, as the Irish joke goes, a much less invasive solution could have been found several years ago.
Obama has to tell Beijing some hard truths
Fred Bergsten (FT) Nov 28, 2010
The G20 stalemate has intensified the feud over currencies and trade rather than helped to resolve it. Mr Obama has to notify China privately that his administration will support new legislation and take China to the WTO unless it lets the renminbi rise.
The Spanish Prisoner
Paul Krugman (NYT) Nov 28, 2010
Trapped by the euro, Spain has no good options for economic recovery.
Macroprudential supervision: Can central bank communication be an effective policy tool?
Benjamin Born, Michael Ehrmann & Marcel Fratzscher (VoxEU) Nov 29, 2010
In response to the financial crisis, many central banks are receiving significant new responsibilities for macroprudential supervision. Exploiting the experience of central banks with Financial Stability Reports and other financial stability-related statements, this column argues that such central bank communication can be highly effective, in particular during periods of financial stress.
What Good Is Wall Street?
John Cassidy (New Yorker) Nov 29, 2010
Much of what investment bankers do is socially worthless.
Obama's Trade Contortions
Mary Anastasia O'Grady (WSJ) Nov 29, 2010
Why, besides the Democratic Party's loyalties to the AFL-CIO, is the president not pushing the U.S. free trade agreement with Colombia?
The Euro Has No Clothes
Roger Cohen (NYT) Nov 29, 2010
Euro-zone "sinners" won't endure joblessness for a tick from the German headmistress.
The Hangover, Part II
WSJ Nov 29, 2010
New derivatives rules could punish firms that pose no systemic risk.
Europe's Bust Debunks Wriston Once Again
Brendan Moynihan (Bloomberg) Nov 29, 2010
The late Walter Wriston, a former chief executive officer of what is now Citigroup Inc., was noted for saying that countries don’t go bankrupt. Nations can default, of course, and many did so in the 1980s. Today’s European leaders and bankers could learn from those experiences.
China’s Monetary Sterilization
Fan Gang (Project Syndicate) Nov 29, 2010
Not long after the US Federal Reserve announced its second round of “quantitative easing, China’s central bank announced another two large increases in the required reserve ratio for bank deposits. How much more of this monetary tightening can China's commercial banks take?
In Ireland's debt crisis, an ominous reckoning for Europe
Robert Samuelson (WP) Nov 29, 2010
Its challenge is no longer just economic; values and ideals are under assault.
Ireland rescue is not a game changer
Mohamed El-Erian (FT) Nov 29, 2010
The package delays but doesn’t solve the EU crisis.
Spain braces itself for a crisis made in Germany
José-Ignacio Torreblanca (FT) Nov 29, 2010
The recklessness of Angela Merkel’s proposal for permanent crisis resolution mechanism points to deep-seated changes in how Berlin views southern Europe.
Bail-out document runs dry on liquidity
Patrick Jenkins (FT) Nov 29, 2010
Governments and regulators have a nasty habit of thinking short-term even when it comes to something as serious as the financial crisis.
Austerity alone will not solve deficit crises
John Quiggin (FT) Nov 29, 2010
The solution to the current debt crisis is not a simple case of balancing the books.
Rebirth of gold standard
Martin Hutchinson (AT) Nov 30, 2010
The revival of an official gold standard, despite positive comments from the likes of World Bank president Robert Zoellick, is unlikely in the next decade or so. But the actions of individuals and businesses recognizing the metal's benefits may soon lead the world's governments in that direction.
Economists' Grail: A Post-Crash Model
Mark Whitehouse (WSJ) Nov 30, 2010
Economists are grappling with a riddle that they hope will catalyze a revolution in economics: How can we understand a world that has proven far more complex than the most advanced economic models assumed?
Europe's debt yields show investors are unconvinced
John Plender (FT) Nov 30, 2010
It is beginning to look as though defaults, whether in the form of stretching maturities, restructuring or other means, will stage a comeback in advanced countries.
India’s reform and growth have lifted all boats
Jagdish Bhagwati (FT) Nov 30, 2010
Politicians should be braver and augment reforms, not reverse them as the misguided progressives urge.
Why the Irish crisis is such a huge test for the eurozone
Martin Wolf (FT) Nov 30, 2010
The fault lines in the currency union stand revealed. The promise was that the eurozone would deliver its members from currency crises. But, as I, and others, warned, be careful what you wish for: credit crises would replace currency crises – and these are likely to be even worse.
The financialisation of commodities
Ke Tang & Wei Xiong (VoxEU) Nov 30, 2010
In recent years, hundreds of billions of dollars of investment has flowed into commodities markets. This column describes why and how commodities markets have grown so rapidly and discusses some policy implications.
Avanti Dilettanti!
Joschka Fischer (Project Syndicate) Nov 30, 2010
The failure of the euro – and thus of the EU and its Common Market – would be the biggest pan-European disaster since 1945. That this outtcome is possible – despite protestations to the contrary by all involved – reflects the willful ignorance and lack of imagination of Europe’s heads of state and government.
India or China?
Jagdish Bhagwati (Project Syndicate) Nov 30, 2010
When US President Barack Obama visited India in November and complimented its leaders on the growing success and prowess of their economy, a tacit question returned to center stage: Will China grow faster than India indefinitely, or will India shortly overtake it?
The G-20’s New Thinking For the Global Economy
Jeffrey D. Sachs (Project Syndicate) Nov 30, 2010
The Seoul G-20 summit was notable for the increasing political weight of the emerging economies. In two crucial areas, macroeconomics and global economic development, their views prevailed.
Investment Banking's New Frontier
Asia Sentinel Nov 30, 2010
And not a particularly safe one.
Europe's Single Debt Zone
WSJ Nov 30, 2010
The permanent crisis-management fund will only make permanent crisis more likely.