International news pertinent to international economics is added here, together with several major newspapers and news magazines. The articles, in general, are held for a month on this main page. You can also access the older archived news articles, with the caveat that there is no guarantee that the links remain live. Current news on international financial markets can be found here. Note: Links to the New York Times require a free registration.
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Blanchard’s admonitions were ill-advised
Andrew Tyrie (FT) Jun 1, 2014
The International Monetary Fund’s exercise of good judgment is vital but now and again it can be faulty.
The dark side of our black gold addiction
Guy Chazan (FT) Jun 1, 2014
In ‘The Secret World of Oil’, Ken Silverstein holds his nose and shines a light into a murky business on which western prosperity depends.
On Inequality Denial
Paul Krugman (NYT) Jun 1, 2014
It persists because there are groups with a strong interest in creating a fog of doubt.
Bitcoin's Futile Quest to Be a Currency
Lawrence Parks (WSJ) Jun 1, 2014
The IRS treats bitcoins as property, and any transaction using them triggers a taxable event.
This is not the 1920s
Robert J. Samuelson (WP) Jun 1, 2014
Income inequality is not as great as it once was.
Brazil's Troubles: World Cup Runneth Over
Juan de Onis (World Affairs) Jun 1, 2014
When Brazil landed this summer’s World Cup seven years ago, its fortunes were on the up and its leaders intended to showcase their country’s growing importance. Things have not gone as planned.
Piketty’s ‘Second Law of Capitalism’ vs. standard macro theory
Per Krusell & Tony Smith (VoxEU) Jun 1, 2014
Thomas Piketty’s new book has been widely praised for its empirical contribution, but his prediction of rising inequality rests on economic theory. This column argues that Piketty’s pessimistic forecast is based on an extreme – and unrealistic – assumption about households’ saving behaviour. According to standard theory, the wealth–income ratio would increase only modestly as growth falls, so declining growth would not be a powerful force for generating high inequality.
Reconciling Hayek's and Keynes' views of recessions
Paul Beaudry, Dana Galizia & Franck Portier (VoxEU) Jun 1, 2014
Hayek viewed recessions as working out excessive investments; Keynes viewed them as demand shortages. This column argues that they may not be as mutually exclusive as many think. Recessions may reflect periods of liquidation but this may be associated with inefficient adjustment involving unemployment and precautionary savings. Stimulative policy may be desirable even if it delays the full recovery.
Welcome to the Revolution
Edward L. Morse (FA) Jun 1, 2014
Why shale is the next shale.
Alternatives to Currency Manipulation: What Switzerland, Singapore, and Hong Kong Can Do
Joseph E. Gagnon (PIIE) Jun 1, 2014
Economists have long decried the efforts of large, advanced economies to manipulate their currencies to boost net exports at their trading partners' expense. But the International Monetary Fund appears to have ignored the beggar-thy-neighbor exchange rate policies of countries with developed, highly open economies. This Policy Brief examines Switzerland, Singapore, and Hong Kong, which have actively kept the value of their currencies low since the 2008–09 global recession. In each case, greater fiscal and especially domestic monetary ease would have achieved similar macroeconomic outcomes with less currency intervention and declining current account surpluses. If such countries had adopted these strategies to increase domestic demand, the global economy would have rebounded faster.
Tremors forecast as EU and US drift apart
Axel Weber (FT) Jun 2, 2014
To my mind, investors should prepare for more volatility this year. The degree of easing has been exceptional.
Foreign banks fall out of love with US
Tom Braithwaite (FT) Jun 2, 2014
Ambition has been reined in since the financial crisis and overseas groups no longer boast of trading floors the size of two football fields.
China faces crucial choice over growth
Manoj Pradhan (FT) Jun 2, 2014
If China chooses consumption-led growth, it could also be choosing much lower growth than the 6% or so most investors have in mind.
Australia: End of the boom
Jamie Smyth (FT) Jun 2, 2014
A cooling Chinese economy has hurt the mining sector, threatening a quarter century of uninterrupted growth and prompting protests over the prime minister’s tough new budget.
The Little Miracle Spurring Inequality
John Steele Gordon (WSJ) Jun 2, 2014
Extreme leaps in innovation, like the invention of the microprocessor, bring with them staggering fortunes.
What Is China's Biggest Weakness?
William Pesek (Bloomberg View) Jun 2, 2014
The very thing from which China's Communist Party has derived its strength and legitimacy in the 25 years since Tiananmen -- a booming economy -- is fast becoming its biggest weakness.
Adam Smith vs. Keynes and Minsky
Mohamed A. El-Erian (Bloomberg View) Jun 2, 2014
Mohamed A. El-Erian examines how free market purists and devotees of Adam Smith must contend with the economic realities defined by Keynes and Minsky.
Fiscal Discipline and Educational Quality
Mehmet Simsek (Project Syndicate) Jun 2, 2014
In a post-industrial age in which manufacturing is becoming ever more complex and competition has become global, countries increasingly need a highly skilled and educated workforce. The first step is to create a sound macroeconomic basis for high-quality, accessible schools.
Exchange rates and trade adjustment: Fat tails matter
Filippo di Mauro & Francesco Pappadà (VoxEU) Jun 2, 2014
Trade imbalances in the Eurozone require relative price adjustments. This column argues that the traditional ‘elasticity’ approach is lacking when thinking about the adjustment magnitude. Exports adjust when exporting firms sell more (intensive margin) and new firms start exporting (extensive margin). The extensive-margin reaction depends upon the fatness of firm-level productivity distributions. Surplus-country distributions have fatter tails than deficit countries, suggesting that the price adjustment magnitude may be larger than traditional calculations suggest.
Bold reforms aid Mexico’s growth
Martin Wolf (FT) Jun 3, 2014
What is needed is not just a big improvement in policy but also one in governance. This is true in Mexico and India alike.
Banking crises happen in US not Canada
John Kay (FT) Jun 3, 2014
The mortgage market in Carney country is cast as enviably dull – and some might apply this to the broader financial system.
Schools must enthuse tomorrow’s coders
Kenneth Baker (FT) Jun 3, 2014
Games, gadgets and apps now make up a global business yet practical skills needed to make and invent things are barely taught in schools.
QE and the Tokyo stock market (part two)
Andrew Smithers (FT) Jun 3, 2014
Even at current levels of bank purchases of bonds, quantitative easing is having a marked impact on the liquidity of other domestic investors.
Bet on tech pays off in China
Henny Sender (FT) Jun 3, 2014
Profiting from middle class consumption increasingly means investing less in groups that make or build physical goods and more in virtual companies.
Rate rises will come despite lower yields
Richard Madigan (FT) Jun 3, 2014
The most important question now is whether the US bond market is saying something negative about a change in the macro landscape. The answer is no.
European banks: Still unstable
Christopher Thomson (FT) Jun 3, 2014
The search for yield has helped fund institutions on the eurozone periphery, but concerns over their financial health remain.
Is there room at the dragon's table?
Swagata Saha (AT) Jun 3, 2014
Indian Prime Minister Narendra Modi has chosen the BRICS summit in Brazil next month as his first official foreign visit. That suggests that beyond a desire for a strong alliance of emerging nations he is intent on exerting influence with China to get India elbow room at the top table as the Asia century unfolds.
How Bold Can the ECB Be?
Mohamed A. El-Erian (Bloomberg View) Jun 3, 2014
Don't expect high drama this week when the European Central Bank announces extraordinary measures to support the economic recovery.
A Manifesto for European Change
Tony Blair (Project Syndicate) Jun 3, 2014
Complacency about anti-EU parties' strong showing in the recent European Parliament election, on the grounds that there remains a pro-European majority, is dangerous. The balance between the EU and its member states must be re-addressed, with institutions reformed to make them more accountable and closer to those they govern.
Creating a Learning Society
Joseph E. Stiglitz (Project Syndicate) Jun 3, 2014
For more than two centuries, innovation has been a critical driver of the global economy, with most of the productivity gains stemming not from major discoveries, but from small, incremental changes. This suggests that we should focus on how societies learn, and what can be done to promote learning – including learning how to learn.
The Spanish Revival
Helga Jung (Project Syndicate) Jun 3, 2014
After fighting for its life for the last two years, Spain’s economy finally seems to have moved out of intensive care: the banking sector has been deemed “cured”; demand for Spanish bonds has soared; and Spain can once again raise capital on the market at reasonable interest rates. But more must be done to ensure a stable long-term recovery.
Repairing the transmission of monetary policy through asset-backed securitisation
Markus K Brunnermeier & Yuliy Sannikov (VoxEU) Jun 3, 2014
Eurozone monetary policy transmission is broken. A key aspect of this is the failure of credit to get to small and medium enterprises, and consumers. This column uses the ‘I theory of money’ to diagnosis the problem and propose ‘prudently designed’ asset-backed securitisation as the cure. This would transform illiquid SME and consumer loans into a liquid asset class that would broaden the transmission mechanism while providing a lasting intermediation market for this segment in the Eurozone.
Mao and Forever
Peter Martin and David Cohen (FA) Jun 3, 2014
Xi Jinping’s authoritarian reforms.
Tiananmen split the workers of the world
John Gapper (FT) Jun 4, 2014
The opening of China through economic reform and foreign investment driven a wedge into the global proletariat.
Critics should heed good IMF advice
Chris Giles (FT) Jun 4, 2014
With the general election less than a year away, the fund can play a vital role in helping the main political parties produce sensible manifestos.
Angola: Gulfs apart
Andrew England and Javier Blas (FT) Jun 4, 2014
Vast oil reserves and the prospect of more to come have created rapid growth but the wealth remains stubbornly concentrated among the elite.
Europe Likely to Get Negative Interest Rates. What Does That Even Mean?
Neil Irwin (NYT) Jun 4, 2014
Normally the bank pays you to keep your money there. When rates turn negative, you pay the bank.
The Corruption Cure: Transparency, Taxes, Trade
David Cameron (WSJ) Jun 4, 2014
G-7 leaders should address the crony capitalism eating away at economic and political systems.
The New Look of Globalization
Mohamed A. El-Erian (Bloomberg View) Jun 4, 2014
A new study offers a picture of how globalization is empowering people and companies in ways that were unthinkable not long ago.
Volatility Dies, Hedge Funds Lose
Mark Gilbert (Bloomberg View) Jun 4, 2014
The strange death of volatility may be sowing the seeds of the next financial crisis.
An Economist’s Guide to War and Peace
Steve Killelea (Project Syndicate) Jun 4, 2014
Stories of violent conflict fill today’s headlines, making its gruesome immediacy all too apparent. But, while commentators debate geostrategic considerations, deterrence, ethnic strife, and the plight of ordinary people caught in the middle, dispassionate discussion of the economic costs of violence are rare.
When Rajan Met Modi
William Pesek (Bloomberg View) Jun 4, 2014
There are signs Raghuram Rajan, India's central bank governor, is extending an economic olive branch to the country's new leader, which should cheer global markets.
Lessons for the G7
Stewart M. Patrick (CFR) Jun 4, 2014
The United States and its G7 partners will still need to work with Russia and China to cope with pressing transnational challenges.
Economic history and economic development
Peter Temin (VoxEU) Jun 4, 2014
Increasing the interaction between economic history and development could benefit both subfields. This column points how some recent insights from economic history can be relevant for development. The Black Death led to an improvement in agricultural technology, changed the status of women, and increased wages. This process helped the Industrial Revolution, but the technology boom was not profitable in low-income countries. These findings suggest an underlying problem of development could be the demographic patterns that keep wages low.
Raising investment in the Eurozone
Marco Buti & Philipp Mohl (VoxEU) Jun 4, 2014
Investment in the Eurozone is forecast to remain below trend until 2015, with a particularly large shortfall in the periphery. Low investment reduces aggregate demand, thus lowering short-term growth, and it also hampers medium-term growth through its effect on the capital stock. This column highlights three causes of low Eurozone investment – reduced public investment, financial fragmentation, and heightened uncertainty – and proposes a series of remedies.
Taking aim at deflation dragon
FT Jun 5, 2014
ECB has shown a fresh determination to protect the eurozone. Lending is unlikely to be revived until the sector is soundly capitalised.
Iran: Rogue trader
Najmeh Bozorgmehr (FT) Jun 5, 2014
Secret sanctions-evading oil deals were only the start of the corruption that thrived under Ahmadi-Nejad. Can the country clean up?
Draghi’s action has silenced the doubters
Gavyn Davies (FT) Jun 5, 2014
The interest rate is as low as it can go but other measures could be intensified if the recovery continues to disappoint.
Draghi tightens central banks’ grip
Ralph Atkins (FT) Jun 5, 2014
ECB move helps restore global investors’ confidence in its ability to back up promises with action if necessary.
ECB promises much and delivers little
George Magnus (FT) Jun 5, 2014
Negative deposit rates are the novel part of the package, but their effectiveness is questionable.
Frankfurt yet to banish deflation threat
Strephen King (FT) Jun 5, 2014
The ECB chief is relying on his reputation as the man who will “do whatever it takes” to lift market sentiment. It works so long as we believe it works.
Europe Divided Over Immigration, Work Ethics
Pallavi Aiyar (YaleGlobal) Jun 5, 2014
Aging, wealthy Europe turns on immigrants for a willingness to work for low wages.
Pittsburgh's Path to Recovery
Matthew Stepp (Globalist) Jun 5, 2014
What does it take for a major city to bounce back economically?
Piketty's Place in the Top 1 Percent
Gary Clyde Hufbauer and Cathleen Cimino (PIIE) Jun 5, 2014
As everyone knows and as Thomas Piketty has documented in his book Capital in the Twenty-First Century, income and wealth are highly skewed towards the top 1 percent. In the United States today, the top 1 percent of households command about 20 percent of personal income and control nearly 35 percent of national wealth.
US Confirms New Import Duties on Chinese Solar Products
Bridges, Volume 18, Number 20 Jun 5, 2014
The US Commerce Department announced on Tuesday that it would be imposing preliminary countervailing duties on imports of certain Chinese crystalline silicon photovoltaic products – including solar cells, modules, laminates, and/or panels. The anti-subsidy duties are significantly higher than those confirmed in a separate probe two years ago and cover an expanded scope of products, including those partly manufactured in Taiwan.
UN Group Chairs Unveil Zero Draft for Sustainable Development Goals
Bridges, Volume 18, Number 20 Jun 5, 2014
A UN group tasked with formulating a proposed set of sustainable development goals (SDGs) will for the first time consider a zero draft of a possible text at its next meeting later this month, officials confirmed earlier this week.
Obama Announces Plans to Slash Carbon Emissions from Existing Power Plants
Bridges, Volume 18, Number 20 Jun 5, 2014
The Obama Administration released plans on Monday to slash carbon dioxide emissions by an average of 30 percent from 2005 levels by 2030 on all existing American power plants, in what has been touted as one of the most far-reaching moves ever made by the US executive branch to tackle the threat of climate change.
Russia, Belarus, and Kazakhstan Announce Eurasian Economic Union
Bridges, Volume 18, Number 20 Jun 5, 2014
Russia, Belarus, and Kazakhstan inked a deal last week to formally establish an economic union between them, capping approximately two decades' worth of talks. The bloc – termed the Eurasian Economic Union – notably does not include Ukraine, and comes at a time where Moscow’s geopolitical rift with many of its Western partners shows no sign of resolution.
Lagarde: Poverty, Poor Infrastructure Risk Dampening African Growth
Bridges, Volume 18, Number 20 Jun 5, 2014
African finance ministers and central bank governors, together with the International Monetary Fund (IMF), agreed last week to ramp up their joint efforts to tackle poverty in order to sustain the strong economic performance that the continent has seen these past two decades. However, they cautioned, various policy challenges remain unresolved as the region works toward achieving sustained growth and development.
ECB's Big Bang Is Impressive, but More Is Needed
Mohamed A. El-Erian (Bloomberg View) Jun 5, 2014
The European Central Bank did today what no major central bank has done outside a major financial crisis: It pushed the rate on bank deposits to minus 0.1 percent. Impressive, but not quite enough.
Mario Draghi's Latest Flop
Bloomberg View Jun 5, 2014
The European Central Bank has failed to announce the one policy that would make a real difference to Europe's economy.
Is Malaysia Asia's Weakest Link?
William Pesek (Bloomberg View) Jun 5, 2014
From missing airplanes to jail-bound opposition leaders, Malaysia has recently made international headlines for all the wrong reasons. Will the nation's economy be next?
History Lesson on What ECB Can Do to Euro
Mark Gilbert (Bloomberg View) Jun 5, 2014
Today's ECB rate decision may turn out to be a non-event for the currency markets.
The Disenchantment of Europe
Philippe Legrain (Project Syndicate) Jun 5, 2014
The recent European Parliament elections were dominated by disillusion and despair. Though German Chancellor Angela Merkel calls the surge in support for extremists “regrettable,” her government – and EU institutions more generally – is substantially responsible for it.
Europe Is Still Standing
Daniel Gros (Project Syndicate) Jun 5, 2014
Judging from the headlines, one might get the impression that the 400 million citizens eligible to participate in the recent European Parliament voted massively against the EU. But to characterize the election result as a rejection of Europe simply is not quite accurate.
The 4% Non-Solution
Kenneth Rogoff (Project Syndicate) Jun 5, 2014
The idea of permanently raising inflation targets to 4%, first proposed by IMF chief economist Olivier Blanchard, has been endorsed by a number of other academics, including, most recently, Paul Krugman. Unfortunately, the problem of ensuring a smooth and convincing transition to a new target is perhaps insurmountable.
Capital controls in the 21st century
Barry Eichengreen & Andrew K Rose (VoxEU) Jun 5, 2014
Since the global financial crisis of 2008–2009, opposition to the use of capital controls has weakened, and some economists have advocated their use as a macroprudential policy instrument. This column shows that capital controls have rarely been used in this way in the past. Rather than moving with short-term macroeconomic variables, capital controls have tended to vary with financial, political, and institutional development. This may be because governments have other macroeconomic policy instruments at their disposal, or because suddenly imposing capital controls would send a bad signal.
How to Control the Banks
Roger E. Alcaly (NYRB) Jun 5, 2014
The most pressing task of financial reform must be to strongly limit the risks posed to the economy by large banks and other financial institutions that borrow so much. The best way to achieve this goal is to explicitly limit the extent to which they borrow to fund their operations.
John Lanchester (LRB) Jun 5, 2014
We want a market to be people buying and selling to and from each other, in a specific physical location, ideally with visible prices. But now the principal actors are not human beings, but algorithms; the real action happens inside computers at the exchanges, and the old market is now nothing more than a stage set whose main function is to be a backdrop for news stories about the stock market. More
The Coming of "Big Renewable"
Karel Beckman (Globalist) Jun 6, 2014
How renewable energy sparks growth in the economy of the future.
The Great Credit Mistake
Adair Turner (Project Syndicate) Jun 6, 2014
After the 2008 financial crisis, credit growth collapsed in most developed economies, including the eurozone. Whether that fall reflected low demand or constrained supply may seem like a technical issue, but it carries important implications for policymaking and economic performance – and the official answer is probably wrong.
Procyclicality of initial margin models
David Murphy, Michalis Vasios & Nick Vause (VoxEU) Jun 6, 2014
Initial margin models are often procyclical, raising margin requirements at times of market stress, which can exacerbate that stress. This column proposes quantitative measures of procyclicality both over the cycle and over liquidity planning horizons. If market participants disclosed these procyclicality measures of their margin models, this could help counterparties to anticipate potential increases in margin requirements, and to prepare accordingly.
Fast money: the battle against the high frequency traders
Andrew Smith (Guardian) Jun 6, 2014
A 'flash crash' can knock a trillion dollars off the stock market in minutes as elite traders fleece the little guys. So why aren't the regulators stepping in? We talk to the legendary lawyer preparing for an epic showdown.
The GOP's Antique Bank
WSJ Jun 8, 2014
The Export-Import Bank is a flagship of crony capitalism.
Rich have advantages money cannot buy
Lawrence Summers (FT) Jun 8, 2014
The differences between the rich and everyone else are not only about money but about health and opportunity.
Growing silver economy signals big winners
John Authers (FT) Jun 8, 2014
Paying for the boon of a longer life will be costly. But there are some positive opportunities and it is worth exploring them.
Transatlantic trade: Hard sell
Shawn Donnan (FT) Jun 8, 2014
They were hailed as a way to ‘fire up’ economies on both sides of the Atlantic. But today the EU-US trade talks are facing political obstacles.
Sierra Leone: From Blood Diamonds to a Market Economy
Jacob Conteh (Globalist) Jun 8, 2014
Forgiveness, freedom and accountability help to restore prosperity to a war-torn country.
Model risk: Risk measures when models may be wrong
Jon Danielsson, Kevin James, Marcela Valenzuela & Ilknur Zer (VoxEU) Jun 8, 2014
Risk forecasting is central to financial regulations, risk management, and macroprudential policy. This column raises concerns about the reliance on risk forecasting, since risk forecast models have high levels of model risk – especially when the models are needed the most, during crises. Policymakers should be wary of relying solely on such models. Formal model-risk analysis should be a part of the regulatory design process.
The Brain Regain
Mohammed bin Rashid Al Maktoum (Project Syndicate) Jun 8, 2014
The “brain drain” that has afflicted developing countries for decades is now going into reverse in some countries. But success requires more than plugging a leak; economic development requires countries to make active efforts to attract talent.
A primer on ‘global liquidity’
Eugenio Cerutti, Stijn Claessens & Lev Ratnovski (VoxEU) Jun 8, 2014
‘Global liquidity’ is often used to describe the impact of low US and EZ interest rates on the rest of the world. The concept is critical for understanding the global financial cycle and international spillovers. This column defines global liquidity as the ease of financing in cross-border markets and points to its potential drivers. To limit their exposures to global liquidity fluctuations nations can embrace better macro policy frameworks, consider capital flow management tools, and more stringently regulate and supervise banks.
Russia’s neighbours: Primary colours
Jack Farchy (FT) Jun 9, 2014
The emergence of the Eurasian Economic Union tightens links between Moscow and former Soviet republics but raises concerns about growing isolation from the west.
Corporate tax escape trick set to backfire
Luca Paolini (FT) Jun 9, 2014
Corporate profitability could suffer as the imbalance between company and household contributions becomes difficult for policy makers to defend.
How to Ride the Next Wave of Chinese Growth
Stephen Roach (WSJ) Jun 9, 2014
Negotiate a Bilateral Investment Treaty to exploit China's coming boom in services.
A world war between classes, not countries
Ismael Hossein-Zadeh (AT) Jun 9, 2014
As today's super-rich increasingly become a nation unto themselves, a de facto alliance between global elites is facilitating imperialist schemes of regime change. When choosing whether an act of aggression needs hard or soft power, interventionist powers are deciding whether countries like Iran or Ukraine can be divided across class lines, and if a pact can be built with their wealthy oligarchs.
IMF Must Contribute to Global Fiscal Policy Debate
IMF Survey Jun 9, 2014
The IMF must provide high-quality fiscal services to its members, especially through technical assistance and capacity building work, says Vitor Gaspar, the new Director of the IMF’s Fiscal Affairs Department.
Towards the Next Era of Growth—Reforms and Rebalancing
Christine Lagarde (IMF) Jun 9, 2014
I will touch upon three themes. First, a brief overview of the state of play of the global economy; second, a tour de table of some key players; and third, some thoughts on laying the foundations for the next era of growth.
China and India, Made for Each Other
William Pesek (Bloomberg View) Jun 9, 2014
The idea that China and India might join forces, to cooperate as much as they compete, is both seductive and ephemeral.
Is the Market Confident or Too Complacent?
Mohamed A. El-Erian (Bloomberg View) Jun 9, 2014
Maybe the VIX "fear index" really should be renamed the "complacency" or "hubris" index.
Financial Football: An Economic Guide to Brazil's World Cup
Jim O'Neill (Bloomberg View) Jun 9, 2014
With the World Cup upon us, Bloomberg View has asked some special guests from competing nations to write about their teams, their chances of success in Brazil,
Europe's Bond Yields Aren't Making Sense
Mark Gilbert (Bloomberg View) Jun 9, 2014
Record low European bond yields should trigger a questioning tickle of the hairs on the back of your neck.
Europe in a Multipolar World
Volker Perthes (Project Syndicate) Jun 9, 2014
Emerging powers’ reactions to the Ukraine crisis show that what happens in Europe no longer defines world politics, even when a major conflict is brewing there. But, though many view this crisis as being largely about Europe’s inability to resolve its own regional disputes, a peaceful outcome could bolster Europe’s global influence.
Europe’s Delivery Gap
Günter Verheugen (Project Syndicate) Jun 9, 2014
In the aftermath of the European Parliament election, Europe’s heavyweight national leaders are engaged in the usual horse-trading over who gets which EU positions. The much wiser approach would be to agree on policy priorities first and jobs later.
The ECB and Sisyphus: It won't be finished unless it does QE
George Magnus (Pieria) Jun 9, 2014
Nothing short of QE will fulfill the ECB’s role of supporting an economic recovery that it is largely the job of governments and the Commission to deliver.
Mega-regional trade deals and the global mega-mess
Jayant Menon (VoxEU) Jun 9, 2014
With the rise of mega-regional trade agreements, the world trade system resembles a jigsaw puzzle. This column discusses the difficulties involved in consolidating free trade agreements at the regional level, and argues that piecing together the blocs around the world will be even more challenging. A potential way forward is to return to the most widely used modality of trade liberalisation – unilateral actions – but this time involving the multilateralisation of preferences rather than unreciprocated reductions in tariff rates.
China Will Need A Series Of Miracles To Sustain Growth
John Maudlin (Business Insider) Jun 9, 2014
The problem is that today China is the most significant macroeconomic wildcard in the global economy.
Financial Stability and Monetary Policy: Happy Marriage or Untenable Union?
John C. Williams (FRBSF Economic Letter) Jun 9, 2014
The very real and sizable costs of using monetary policy to deal with risks to financial stability—along with the uncertain benefits of doing so—argues for finding alternative tools with more favorable tradeoffs. Policymakers should study ways to design policy frameworks that support financial stability, with only a modest cost to macroeconomic goals and anchoring inflation expectations.
Three events that shaped our world
Martin Wolf (FT) Jun 10, 2014
If there is one lesson from the past 100 years it is that we are doomed to co-operate. Yet we remain tribal.
Deja vu: echoes of pre-crisis world mount
John Plender (FT) Jun 10, 2014
While a financial crisis is not imminent, the seeds of one are being sown in the way described by Minsky, the theorist of capital market instability.
How 'Rogue' Is China's Aid?
Cullen S. Hendrix and Marcus Noland (WP/PIIE) Jun 10, 2014
Are China's 21st century investment, aid, and security ties disproportionately to nondemocratic countries, reflecting an affinity for authoritarian governments, or does China's interest in natural resource wealth undermine democratic institutions?
Unemployment and A Tale of Two Financial Crises
D.W. MacKenzie (Mises Daily) Jun 10, 2014
Why has the recovery been so very slow?
Greece: Grounds for Cautious Optimism
IMF Survey Jun 10, 2014
Greece has made substantial progress on fiscal and external adjustment, and the economy is set to grow in 2014 after six years of recession says Poul Thomsen, head of the IMF’s Greece team.
Brazil’s Own Goals
Matt Slaughter and Jaana Remes (Project Syndicate) Jun 10, 2014
Brazil may be in the international spotlight – hosting the World Cup this month and the 2016 Summer Olympics – but it maintains considerable barriers to the global economy. In a world that is constantly becoming more interconnected, Brazil risks being left behind.
Why This Merger Boom Is Different
Peter R. Orszag (Bloomberg View) Jun 10, 2014
Mergers and acquisitions are booming again worldwide, and this time the markets are rewarding both the companies doing the buying and the ones being sold. This may be because the economy is sluggish and interest rates are low.
Slow Your Judgments on Fast Trading
Noah Smith (Bloomberg View) Jun 10, 2014
High-frequency trading may be problematic, but it's best not to draw any hasty conclusions.
Levine on Wall Street: 21st-Century Activists and 14th-Century Markets
Matt Levine (Bloomberg View) Jun 10, 2014
Really if you have an investment strategy and it doesn't work when you backtest it over 600 years of data, you have nothing.
What If the Fed Has Created a Bubble?
Mohamed A. El-Erian (Bloomberg View) Jun 10, 2014
The Fed might be overestimating its ability to contain the financial repercussions of its stimulus efforts.
Asia's New 'Axis of Reform'
William Pesek (Bloomberg View) Jun 10, 2014
Asia's three biggest economies are suddenly experiencing a burst of change. Are we seeing the birth of a new "Axis of Reform," one which could revive the global economy?
Is Japan Turning to Voodoo Economics?
William Pesek (Bloomberg View) Jun 10, 2014
In November 2012, Tokyo unleashed one of modern history's greatest gestures of corporate welfare, driving the yen down 20 percent. Nineteen months on, have companies shared the wealth? Nope.
Wage compression and falling Latin American inequality
Eduardo Levy Yeyati & Samuel Pienknagura (VoxEU) Jun 10, 2014
Latin America’s inequality has fallen, driven by a reduction in the educational wage premium. This column discusses potential driving forces behind this phenomenon and argues that while this is a positive outcome, it may reflect a deeper malaise. A preliminary evaluation suggests that supply changes are more important than de-industrialisation. But lacklustre PISA scores support a more dismal hypothesis. The premium decrease may mirror a decline in education quality.
India must reap benefits of urbanisation
David Pilling (FT) Jun 11, 2014
Modi has tapped into the aspiration created by the blending of rural and urban – which itself brings challenges and opportunities.
Crazy equities should be boring as bonds
Stephen King (FT) Jun 11, 2014
The market fears its own craziness and demands a huge risk premium over short rates, 4-6% a year, versus 1% a year for bonds.
Forget targeting – try ‘positive ambiguity’
Miko Giedroyc (FT) Jun 11, 2014
A little uncertainty can go a long way toward reducing the dangers of risk-taking and put the economy on more solid ground.
Paul Volcker Calls for a New Bretton Woods conference
Seth Lipsky (WSJ) Jun 11, 2014
The world since the rule-based monetary system collapsed in the 1970s is not a pretty picture.
The European Central Bank’s House of Cards
Frank Hollenbeck (Mises Daily) Jun 11, 2014
The European Central Bank (ECB) recently imposed negative deposit rates and is preparing a form of quantitative easing (QE) to purchase asset backed securities, corporate bonds or possibly bailout bonds
New Global Housing Watch Throws Spotlight on Booms and Busts
IMF Survey Jun 11, 2014
The IMF’s new Global Housing Watch brings together housing market information to keep track of boom and bust cycles and to nudge policymakers to take early action to moderate housing booms.
China's Interest in Central and Eastern Europe
Valbona Zeneli (Globalist) Jun 11, 2014
The Middle Kingdom sets its eyes on Europe’s eastern half, to get a beachhead into Western Europe.
Japan: A Venetian Destiny?
John West (Globalist) Jun 11, 2014
Japan and Venice share a similar history, but Japan should change course before that history repeats itself.
Leaners of Last Resort
Barry Eichengreen (Project Syndicate) Jun 11, 2014
With Jeremy Stein’s return to his academic post at Harvard at the end of May, the US Federal Reserve Board lost its leading proponent of the view that monetary policy should be used to lean against financial excesses. In fact, monetary policy should be viewed as a last resort in this context, not as the first line of defense.
The Interest-Rate Enigma
Claudio Borio and Piti Disyatat (Project Syndicate) Jun 11, 2014
The prevailing view of today's ultra-low real interest rates in much of the world is that they largely reflects a fall in equilibrium, or “natural” rates, driven by changes in saving and investment fundamentals. But this explanation neglects the role of financial factors in pushing down real rates.
Democracy in Europe
Kemal Dervis (Project Syndicate) Jun 11, 2014
The struggle over who will preside over the European Commission has begun. But the real debate is not about the personalities involved; it is about the degree to which Europeans are prepared to create the shared political space that is needed to manage the monetary union and secure Europe’s global leadership role.
Dani Rodrik (Project Syndicate) Jun 11, 2014
What many call “liberal democracy” flourished only after the emergence of the nation-state and the popular upheaval and mobilization produced by the Industrial Revolution. With the nation-state now under stress from above and below, so is liberal democracy.
The Infrastructure Solution
Martin Baily and Robert Palter (Project Syndicate) Jun 11, 2014
Though the debate on infrastructure tends to focus on the need for creative financing, the real problem is not insufficient investment. Rather, the deterioration of the built environment reflects the world's fragmented approach to infrastructure planning, delivery, and operation.
Rust Belt Rising
Yuri M. Zhukov (FA) Jun 11, 2014
The economics behind eastern Ukraine's upheaval.
Grouchy EU bonds tell downbeat story
Ralph Atkins (FT) Jun 12, 2014
Low borrowing costs should help nurture the eurozone’s nascent economic recovery, securing its longer-term stability, but how long can they last?
In Emerging Markets, What Scares Most Investors Entices Oppenheimer
Landon Thomas Jr (NYT) Jun 12, 2014
Mr. Leverenz, who runs America's largest emerging markets mutual fund at Oppenheimer Fund, believes that nations like China, Brazil, Russia and India are experiencing economic and social change that won't be reversed.
The US's dollar domination is coming to an end
Brian Caplen (The Banker) Jun 12, 2014
US fines on non-US banks for breaking the country's various sanctions is rankling the international community, and speeding up the rise of the renminbi and rouble as alternate trade currencies.
Leaders Weigh Climate, Economic Goals as Paris Deadline Approaches
Bridges, Volume 18, Number 21 Jun 12, 2014
National leaders from various countries have become increasingly vocal on domestic emissions reduction approaches in recent weeks, as the deadline to negotiate a new international climate deal draws ever nearer. The prime ministers of Australia and Canada jointly slammed carbon taxes and emissions trading schemes as viable solutions earlier this week, while US President Barack Obama and other officials have touted these as economically-sound ways to transition to cleaner energy sources and reduce emissions.
New Ukraine President Affirms Readiness to Ink EU Trade Pact
Bridges, Volume 18, Number 21 Jun 12, 2014
Ukraine President Petro Poroshenko took office this past weekend, immediately promising to sign a long-awaited trade deal with the European Union as soon as the latter approves the pact. The pledge came within days of a meeting of leaders from the Group of 7 industrialised countries in Brussels, where the coalition reaffirmed its readiness to impose further sanctions on Russia – including sectoral ones – should the crisis escalate further.
China to Nix Rare Earth Export Restrictions Following WTO Ruling
Bridges, Volume 18, Number 21 Jun 12, 2014
China is said to be planning to get rid of strict export quotas and duties on certain rare earth elements, media reports indicated late last week. The rumoured move comes shortly after a March 2014 ruling by a WTO dispute panel, which deemed these measures to be in violation of global trade rules and Beijing’s accession commitments.
African Union, EU Outline Priorities for Post-2015 Development Agenda
Bridges, Volume 18, Number 21 Jun 12, 2014
The African Union Commission and the European Union each released their respective priorities for the post-2015 development agenda last week, shortly after the circulation of a "zero draft" that would serve as a potential launching point for negotiating a set of Sustainable Development Goals (SDGs).
TPP: US, Japan Meet to Iron Out Automobile Trade Differences
Bridges, Volume 18, Number 21 Jun 12, 2014
US and Japanese trade officials met in Washington earlier this week in an effort to resolve some of their outstanding issues related to automobile trade, with just weeks until the next meeting of chief negotiators for the 12-country Trans-Pacific Partnership (TPP) Agreement.
Emerging Markets Face Tough Climb Back to Past Growth Levels
IMF Survey Jun 12, 2014
As the global environment turns less supportive and productivity gains of the last decade fade, growth in emerging markets will have to come from new engines, supported by a new wave of structural reforms, a new IMF study says.
It Is Lonely at the Top
Globalist Jun 12, 2014
Only 18 countries have more than a 1% share of the world’s total GDP.
China's Latest Bubble: Millionaires
William Pesek (Bloomberg View) Jun 12, 2014
China's millionaire bubble is dangerous for two reasons: it's widening the gap between rich and poor, and slowing the impetus for much-needed reforms.
It Takes a Village to Lower Inequality
Megan McArdle (Bloomberg View) Jun 12, 2014
Stronger communities can help close the bottom-to-middle inequality gap.
The Ivy Clique
Sami Mahroum (Project Syndicate) Jun 12, 2014
The relationships that are formed at elite universities are among the most influential in the world. As long as low-income countries are excluded from these social circles, they will remain unable to attract the resources they need to improve their international status and enhance their contribution to the global economy.
The IMF’s False Confession
Ashoka Mody (Project Syndicate) Jun 12, 2014
By apologizing for its criticism of Britain's dogged pursuit of fiscal austerity, the IMF has compromised on an economic principle that enjoys overwhelming academic support: The confidence “fairy” does not exist. And, by bowing to the UK’s pressure, the Fund undermined its only real asset – its independence.
Fiscal policy responses to crises: The social impacts
Carlos A. Vegh & Guillermo Vuletin (VoxEU) Jun 12, 2014
The question of whether fiscal policy should be pro- or countercyclical has become increasingly relevant during the recession. This column provides causal evidence from South American countries showing the success of countercyclical policy in improving social indicators of economic success, combined with correlative evidence from Europe. This represents a strike against the case for austerity-led growth.
The ECB's Bank Review: Kill the Zombies and Heal the Wounded
Ajai Chopra and Nicolas Véron (PIIE) Jun 13, 2014
The European Central Bank (ECB)'s comprehensive assessment of euro area banks has had an encouraging start. But complacency could still lead to another failed attempt to fix Europe's banks, with severe consequences.
A Win-Win-Win Solution for the Trans-Pacific Partnership
Adam S. Posen (Caixin/PIIE) Jun 13, 2014
The security tensions between China and the United States are spilling over rapidly into economic ones. Some outreach from both sides is required, not just to try to keep things from unnecessarily escalating, but to maintain the mutual benefits of the economic relationship.
Not So Exceptional After All
Bill Humphrey (Globalist) Jun 13, 2014
How the Netherlands provided the guidebook for America’s founding.
Mark Carney, the Ringo Starr of Central Banking
Mark Gilbert (Bloomberg View) Jun 13, 2014
Bank of England Governor Mark Carney will need every independent sinew in his body in the delicate balancing act of raising rates without trashing consumer confidence.
Economic Nationalism Endangers Indonesia
William Pesek (Bloomberg View) Jun 13, 2014
Indonesia presidential front-runner Joko Widodo's pledges to restrict foreign investment in Indonesian banks, review trade deals and raise mining taxes will do more harm than good in a nation that direly needs more inward investment.
Yu Yongding (Project Syndicate) Jun 13, 2014
The Nobel laureate economist Robert Mundell showed that an economy can maintain two – but only two – of three key features: monetary-policy independence, a fixed exchange rate, and free cross-border movements of capital. But China is currently juggling all three – an act that is becoming increasingly difficult to sustain.
The Government as Venture Capitalist
Laura Tyson (Project Syndicate) Jun 13, 2014
Government cannot satisfy the demand for public goods and services alone. Its role should be akin to a venture capitalist, soliciting, supporting, evaluating, and scaling innovative strategies to address social problems.
Football in the time of protest
Nauro F Campos (VoxEU) Jun 13, 2014
The 2014 FIFA World Cup is upon us. This column argues that there will be plenty of partying, but also plenty of protests fuelled by the gross mismanagement and limited economic benefits from hosting the Cup. Stadia may be ready, but much planned infrastructure has already been abandoned. Indeed, rent-seeking may be one reason nations bid for the Cup. Since the returns to transportation infrastructure are higher in poor countries, the international community should work to stamp out corruption so that poor countries can continue to host mega-events like the World Cup.
Global value chain participation: Risks and opportunities
Gary Gereffi & Xubei Luo (VoxEU) Jun 14, 2014
The explosion of trade in intermediate goods has created new development opportunities, but many of the jobs at the bottom of global value chains are low-paid, insecure, and dangerous. This column argues that participation in global value chains brings risks as well as opportunities. The gains from ‘moving up the global value chain’ are not equally distributed – large, professional, high-tech firms with diversified export markets, and high-skilled workers with formalised contracts benefit the most.
The Promise of Modinomics
Arvind Panagariya (FA) Jun 14, 2014
How the new prime minister can bring back growth.
In search of house-price bubbles
Stefano Giglio, Matteo Maggiori & Johannes Stroebel (VoxEU) Jun 14, 2014
The existence of house-price bubbles and market efficiency are among the fundamental debates in finance, especially popular in current years. This column describes a recent test of one of the prominent models of bubbles, exploiting a unique feature of the housing markets in the UK and in Singapore. The results show that no infinitely lived bubble was present in these markets.
Shadows: risky business, global threat
Jamil Anderlini (FT) Jun 15, 2014
Into the shadows: The first of an FT series investigates how China’s precarious shadow banking system could inflict severe damage on the world economy.
Time to focus a light on shadow banking
Mark Carney (FT) Jun 15, 2014
The goal is to replace a system prone to excess and collapse with one that contributes to strong balanced growth.
Europe faces house of debt horrors
Wolfgang Munchau (FT) Jun 15, 2014
The most likely trajectory is a long period of slow growth, low inflation and a threat of insolvency and political insurrection.
Prof Piketty’s r>g equation causes waves
James Mackintosh (FT) Jun 15, 2014
The rallying cry of the professor’s supporters – that returns on capital will outpace the economy – matters not just in politics but for investors too.
The True Cost of Hidden Money
Jacques Lesliejune (NYT) Jun 15, 2014
A Piketty protégé’s theory on tax havens.
High-Frequency Trading Needs One Quick Fix
Andy Kessler (WSJ) Jun 15, 2014
Change Reg NMS Rule 611 to read 'best execution' instead of 'best price.'
The March of the Autocrats
Pankaj Mishra (Bloomberg View) Jun 15, 2014
The widespread craving for such efficacious GDP-boosters as Deng Xiaoping, Suharto and Augusto Pinochet wasn’t the happy ending many of us envisaged to the collapse of communism in 1989.
Why does inequality grow?
Coen Teulings (VoxEU) Jun 15, 2014
Income inequality has increased worldwide in recent years. This column discusses the role of technological progress, globalisation, and the liberalisation of labour-market institutions in this growing inequality. The liberalisation of labour market institutions has made labour markets more flexible and created many jobs. But beyond a certain point, the net effect of further liberalisation might be negative for society.
Taking another path
Patrick Jenkins and Sam Fleming (FT) Jun 16, 2014
Six years after it helped spark the financial crisis, shadow banking offers potential benefits and challenges as it goes mainstream.
Safe shadow banks and sound savings
Paul McCulley (FT) Jun 16, 2014
As with regular banking 100 years ago, the Fed is taking vital steps to turn informal banking into a public-private partnership.
China’s push to build a global currency
James Kynge (FT) Jun 16, 2014
The political system relies on control while acceptance into global free markets needs liberalisation.
Fed still tinkering with the plumbing
Tom Braithwaite (FT) Jun 16, 2014
Fed eyes ‘matched books’ where a bank will lend cash to hedge fund against its securities book and finance deal by borrowing cash against securities.
Time to take some chips off the table
Mohamed El-Erian (FT) Jun 16, 2014
Central banks are trading possibility of immediate economic gains for a growing risk of financial instability later; investors should be prudent.
Don't Cry for Thee, Argentina
WSJ Jun 16, 2014
The Buenos Aires deadbeats lose 7-1 at the Supreme Court.
The Structures of Growth
David Brooks (NYT) Jun 16, 2014
What do you need to do to get better at something after you have gone through the early stages of making a lot of progress really quickly?
The Data Is Clear: Free Markets Reduce Poverty
D.W. MacKenzie (Mises Daily) Jun 16, 2014
Some Catholic clergy have, once again, denounced supporters of laissez-faire capitalism. Cardinal Oscar Rodriguez Maradiaga claims that the free market economy is “a new idol” which creates inequality, excludes the poor, and that “this economy kills.” Cardinal Maradiaga does not speak alone. He quoted Pope Francis in his recent remarks and claimed that since the Pope “grew up in Argentina,” he “has a profound knowledge of the life of the poor.”
China's Brewing Subprime Crisis
William Pesek (Bloomberg View) Jun 16, 2014
As home prices across China have fallen 10.2 percent by value in the first five months of this year, property developers are showing signs of panic.
The U.S. Should Heed the IMF's Advice
Mohamed A. El-Erian (Bloomberg View) Jun 16, 2014
The U.S. would benefit from even bolder criticism on the part of the International Monetary Fund.
Bond Vultures' Bet Against Argentina Pays Off
Noah Feldman (Bloomberg View) Jun 16, 2014
Today the Supreme Court handed a double defeat to the Republic of Argentina in its effort to default on sovereign bonds issued in 1994.
Culture: Persistence and evolution
Francesco Giavazzi, Ivan Petkov & Fabio Schiantarelli (VoxEU) Jun 16, 2014
The persistence of cultural attitudes is an important determinant of the success of institutional reforms, and of the impact of immigration on a country’s culture. This column presents evidence from a study of European immigrants to the US. Some cultural traits – such as deep religious values – are highly persistent, whereas others – such as attitudes towards cooperation and redistribution – change more quickly. Many cultural attitudes evolve significantly between the second and fourth generations, and the persistence of different attitudes varies across countries of origin.
The Age of Entropy
Randall L. Schweller (FA) Jun 16, 2014
Why the new world order won't be orderly.
Why clearing houses could bring chaos
Simon JOhnson (FT) Jun 17, 2014
We have built them up as an officially sanctioned form of credit protection. No one feels good about where that had and could lead.
China will profit from feeding the world
Ding Xuedong (FT) Jun 17, 2014
For the past 40 years, US farmland investments have outperformed stocks and bonds. Savvy investors have taken note.
Low interest rates unlikely to continue
Andrew Smithers (FT) Jun 17, 2014
A look at the past raises doubts as to whether real rates and growth have been related.
Systemic risk worse than '08
Martin Hutchinson (AT) Jun 17, 2014
Since the crash of 2008, thousands of pages of financial regulations have been written and speeches bloviated about how we now understand the dangers of "too big to fail". Needless to say this is nonsense; systemic risk is worse now than it was in 2008.
Inequality and the Nature of Capital: A Reminder to Economists
Chandran Nair (YaleGlobal) Jun 17, 2014
Complaints about inequality have taken the West by storm, and that accounts for the success of the book “Capital in the Twenty-First Century” by economist Thomas Piketty. But inequality is not a new topic for developing nations.
Let Ireland Keep Its Tax Rates
Leonid Bershidsky (Bloomberg View) Jun 17, 2014
The biggest tax inversion deal in history should make U.S. legislators think about lowering the corporate tax burden rather than closing expatriation loopholes.
Argentina's Debts: US Supreme Court Sets New Ground Rules for Sovereign Debt Management Worldwide
Anna Gelpern (PIIE) Jun 17, 2014
On Monday, June 16, the US Supreme Court rang the curtain down on two key parts of the drama surrounding Argentina and its creditors, which had dragged on since the country's debt default in 2001. First, the Court refused to review decisions by the federal appeals court for the Second Circuit in New York, ordering Argentina to pay creditors holding defaulted bonds in full whenever it pays its new restructured bonds.
Is Greece Really Back?
Mohamed A. El-Erian (Bloomberg View) Jun 17, 2014
Greece's recovery hasn't been nearly as complete as markets suggest.
Who Won Europe?
Daniel Gros (Project Syndicate) Jun 17, 2014
The process of choosing the European Commission’s next president appears to be a conflict between the voice of the people, as expressed in last month’s European Parliament election, and backroom deal-making by governments. But reality is more complex, and the genuine democratic mandate did not go to the election's putative victor.
The Environment of Poverty
Bjørn Lomborg (Project Syndicate) Jun 17, 2014
Some of the world's most lethal killers stem from environmental problems, and poverty underpins many of them. So why does the world consciously choose to spend its aid money so ineffectively by devoting most of its environmental assistance to reducing greenhouse-gas emissions in developing countries?
The Development Costs of Homophobia
Adebisi Alimi (Project Syndicate) Jun 17, 2014
Development aid to governments that permit specific social groups to be ostracized can carry very real economic costs. As new loans are considered, steps should be taken to ensure that the benefits are as inclusive as possible.
Macro-stabilisation and tax rebates
Jonathan A. Parker (VoxEU) Jun 17, 2014
Governments around the world are searching for macro-stimulation instruments. This column discusses evidence showing that rebate-type payments policies generate substantial increases in demand for goods and services. In particular, a large portion of tax rebates are spent rapidly on arrival.
Regulators need firm principles and rules
Paul Tucker (FT) Jun 18, 2014
As regulation becomes more stringent once again some of the substance of banking will inevitably re-emerge elsewhere.
Prudential policy is not everything
Chris Giles (FT) Jun 18, 2014
Anyone thinking that curbs on risky mortgages are an alternative to higher interest rates is wrong.
Third arrow is more like 1,000 needles
David Pilling (FT) Jun 18, 2014
Some of the Japanese leader’s jabs will do no good. A few may do harm. But at least some will have a positive impact.
Argentina in game of chicken over debt
John Paul Rathbone (FT) Jun 18, 2014
Cristina Fernández has sworn never to succumb to the holdouts’ ‘extortion’. She must be seen to follow through on the pledge – even if she fails.
Brace for bond market bumps ahead
Francesco Garzarelli (FT) Jun 18, 2014
A rebuilding of inflation expectations in the euro area and the anticipation of rate hikes in the US will lead to a steeper yield curve.
Why the U.S. Needs to Lift the Ban on Oil Exports
Daniel Yergin and Kurt Barrow (WSJ) Jun 18, 2014
Surprisingly, this will mean lower gas prices at the pump, and a greater supply of crude in an unstable world.
What Picketty forgot
Noel Ortega (FPIP) Jun 18, 2014
French economist Thomas Piketty's improbably popular opus of economic history, Capital in the Twenty-First Century, has been called the most important study of inequality in over 50 years. But because it fails to address the real limits on growth it can't be a roadmap for the next.
Chinese Premier Is Loaded for Bear
Jim O'Neill (Bloomberg View) Jun 18, 2014
"I can promise everyone honestly and solemnly, there won’t be a hard landing," Chinese Premier Li Keqiang says.
Fed Dishes Out Continuity
Mohamed A. El-Erian (Bloomberg View) Jun 18, 2014
The Fed's steady-as-she-goes approach, while expected, also is reassuring to markets.
Robert Skidelsky (Project Syndicate) Jun 18, 2014
Mainstream economics is in fact an ideology – the ideology of the free market. But the tools of economics, as currently taught, provide little scope for investigating the links between economists’ ideas and the structures of power.
Mexico’s Breakout Moment?
Mohamed A. El-Erian (Project Syndicate) Jun 18, 2014
Mexico has a good chance to realize its impressive structural-reform agenda. Doing so would give the rest of the world an important example of how such programs can be designed, implemented, and, most important, sustained until a critical mass of revitalized sectors – and thus faster growth and greater prosperity – is achieved.
India’s female economic participation
Piritta Sorsa (VoxEU) Jun 18, 2014
Female labour market participation in India is lower than in other emerging markets. This column discusses the dynamics and causes of this issue. Many women have dropped out of the labour market in the recent years, or work in low-paying jobs without social benefits and with large wage differentials. Raising female labour force participation could boost economic growth up to 2.4% with a package of pro-growth and pro-women policies.
Why standard macro models fail in crises
David F. Hendry & Grayham E. Mizon (VoxEU) Jun 18, 2014
Many central banks rely on dynamic stochastic general equilibrium models – known as DSGEs to cognoscenti. This column – which is more technical than most Vox columns – argues that the models’ mathematical basis fails when crises shift the underlying distributions of shocks. Specifically, the linchpin ‘law of iterated expectations’ fails, so economic analyses involving conditional expectations and inter-temporal derivations also fail. Like a fire station that automatically burns down whenever a big fire starts, DSGEs become unreliable when they are most needed.
Tell Narendra Modi: Human Development is More than GDP
Martha C. Nussbaum (Boston Review) Jun 18, 2014
India's new prime minister has won acclaim for driving economic growth. But his record on education and public health leaves a lot to be desired.
The Fed needs a big balance sheet
Benjamin Friedman (FT) Jun 19, 2014
The central bank cannot sell what it does not own. The US Federal Reserve and other central banks should hold on to an ample supply of assets.
Beware central banks’ share-buying sprees
Ralph Atkins (FT) Jun 19, 2014
With world stock markets hitting all-time highs, are central banks that are buying equities doing so at the top and encouraging others to follow?
Ruling on Argentina Gives Investors an Upper Hand
Floyd Norris (NYT) Jun 19, 2014
The ruling made it far less likely that genuinely troubled countries will be able to restructure their debts and increased the power of investors to prevent needed restructurings.
The Asset-Rich, Income-Poor Economy
Kevin Warsh and Stanley Druckenmiller (WSJ) Jun 19, 2014
The Fed's balance-sheet recovery hasn't stirred business investment, an opportunity killer for workers.
UN Climate Talks Shift to Negotiating Mode Toward 2015 Deal
Bridges, Volume 18, Number 22 Jun 19, 2014
The latest round of UN climate talks saw countries move into negotiating mode on some of the substantive details that will need to be hammered out over the next 18 months in order to successfully deliver a global climate deal by end-2015.
Argentina's Debts Aren't Just Argentina's Problem
Bloomberg View Jun 19, 2014
Investors have followed the news about Argentina's sovereign-debt case pretty calmly. Soon, they may have second thoughts.
What Will Argentina Do With Its Vultures?
Matt Levine (Bloomberg View) Jun 19, 2014
The trick to any negotiation is to act crazy to intimidate the other side. Well, the trick to some negotiations. Probably not that many.
Michael Spence (Project Syndicate) Jun 19, 2014
Though China's government has expressed a willingness to accept slower growth for the sake of a more stable, sustainable economy, whether the decline will be temporary is not yet apparent. Ensuring that it is will require patience and discipline in domestic and foreign policy.
Iraq and the Oil Market
John Sfakianakis (FA) Jun 19, 2014
How much will prices rise?
An American Passion for Tyrants
David Rieff (NYRB) Jun 19, 2014
William Easterly, a former World Bank economist, argues that international development aid has not only failed since its inception to deliver on its promises, but is actually a trap for the world’s poor, whom he sees as the victims of those he calls “planners.”
The rise of the infrastructure giants
Bretton Woods Observer Summer Jun 20, 2014
World Bank’s infrastructure hegemony challenged in Asia.
Big banks & IMF: No structural reform
Bretton Woods Observer Summer Jun 20, 2014
The IMF rings more warnings about the costs of having an oversized financial sector, but fails to recommend stronger controls on the banking sector.
IMF Explores Ways to Strengthen Response to Sovereign Debt Distress
IMF Survey Jun 20, 2014
The IMF continues to consider ways to improve its lending policies for countries experiencing sovereign debt distress so that the costs of crisis resolution can be minimized for debtors, creditors, and ultimately the international financial system.
Why I Love High-Speed Trading
Clifford S. Asness (Bloomberg View) Jun 20, 2014
High-frequency trading often gets represented by people who don't understand how it works.
Europe's Worst Central Banker
Mark Gilbert (Bloomberg View) Jun 20, 2014
Polish central bank Governor Marek Belka has been caught on tape asking a government official to dismiss the finance minister. If he doesn't resign, the government should dismiss him.
What to Do When Governments Default
Mohamed A. El-Erian (Bloomberg View) Jun 20, 2014
Argentina's battle with creditors illustrates the coordination problems that arise when governments default on their debts.
China’s Real-Estate Wrongs
Yao Yang (Project Syndicate) Jun 20, 2014
With growth in China's real-estate prices easing, it seems that the government’s campaign to rein in property risk is finally taking hold. The danger now is that the housing market will collapse – bringing China’s economic prospects down with it.
Scottish independence in an interdependent world: New evidence
Andrew Hughes Hallett (VoxEU) Jun 20, 2014
The UK and Scottish governments are engaged in a set of parallel and overlapping games in the economic and political arenas. This column presents research that analyses how decisions about whether to cooperate over financial regulation, fiscal rules, and the choice of currency and monetary policy, will all have far reaching implications for a newly independent Scotland and the rest of the UK.
Central bank transparency and committee deliberation
Stephen Hansen, Michael McMahon & Andrea Prat (VoxEU) Jun 20, 2014
Central bank transparency is essential to democratic accountability. Central bankers often limit it – fearing its stifling effect on frank debate. Yet transparency may induce monetary policy committee members to be better prepared. This column discusses evidence showing that the ‘better prepared’ effect is important empirically. Exploiting a natural experiment in the Fed Open Market Committee in 1993 – and using computational linguistics tools to measure the impact of transparency on deliberation – the research shows that the net effect is a more informative deliberation process.
So Similar, So Different
Nicholas Kristof (NYT) Jun 21, 2014
Two women, both 20 and talented, have lives that are miles apart. Literally and otherwise, thanks to the lottery of birth.
Africa as a Global Test Case
Ludger Kühnhardt (Globalist) Jun 21, 2014
Has the time for a new global approach to Africa finally arrived?
‘The Consolations of Economics’, by Gerard Lyons
Ferdinando Giugliano (FT) Jun 22, 2014
A riposte to those who argue the rise of emerging economies will cost the west dear underestimates the challenges ahead.
Role of banks recedes in wake of crisis
John Authers (FT) Jun 22, 2014
Traditional banking roles are being usurped by the growth in crowdfunding, mobile payments systems and finance being provided by capital markets.
'Pikettymania' and Inequality in the U.S.
Alan S. Blinder (WSJ) Jun 22, 2014
The gap between top and bottom is clear. Not so clear is whether shaving the top is the best way to help the bottom.
Big Banks Kowtow to Beijing
L. Gordon Crovitz (WSJ) Jun 22, 2014
They are taking China's orders not to advertise in the independent press.
Is the Rupee Fairly Valued?
Martin Kessler and Arvind Subramanian (Business Standard/PIIE) Jun 22, 2014
Is the rupee fairly valued? Should the Reserve Bank of India (RBI) allow it to appreciate beyond the current rate of 60 rupees to the dollar? These are important policy questions, and will remain so, if a Modi effect continues to dominate investor sentiment in the months ahead and attracts large amounts of foreign capital into India.
Credit ratings and regulatory risk weights
Harold Cole & Thomas F Cooley (VoxEU) Jun 22, 2014
In the aftermath of the sub-prime crisis, the major credit rating agencies have been criticised for giving overly generous ratings to mortgage-backed securities. Whereas many commentators have blamed the ‘issuer pays’ market structure for distorting incentives, this column argues that the key distortion came from regulators’ use of private ratings to assign risk weights. This induced investors to focus on the risk weights attached to ratings rather than their information content, thus undermining the reputation mechanism that had previously kept ratings honest.
Robots will unleash our creativity
Marc Andreessen (FT) Jun 23, 2014
In all the fear-mongering, people often forget the tech revolution has put the means of production within everyone’s grasp.
Finland is far from Europe’s best
Risto Penttila (FT) Jun 23, 2014
The country’s plummeting productivity is partly down to bad luck – which came in the form of Steve Jobs – and bad policies.
Turmoil in Iraq Spells Trouble for Oil Markets
Gal Luft and Robert McFarlane (WSJ) Jun 23, 2014
The U.S. needs a strategy to insulate the global economy from ruinous energy shocks.
Shop till they drop
Ellen Brown (AT) Jun 23, 2014
Out-of-control central banks have taken to a corporate buying sprees, not to bail out the "too big to fail" bankrupt companies but as investments to offset bond income lost as a result of record-low interest rates. The development is all too alarming.
Slow-Growth China Is Already Here
Martin Hutchinson (Globalist) Jun 23, 2014
When China's recession comes, after decades of growth, the unrest will be considerable.
Living in the Republic of Samsung
William Pesek (Bloomberg View) Jun 23, 2014
The Organization for Economic Cooperation and Development issued a report last week on the structural weaknesses that threaten to undermine South Korea's economy. None looms larger than the chaebol.
Partial Progress in Rule Design for Orderly Failure of Cross-Border Banks
IMF Survey Jun 23, 2014
Policymakers around the world need to finish and implement their plans to deal with global banks when they fail, according to a new progress report from the International Monetary Fund.
More World Cup Goals, More Good Economic News
Jim O'Neill (Bloomberg View) Jun 23, 2014
The World Cup so far has delivered lots of goals and no outright favorite to win -- a bit like financial markets in recent weeks.
Africa’s Farms of the Future
Strive Masiyiwa (Project Syndicate) Jun 23, 2014
The recent explosion of Africa’s telecommunications sector demonstrates how the combination of effective incentives, high investment, and robust regulation can unleash a revolution. It is time to do the same for Africa's agricultural sector.
The Limits of Climate Negotiations
Jeffrey D. Sachs (Project Syndicate) Jun 23, 2014
Decarbonizing the world’s energy system requires that our production of vast and growing amounts of electricity does not boost atmospheric CO2 emissions, a zero-carbon transport fleet, and a lot more production per kilowatt-hour of power. These are mainly engineering problems, not negotiating problems.
Do capital controls deflect capital flows?
Paolo Giordani, Michele Ruta, Hans Weisfeld & Ling Zhu (VoxEU) Jun 23, 2014
Capital controls may help countries limit large and volatile capital inflows, but they may also have spillover effects on other countries. This column discusses recent research showing that inflow restrictions have significant spillover effects as they deflect capital flows to countries with similar economic characteristics.
Changes in migration policies after 1914
Drew Keeling (VoxEU) Jun 23, 2014
When nations declared war in 1914, migration policies changed. This column describes some of these changes and how they affected later migration incentives and patterns. Before 1914, migration had been peaceful and driven by market incentives. Since 1914, it has been shaped by politically determined quotas, legal restrictions, and flights from wars and oppression.
Bank of England: Crashing the party
Sam Fleming and Chris Giles (FT) Jun 24, 2014
The central bank has a wide range of new tools designed to stop bubbles. Now they face their first test.
Defend Argentina from the vultures
Martin Wolf (FT) Jun 24, 2014
A creditor paid more to take on the risk of a default cannot then be surprised by it.
The ‘best’ care might not keep us alive
John Kay (FT) Jun 24, 2014
Spending above a base level in rich nations seems to have little effect mortality and morbidity - lifestyle matters more.
Beijing will run London’s renminbi trade
Paola Subacchi (FT) Jun 24, 2014
A premature opening of the capital account could unleash damaging financial flows and undermine stability.
Don’t bank on a comfortable rate ride
John Plender (FT) Jun 24, 2014
Conventional wisdom has it equilibrium or natural interest rates have fallen since the crisis, perhaps even on a permanent basis. But is it correct?
Shinzo Abe’s Bid to Shake Up Corporate Japan
Hiroko Tabuchi (NYT) Jun 24, 2014
A crosshatch of stock holdings allows Japan’s big corporations to protect one another from outside attempts to shake up management. The prime minister has taken aim at the practice.
China and the US: Destined to Cooperate?
Andrew Follett (Diplomat) Jun 24, 2014
Geography, economics, and energy will all push America and China closer together.
Europe’s Mario Draghi Now Starring in Bernanke’s Show
Brendan Brown (Mises Daily) Jun 24, 2014
Just as Professor Bernanke exits center stage at the end of Act I of the monetary comedy he created, the scene shifts to Frankfurt. The star of Act II is European Central Bank (ECB) chief Mario Draghi. As we pick up the story, Mr. Draghi has been launching a defense against a phantom threat of deflation.
China demand drives world gas growth
Michael Lelyveld (AT) Jun 24, 2014
Energy experts point to the arrival a "golden age" for natural gas in China, predicting that rising demand for cleaner-burning fuel will lead the world's growth in gas use over the next five years. The outlook is darker for the country's power sector, where cheap coal will still dominate as a fuel in 2019 and continue to choke cities with smog.
Don't Shortchange Short Sellers
Noah Smith (Bloomberg View) Jun 24, 2014
If we want stronger, less bubble-prone financial markets we short make it easier and less expensive for people short sell stocks.
A Trio of Economic Problems Haunting Europe
Mohamed A. El-Erian (Bloomberg View) Jun 24, 2014
A trio of economic problems -- and the weak policies perpetuating them -- may cause Europe to face a troubling economic future.
Emerging-Market Target Practice
Jeffrey Frankel (Project Syndicate) Jun 24, 2014
Since the currency crashes of the 1990s, emerging and developing countries have tended to anchor monetary policy in targets for consumer price inflation. But, given that these countries' central banks tend to miss their targets even more often than the advanced countries do, they ought to consider switching to a nominal-GDP anchor.
Hans-Werner Sinn (Project Syndicate) Jun 24, 2014
The Transatlantic Trade and Investment Partnership, currently the subject of intense negotiations between the EU and the US, is making big waves. In order to ensure that the TTIP benefits consumers on both sides of the Atlantic, those negotiating it must recognize and avoid some key traps.
Richard Lambert and John Springford (Project Syndicate) Jun 24, 2014
British euroskeptics claim that EU membership has bound the UK economy by swaths of costly red tape to a bunch of moribund economies with no growth prospects. The facts, however, tell a very different story.
Global banks and liquidity risk transmission
Claudia M. Buch, James Chapman & Linda Goldberg (VoxEU) Jun 24, 2014
The international transmission of liquidity shocks is one of the key questions of banking globalisation. This column discusses a project of central bank researchers from around the world who have been exploring the role of global banks in the transmission of liquidity shocks. Using micro data from individual banks and applying common methodology are of individual interest. But more importantly, it allows us to detect common features of international bank and liquidity shock transmission.
Don't Shortchange Short Sellers
Noah Smith (Bloomberg View) Jun 24, 2014
If we want stronger, less bubble-prone financial markets we short make it easier and less expensive for people short sell stocks.
Douglas M. Hodge (PIMCO) Jun 24, 2014
It’s been a remarkable turnabout. Just over a year ago, then-Fed Chairman Ben Bernanke introduced a five-letter word into our financial lexicon – “taper.” In the weeks that ensued, interest rates on 10-year Treasuries spiked 70 basis points. And whether it was the “Great Rotation” into stocks or the simple aversion to any form of interest rate risk, the seemingly insatiable appetite for bonds, most notably among individual investors, turned into apprehension as they rushed for the exits.
Hedge Fund vs. Sovereign
Felix Salmon (FA) Jun 24, 2014
How U.S. courts are upending international finance.
Indonesia: The political outsider
Ben Bland (FT) Jun 25, 2014
As southeast Asia’s biggest economy prepares to elect a new president, many hope victory for Joko Widodo will consolidate its democracy and he will fix its finances.
Investors manic for ‘disrupter’ stocks
Richard Bernstein (FT) Jun 25, 2014
Whereas speculative IPO markets often mirror overall stock market valuation, the current cycle’s speculation seems limited to a relatively narrow universe of stocks.
Q. and A.: William C. Kirby on 'Can China Lead?'
Didi Kirsten Tatlow (NYT) Jun 25, 2014
In the book “Can China Lead?”, three business school professors looked at the motors for and the constraints against greatness that China is experiencing. One of the authors, William C. Kirby, explains what they found.
Three Myths about the Ex-Im Bank
Caroline Freund (PIIE) Jun 25, 2014
Congress has begun holding hearings on the reauthorization of the US Export-Import Bank, which provides financing assistance to help US exports. TheEx-Im Bank's charter expires in September. Three myths are being perpetuated by the new House majority leader, Kevin McCarthy, and other conservatives who would like to see the Ex-Im Bank closed. Below these myths are considered in turn.
The central paradox of the 21st century
Tom Streithorst (Pieria) Jun 25, 2014
Our unheard of affluence as consumers, our precarious existence as workers both stem from the same source: inexorable productivity increases.
Banks Can Still Have Fun Prop Trading in Rates
Matt Levine (Bloomberg View) Jun 25, 2014
The Volcker Rule is not strong on internal coherence, so it can generate lots of semi-scandals.
Draghi and the Art of the Feasible
Mohamed A. El-Erian (Bloomberg View) Jun 25, 2014
Mohamed El-Erian analyzes the policy challenges facing ECB President Mario Draghi as he tries to spur economic growth in Europe.
Hard Truths About Europe’s Soft Power
Nick Witney (Project Syndicate) Jun 25, 2014
Europeans may be “postmodern,” but the rest of the world is not. Even a cursory glance at Europe’s neighborhood demonstrates the limitations of “soft” power and dispel hopes that emerging powers can be house-trained as “responsible stakeholders” in a Western-designed international system.
Income Inequality and Youth Unemployment
Mark Esposito (Project Syndicate) Jun 25, 2014
The public debate surrounding income and wealth inequality has focused on decreased social cohesion, growing slums, exploitation of labor, and pressure on middle-class households. But one effect has received relatively little attention: youth unemployment and underemployment.
Greek debt restructuring: Lessons learned
Miranda Xafa (VoxEU) Jun 25, 2014
The 2012 Greek debt restructuring was the largest one in the history of sovereign defaults. This column discusses the lessons from this historically unprecedented episode. Delaying the restructuring implied that externally held debt remained higher than it would have been otherwise. Supportive crisis management is necessary for smooth restructuring to take place in a currency union.
Low interest rates, secular stagnation, and debt
Claudio Borio & Piti Disyatat (VoxEU) Jun 25, 2014
Real interest rates have fallen to historic lows, and some economists are concerned that an era of secular stagnation has begun. This column highlights the role of policy frameworks and financial factors – particularly debt – in linking low real interest rates and sluggish economic growth. Policies that do not lean against booms but ease aggressively and persistently in busts induce a downward bias in interest rates over time and an upward bias in debt levels – something akin to a debt trap. Low real interest rates may thus be self-reinforcing and not always ‘natural’.
New World Order
Erik Brynjolfsson, Andrew McAfee, and Michael Spence (FA) Jul 1, 2014
Labor, capital, and ideas in the power law economy.
Karachi: Under siege
Victor Mallet and Farhan Bokhari (FT) Jun 26, 2014
The struggle against the violence in Pakistan’s commercial capital bodes ill for the country’s attempts to kick-start its spluttering economy.
An uneven recovery is no reason to relax
Martin Wolf (FT) Jun 26, 2014
When interest rates rise in the UK they are likely to hit the economy harder than before, given the mountain of debt that households now bear.
Shine light on the sharks in dark pools
Gillian Tett (FT) Jun 26, 2014
Simply relying on the principle of caveat emptor to keep the trading system from becoming too murky is naive, and regulators must act.
UN Group Reviews Sustainable Development Goals "Zero Draft"
Bridges, Volume 18, Number 23 Jun 26, 2014
The UN working group charged with formulating a proposed set of sustainable development goals (SDGs) met recently for its penultimate session in New York, with delegates for the first time considering a "zero draft" that will serve as a basis for the group's recommendations due out this summer.
Officials Float Potential TPP Target Dates Ahead of July Meeting
Bridges, Volume 18, Number 23 Jun 26, 2014
The 12 Pacific Rim countries negotiating a sweeping trade deal could have a document ready by the end of the year, US President Barack Obama said last Friday. Other officials, however, have been more cautious in their predictions, suggesting that 2015 might be a more likely scenario for clinching a Trans-Pacific Partnership (TPP) Agreement, in light of the domestic political climate in many countries and the various issues that remain unresolved.
Rethinking the Sino-American Relationship
Stephen S. Roach (Project Syndicate) Jun 26, 2014
In early July, senior US and Chinese officials will gather in Beijing for the sixth Strategic and Economic Dialogue. With bilateral frictions mounting on a number of fronts, the summit offers an opportunity for a serious reconsideration of the relationship between the world’s two most powerful countries.
Self-fulfilling Eurozone debt crises and the ‘Draghi put’
Marcus Miller & Lei Zhang (VoxEU) Jun 26, 2014
Like banks, indebted governments can be vulnerable to self-fulfilling financial crises. This column applies this insight to the Eurozone sovereign debt crisis, and explains why the ECB’s Outright Monetary Transactions policy reduced sovereign bond spreads in the Eurozone.
IMF issues stark tax-cheat warning
Carey L Biron (AT) Jun 27, 2014
A lack of harmonized global tax policies has allowed global corporations to indulge in widespread tax gaming, particularly hurting developing countries, staff at the International Monetary Fund say in a new paper that reform activists are branding 'revolutionary'.
Two Years Ago, Banking Union Was Euro Crisis Turning Point
Nicolas Véron (PIIE) Jun 27, 2014
Europe's banking union, constituting a supranational pooling of most instruments of banking policy, was established two years ago, in the early hours of June 29, 2012. To a greater extent than was initially realized by most observers, this step marked a watershed in the European crisis by making it possible for the European Central Bank (ECB) to stabilize sovereign debt markets. The banking union will also profoundly reshape and realign Europe's financial system and institutions, with consequences that will unfold gradually.
David Cameron Fights the Good Fight
Mohamed A. El-Erian (Bloomberg View) Jun 27, 2014
Mohamed El-Erian explores and defends David Cameron's aggressive efforts to reform appointment making at the European Commission, and says it's time for a similar reform stance toward the IMF and the World Bank.
Taking Systemic Risk Seriously
Simon Johnson (Project Syndicate) Jun 27, 2014
The nature of externalities means that financial firms do not care about the costs that they may create for others. Big and small firms can create a wide variety of externalities, and these have to be examined carefully and dispassionately – exactly as a growing number of US regulators are recommending.
Trade policy through 2013: Signs of improvement but new policy concerns
Chad P Bown (VoxEU) Jun 27, 2014
Temporary trade barriers have become more than an important bellwether for contemporary protectionism; with persistent tariff levels, they are now a primary obstacle to free trade. The World Bank’s newly updated Temporary Trade Barriers Database suggests that the Great Recession-era increases in import protection may be levelling off. Now policymakers begin to face the daunting task of dismantling all of those temporary barriers they imposed during the early phase of the crisis.
Shinzo Abe and the Three Magic Arrows
Andy Sirkis (Mises Daily) Jun 28, 2014
Despite claims to the contrary in the mass media, Japan’s economy is continuing to suffer mightily under the leadership of Prime Minister Abe Shinzo. Abe is from a famous family and he’s a convincing talker, so he was able to bamboozle people into believing that he could make Japan prosper with his three arrows. These metaphorical arrows stand for “monetary stimulus,” “fiscal stimulus,” and “structural reform.
The Open Drains of Latin America
Ricardo Hausmann (Project Syndicate) Jun 28, 2014
In developing countries, economic progress requires adapting technology that exists in other places, which necessitates engaging with those that have it. Characterizing these interactions as pure exploitation, rather than value-creating opportunities, has undermined the possibilities of many in Latin America and elsewhere.
New Hope for India
Martin Feldstein (Project Syndicate) Jun 28, 2014
The measures needed to stimulate economic performance in India will take time to implement and to produce results. But anyone who wants to judge whether the new government is acting effectively to achieve faster long-term growth should examine whether progress is being made in ten policy areas.
US economy: The productivity puzzle
Robin Harding (FT) Jun 29, 2014
Long-term prosperity depends on the capacity of every American to increase output constantly. Can they?
Lethargic Europe needs investment jolt
Wolfgang Munchau (FT) Jun 29, 2014
If you want to solve a demand problem, giving the banks more money for lending is surely not the answer.
Let Them Eat Cash
Christopher Blattman (NYT) Jun 29, 2014
Help the poor by giving them money. They won't waste it.
Inequality Is Not Inevitable
Joseph E, Stiglitz (NYT) Jun 29, 2014
Inexorable laws of economics aren't tearing us apart. Our policies are.
The business cycle, RIP?
Robert J. Samuelson (WP) Jun 29, 2014
Smoothing out the economy may bring long-term risks.
Revisionist powers drive world’s crises
Gideon Rachman (FT) Jun 30, 2014
There has been no definitive break with the US-dominated global system yet China looks to be the challenger and, unlike Russia, it is a rising power.
Give geniuses reason to better our lives
John Llewellyn (FT) Jun 30, 2014
It should not take a calamity to make us motivate inventors, engineers and scientists to unleash their talents to improve our lives.
A ‘third arrow’ will fell Japan’s demons
Shinzo Abe (FT) Jun 30, 2014
We know that there can be no fiscal consolidation without economic revitalisation – which is why structural reforms are so important.
A Win-Win Possibility for China-U.S. Trade
Charlene Barshefsky and Long Yongtu (WSJ) Jun 30, 2014
Bilateral investment treaty talks on July 9-10 could pay big dividends.
Why Timid Reforms of Central Banks Won’t Work
Frank Hollenbeck (Mises Daily) Jun 30, 2014
The Federal Reserve System of central banking was a response to the financial panics of 1903 and 1907 that rocked the US financial system. One of the key objectives, if not the only real one, was to counterbalance the nefarious nature of fractional reserve banking. We now have experienced a century of living with a central bank and we must only conclude that it has failed as a counterbalance while making fractional reserve banking an even bigger, more nefarious master. The evidence is clear and reform of the system is not the answer. Only the abolition of this institution will begin to set our economic system on the right path.
Geopolitical Risks Cloud Future of Russian Economy
IMF Survey Jun 30, 2014
Russia’s economy continued its slow pace of growth in 2013, reflecting pre-existing structural problems and the fallout of geopolitical tensions with Ukraine.
Listen to the World's Central Bank
Leonid Bershidsky (Bloomberg View) Jun 30, 2014
Bank for International Settlements chief Jaime Caruana has renewed calls for tighter monetary policy. It's time his warnings were heeded.
A French Cure
Jean Pisani-Ferry (Project Syndicate) Jun 30, 2014
France is widely regarded as a country that has failed to embrace globalization or to modernize its economic and social model. Can it map out a way forward and rebuild prosperity?
The World’s Central Banker
J. Bradford DeLong (Project Syndicate) Jun 30, 2014
Those who fear that the Federal Reserve's monetary approach has greatly deepened the US economy’s malaise have lost the domestic policy argument. But there is another policy argument that needs to be joined, because the Fed's responsibility is global in nature.
The Lawless Sea
Andrés Velasco (Project Syndicate) Jun 30, 2014
The ocean is our planet’s life-support-system, keeping it healthy and productive. But overfishing and pollution are causing tremendous damage, and there is virtually no governance or rule of law to prevent it.
Koichi Hamada (Project Syndicate) Jun 30, 2014
Over the last 18 months, the first and second "arrows" of Abenomics – expansionary monetary and fiscal policies – have achieved considerable success in spurring Japan’s economic renewal. Now it is time for Abe to launch his third and final arrow: an ambitious reform package focused on reducing barriers to growth for businesses.
Escaping the Bear Hug
Merkhat Sharipzhan (Project Syndicate) Jun 30, 2014
Three former Soviet republics – Georgia, Moldova, and Ukraine – have now signed association agreements with the European Union, despite Russia’s sometimes brutal attempts to obstruct the process. It would be naive to think that Russia will give up so easily.
Housing capital and Piketty’s analysis
Odran Bonnet, Pierre-Henri Bono, Guillaume Camille Chapelle & Étienne Wasmer (VoxEU) Jun 30, 2014
Thomas Piketty’s claim that the ratio of capital to national income is approaching 19th-century levels has fuelled the debate over inequality. This column argues that Piketty’s claim rests on the recent increase in the price of housing. Other forms of capital are, relative to income, at much lower levels than they were a century ago. Moreover, it is rents – not house prices – that should matter for the dynamics of wealth inequality, and rents have been stable as a proportion of national income in many countries.
Chile: Limits to growth
Benedict Mander and John Paul Rathbone (FT) Jul 1, 2014
The country’s economic ‘miracle’ hangs in the balance as President Michelle Bachelet tackles social inequality with controversial reforms.
Bad advice from Basel’s Jeremiah
Martin Wolf (FT) Jul 1, 2014
The Bank for International Settlements’ recommendations for post-crisis policies contain serious flaws.
Moscow must build a nation not an empire
Dmitri Trenin (FT) Jul 1, 2014
Now Russia has Crimea, it needs people not land. It should think of the Eurasian Union not as an EU2 but as a kind of Nafta.
How Government Forces the Poor Into Black Markets
Peter St. Onge (Mises Daily) Jul 1, 2014
From the left we often see tension between those who want to help the poor, and those who want to help the government. Onerecent example of this is the proposal to ban cash forwarded by Harvard’s Ken Rogoff.
A misleading debate
Robert J. Samuelson (WP) Jul 1, 2014
The congressional fuss over the renewal of the Export-Import Bank’s charter is political grandstanding.
Goldman Sachs Got Lost in Its Own Dark Pool
Matt Levine (Bloomberg View) Jul 1, 2014
Maybe I am naive about data analysis, but I feel like (1) lots of people could be checking whether there's latency arbitrage and (2) no one does.
Ex-Im Bank Pays the U.S. Back
Noah Smith (Bloomberg View) Jul 1, 2014
The Export-Import Bank helps U.S. businesses sell overseas, counters subsidies that other government offer their businesses and doesn't cost taxpayer.
Markets, Sprinkled With Fairy Dust
Mohamed A. El-Erian (Bloomberg View) Jul 1, 2014
Mohamed El-Erian is worried that supportive monetary policy has made investors comfortable with high returns, even though he think that financial markets may be sprinkled with the "fairy dust of illusionary riches".
Gouging the Gauchos
Nouriel Roubini (Project Syndicate) Jul 1, 2014
Like individuals and private firms that rely on bankruptcy procedures to reduce an excessive debt burden, countries sometimes need orderly debt restructuring or reduction. But the ongoing legal saga of Argentina’s fight with holdout creditors shows that the international system for orderly sovereign-debt restructuring may be broken.
The tipping over of TPP
Jayant Menon (VoxEU) Jul 1, 2014
The Trans-Pacific Partnership (TPP) is taking a long time to conclude. This column argues that the TPP agenda, unlike the Doha round, is more ambitious and controversial. Many see it as skewed in favour of one country – the US. There are fears that even the US may lose interest in the Partnership without the fast-track authority given by the current Congress. The only useful way forward is for countries to take matters in their own hands.
The Great Recession’s long-term damage
Laurence Ball (VoxEU) Jul 1, 2014
Whereas textbook macroeconomic theory suggests that output should return to potential after a recession, there is mounting evidence that deep recessions have highly persistent effects on output. This column reports estimates of the long-term damage caused by the Great Recession. In most countries in the sample, the loss of potential output – 8.4% on average – has been almost as large as the loss of actual output. In the countries hit hardest by the recession, the growth rate of potential output is much lower today than it was before 2008.
The New Casinos – Emerging Markets
Anthony Rowley (YaleGlobal) Jul 1, 2014
New casinos? Wall Street re-labeled developing nations as emerging markets for investors
Does Innovation Lead to Prosperity for All?
Various (TIE) Jul 1, 2014
The word “innovation” has become the new mythical silver bullet to fix the world economy. But will innovative breakthroughs raise real income for average working families?
Mario the Magician
Wolfgang Münchau (TIE) Jul 1, 2014
He will either succeed or fail spectacularly.
Finding bargains will be tough after QE
Robert Parker (FT) Jul 2, 2014
Approach to asset management will have to change where catalysts that have spurred market rallies are dissipating.
WSJ Jul 2, 2014
Foreign investment in France has dropped 94% over the last decade.
Dollars trump democracy
Harold Meyerson (WP) Jul 2, 2014
For Western companies, the focus on China has just one value.
Piketty with Chinese Characteristics
Andrew Sheng and Xiao Geng (Project Syndicate) Jul 2, 2014
In Capital in the Twenty-First Century, Thomas Piketty argues that capitalism aggravates inequality through several mechanisms, all of which are based on the notion that the return on capital falls less quickly than growth in income. This framework fits China’s recent experience well, and thus merits closer examination.
Productivity and development: Competitive services can help, but can’t do everything
Martin Wermelinger (OECD Insights) Jul 2, 2014
Strong growth over much of the past decade, particularly in China, has substantially boosted developing countries’ share of the global economy. In 2010, the share of global GDP of non-OECD countries overtook that of OECD countries, when measured in terms of purchasing power parity. But will this process of “shifting wealth” allow these countries to eventually converge with advanced country per capita incomes?
Why Europe needs two euros, not one
Jacques Melitz (VoxEU) Jul 2, 2014
As the Eurozone cautiously implements stabilising reforms, Germany is forced to go further with concessions than it would prefer. This column suggests that it would be beneficial for discontented members to consider the formation of a second monetary union. The second euro can be constructed better than the first, bringing the discontented members exchange-rate adjustments relative to Germany, and avoiding competitive devaluations.
Banque de France’s 1889 ‘lifeboat’ bank rescue
Pierre-Cyrille Hautcoeur, Angelo Riva & Eugene N. White (VoxEU) Jul 2, 2014
The key challenge for lenders of last resort is to ameliorate financial crises without encouraging excessive risk-taking. This column discusses the lessons from the Banque de France’s successful handling of the crisis of 1889. Recognising its systemic importance, the Banque provided an emergency loan to the insolvent Comptoir d’Escompte. Banks that shared responsibility for the crisis were forced to guarantee the losses, which were ultimately recouped by large fines – notably on the Comptoir’s board of directors. This appears to have reduced moral hazard – there were no financial crises in France for 25 years.
Africa: On the frontier
Katrina Manson (FT) Jul 2, 2014
Investors chasing high returns are prepared to overlook danger, poor governance and creaking infrastructure in the continent’s more remote markets.
History tells us not to cling on to the past
Philip Stephens (FT) Jul 2, 2014
Leaders unwilling to confront the world as it is becoming must not simply hang on to what they know.
‘Dragon kings’ lurk under market calm
Ralph Atkins (FT) Jul 2, 2014
In market crashes, the trigger can be miscalculations by a financial institution or a change in sentiment towards an asset class.
WTO: Farm Trade Negotiators Confront Gulf in Expectations
Bridges, Volume 18, Number 24 Jul 3, 2014
Negotiators must clarify in the coming months what agricultural concessions they can make if progress is to be achieved on wrapping up the Doha Round talks, the chair of the WTO's farm trade negotiations urged last week.
UN Group Revises Sustainable Development Goals "Zero Draft" Ahead of Final Session
Bridges, Volume 18, Number 24 Jul 3, 2014
The co-chairs of a UN working group charged with drafting recommendations for a set of sustainable development goals (SDGs) have released a revised version of a "zero draft" text to be considered at the group's final session later this month.
From the Unipolar Moment to a Multiplex World
Amitav Acharya (YaleGlobal) Jul 3, 2014
New World order emerges, one that requires cooperation and ability to build regional ties
State of Imbalance
Benjamin Miller (FA) Jul 3, 2014
Why countries break up.
Germany and the future of the euro
Joshua Aizenman (VoxEU) Jul 3, 2014
After a promising first decade, the Eurozone faced a severe crisis. This column looks at the Eurozone’s short history through the lens of an evolutionary approach to forming new institutions. German dominance has allowed the euro to achieve a number of design objectives, and this may continue if Germany does not shirk its responsibilities. Germany’s resilience and dominant size within the EU may explain its ‘muddling through’ approach to the Eurozone crisis. Greater mobility of labour and lower mobility of under-regulated capital may be the costly ‘second best’ adjustment until the arrival of more mature Eurozone institutions.
Benjamin Kunkel (LRB) Jul 3, 2014
Capitalism can dispense with democracy more easily than with profits. A question for the century ahead is how far it will minimise the former in seeking to maximise the latter.
Has GDP outgrown its use?
David Pilling (FT) Jul 4, 2014
Governments and the media obsess about it while statisticians endlessly fiddle – but what is the real point of GDP and can it ever be accurately measured?
The Middle East: The tragedy of the Arabs
Economist Jul 5, 2014
A civilisation that used to lead the world is in ruins—and only the locals can rebuild it.
Unemployment: Labour pains
Sarah Gordon, Claire Jones and Peter Wise (FT) Jul 6, 2014
Despite signs of a eurozone recovery, economists fear the crisis has left a permanent scar on the continent’s job market.
Put US foreign policy back on the pitch
Lawrence Summers (FT) Jul 6, 2014
A failure to engage effectively with global economic issues is a failure to mount a strong forward defence.
‘Unhappy Union’, by John Peet and Anton La Guardia
Ferdinando Giugliano (FT) Jul 6, 2014
A convincing diagnosis of the eurozone’s flaws presents prescriptions that are useful if at times fanciful.
China takes senior role in trade talks
Shawn Donnan (FT) Jul 6, 2014
Country is starting to take a more proactive role in the WTO talks and to put distance between itself and the other big emerging economies.
Fund managers linked to systemic risk
John Authers (FT) Jul 6, 2014
The critical question now is whether fund managers amplify market cycles, or damp them. If it is the former, then they contribute to systemic risk.
Our Mismeasured Economy
Lew Daly (NYT) Jul 6, 2014
Standard G.D.P. doesn’t fully account for the role of government.
Puerto Rico's Borrowing Bubble Pops
Mary O'Grady (WSJ) Jul 6, 2014
Moody's measure of 'expected default' for Puerto Rico is higher than Argentina and Venezuela.
R&D internationalisation during the Global Crisis
Bernhard Dachs & Georg Zahradnik (VoxEU) Jul 6, 2014
The Global Crisis brought a halt to three decades of R&D internationalisation, in which foreign firms’ share of total R&D expenditure had increased in almost all countries where data is available. However, this column argues that the crisis did not lead to a new global distribution of overseas R&D expenditure, despite the erosion of the EU’s share. The persistence of R&D expenditure is attributed to the costs of relocating R&D and to the autonomy of foreign subsidiaries.
Piketty’s two laws
Ton van Schaik (VoxEU) Jul 6, 2014
Piketty’s book “Capital in the 21st century” has gained popularity with its finding of a growing gap between wage earners and capital owners. This column presents a test to the two main laws in Piketty’s book. The attractiveness of these two laws is in their simplicity, but so is their limitation. Piketty neglects investment replacement and depreciation.
Brazil’s brilliance is also a curse
Gideon Rachman (FT) Jul 7, 2014
Footballing genius has sometimes seemed to serve not as an inspiration to genius in other areas of life – but as an alternative.
Argentina has to talk to holdouts
Jay Newman (FT) Jul 7, 2014
A debt settlement would be affordable – and it would attract investment, boosting the country’s economic prospects.
Punishing foreign banks could backfire
Martin Arnold (FT) Jul 7, 2014
Some investors wonder if the US is going too far in using financial regulation to pursue foreign policy aims.
End to China property boom barely begun
George Magnus (FT) Jul 7, 2014
China is probably in the first stage of a denouement of the property- and construction investment-led growth model of the last 15 years.
Europe’s Debt Wish
Kenneth Rogoff (Project Syndicate) Jul 7, 2014
It is difficult to see how Europe can revive economic growth without significant debt restructuring or rescheduling. But Europe’s politicians seem utterly unable to contemplate this scenario, thus placing a huge burden on the ECB.
Revisiting the pain in Spain
Paul De Grauwe (VoxEU) Jul 7, 2014
There has been a stark contrast between the experiences of Spain and the UK since the Global Crisis. This column argues that although the ECB’s Outright Monetary Transactions policy has been instrumental in reducing Spanish government bond yields, it has not made the Spanish fiscal position sustainable. Although the UK has implemented less austerity than Spain since the start of the crisis, a large currency depreciation has helped to reduce its debt-to-GDP ratio
Globalisation, job security, and wages
Kerem Cosar, Nezih Guner & James R Tybout (VoxEU) Jul 7, 2014
Trade liberalisations are often accompanied by labour market reforms, making it difficult to isolate their effects. This column discusses the effects of trade liberalisation, globalisation, and labour-market reforms on the Colombian labour market. Reduced trade frictions increased cross-firm wage inequality and shifted the firm-size distribution rightward, with offsetting effects on overall wage inequality. Average income increased, but the gains were concentrated among employees of large, productive firms with access to export markets. Greater trade openness also increased job turnover.
In Bulgaria, Corruption and Mistrust Turn Promise Into Pain
Jack Ewing and Georgi Kantchev (NYT) Jul 8, 2014
Bank runs and political instability have cast a shadow on the future of the European Union’s poorest member state.
France lacks authority to depose dollar
Barry Eichengreen (FT) Jul 8, 2014
The French government failed to detect the violation of international norms by BNP Paribas, one of its biggest banks – or worse, did not try.
Pimco: Lex in-depth
Oliver Ralph (FT) Jul 8, 2014
Allianz has done well from its acquisition of Bill Gross’s firm. But after 15 years the German insurer should consider spinning it off.
How the Everything Boom Might End: The Good, the Bad and the Ugly
Neil Irwin (NYT) Jul 8, 2014
With nearly every major asset class expensive by historical standards, it's natural to wonder what will happen next.
Shanghai free-trade zone reforms falter
Michael Lelyveld (AT) Jul 8, 2014
Nine months after the launch of Shanghai's free-trade zone to great fanfare, China's showcase economic initiative seems to have landed with a thud.
What Enabled Bretton Woods?
Harold James and Domenico Lombardi (Project Syndicate) Jul 8, 2014
The Bretton Woods conference created a global monetary framework that served as a cornerstone of a peaceful global political order for at least 30 years. What was the key to its effectiveness, and how can its success be replicated to create a new international monetary system?
India is shackled on state sell-offs
Swaminathan Aiyar (FT) Jul 9, 2014
What the country really needs is a right to privatise, but this right is needed not by its citizens but by its government.
Fear factor will return to haunt Yellen
Axel Merk (FT) Jul 9, 2014
Fed’s policies have created a low volatility environment and with it equity price appreciation that Ms Yellen insists is not the Fed’s concern.
Why Piketty's Wealth Data Are Worthless
Alan Reynolds (WSJ) Jul 9, 2014
Private retirement plans rose to $12.4 trillion in 2012 from $875 billion in 1984. None of it is reported on tax returns.
Our Financial Crisis Amnesia
Alex Pollock (WSJ) Jul 9, 2014
Remember the S&L crisis? Nobody else does either. And we'll soon forget about 2008 too.
Only Dummies Ignore Foreign Brainpower
Noah Smith (Bloomberg View) Jul 9, 2014
The U.S. needs to let in more high-skilled foreign workers -- and low-skilled ones too.
The Upside of Brazil's Defeat
Mohamed A. El-Erian (Bloomberg View) Jul 9, 2014
Brazil's devastating defeat in the World Cup could improve the prospects for much-needed economic reform
Is There A Right To Secede?
Peter Singer (Project Syndicate) Jul 9, 2014
The EU has brought 28 countries into a closer political and economic union. Paradoxically, it has also made it more feasible to contemplate the breakup of some of those countries.
Argentina’s Sovereign Bondage
Anne Krueger (Project Syndicate) Jul 9, 2014
Sovereign debt has been back in the news recently, this time because of a US Supreme Court ruling concerning Argentine debt. As a result of the ruling, a complicated issue is likely to become even more so.
A Real Fix for Credit Ratings
Robert E. Litan & Ann Rutledge (Brookings) Jul 9, 2014
An innovative new proposal calls for a single, public structured finance credit scale to fix the broken credit ratings process that contributed to the financial crisis.
China's Challenge in Africa: Avoid Blame of Neo-Colonialism
Gregory Chin (YaleGlobal) Jul 9, 2014
China modifies its south-south narrative for Africa and recognizes the continent as competitor.
An ever closer union?
Bruno Maçães (VoxEU) Jul 9, 2014
The debate on the future of the European Union is in full swing. In this column, Bruno Macaes – the Portuguese Minister for Europe – stresses the importance of policy coordination in achieving better integration. One way to do so is via a fiscal union, but this creates unity at the expense of diversity. A second way involves formal contracts and partnerships. But to make this approach less rigid, the political dialogue does not need to be formalised in actual contracts.
Trade, regional development, and institutions: Lessons from Brazil
André Carlos Martínez, Aldo Musacchio & Martina Viarengo (VoxEU) Jul 9, 2014
Institutions are known to play a powerful and enduring role in countries’ divergent levels of economic development. This column presents evidence that institutions matter for within-country inequality, too. In Brazil, changes in export prices and export tax revenues led to an increase in education spending in states that experienced commodity booms, which increased the number of schools and improved educational outcomes such as literacy rates. However, the effect was limited in states where slavery was predominant in colonial times.
Financial preparations leading up to WWI
Harold James (VoxEU) Jul 9, 2014
The 1907 panic affected the world, demonstrating the fragility of the international financial system. This column discusses the steps the US and Germany took in fortifying their financial systems following 1907. There is a link between the financial crisis and the escalation of diplomatic relations that led to war in 1914. And this link has implications for today as the world is recovering from the 2008 crisis.
Worst threat to euro is a lack of trust
Philip Stephens (FT) Jul 10, 2014
The argument between Italy’s Matteo Renzi and Germany’s Angela Merkel asks a question at the heart of the future of Europe’s single currency.
We risk crisis by indulging China’s banks
Joe Zhang (FT) Jul 10, 2014
The only realistic way in which to contain the Chinese credit bubble is to starve the banks of new capital.
Euro strength defies Draghi’s plans
Ralph Atkins (FT) Jul 10, 2014
The ECB is in a difficult position, and may not see real weakening of the euro until the Fed adopts policies that strengthen the dollar.
The folly of central banks’ tightening
Lorenzo Bini Smaghi (FT) Jul 10, 2014
While euro states implemented a sharper fiscal contraction than other major economies they have not been rewarded by a more accommodating monetary policy.
"Green Goods" Trade Talks Kick Off in Geneva
Bridges, Volume 18, Number 25 Jul 10, 2014
A group of 14 WTO members – including the US, EU, and China – formally launched negotiations on Tuesday for a new agreement aimed at liberalising trade in environmental goods.
WTO Members Work to Bridge TFA Divide Before July Deadline
Bridges, Volume 18, Number 25 Jul 10, 2014
The divide among WTO members over the implementation of the new Trade Facilitation Agreement (TFA) has continued to persist in recent weeks, despite an end-July deadline to agree on a protocol of amendment that would bring the deal into the organisation's overall legal framework.
WTO Appellate Body Issues Mixed Ruling in US-China Trade Remedy Case
Bridges, Volume 18, Number 25 Jul 10, 2014
The WTO Appellate Body released its final ruling on the US' Tariff Act Amendment – known otherwise as the "GPX Legislation" – this week, finding that there was not enough factual analysis in a previous panel decision to determine whether the law violates Washington's international trade obligations.
How to Tame Argentina's Debt Vultures
Mac Margolis (Bloomberg View) Jul 10, 2014
Brazil may be out of the World Cup, but it can teach Argentina something about dealing with debt holders.
Hang On, Portugal, Europe's Crisis Isn't Over
Bloomberg View Jul 10, 2014
With trouble brewing at Espirito Santo International, Europe's leaders must find the political will to recapitalize the financial system and address the flaws in their currency union.
The End of `Made in Japan'?
William Pesek (Bloomberg View) Jul 10, 2014
Economists in Japan are clamoring for another jolt of monetary audacity after Prime Minister Shinzo Abe's ill-advised tax hike in April. They're right -- the Bank of Japan should act.
Central Banks, In a Corner
Mark Gilbert (Bloomberg View) Jul 10, 2014
The Federal Reserve and other central banks are worried that investors are taking too much risk, which is exactly the behavior their policies were designed to encourage.
Currency Headwinds? You Mean Price War
Leonid Bershidsky (Bloomberg View) Jul 10, 2014
Multinationals throughout the developed world are complaining of "currency headwinds" -- possibly because policymakers are engaged in a race-to-the-bottom currency war.
Markets Aren't Immoral
Clive Crook (Bloomberg View) Jul 10, 2014
How to think about morals and markets.
Is the World Bank Losing Asia?
Mohamed A. El-Erian (Bloomberg View) Jul 10, 2014
Feeling underserved by the IMF and the World Bank, Asia is starting to go its own way.
The Three-Track Middle East
Mohamed A. El-Erian (Project Syndicate) Jul 10, 2014
Rather than achieving internal convergence, the Middle East is now following at least three distinct paths, and already-large differences will persist and grow for a number of years to come. The main question is what will become of countries like Egypt, which can end up following the path of Syria or of the UAE.
The Old World’s New Roles
Joseph S. Nye (Project Syndicate) Jul 10, 2014
China’s rise has raised many questions for the West, with some wondering whether it is set to usurp a struggling Europe’s global leadership role. But Europe – which remains the world’s largest economic entity, a leader in multilateral institutions, and a champion of values like human rights – still has a critical role to play.
The Renminbi’s Grand Tour
Barry Eichengreen (Project Syndicate) Jul 10, 2014
By permitting two clearing banks to access renminbi onshore, Chinese officials are effectively subsidizing their London and Frankfurt operations and encouraging direct sterling and euro trades. But London and Frankfurt would be reckless to bank on rapid growth in their renminbi transactions.
A Class of Its Own
Dani Rodrik (Project Syndicate) Jul 10, 2014
If today's super-rich believe that they no longer need to rely on their national governments, they are making a huge mistake. The reality is that the stability and openness of the markets that produce their wealth have never depended more on government action.
Does He Pass the Test?
Paul Krugman (NYRB) Jul 10, 2014
A review of Timothy Geithner’s Stress Test: Reflections on Financial Crises.
How US Investments in Mexico Have Increased Investment and Jobs at Home
Theodore H. Moran and Lindsay Oldenski (PIIE) Jul 11, 2014
Enactment of the North America Free Trade Agreement (NAFTA) 20 years ago was accompanied by dire predictions that an increase in US investment in Mexico would lead to job losses and investment reduction at home. The rhetorical highpoint for this concern was captured by H. Ross Perot's assertion in the 1992 presidential campaign that NAFTA would create a "giant sucking sound" as US jobs and investors rushed south of the border.
The Message of Espirito Santo
Mohamed A. El-Erian (Bloomberg View) Jul 11, 2014
Trouble at the Portuguese bank reflects a deeper economic malaise.
Malthus wrong again says OECD
Patrick Love (OECD) Jul 11, 2014
Even if you know nothing about the French Revolution, you’ve probably heard of Marie-Antoinette’s reaction on being told the people had no bread: “Let them eat cake”.
Another Reason Not to Fear Inflation
Roberto Rigobon (Bloomberg View) Jul 11, 2014
The Fed shouldn't worry too much about the recent surge in consumer prices. It's most likely a catch-up after a tough winter.
External integration and development: Evidence from Argentina
Pablo Fajgelbaum & Stephen Redding (VoxEU) Jul 12, 2014
External integration is often viewed as an important driver of economic development, but most existing studies use aggregate data. This column present evidence from a natural experiment provided by Argentina’s integration into the world markets in the late 19th century. The findings point that proximity to trade centres is associated with employment density, high lands rates relative to wages, and structural transformation away from agriculture.
How central banks can deal with bubbles
Wolfgang Munchau (FT) Jul 13, 2014
It is a mistake to think that macroprudential regulation is a potent independent monetary policy tool. It is simply a useful supplementary tool.
Economic reform is key to a new Japan
Peter Tasker (FT) Jul 13, 2014
At a time when fresh challenges are emerging it becomes all the more important to give the people a bigger say.
Private equity: A fee too far
Anne-Sylvaine Chassany and Henny Sender (FT) Jul 13, 2014
Regulators are probing conflicts of interest and high fees charged by fund managers to the companies they own.
How to Fix the Credit-Rating System
Clive Crook (Bloomberg View) Jul 13, 2014
Credit-rating companies failed spectacularly during the financial crisis. Here's the solution.
Knowledge elites, enlightenment, and industrialisation
Mara Squicciarini & Nico Voigtländer (VoxEU) Jul 13, 2014
Although studies of contemporary economies find robust associations between human capital and growth, past research has found no link between worker skills and the onset of industrialisation. This column resolves the puzzle by focusing on the upper tail of the skill distribution, which is strongly associated with industrial development in 18th-century France.
The failed policy response to the Global Crisis
Richard Wood (VoxEU) Jul 13, 2014
The Global Crisis triggered a series of medium-term policy changes. This column reviews the effectiveness of some of these monetary, fiscal policies, and internal devaluation policies. Policymakers anchored their strategic thinking in paradigms that became inapplicable to the new problems. An alternative set of macroeconomic policies is suggested.
FT series: A world without water
Pilita Clark (FT) Jul 14, 2014
The first instalment of a series on the threat of water scarcity describes how companies are bearing large costs for a resource long considered to be free.
Capital markets can help Europe
Hugo Dixon (FT) Jul 14, 2014
Europe needs a modern financial system to fund jobs and growth, and that such an initiative would help keep Britain in the EU.
It is pensioners who are getting richer
Robert Joyce (FT) Jul 14, 2014
This period will not be defined by inequality between rich and poor but by the differences between old and young.
Investors beware: economists at large
Mohamed El-Erian (FT) Jul 14, 2014
Analytical underpinnings of risk-taking are far from robust.
BRICS: Toward a Rio Consensus
Kevin P. Gallagher (Globalist) Jul 14, 2014
The BRICS countries set out to overcome Western domination and the legacy of the "Washington Consensus."
Eurozone: More Reforms Needed to Strengthen Recovery
IMF Survey Jul 14, 2014
The euro area is recovering, but policymakers must address deep-seated obstacles to growth to ensure a strong and durable recovery, according to the IMF’s latest report on the currency area.
The financial drawbacks of being an emerging economy
Markus Jaeger (DB Research) Jul 14, 2014
The US today, like Britain under the gold standard, acts as the world’s banker. It is the most important source of international liquidity, leading countries to hold USD-denominated assets. Not only does this allow the US and especially the US Treasury to tap into a large investor base ready to finance current account and fiscal deficits at a lower cost. To the extent that the demand for international liquidity and USD assets exceeds the US balance-of-payments deficit, it allows the US to recycle short-term foreign liabilities into long-term assets.
Containing the Resource Crisis
Alejandro Litovsky (Project Syndicate) Jul 14, 2014
Competition for scarce resources is sorely testing global governance and cooperation. But even in the absence of overarching global legal frameworks, it is possible to maintain a sense of common security if the terms of resource investments are founded on long-term political understanding and commercial relationships.
The Euro "recovery" in Real Time (in case you missed it)
John Weeks (Pieria) Jul 14, 2014
Has recovery come to the largest countries of the euro zone? No, because austerity has depressed public sector demand.
How to Spark Another 'Great Moderation'
John Taylor (WSJ) Jul 15, 2014
A new House bill would encourage the Fed to abide by monetary policy rules.
Energy: The indispensable country
Ed Crooks and Anjli Raval (FT) Jul 15, 2014
The US shale revolution has averted the threat of a global oil crisis caused by growing levels of conflict and instability around the world.
Malaysian credibility rests on bank union
Jeremy Grant (FT) Jul 15, 2014
The southeast Asian nation has an opportunity via its planned three-way bank merger to demonstrate disclosure and governance that is world class.
For Proof Wall Street Is Changing, Look at Citigroup's Numbers
Neil Irwin (NYT) Jul 15, 2014
It’s easy to be cynical about Wall Street reform. Nothing ever changes. Well, maybe.
BRICS against Washington consensus
Pepe Escobar (AT) Jul 15, 2014
Brazil, Russia, India, China, and South Africa come together today to play top class geopolitical ball with the launch a development bank for the emerging world. The new institution has the power to leave the World Bank in the dust, never mind challenge the order of the Washington consensus that's been received wisdom since the end of World War II.
Going Hard on China Isn't Easy
William Pesek (Bloomberg View) Jul 15, 2014
Australia's strained relations with China shows the difficulty of being adversarial while being economically dependent.
The End of the World Bank?
Leonid Bershidsky (Bloomberg View) Jul 15, 2014
The BRICS nations are committing more resources to their new financial institutions than to the IMF and World Bank. That is a real threat to the established financial order.
Booming Until It Hurts?
Robert J. Shiller (Project Syndicate) Jul 15, 2014
In recent months, concern has intensified among the world’s financial experts and news media that overheated asset markets – real estate, equities, and long-term bonds – could lead to a major correction and another economic crisis. The general public seems unbothered, but the experts' concern is healthy.
Creative Destruction at Work
Carl Benedikt Frey (Project Syndicate) Jul 15, 2014
Despite the diffusion of big-data-driven technologies, research suggests that labor will continue to have a comparative advantage in social intelligence and creativity. Government development strategies should therefore focus on enhancing these skills, so that they complement, rather than compete with, computer technologies.
The Inverted World of Mobile Capital
Laura Tyson (Project Syndicate) Jul 15, 2014
In recent months, a flurry of American companies have sought to move their legal headquarters abroad by acquiring or merging with foreign companies. Such deals reflect the deep flaws in the US corporate tax system.
The BRICS Don't Need Their Own Bank
Bloomberg View Jul 15, 2014
To win their fight for the status they deserve, the BRICS must choose their targets more shrewdly.
The TARGET2 controversy
Livia Chitu, Barry Eichengreen, Arnaud Mehl & Gary Richardson (VoxEU) Jul 15, 2014
The European debt crisis has triggered debates over the TARGET2 imbalances. This column discusses gold flows across Federal Reserve districts and points to the similarity of such operations to liquidity flows from Eurozone’s ‘core’ to its ‘periphery’. Though the institutional setting in Europe differs, important lessons can be drawn from the US example. Cooperation between regional Reserve Banks was essential for the cohesion of the US monetary union. Such cooperative spirit will be important for the smooth operation of the Eurozone.
Comprehensive gains from trade: Non-price factors
Konstantins Benkovskis & Julia Woerz (VoxEU) Jul 15, 2014
Import price statistics may not be a reliable indicator of welfare gains. They must adequately reflect the fact that consumers value variety, and that consumer tastes and product quality change over time. This column evaluates existing findings, and introduces new results for the four largest EU economies – including evidence of higher consumer welfare gains than suggested by official import prices for the period from 1995 to 2012.
A new paper suggests bond investors need to be careful reaching for yield
Ian Kelly (Pieria) Jul 15, 2014
If the Leibowitz, Bova and Kogelman paper is right, you can only have any sort of certainty over a long – sometimes a very long – time horizon.
The Price of Poverty
Johannes Haushofer (FA) Jul 15, 2014
Psychology and the cycle of need.
Emerging economies: Taking a stand
Robin Harding, Joseph Leahy and Lucy Hornby (FT) Jul 16, 2014
The Brics countries are using their growing economic might to create their own development bank. But critics warn that the group is bound more by frustration than shared ideals.
Renewed crisis stalks E European banks
Neil Buckley (FT) Jul 16, 2014
Greater risk seems to exist for eastern European banks than further west, in particular the problem of lingering bad loans.
Weak US + slowing China = big EU trouble
Edouard Carmignac (FT) Jul 16, 2014
Faced with high debt levels, the EU peripheral countries’ only option is to try to ride the coat-tails of more buoyant economies elsewhere.
Protectionists Steel Washington
WSJ Jul 16, 2014
New tariffs will hurt U.S. manufacturers.
Investors Heed the Fed at Their Peril
Marc Sumerlin and Phillip Swagel (WSJ) Jul 16, 2014
If booming asset prices go bust, the central bank's credibility would be severely damaged.
A Role for the World Bank in Cleaning Up Coal
Nigel Purvis (Brookings) Jul 16, 2014
Can the World Bank help clean up coal power plants in middle-income countries?
China as Greece’s Savior
Robert Hardy (Globalist) Jul 16, 2014
How the upcoming privatization round in the eurozone crisis helps China expand its foothold in Europe.
BRICS new alliance speaks volumes
Brian Caplen (Banker) Jul 16, 2014
By establishing the New Development Bank, the BRICS economies of Brazil, Russia, China, India and South Africa have made their biggest push yet towards redressing the economic world order.
Slow-Growth Forecasts Are Wrong
A. Gary Shilling (Bloomberg View) Jul 16, 2014
When an economic phenomenon, such as today's persistently slow growth, lasts long enough, economists like to develop theories to show that it will last forever. They are often mistaken.
What to Fear If China Crashes
William Pesek (Bloomberg View) Jul 16, 2014
If China has a credit crisis, it might send shock waves around the world.
A Better Way to Fight Inequality
Clive Crook (Bloomberg View) Jul 16, 2014
Pounding the plutocracy won't help the disadvantaged. What will?
Getting Globalization Right
Ian Goldin (Project Syndicate) Jul 16, 2014
Over the last quarter-century, rapid technology-driven globalization has contributed to the fastest increase in incomes and population in history. But globalization has also unleashed a new form of systemic risk – one that threatens to devastate political institutions and national economies.
Members only: Embracing diversity in the WTO
Bernard Hoekman & Petros C. Mavroidis (VoxEU) Jul 16, 2014
The proliferation of trade ‘clubs’ indicates that governments are keen on engaging in trade liberalisation. This column argues that the creation of new trade clubs under the umbrella of the WTO is inevitable. Such issue-specific (plurilateral) agreements keep the cord with the WTO tight, while allowing countries to cooperate on issues outside of WTO’s grounds.
New price adjustments reshape the world, yet again
Bettina Aten & Angus Deaton (VoxEU) Jul 16, 2014
When the international comparison project published its latest estimates of purchasing power parity exchange rates in April there was some consternation. Poor countries became richer overnight, world GDP increased, and global income inequality was revised downwards. Alas, no one stopped being poor. This column digs into the numbers to see if we’ve been consistently underestimating the relative size of poorer economies and overestimating global poverty and inequality.
Spain's Economic Reforms and the IMF
WSJ Jul 17, 2014
Leave it to the austerity scolds to call for tax increases just as Spain begins to grow.
An Unnecessary Fix for the Fed
Alan S. Blinder (WSJ) Jul 17, 2014
Legislation in pursuit of 'transparency and accountability' has little to do with either.
Immigration: Life on the line
FT Jul 17, 2014
As the US grapples with a border crisis, FT reporters speak to the immigrants and the Americans who are torn over their fate.
The darker side of Iceland’s recovery
Gillian Tett (FT) Jul 17, 2014
We should remember that ‘emergency’ policy measures that distort the financial world tend to become addictive.
China’s banking threat is overstated
Yukon Huang (FT) Jul 17, 2014
The exposure of the sector to risky activities is more modest than many imply, the real concerns are more in’ wealth management products.
All this talk of Ficc is making me sick
Gary Silverman (FT) Jul 17, 2014
What constitutes good news these days on Wall Street is Masters of the Universe coming down to Earth, slowly.
Xi’s Latin trip puts trade before ideology
John Paul Rathbone (FT) Jul 17, 2014
Washington fears that Chinese president’s visit is about extending sphere of influence to ideological enemies in the region are overblown.
Capital markets still not safe for Greece
Ralph Atkins (FT) Jul 17, 2014
Contagion is still an issue, as displayed by recent woes in Portugal, which has damped down investor enthusiasm for a Greek bond sale.
BRICS Countries Launch New Development Bank
Bridges, Volume 18, Number 26 Jul 17, 2014
Leaders from the BRICS countries – Brazil, Russia, India, China, and South Africa – formally launched a joint international development bank on Tuesday during their annual summit, held this year in the Brazilian city of Fortaleza. Headquartered in Shanghai, the bank will finance infrastructure and sustainability projects in BRICS and other emerging and developing countries.
West African Leaders Formally Endorse EU Trade Pact
Bridges, Volume 18, Number 26 Jul 17, 2014
After over a decade of negotiations, West African leaders formally approved their Economic Partnership Agreement (EPA) with the EU last week during an ECOWAS Heads of States summit in Accra, Ghana. Regional chief negotiators have now been instructed to take immediate action toward launching the signing and implementation processes.
WTO Finds No Acceleration in New Trade Restrictions
Bridges, Volume 18, Number 26 Jul 17, 2014
The pace at which trade restrictions have been introduced by WTO members has shown no notable increases in recent months, according to the latest monitoring report released by the global trade body on 11 July.
The Neo-Mercantilist Hysteria Over US Trade Deficits
Joseph T. Salerno (Mises Daily) Jul 17, 2014
One of the worst effects of modern Keynesian economics is that its total spending (“aggregate demand”) approach to output and employment provides a pseudo-scientific justification for the central error of mercantilism — an error that dates back to the sixteenth century.
Not the worst of times
Fareed Zakaria (WP) Jul 17, 2014
World turmoil is nothing new. But what is producing so much instability today?
Argentina’s Never Ending Crisis
Globalist Jul 17, 2014
Argentina is on the brink of its third major economic crisis in the last 35 years.
The BRICS Safety Net
Bruce Jones & Thomas Wright (Brookings) Jul 17, 2014
The new BRICS development bank will serve as a safety net for members against the risk of U.S. sanctions.
Debunking Misconceptions About Xi Jinping's Anti-Corruption Campaign
Cheng Li & Ryan McElveen (Brookings) Jul 17, 2014
Chinese President Xi Jinping has investigated 182,000 party officials as part of an unprecedented anti-corruption campaign that could positively impact Chinese society.
Espirito Santo: Complexity, Opacity and Moral Hazard
Frances Coppola (Pieria) Jul 17, 2014
Portugal's Espirito Santo Group shows that complex, opaque corporate structures with embedded banks create moral hazard and the risk of fraud.
The BRICS Bank: Now Comes the Hard Part
Vikram Nehru (CEIP) Jul 17, 2014
The BRICS bank is good news for developing countries. If done right, it could change the landscape for multilateral development financing.
Brazil's Rousseff Gets BRICS Boost
Mac Margolis (Bloomberg View) Jul 17, 2014
Is Brazil ready to put its days as a chronic global underachiever behind it?
Trade of the Day: Dabble in World's Most Boring Currency
Mark Gilbert (Bloomberg View) Jul 17, 2014
The Trade of the Day is to soothe your blood pressure by dabbling in the world's most boring currency.
The Real Message of the BRICS Summit
Mohamed A. El-Erian (Bloomberg View) Jul 17, 2014
Global financial management must adjust to a new reality.
Sovereign Debt at Square One
Jeffrey Frankel (Project Syndicate) Jul 17, 2014
The US Supreme Court has barred Argentina from making payments to fulfill debt-restructuring agreements with its creditors unless the 7% of creditors who rejected the agreements are paid in full. While it is hard to cry for Argentina, the ruling sets back the evolution of the international regime for restructuring sovereign debt.
The Other Nigeria
Paul Collier and Acha Leke (Project Syndicate) Jul 17, 2014
Nigeria has been getting a lot of bad press lately. But, while the militant Islamist group Boko Haram’s brutal campaign of kidnappings, bombings, and murder merits international concern, it should not be allowed to obscure Nigeria's considerable achievements – or impede the country's progress toward stable, inclusive economic growth.
Trust and the welfare state: The twin-peaked curve
Yann Algan, Pierre Cahuc & Marc Sangnier (VoxEU) Jul 17, 2014
It is commonly argued that the persistence of large welfare states in Scandinavian countries is due to the trustworthiness of their citizens. This column shows that the relationship between trust and the size of the welfare state is twin peaked. Untrustworthy individuals support generous welfare states because they expect to benefit without bearing the costs, whereas civic-minded individuals only support generous welfare states when surrounded by people they trust.
The Great Income Divide
Kemal Dervis (Project Syndicate) Jul 18, 2014
Thomas Piketty’s bestseller Capital in the Twenty-First Century is fueling heated debate about the relationship between capital accumulation and inequality. But the broader question is whether these debates will produce real solutions to two of the critical problems of our time: income inequality and limited social mobility.
The Trade Delusion
Adair Turner (Project Syndicate) Jul 18, 2014
Many experts fear that rising protectionism is undermining globalization, threatening to impede global economic growth. But slower growth in global trade may be inevitable, and liberalization is decreasingly important.
The Boom Is Coming, and Sooner Than You Think
Gary Shilling (Bloomberg View) Jul 18, 2014
Disagreement with the pessimists who believe that persistently slow growth will be the norm for years to come.
Why Would Anyone Buy Credit Default Swaps on China?
Matt Levine (Bloomberg View) Jul 18, 2014
Or Kazakhstan? Which has no external government debt, but half a billion dollars of net notional CDS outstanding.
Making macroprudential regulation operational
Anil K Kashyap , Dimitri Tsomocos & Alexandros Vardoulakis (VoxEU) Jul 18, 2014
Do the extant workhorse models used in policy analysis support macroprudential and macrofinancial policies? This column argues that this is not the case and describes a new macroprudential model that stresses the special role played by banks. The model also accounts for two, often neglected, key principles of the financial systems. Some of the findings of the model could carry over to other, more general settings that satisfy these two principles.
America’s lost oomph
Economist Jul 19, 2014
The country’s potential growth rate is barely half what it was two decades ago. Here’s how to raise it.
Banks, government bonds, and default
Nicola Gennaioli, Alberto Martin & Stefano Rossi (VoxEU) Jul 19, 2014
There is growing concern – but little systematic evidence – about the relationship between sovereign default and banking crises. This column documents the link between public default, bank bondholdings, and bank loans. Banks hold many public bonds in normal times (on average 9% of their assets), particularly in less financially developed countries. During sovereign defaults, banks increase their exposure to public bonds – especially large banks, and when expected bond returns are high. At the bank level, bondholdings correlate negatively with subsequent lending during sovereign defaults.
Income Inequality Is Not Rising Globally. It's Falling.
Tyler Cowen (NYT) Jul 19, 2014
Though the income gap has widened in many individual nations, it has been shrinking globally for most of the last 20 years.
Europe must hit Russia’s finances
Wolfgang Munchau (FT) Jul 20, 2014
From what we have seen so far, we should not exclude that regarding MH17 we are dealing with a first-order global economic shock.
Indian water is a geopolitical issue
Anjana Ahuja (FT) Jul 20, 2014
The plan to connect rivers with 15,000km of canals and reservoirs to enrich farming prospects and deal with flood water is fraught with difficulties.
A qualified defence of economic complexity
Shawn Donnan (FT) Jul 20, 2014
In ‘The Butterfly Defect’, Ian Goldin and Mike Mariathasan argue that globalisation needs to be made more resilient if it is not to fall prey to systemic risk.
Bets are on equities outperforming bonds
James Mackintosh (FT) Jul 20, 2014
American politicians are paying attention to transatlantic takeovers, although their focus is on revenues the US is losing as groups shift tax base.
Why geopolitics barely trouble investors
Russ Koesterich (FT) Jul 20, 2014
Low market volatility, in spite of events that have in the past caused investors to worry about possible ‘contagion’, is a byproduct of central bank policies.
Africans Open Fuller Wallets to the Future
Nicholas Kulish (NYT) Jul 20, 2014
Across sub-Saharan Africa, consumer demand is fueling the continent’s economies in new ways, driving hopes that Africa will emerge as a success story.
China Is Driving the BRICS Train
Pankaj Mishra (Bloomberg View) Jul 20, 2014
Until China reforms its economy, the BRICS acronym will continue to denote extravagant ambition rather than genuine ability.
The Downside of Efficiency
Mark Buchanan (Bloomberg View) Jul 20, 2014
What looks like efficiency often makes us worse off in ways that are hard for the human mind to grasp.
India: Land-Shackled I
Devesh Kapur, T. V. Somanathan, and Arvind Subramanian (Business Standard/PIIE) Jul 20, 2014
Capital, labor, or land? Which of these is the binding constraint is one diagnostic question India's new government should be asking itself as it seeks to revive the sputtering Indian growth engine.
Asean: Long on optimism
Jeremy Grant (FT) Jul 21, 2014
Eager foreign investors and a growing consumer class are driving the economic rise of the 10-member Association of Southeast Asian Nations Read more >>
Zen and the art of wealth
Bilal Hafeez (FT) Jul 21, 2014
America is the richest civilisation that has ever existed, yet one in which free time is both scarce and difficult to fill.
Fed and markets must try new dance
Henry Kaufman (FT) Jul 21, 2014
Relying on cyclical patterns to judge economic and financial trends may not be as dependable as it once was because of the structural changes in financial markets.
Spain’s export-led recovery loses momentum
Tobias Buck (FT) Jul 21, 2014
Spain’s trade deficit is ballooning once again – rising more than 80 per cent in the first five months of 2014 compared to same period last year.
A dose of rate reality to hit markets
Henny Sender (FT) Jul 21, 2014
Treasury issuance provides the best clues for interest rate direction, although such technicals can be overwhelmed by sentiment.
Did Dodd-Frank Work?
Joe Nocera (NYT) Jul 21, 2014
We really have no way of knowing whether "too big to fail" is still with us until we have another crisis.
Tariffs, Textiles and TTIP
Sabine Muscat (Globalist) Jul 21, 2014
Will the United States and EU turn into one big duty-free zone via TTIP?
Does the World Still Need the World Bank?
Bloomberg View Jul 21, 2014
The World Bank, which fights poverty and income inequality, turns 70 on Tuesday. It needs serious reforms beyond what its president, Jim Yong Kim, is now doing.
The Waste of War
Jeffrey D. Sachs (Project Syndicate) Jul 21, 2014
Organized collective violence in the industrial age is tragedy, disaster, and devastation; it solves no political problems. War has become a continuation not of politics, as Clausewitz thought, but of political failure.
The Transatlantic Growth Gap
Daniel Gros (Project Syndicate) Jul 21, 2014
The key to the economic-performance gap between the US and the EU in the last three years is the resilience of private consumption by American households. How were US households able to reduce their debt burden during a period of high unemployment and almost no wage gains while sustaining consumption growth?
Agglomeration and product innovation in China
Hongyong Zhang (VoxEU) Jul 21, 2014
The Chinese government has been actively promoting innovation via policies such as R&D subsidies, tax relief, and location policies. Since 1995, central and local governments have established more than 100 clusters in over 60 cities. This column presents new evidence on the effect of the concentration of firms on product innovation (new products) in the manufacturing industries.
Corporate governance of banks and financial stability
Luc Laeven & Lev Ratnovski (VoxEU) Jul 21, 2014
Bank distress during the recent crisis caused significant damage to the real economy. Appropriately, the policy response focused on stronger bank supervision and regulation. This column asks if there is a role for improvements in bank corporate governance. Based on the literature the authors suggest that better risk management, regulation of pay, and enhanced market discipline can help make banks safer. However, corporate governance cannot substitute for strong supervision: it can at best provide a helping hand.
John Taylor's Reply to Alan Blinder
John B. Taylor (WSJ) Jul 22, 2014
The Fed's ad hoc departures from rule-based monetary policy has hurt the economy.
Free trade suffers for conservative errors
Adam Posen (FT) Jul 22, 2014
The bogeyman-based approach has failed both the progressive agenda and the US economy as a whole.
Chinese moves trump Fed’s effect on US
Diana Choyleva (FT) Jul 22, 2014
Growth trouble in China may have a much bigger impact on US yields in 2015 and 2016 than the expected pace of US central bank tightening.
Promises of Hope Tarnished by Lack of Change
Damien Cave (NYT) Jul 22, 2014
Even as the president garners international praise for pushing through reforms in energy, education and taxes, voters are less willing to embrace platitudes without true transparency.
A 401(k) for All
Gene B. Sperling (NYT) Jul 22, 2014
Reduce wealth inequality by encouraging saving.
A solution to global corruption
Mark L. Wolf (WP) Jul 22, 2014
The creation of an International Anti-Corruption Court would hold leaders accountable.
Libor Needs More Competition
Darrell Duffie (Bloomberg View) Jul 22, 2014
Fixing Libor will require moving to other benchmarks better tailored to their purposes. This might require a push from regulators.
Michael J. Boskin (Project Syndicate) Jul 22, 2014
The EU has three broad options as it confronts its economic malaise and increasingly frustrated voters. Unfortunately, the most likely option – business as usual, with improvised fixes to mini-crises – is the one least likely to deliver the growth that Europe desperately needs.
The Fed in Denial
Simon Johnson (Project Syndicate) Jul 22, 2014
Senior US Federal Reserve officials seem to have slipped back into their pre-2008 ways, ignoring concerns about dangerous financial-sector behavior. That is not only unfortunate; it is also dangerous, because the Fed’s political position is much more precarious than its leadership seems to realize.
César Gamboa (Project Syndicate) Jul 22, 2014
Peru may be among Latin America’s fastest-growing economies today, but its long-term prosperity is far from certain – not least because its economy is largely dependent on the export of raw materials and hydrocarbons. Worse, though the government recognizes the need to pursue growth-enhancing reform, its approach is all wrong.
The Fertility Conundrum
Karen Buch and Duksoo Kim (Project Syndicate) Jul 22, 2014
It is perhaps inevitable that contraception and population growth are controversial topics, given the many perspectives – economic, social, political, and epidemiological – brought to bear on them. Striking the right balance among these different viewpoints is no easy task – but much depends on getting it right.
The Gallic Heart of Europe
Javier Solana (Project Syndicate) Jul 22, 2014
Perhaps because of its very relevance to the making of Europe, France mistrusts the changes taking place around it – as though the weight of its nationhood were narrowing its horizons. But no country today can remain isolated from globalization, tame it, or lead it alone. So France must look again to Europe and political union.
Partial corporate tax harmonisation in the EU
Agnès Benassy-Quéré, Alain Trannoy & Guntram Wolff (VoxEU) Jul 22, 2014
Tax harmonisation has been controversial since the establishment of the European Economic Community, and corporation tax proposals are currently on the table in the EU. Although tax competition can be beneficial, tax harmonisation could curb tax competition that leads to the under-provision of public goods or to burden-shifting from mobile to immobile tax bases. As yet, no agreement has been reached on any ambitious harmonisation plan for mobile tax bases. This column explores the possibility of implementing partial tax harmonisation for corporate taxation and the taxation of the banking sector.
Long-term damage of the US court’s Argentinian debt ruling
Jeffrey Frankel (VoxEU) Jul 22, 2014
The US court ruling forcing Argentina to pay its hold-out creditors has big implications. This column argues that some of them are particularly worrying. The court ruling undermines the possibility of negotiated re-structuring of unsustainable debt burdens in future crises. In the future, it will not be not enough for the debtor and 92% of creditors to reach an agreement, if holdouts and a New York judge can block it. This will make both debtors and creditors worse-off.
Fighting the Fed
Martin Feldstein (Project Syndicate) Jul 23, 2014
The US Federal Reserve fears that a proposed law requiring it to use a formal rule to guide monetary policy would limit its independence, while the bill’s proponents argue that it would produce more predictable growth with low inflation. Who is right?
Europe’s Surplus of Stagnation
Robert Skidelsky (Project Syndicate) Jul 23, 2014
Earlier this month, the chief executive of Airbus called for drastic action by the European Central Bank to reduce the value of the euro against the dollar by about 10%, from a “crazy” $1.35 to between $1.20 and $1.25. But the euro's strong exchange rate is the result of inaction by Germany, not inaction by the ECB.
Rethinking African solar power for Europe
Emanuele Massetti & Elena Ricci (VoxEU) Jul 23, 2014
Concentrated solar power generation in Northern African and Middle Eastern deserts could potentially supply up to 20% of European power demand. This column evaluates the technological, economic, and political feasibility of this idea. Although concentrated solar power is a proven technology that can work at scale, it is currently four or five times more expensive than fossil fuels. Concentrated solar power could play an important role in Europe’s energy mix after 2050, but only if geo-political challenges can be overcome.
A ‘crowding out’ theory of the Eurozone crisis
Fernando A Broner, Aitor Erce, Alberto Martin & Jaume Ventura (VoxEU) Jul 23, 2014
By 2010, Eurozone periphery countries had faced severe debt problems and a falling credit to the private sector. This column proposes a theory to interpret these events. Governments can discriminate in favour of domestic creditors and public debts trade in secondary markets. This leads to a shift in the debt holdings from foreign to domestic residents. Finally, private financial frictions crowd out private investment, potentially reducing growth.