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The Washington Post: Five myths about how to create jobs, by James Manyika and Byron Auguste, Feb. 7, 2010

1. Surely there's a quick fix
2. The key to boosting employment quickly is to help small businesses
3. High-tech jobs will solve the problem
4. Higher productivity -- when an economy produces more goods and services per worker -- kills jobs
5. Increasing exports will revive manufacturing employment

WSJ: How to Destroy American Jobs, by Matthew J. Slaughter, Dartmouth College, Feb. 3, 2010

Deep in the president's budget released Monday—in Table S-8 on page 161—appear a set of proposals headed "Reform U.S. International Tax System." If these proposals are enacted, U.S.-based multinational firms will face $122.2 billion in tax increases over the next decade. This is a natural follow-up to President Obama's sweeping plan announced last May entitled "Leveling the Playing Field: Curbing Tax Havens and Removing Tax Incentives for Shifting Jobs Overseas."

The fundamental assumption behind these proposals is that U.S. multinationals expand abroad only to "export" jobs out of the country. Thus, taxing their foreign operations more would boost tax revenues here and create desperately needed U.S. jobs.

This is simply wrong. These tax increases would not create American jobs, they would destroy them.

Academic research, including most recently by Harvard's Mihir Desai and Fritz Foley and University of Michigan's James Hines, has consistently found that expansion abroad by U.S. multinationals tends to support jobs based in the U.S. More investment and employment abroad is strongly associated with more investment and employment in American parent companies. read more

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"The weight of the empirical evidence is that foreign activity is a complement, rather than a substitute", MarketObservation, May 4, 2009

Above are some interesting charts on the international economy from the latest Bulletin of the Swiss Economic Institute (KOF). Wouldn't it be about time for an exchange rate regime change in China?...

The Swiss Economic Institute (KOF) published its latest Bulletin about the Swiss Economy and aspects of international economic development.

Signs for the Swiss economy are rather positive:

"The current KOF survey reports that Swiss companies are issuing increasingly positive signals. As before, however, sentiment varies greatly between individual sectors. Amongst manufacturers, for example, the twelve-month slowdown in production has ended, and expectations are now more positive than they have been at any time for the past three years. It is only within the hotel and restaurant sector that output is still contracting."

Atlanta Fed Macroblog: Is good news hidden in bad employment numbers? , Feb. 5, 2010

In his blog post, David Altig refers to a post by Prof. Becker on The Becker Posner Blog. Becker writes:

"The US is tied for first place [according to estimates by the World Bank] on the ease of employing workers. It is much easier for American small and medium size business to reduce their employment during bad times than it is for similar-sized companies in Europe, Latin America, or India. This helps explain why employment fell, and unemployment rose, more sharply during this recent recession in the US than in say Germany, Italy, and many other countries that have much less flexible labor markets, even when other countries experienced larger recession-induced falls in GDP."

The more flexible labor laws in the US could in fact have a positive influence on productivity gains. Productivity will be a key element of future competitiveness.

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Prof. K. Rogoff thinks that it will be very hard for Greece to avoid default.

Project Syndicate: Can Greece Avoid the Lion?, by Kenneth Rogoff (Harvard), Feb. 2010

History and statistical numbers speak rather against Greece:

"As demonstrated in my recent book with Carmen Reinhart This Time is Different: Eight Centuries of Financial Folly , Greece has been in default roughly one out of every two years since it first gained independence in the nineteenth century. Loss of credibility, if it comes, can bite hard and fast. Indeed, the historical evidence slams you over the head with the fact that, whereas government debt can drift upward inexorably for years, the end usually comes quite suddenly.

And it can happen to any country, although advanced countries can usually tighten fiscal policy with sufficient speed and credibility that the pain comes mainly in slower growth. Unfortunately, for emerging markets, adjustment is often impossible without help from the outside. That is the precipice on which Greece stands today."

The problems of other countries who start to act decisively might force to act the Greek socialist government against the promises made during elections.

"There is an old joke about two men who are trapped by a lion in the jungle after a plane crash. When the first of them starts putting on his sneakers, the other asks why. The first answers: “I am getting ready to make a run for it.” But you cannot outrun a lion, says the other man, to which the first replies: “I don’t have to outrun the lion. I just have to outrun you.”

Greece has yet to put on its sneakers, while other troubled countries, such as Ireland, race ahead with massive fiscal adjustments. Greece’s new Socialist government is hampered by campaign promises that suggested the money was there to solve the problems, when in fact things turned out to be far worse than anyone imagined. Unions and agricultural groups tie up traffic with protests every other day, hinting at possible escalation."

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FT: The race is on for Greece before the ECB exits, by Gillian Tett, Feb. 4, 2010

FT: Sovereign debt fears rattle investors, Feb. 2, 2010

There were further signs of contagion across the eurozone on Thursday ahead of a European Central Bank meeting, as investors sold government bonds of many peripheral eurozone countries, sending yields higher.

Fears of default by companies in the eurozone periphery also rose sharply, indicating that the contagion was spreading to the corporate sector.


Stock markets in Europe were also hit, with Portugal and Spain worst affected as financials led the charge lower.

Reflecting those concerns, the western Europe Markit SovX index, which measures the cost of insuring against the risk of default, widened beyond 100 basis points for the first time amid heavy buying in the sovereign credit default swap market. CDS spreads on Portugal hit record highs, up 17 basis points to 212 basis points, while Greek credit default swaps rose 7 basis points to 398 basis points, heading closer to records of 421 basis points reached in January. read more

Powerful Lies, by Dana Carney, Columbia University, Jan. 22, 2010

Most people become stressed when lying, but new research shows that people with power feel just fine when lying — and are better at getting away with it.

Lying is costly, extracting physiological and cognitive tolls from most people. The body of research on lying consistently shows that people become stressed when they do not tell the truth. The speed with which they process information slows down, possibly because lying requires keeping track of the lie and the truth while simultaneously trying to suppress nervous habits or other signs that might give the liar away. (So-called lie-detector tests, or polygraphs, can’t actually determine if people are lying, but they can identify signs of physiological stress that are consistent with lying.) read more

FT blogs: What the world must do to sustain its convalescence, by Martin Wolf, Feb. 2, 2010

So what did I make of this year’s annual meeting of the World Economic Forum at Davos? It felt like sitting at the bedside of somebody who had survived a heart attack but was unsure how long it would take to recover full vigour, if, indeed, he would at all. The mood of “Davos men” (yes, they mostly still are) was, as my colleague, Gideon Rachman, has pointed out, one of anxiety. Meanwhile, the participants in a still predominantly western meeting looked at the youthful vigour of emerging economies with admiration, envy and even fear.

For me, the highlight of the programme was the economic outlook session on Saturday.* This is not only because I was moderator. The starting point for the discussion was an obvious one: the policy interventions of late 2008 and 2009 have been a resounding success. The outcome has been a far briefer and shallower recession than most participants imagined a year ago. That is obvious from the successive consensus of forecasts for 2010. For almost every significant economy, the forecast for growth this year is higher than it was a year or even six months ago (see charts). The world economy survived the heart attack in the financial system. read more

EuroIntelligence: Towards a bond market crisis, Feb. 2, 2010

Eurozone governments have borrowed a record of €110bn from markets this year, reports the FT. This forces up the borrowing costs for the weakest countries even further. Debt managers have to increase yields to lure investors amid competition from AAA-rated governments, a crowding out effect that is likely to continue as eurozone governments raise record amounts of bonds to pay their debt, bail out banks and finance their stimulus packages. Investors warned that if there is no sign from politicians that they are prepared to tackle their debt levels, there will be a sell-off in eurozone bonds. read more

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MarketObservation: Is there a real estate bubble in China?, Jan. 21, 2010