Keywords: China, Chinese Economy, America, US
Airtime: Tue 28 Jun 11 | 07:30 AM ET
Keywords: Martin Feldstein, Greek Crisis, US Economy
Bhagwati is a strong advocate of free trade. He explains that an open economy can have very positive impacts on people's wealth development:
Keywords: Free Trade, Poverty Reduction
Americans are best known for their statistics in baseball, football, basket ball. Following international population statistics, published by the US Census Bureau is also great:
Keywords: Statistics, Population
In a SPIEGEL interview, leading German economist Stefan Homburg argues that euro-zone members should not bail out Greece, discusses who is making a profit from the crisis and explains why he himself is buying Greek bonds. "I believe in the boundless stupidity of the German government," he says. read more in Spiegel Online International
Keywords: European Crisis, Greek Crisis
June 24, 2011
Keywords: John Taylor, US Economy, Balance Sheet Recession
The increase in upside risks to inflation calls for higher policy rates globally, the Bank for International Settlements, or BIS, said on Sunday.
Releasing its latest annual report, the bank said that inflation risks have been driven up by dwindling economic slack and increases in the prices of food, energy and other commodities.
'The spread of inflation dangers from major emerging market economies to the advanced economies bolsters the conclusion that policy rates should rise globally,' the report said.
The bank noted that a protracted period of low interest rates in major advanced economies are delaying the necessary balance sheet adjustments of households and financial institutions.
At the same time, the report recommended some countries to weigh the need to tighten with vulnerabilities linked to still-distorted balance sheets and lingering financial sector fragility. But once central banks start lifting rates, they may need to do so more quickly than in past tightening episodes, the report added.
According to BIS, persisting low interest rates are magnifying the risk that the distortions that arose ahead of the crisis will return. 'If we are to build a stable future, our attempts to cushion the blow from the last crisis must not sow the seeds of the next one,' the bank warned.
The report said that it would be a mistake for policymakers to relax now as international financial imbalances are re-emerging while highly accommodative monetary policies are fast becoming a threat to price stability.
It also found that the data frameworks that should serve as an early warning system for financial stress remained underdeveloped.
Regarding the rising indebtedness of economies, the report said that addressing over-indebtedness is the key to building a solid foundation for high, balanced real growth and a stable financial system. That means driving up private saving and taking substantial action now to reduce deficits in the countries that were at the core of the crisis.
On emerging markets, the bank said that those where debt is fueling huge gains in property prices and consumption are running the risk of building up the imbalances that now plague the advanced economies.
Among the central banks of the major economies, the European Central Bank is the only bank that has responded to inflation threats after the financial crisis. The ECB raised the key policy rate by 25 basis points in April.Copyright RTT News/dpa-AFX
© 2011 AFX News
Keywords: BIS, Bank for International Settlements, BIS Annual Report
Stimulating article of Harvard's Mark Roe who asks how capitalistic the US really is:
Keywords: Capitalism, Government Interventions
Interesting study about expectations about the retirement system in the Netherlands across various social groups. Individual responsibility to design a realistic pension scheme seems to be crucial - at least for those who have the means to take action. Others will hope that re-distribution will work once they retire.
Bissonnette, Luc and Van Soest, Arthur H. O., The Future of Retirement and the Pension System: How the Public's Expectations Vary Over Time and Across Socio-Economic Groups. IZA Discussion Paper No. 5759
"We analyze expectations of the Dutch population of ages 25 and older concerning the future generosity state and occupational pensions, the two main pillars of the Dutch pension system. Since the summer of 2006, monthly survey data were collected on the expectations of Dutch households concerning purchasing power of occupational pensions, eligibility and purchasing power of old age social security benefits, and the average retirement age ten or twenty years from now. We investigate how these expectations have changed over time and how they vary with socio-economic characteristics. Exploiting the fact that we have data until September 2010, we also analyze the effect of the recent financial and economic crisis. We find significant differences in expectations of different socio-economic groups, mainly suggesting that groups who are probably better informed were also more pessimistic."
Keywords: Pension Systmes, Retirement
Jan. 22, 2011
Keywords: Federal Reserve, Fed, Monetary Policy, Quantitative Easing, QE2
Inevitable Catastrophe: The Fruits Of Moral Hazard On A Global Scale
Insulate participants from risk with policies like the Bernanke Put and you guarantee destruction of both the market and institutional legitimacy.
Identify the common characteristic of these three statements:
1. The Federal Reserve will never let the stock market decline, i.e. the "Bernanke put"
2. The Chinese government will never let property prices decline
3. The European Central Bank will never let Greece default
Keywords: Moral Hazard, Global Political Interventions, Market Distortions
Fri 24 Jun 11 | 07:55 PM ET
Keywords: US Economy, US Growth, US Growth Crisis
There has been a heavy debate about Cesifo's Hans-Werner Sinn's argument that there were "hidden bail outs" in the Eurozone whereby the Bundesbank has been lending money to the crisis-stricken Eurozone members via the Target system on the order of €300 billion.
In a new paper, Hans-Werner Sinn and colleague Timo Wollmershäuser provide more detailled data on the capital flows within the Euro System:
Heavy opposition to Sinn's argument came from Citi's Willem Buiter and Karl Whelan:
June 21, 2011
Keywords: US Economy, Unemployment, Investments, CAPEX
"Concerns about export growth within the euro area peripheral countries due to a lack of competitiveness within the euro area are a key policy issue. Our analysis suggests that: (i) Long-term price elasticities for intra-euro area exports are at least double those for extra-euro area exports, so traditional real effective exchange rate indexes may overstate the effectiveness of euro depreciation in restoring exports growth in the euro area periphery and; (ii) There are surprisingly wide divergences across alternative relative price measures and even when relative price data suggest a steady loss in intra- (and extra-) euro area competitiveness, the pace of deterioration depends on the measure of relative prices used."
Keywords: Euro Area, Euro Area Growth, Euro Area Export Growth
The New York Times puts the planned Greek austerity program into perspective and virtually applies the relations to a similar program in the US:
Here is an excerpt from the article:
"To put that in perspective, spending cuts and tax increases of a similar scale in the United States would amount to $1.75 trillion, considerably more sweeping than even the most far-reaching proposals for reducing the American federal budget deficit. And Greece has promised to generate another $72 billion by selling off prime state assets, which many Greeks consider a fire sale of national patrimony.
While the commitment to austerity will allow Greece access to a fresh infusion of international aid, a growing chorus of economists say that the government’s new program will at best delay default and a restructuring of its debt, which is already more than 150 percent of the country’s gross domestic product. Steeper budget cuts and tax increases, they say, are the enemy of economic growth, which Greece desperately needs to make its debt burden lighter."
Keywords: European Crisis, Greek Crisis, Austerity
Following article in The Economist lays out the options for European decision makers regarding Greece well:
The author concludes:
"No matter what fictions they concoct this week, the euro zone’s leaders will sooner or later face a choice between three options: massive transfers to Greece that would infuriate other Europeans; a disorderly default that destabilises markets and threatens the European project; or an orderly debt restructuring. This last option would entail a long period of external support for Greece, greater political union and a debate about the institutions Europe would then need. But it is the best way out for Greece and the euro. That option will not be available for much longer. Europe’s leaders must grab it while they can."
Keywords: European Crisis, Greek Crisis
It seems that Harvard's Jeffrey Frankel and colleagues bringt it to the point: They mention that the cyclicality of a country’s fiscal policy is inversely correlated with the country’s institutional quality which includes measures of law and order, bureaucracy quality, corruption, and other risks to investment."
It might be astonishing for many people that they point out that institutional quality of various emerging markets has improved tremendously during the past years and in some cases has surpassed that of highly developed nations. They mention Chile as an example:
"Chile’s institutional quality has risen strongly since the early 1980s, during which time its fiscal policy has turned from procyclical to countercyclical. A country with good institutional quality in the general sense of rule of law can help lock in countercyclical fiscal policy through specific budget institutions. Frankel (2011a) explains how Chile did it, with the structural budget reforms of 2000 and 2006. Chile’s approach could be emulated by others.
Fiscal rules, such as the Eurozone’s Stability and Growth Pact, may accomplish little in themselves. Rules can actually worsen the tendency of governments to make overly optimistic forecasts for economic growth and budget balance (Frankel 2011b). Chile’s key innovation was to give responsibility for forecasting to independent expert commissions, insulated from politicians’ wishful thinking.
Keywords: Cyclicality of Fiscal Policy, Wishful Thinking of Politicians
June 21, 2011
Keywords: Euro Crisis, Eurozone
An impressive group of speakers presented different views. Great material!
Edmond Alphandéry, Arnoud W.A. Boot, Lee C. Buchheit, Charles W. Calomiris, Youssef Cassis
Mitu Gulati, Martin Hellwig, Janet Kersnar, Ramon Marimon, Wolfgang Münchau, Erik F. Nielsen, Fabio Panetta, Helmut Siekmann, David A. Skeel, Jr., Karl Whelan
Keywords: European Crisis, EU, Euro, European Defaults
Recommended search items and names(click on terms):
BIS Quarterly Review, Case Shiller Index, IFO Outlook, Institute for Supply Management, Michigan Consumer Sentiment Index, Philadelphia Fed Regional Index,
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