Ken Ohmae, former head of McKinsey’s Tokyo office (disclosure: I have a passing acquaintence with him and he was enormously well regarded in his day despite being a tireless self-promoter) says that the Paulson program is grossly inadequate and the magnitude of the US crisis is so large that a $5 trillion international facility is […]
Read more...Two stories on Bloomberg discussed how the world’s export powerhouses, China and Japan, are feeling the effects of the global slowdown. First on China, which seems inclined to weaken the yuan to defend growth. That’s a mixed blessing for the US. A stronger dollar hurts the export sector, the one sunny area of the economy, […]
Read more...Note the not-pretty pattern. The flow of funds out of emerging markets has reached the high-water mark of the period leading into the Asian, then Russian financial crises of 1997-1998. However, after recovering from the damage of this period, emerging markets as a whole enjoyed a period of strong growth. In theory, their economies are […]
Read more...A very useful post comes from Robert Dekle, Jonathan Eaton, and Samuel S. Kortum at VoxEU. The authors steer clear of the “when will global imbalances end” question (as in when will China, Japan, Taiwan, and the Gulf States tire of funding our current account deficit) to focus on one at least as important: “what […]
Read more...Readers may know I am not much of a fan of Larry Summers’ occasional comments in the Financial Times. He has a tendency to come forth with views of how things work that sound nice but too often are at odds with facts on the ground. His latest offering scores better than previous offerings as […]
Read more...We have been skeptical of the idea that a weak dollar would be the boon for US manufacturing that many thought it would. The reason? The best possible outcome would be to see a resurgence in manufacturing, since manufacturing has higher potential for productivity gains than does the service industry (although getting back some of […]
Read more...Brad Setser thinks that China is again holding the RMB down to maintain export volume in the face of softening global demand. From the comments (my emphasis): China prefers subsidizing US consumption of Chinese goods to subsidizing Chinese consumption of Chinese goods… if China’s foreign asset accumulation continues at $800b a year, it will add $3.2 […]
Read more...This item came from reader Chris, who passed along a tidbit from Wolfgang Munchau’s Eurointelligence daily newsletter. I can’t provide a link to the story itself; checking around the Eurointelligence site, it seems to be an e-mail only product, and the piece in question is based on a German news story. The proposal is odd. […]
Read more...The headline of this International Herald Tribune article (hat tip reader Saboor) is a real sign of the times. The short answer is our policies assume the answer is yes, but if we don’t course correct, that assumption is likely to be tested. Specifically, the argument goes, our trading partners will continue to be willing […]
Read more...Even though Greg Mankiw claims in the New York Times today that ” Economists are nearly unanimous in their support of an unfettered system of world trade,” another Harvard economics professor begs to differ. Dani Rodrik, writing for Project Syndicate, finds that some prominent former staunch advocates of liberalized trade regimes are having serious doubts […]
Read more...Blomberg columnist William Pesek plays out a line of thought that may have occurred to some readers: what if the resolution of the credit crisis and global imbalances isn’t a nasty recession or punishing inflation but Japan-like protracted low growth, with stagnant to deteriorating living standards? This idea may not be as much of a […]
Read more...The headline above, which comes from an article in the Telegraph by Ambrose Evans-Pritchard, might benefit from a better image. “Blowing up” doesn’t seem the right image to describe an economy at risk of a sudden drop in growth. But something more fitting, like engines going into stall, might have taken too much space. Aside […]
Read more...Bloomberg, getting a jump on next week’s news, tells us that expectations for the Commerce Department’s report on the US trade deficit, due on July 11, is that it got worse. In general, increasing current account deficits (of which trade is the biggest component) put downward pressure on currencies. But our nasty conundrum is that […]
Read more...Full disclosure: I’m normally a fan of Mohamed El-Erian, former head of Harvard Management, now co-president of bond giant Pimco. But his current comment in the Financial Times, “How best to manage global imbalances,” struck me as more than a tad disingenuous. Let’s go through the article: Whatever happened to the debate on global payments […]
Read more...A good paper at VoxEU reaches a conclusion that seems expected, yet has been contested in academic research, namely, that imports have lowered US inflation. As we have discussed in other posts, this has far more important policy implications than obvious at first blush. The Fed has been looking at inflation as strictly a domestic […]
Read more...