Results 851–865 of 865 found.
How to Prevent a Depression
The latest economic data suggests that recession is returning to most advanced economies, with financial markets now reaching levels of stress unseen since the collapse of Lehman Brothers. The risks of an economic and financial crisis even worse than the previous one-now involving not just the private sector, but also near-insolvent sovereigns-are significant. So, what can be done to minimize the fallout of another economic contraction and prevent a depression and financial meltdown? The best way to avoid the risk of repeating such a sequence is bold and aggressive global policy action now.
Thinking the Unthinkable in Europe
Having in sight a solution to the eurozones sovereign-debt crisis would be a source of relief for financial markets. Even so, because any new treatys terms will inevitably be dictated by Germany, a severe economic slowdown would be almost certain. That might induce a further change of attitude in Germany, in turn allowing the adoption of counter-cyclical policies. At that point, growth in much of the eurozone could resume.
Europe on the Verge of a Political Breakdown
Europe is again on the precipice. The most recent Greek rescue, put in place barely six weeks ago, is on the brink of collapse. The crisis of confidence has infected the eurozones big countries. The euros survival and, indeed, that of the European Union hang in the balance. European leaders have responded with a cacophony of proposals for restoring confidence. There are several ways to recapitalize Europes weak banks. If these proposals have one thing in common, it is that they all fail to address the eurozones immediate problems.
The Great Bank Robbery
For the US economy and other developed economies the elephant in the room is the amount paid to bankers over the last five years. Investors, and the rest of us, would be better off if these funds flowed to productive companies, perhaps with an amount equivalent to what would be transferred to bonuses directed to well-managed charities.
Will the IMF Stand Up to Europe?
Until now, the IMF has sycophantically supported each new European initiative to rescue the over-indebted eurozone periphery, committing more than $100 billion to Greece, Portugal, and Ireland so far. Unfortunately, the Fund is risking not only its members money, but, ultimately, its own credibility. Now that the Fund has squarely acknowledged the huge capital holes in many European banks, it should start pressing for a comprehensive solution to the eurozone debt crisis, a solution that will involve either partial breakup of the eurozone or fundamental constitutional reform.
One Number Says it All
The average annualized growth of US consumer spending over the past 14 quarters-calculated in inflation-adjusted terms from the first quarter of 2008 to the second quarter of 2011 is 0.2%. Never before in the post-WWII era have American consumers been so weak for so long. This one number encapsulates much of what is wrong today in the US-and in the global economy. The US economy-as well as the global economy-cannot get back on its feet without the American consumer. Its time to look beyond ideology-on the left and right-and frame the policy debate with that consideration in mind.
Chinas New Currency Policy
Chinas government may be about to let the renminbi-dollar exchange rate rise more rapidly in the coming months than it did during the past year. The exchange rate was frozen during the financial crisis, but has been allowed to increase since the summer of 2010. The dollar is likely to continue falling relative to the euro and other currencies over the next several years. As a result, the Chinese will be able to allow the renminbi to rise substantially against the dollar if they want to raise its overall global value in order to decrease Chinas portfolio risk and rein in inflationary pressure.
Europes Central Bank at Sea
My sense is that politicians will opt for a weak variant of greater fiscal union, but that, ultimately they will fail to execute it for the eurozone as we know it today. After some considerable volatility, a smaller and more robust currency union will emerge; and, importantly, Europe will avoid the euros demise and a total breakdown of the eurozone. No matter how you view it, the coming endgame will be neither simple, nor orderly. Had the ECB known this at the start of Europes debt crisis, it might have resisted taking so many risks with its balance sheet and reputation.
Is Capitalism Doomed?
The massive volatility and sharp equity-price correction now hitting global financial markets signal that most advanced economies are on the brink of a double-dip recession. A financial and economic crisis caused by too much private-sector debt and leverage led to a massive re-leveraging of the public sector in order to prevent Great Depression 2.0. But the subsequent recovery has been anemic and sub-par in most advanced economies given painful deleveraging.
A Contagion of Bad Ideas
There has been much concern about financial contagion between Europe and America. After all, Americas financial mismanagement played an important role in triggering Europes problems, and financial turmoil in Europe would not be good for the US-especially given the fragility of the US banking system and the continuing role it plays in non-transparent CDSs. But the real problem stems from another form of contagion: bad ideas move easily across borders, and misguided economic notions on both sides of the Atlantic. The same will be true of the stagnation that those policies bring.
Washington and the Art of the Possible
The big necessary decisions on curbing entitlement growth and reforming the tax code will probably have to wait until after the next election, giving the divided electorate an opportunity to reflect on its own inconsistency and send a clearer message. In the meantime, US politicians might have done just about enough to convince debt markets that Americas credit is still good. For that, Americans and others around the world should stop pillorying them and give them their due credit.
The Second Great Contraction
Why is everyone still referring to the recent financial crisis as the Great Recession? The term, after all, is predicated on a dangerous misdiagnosis of the problems that confront the United States and other countries, leading to bad forecasts and bad policy. The phrase Great Recession creates the impression that the economy is following the contours of a typical recession, only more severe. That is why, throughout this downturn, forecasters and analysts who have tried to make analogies to past post-war US recessions have gotten it so wrong.
Read Chinas Lips
China, the largest foreign buyer of US government paper, will soon say, enough. Yet another vacuous budget deal, in conjunction with weaker-than-expected growth for the US economy for years to come, spells a protracted period of outsize government deficits. It is no longer willing to risk financial and economic stability on the basis of Washingtons hollow promises and tarnished economic stewardship. The Chinese are finally saying no. Read their lips.
Debt and Delusion
The problem that much of the world faces today is that investors are overreacting to debt-to-GDP ratios and demanding fiscal-austerity programs too soon. They are asking governments to cut expenditure while their economies are still vulnerable. Households are running scared, so they cut expenditures as well, and businesses are being dissuaded from borrowing to finance capital expenditures. The lesson is simple: We should worry less about debt ratios and thresholds, and more about our inability to see these indicators for the artificial and often irrelevant constructs that they are.
The Eurozone?s Last Stand
The eurozone crisis is reaching its climax. Greece is insolvent. Portugal and Ireland have recently seen their bonds downgraded to junk status. Spain could still lose market access as political uncertainty adds to its fiscal and financial woes. Financial pressure on Italy is now mounting. By 2012, Greek public debt will be above 160% of GDP and rising. Alternatives to a debt restructuring are fast disappearing. A full-blown official bailout of Greece?s public sector would be the mother of all moral-hazard plays: extremely expensive and politically near-impossible.
Results 851–865 of 865 found.