Tax avoidance has driven down the share of corporate tax to 9% of federal revenues http://t.co/bTxUxr3dXo
16 minutes ago
Europe Channel: Latest Posts
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Asia
Perhaps canceling purchases of the Financial Times won’t be enough
On my flight back to Beijing last night I noticed an article in the Financial Times in which Miguel Sebastián, Spain’s industry minister and someone hotly tipped for finance minister, called on Spanish households to stop buying foreign goods and to buy more Spanish goods.
“Right now,” he said, “there is something that our citizens can do for their country: bet on Spain, bet on our products, our industry and our services – bet, in short, on ourselves.”
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Europe
The Strange Case of Mr Tremonti
The crisis, we know, is a global one. The recession is hitting the US, Europe and Latin America hard, and is not sparring Asia, with China now heading towards a recession. It is not surprising therefore that governments around the world, having bailed out banks and insurance companies, are now implementing fiscal “anti-crisis” packages to [...]
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Asia
Protectionism by Another Name?
One thing you can probably get 99% of economists to agree on is that a global trade war in the middle of a global recession is a bad idea. If every country increases import tariffs, hoping to protect its domestic industry from foreign competition, global trade will fall in all directions, hurting everybody. Put another way, increased tariffs are a negative-sum game.To date, we haven’t seen much in the way of higher trade barriers during this crisis, although you could argue that some bailouts constitute subsidies favoring local over foreign companies. Instead, however, we are seeing friction over currency valuations. If you want to boost your net exports but don’t want to do the obviously unfriendly thing and increase tariffs, the other option is to devalue your currency: a weaker currency increases the price of imported goods and reduces the price of exported goods, hence reducing imports and increasing exports. -
Europe
Davos World Economic Forum: A Viewer’s Guide
The big annual economic meeting at Davos opens next week (Jan 28-Feb 1 are the official dates), and the discussion there – in both formal and informal interactions – is worth scouring for indications of the current situation around the world and where we all may be heading.Given the likely composition of the main players this year – world corporate leaders and the non-US policy elite (with the new US policymakers stuck at home, doing real work; update: this is now confirmed by Bloomberg for Summers and Bair) – I would suggest viewers at home and on the ground keep watch for answers to the following. -
The Wilder View
UK vs. US in graphs
The U.S. and U.K. economies are in hot (no boiling) water. Some call it the brink of a debt disaster:
“The United States and the United Kingdom stand on the brink of the largest debt crisis in history.
While both governments experiment with quantitative easing, bad banks to absorb non-performing loans, and state guarantees to restart bank lending, the only real way out is some combination of widespread corporate default, debt write-downs and inflation to reduce the burden of debt to more manageable levels. Everything else is window-dressing.” Although the feedback loop cannot be discounted, the real problem here is the tidal wave-sized recession that the financial crisis has brought upon the two economies. The U.K. posted a 1.5% contraction in the fourth quarter (about 6% negative growth, annualized) ,while the U.S. is expected to post an equally dismal 5.5% decline in economic activity.
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Dan Alpert's Two Cents
Inauguration, Aggregation and Aggravation
On the occasion of President Obama’s inauguration, we are publishing pieces on the two elements of the economy that we believe require the most urgent attention by the incoming administration – the unemployment crisis and, in this report, repair of the banking system.
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Europe
Still too much wishful thinking on banks
Thinking on banks is still severely inconsistent in the public domain. Consider those three demands: 1.Continue lending at low rates in order to keep the economy going. 2.Increase the asset quality on the balance sheet. 3.Improve the risk absorbing equity. Actually, at best only the last two of those three demands are not mutually exclusive. [...]
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Don't Shoot the Messenger
Germany’s Economic Woes Continue In January
Germany’s economy continued to contract in January, and even more rapidly (slightly) than in December, according to the latest flash estimates for the Markit PMI.
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Europe
Denmark wants in on the Euro
Danish Prime Minister Fogh Rasmussen is preparing Denmark for admission to the Eurozone. Despite my skepticism about the Euro as a currency, I would say that Denmark is a perfect candidate for entry. The Danish economy is already very well harmonized with “core” Europe of France and Germany. Their business cycle, monetary policy, political economy, and per capita GDP are all similar to France and Germany.
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Europe
Chapter 14: Executive Summary – Private Lessons for Public Banking: The Case for Conditionality in LOLR Facilities
From the book “Restoring Financial Stability: How to Repair a Failed System”. Section V: The Role of the Fed
Background
As we work our way through the current financial crisis, central banks have shifted their attention from managing short-term interest rates to providing liquidity to the financial system. In the US, for example, the Federal Reserve’s balance sheet has expanded rapidly, as it offered funds to banks and accepted securities in return: from under a trillion dollars in August 2007 to over two trillion in November 2008, expanding primarily through its lending to banks against illiquid collateral. This “lender of last resort” (LOLR) role is neither new nor unusual, but its massive scale suggests that it is worth some thought to get the details right. We make below what may seem right now to be a perverse argument: Central banks can learn something from the private sector about how to manage its provision of liquidity.
