Archive for October, 2010
French labor unions are preparing to block President Nicolas Sarkozy’s proposal to raise the French retirement age by two years.1 They plan open-ended strikes to shut down France’s transport and energy infrastructure, hoping to repeat their success in 1995 when street protests forced President Jacques Chirac and Prime Minister Alain Juppe to abandon their proposals to reform the public pension system and government finances more broadly. This time, however, the unions are certain to lose. In fact they could actually end up strengthening the reelection chances of President Sarkozy.
The chaos that followed Lehman Brothers’ collapse two years ago hit financial systems in the United States and Europe with similar violence. But the consequences were not symmetrical. Several large financial institutions disappeared in the United States, partly because of stringent disclosure requirements, leading to immediate restructuring of the financial landscape. In the spring of 2009, public “stress tests” forced weaker banks to recapitalize, and soon the institutions at the core of the US financial system started regaining investors’ confidence, in spite of much pain still to come among smaller local banks. The United States faces major economic and social challenges, but its financial crisis appears to have essentially ended more than a year ago.
Nicholas R. Lardy says the House of Representatives’ bill to impose tariffs on China over the currency issue is unlikely to pass the Senate and would have minimal effects if it did.
Edited transcript, recorded September 30, 2010. © Peterson Institute for International Economics.
Steve Weisman: The House of Representatives, in one of its last acts before recessing, passed legislation to punish China over its failure to let its currency appreciate. Nicholas Lardy, senior fellow at the Peterson Institute, is here to talk about that bill and its prospects. This is Steve Weisman. Thanks, Nick.
Joseph E. Gagnon and Michael Mussa discuss the merits of the Federal Reserve and other central banks engaging in quantitative easing to stimulate the economy.
Edited transcript, recorded October 1, 2010. © Peterson Institute for International Economics.
This week, the eurozone’s “new normal” played out as a textbook example of how short-term market concerns can have a constructive impact on Europe’s long-term economic future. Under increasing political and economic pressure from rising bond market spreads, the Irish and Portuguese governments finally “did the right thing” and took productive policy actions. The eurozone’s “new normal” (discussed here) is working as intended.
Op-ed in the Financial Times October 4, 2010
© Financial Times
China continues to manipulate the renminbi to the extent that it is now undervalued by at least 20 percent. Japan has resumed intervention on a massive scale to lower the yen. Switzerland recently spent more than $100 billion to keep its franc from rising. All these countries, and a number of others, already run large trade surpluses and hold huge reserves but nevertheless want to weaken their exchange rates to boost growth through exports.