Berlusconi's 'burlesque games' apparently included dressing up as Barack Obama http://t.co/WS1QwkyJ
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A Breakthrough on the Reminbi?
There are encouraging signs that a breakthrough may have been achieved in the long-running debate over the exchange rate of China’s currency, the renminbi. Its real rate against the dollar is now rising at an annual rate of 10 to 12 percent, which if continued would complete the needed correction of 20 to 30 percent over two to three years, and official US reactions suggest that assurances that the adjustment will continue may have been received. This movement appears to derive from effective US pressure, increasing expressions of concern about the issue from other countries (especially a number of major emerging markets) and, most importantly, changes in economic conditions in China itself.
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US-China Trade Disputes Could Grow
Gary Clyde Hufbauer says that while the specific trade disputes the United States has with China are in line with the levels experienced with other countries, those with China are likely to grow.
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How Europe Can Muddle Through Its Crisis
As Europe’s financial market contagion spreads to systemically important eurozone members, the region is echoing with “end-game scenarios” and demands for major new steps by European policymakers. Among these would be a European “fiscal transfer union,” a new common eurozone bond, action by the European Central Bank (ECB) to monetize sovereign debts, and finally a eurozone breakup itself.
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Getting Surplus Countries to Adjust
It has been 80 years since John Maynard Keynes first proposed a plan that would have disciplined persistent surplus countries. But the Keynes Plan, like the subsequent Volcker Plan in 1972–74, was defeated by the major surplus country of the day (the United States and Germany, respectively), and today China (not to mention Japan or Germany) exhibits no enthusiasm for new revisions of these ideas.
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10 Reasons Why the Russian Economy Will Recover
Op-ed in the Moscow Times
November 25, 2010
In my September 3, 2008, column titled “10 Reasons Why the Russian Economy Will Falter,” I saw no reason why economic growth would continue. At the time, most economic analysts argued that Russia was a safe haven and predicted growth of 7 percent to 8 percent in 2009. Instead, gross domestic product plummeted by 8 percent in 2009.
During the past two years, the mood in Russia has changed profoundly. Euphoria and complacency have been replaced with cynicism and pessimism. A broad conviction has spread that the country is condemned to a growth rate of, at most, 3 percent to 4 percent a year.
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The Eurozone: Can’t Live Within It, Can’t Live Without It
Jacob Funk Kirkegaard says talk of debt restructuring or “haircuts”” for creditors is inevitable but is also fanning the flames of contagion and discord in Europe.
Edited transcript, recorded November 30, 2010.
Steve Weisman: First Greece, then Ireland, then maybe Portugal and Spain. What next for the contagion in Europe? We’ve had Jacob Kirkegaard of the Peterson Institute here on these developments a number of times. Thanks for coming again today.
Jacob Kirkegaard: My pleasure.
Steve Weisman: Give us a snapshot of the state of play at the end of November and beginning of December.
Jacob Kirkegaard: First of all one thing that is clear, the thing that everybody feared so to speak, which is contagion to a systemically important eurozone country—whether it’s Spain or Italy doesn’t really matter—has already materialized. That really is a significant change of events in the last couple of days.
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Obama Has to Tell Beijing Some Hard Truths
With policymakers failing to make progress on the critical issue of global imbalances, America has no alternative but to put China on notice. Privately but promptly, Washington has to inform Beijing it will label it as a currency manipulator, back legislation treating the manipulation as an export subsidy, and take it to the World Trade Organization (WTO) if it does not let the renminbi rise significantly.
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Exchange Rate Policy in Brazil
The macroeconomic regime implanted in Brazil during the second administration of Fernando Henrique Cardoso, and largely maintained by his successor, is typical of those of the advanced countries. The anchor is provided by an inflation-targeting regime (with a target inflation rate somewhat greater than in most advanced countries, of 4.5 percent a year, with a band around it of +/–2 percent). The exchange rate floats. The float is often described as free, but given the extent of recent reserve accumulation it would not qualify as a free float as understood by most economists. Fiscal policy has actually been more ambitious under the Lula regime, resulting for a time in a primary surplus of at least 4.25 percent of GDP (subsequently reduced to allow for a higher rate of public investment, and also temporarily reduced further to help combat the crisis). Monetary policy has then been directed at achieving the inflation target given fiscal policy, which—given history—has implied maintaining high interest rates.
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Why It Is Still Possible to Be Bullish on Europe
Despite the expanding European commitments of aid for Greece and Ireland, accompanied by increasingly detailed pledges to set up a permanent post-2013 resolution mechanism [pdf], fears of a dreaded sovereign debt contagion have tanked European sovereign debt markets throughout the region, particularly in Spain and Italy. Never has there been more talk of doom for the entire eurozone.
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Is the European Market Turmoil Self-Inflicted?
Nicolas Véron assesses the charge that Europe’s plan to make bondholders pay in future bailouts has itself produced turmoil in European markets.
Edited transcript, recorded November 15, 2010. © Peterson Institute for International Economics.
Steve Weisman: With European bond markets and financial markets again in disarray, it’s great to have Nicolas Véron, a visiting fellow at the Peterson Institute for International Economics and a senior fellow at Bruegel, our sister institution, to discuss this volatility. This is Steve Weisman at the Peterson Institute. Welcome Nicolas.
