World economy 2010

World’s Richest Government after 2008-2009 financial crisis – we cannot find any attribution for the source of these statistics, however they sound plausible and make for fascinating reading.

Times topics: Bretton Woods System; World Economic Forum (Davos)
Jon Stewart interviews Gordon Brown

The Changing Wealth of Nations: Measuring Sustainable Development in the New Millennium
This book is the latest report by the World Bank to estimate comprehensive wealth — including produced, natural and human / institutional assets — for over 100 countries. This ground-breaking report presents wealth accounts for 1995, 2000, and 2005, permitting the first longer-term assessment of global, regional, and country performance in building wealth. This overall assessment is complemented by chapters detailing individual components of wealth, as well as how countries and the World Bank are using comprehensive measures of wealth for policy analysis.
World Economic Situation and Prospects 2011
After a year of fragile and uneven recovery, global economic growth started to decelerate on a broad front in mid-2010 and this slower growth is expected to continue into 2011 and 2012. The United Nations baseline forecast for the growth of world gross product (WGP) is 3.1 per cent for 2011 and 3.5 per cent for 2012, which is below the 3.6 per cent estimated for 2010 and the pre-crisis pace of global growth.
Weaknesses in major developed economies continue to drag the global recovery and pose risks for world economic stability in the coming years. The unprecedented scale of the policy measures taken by Governments during the early stage of the crisis has no doubt helped stabilize financial markets and jump-start a recovery. However, overcoming the structural problems that led to the crisis—and those that were created by it—is proving much more challenging and will be a lengthy process. This contrasts with the strong GDP growth in many developing countries and economies in transition, which has contributed more than half of the total expansion of the world economy since the third quarter of 2009.

The Year in Review: The economy
After the belated bounce, it’s time for the long, hard slog
(The Independent) If 2010 was the year of the bounce, for the economy did manage to bounce off the bottom and make a somewhat better recovery than originally forecast, 2011 will be the year of the slog. Or at least it will be a slog for Britain and much of the rest of the developed world, as the emerging economies are quite a different story.
8 December
Internationalising the yuan: Redback mountain
(The Economist) SPEAKING at a forum in Tokyo this week, Liu Guangxi, a leading Chinese economic expert, and official in the State Administration of Exchange Control, has forecast that it will not take long for China’s currency, “the yuan, to be internationalised”. Such predictions have become common; and piecemeal reforms are indeed making the yuan more of an international currency.
But there remains considerable confusion abroad about China’s intentions for the yuan, and debate at home about how fast and how far to go with internationalising the currency.
A very useful account of the state of the debate in China has been published by the European Council on Foreign Relations, a think-tank, and the Asia Centre at SciencesPo, an elite French college.
Called “Redbacks for Greenbacks”, it makes clear that the yuan’s overseas expansion might not follow the sort of linear progression many in the West have assumed.
19 November
Economist Ha-Joon Chang on Currency Wars, the G20, and Why “There’s No Such Thing As a Free Market” forwarded by Kimon Valaskakis with the comment: An iconoclastic view of capitalism and free trade by a Cambridge University economist, well worth reading and commenting by the ‘Wed-Night Globalization Caucus’.
17 November
China and Europe rattle markets
Rising inflation in China and financial turmoil in Europe rattled global markets, triggering widespread falls in stocks and commodities on investor concerns of slower economic growth
16 November
Former IMF chief lays out plan for global monetary overhaul
(Emerging Markets) Leading French statesman and former IMF chief Michel Camdessus in an interview with Emerging Markets has called for a radical overhaul of the global monetary system that would include ditching the dollar as the leading international reserve currency
As France takes the helm of the Group of Twenty industrialized and developing economies, leading French statesman and former IMF chief Michel Camdessus has called for a radical overhaul of the global monetary system that would include ditching the dollar as the leading international reserve currency.
Don’t panic, say the Irish – but Europe is getting nervous
European partners are urging the debt-stricken nation to seek immediate assistance from an international rescue fund to resolve its financial problems.
14 November
Niall Ferguson’s guide to the coming sovereign debt crisis
(Financial Post) The Harvard and Oxford historian isn’t just explaining the “PIIGS” states, but the United States and United Kingdom too. It is about what these states are going to have to sacrifice to maintain stability, both fiscal and political, and can already be seen in proposals like that made by President Obama’s deficit commission this week, and Britain’s coalition austerity budget. Niall Ferguson’s Complete And Definitive Guide To The Coming Sovereign Debt Crisis
12 November
G20 closes ranks but skims over toughest tasks
(Reuters) – G20 leaders closed ranks on Friday and agreed to a watered-down commitment to watch out for dangerous imbalances, yet offered investors little proof the world was any safer from economic catastrophe.
(Foreign Policy) Meeting in Seoul, the G-20 agreed on a broad set of economic guidelines but rejected a a U.S. push to pressure China to revalue its currency. The final agreement commits G20 nations to curb deficits and move toward more flexible exchange rates.
The final language did not include a pledge to refrain from “competitive undervaluation” of currencies, a phrase that the United States had wanted included to show that the body was taking a strong stand against China’s currency policies. It also included a suggestion to countries with widely used currencies like the United States to “be vigilant against excess volatility,” a warning against loose monetary policy.
Canadian non-profit wins G20 small business funding challenge
In hopes of increasing funding opportunities for small and medium-sized enterprises in the developing world, the G20 also enlisted the services of social entrepreneur group Ashoka Changemakers to find innovative ways of making that happen. Launching the G20 SME Finance Challenge, Changemakers accepted potential solutions from all over the world before selecting 14 most likely to break down obstacles to financing.
Canada’s own Peace Dividend Trust (PDT) was the only Canadian entity to make the cut, and on Friday won second place in Ashoka’s “People’s Choice” awards, where visitors to the Changmakers website were asked to vote for their favourite solution. The Ottawa-based non-profit invented the Factor Finance For Procurement (3FP) concept, which has helped local SMEs win donor procurement contracts in Haiti, Liberia, Timor Leste and Afghanistan, redirecting more than $537-million into local economies to date.
Perfect storm sparks global market sell-off
(Emerging Markets) Global markets tumbled Friday amid jitters over a Chinese interest rate hike and an Irish sovereign debt crisis, while global tensions on trade imbalances, intensified by a lackluster G20 summit, dented risk appetite
(The Economist) The G20 summit in Seoul forged a compromise between the world’s most powerful leaders. But it was a decision made in Washington, DC, that made the biggest splash … Brazil, China and South Korea, unnerved by the Federal Reserve’s decision this month to print another $600 billion of the world’s reserve currency in an effort to revive the American economy. The decision will encourage capital to flow elsewhere, weakening the dollar and putting upward pressure on the real, yuan and won. The Fed’s policy of “quantitative easing” contributed to a qualitative hardening of tone among the summiteers.
Simon Johnson: Vikram Pandit Has No Clothes
Vikram Pandit heads Citigroup, one of the world’s largest and most powerful banks. Writing in the Financial Times, with regard to the higher capital standards proposed by the Basel III process, he claims, “There is a point beyond which more is not necessarily better. Hiking capital and liquidity requirements further could have significant negative impact on the banking system, on consumers and on the economy.” Mr Pandit is a smart individual — why then does he advance such obviously specious arguments? The answer is straightforward: he can get away with it. Mr. Pandit is engaged in lobbying, pure and simple.
11 November
Bickering Likely to Lame G- 20 Summit
The days of close cooperation among the world’s big 20 economic powers may have ended. With the economic recovery, displays of envy and egotism have reared up at this year’s G-20 summit in Seoul. German Chancellor Angela Merkel is on a confrontation course with Washington over trade policy. ‘G-20 Solidarity Is Crumbling’ — With significant squabbling in the run-up to the G-20 summit in Seoul this week, particularly between Germany, China and the US, observers expect few results of substance. German commentators argue that there is a lesson to be learned for Berlin.

10 November
Terence Corcoran: Anti-gold fever
Nothing matches monetary theory and currency issues as a source of delirium among economists. As the G20 gets underway today in South Korea, name-calling has taken the place of diplomacy. The German Finance Minister called the U.S. Federal Reserve’s US$600-billion money-printing operation “clueless,” while Bank of Canada governor Mark Carney says he has “absolute confidence” in the program
9 November
G20 draws up two-tier bank plan
(FT) Most big Asian banks will be exempted from a global regulatory regime under the latest ­proposal for the industry from the world’s leading economies, which aims to prevent another financial crisis.
People briefed on the agenda for the G20 summit, which begins in Seoul on Thursday, said officials had concluded that global regulators should focus on big banks with global ­businesses, stripping out domestically focused institutions ­without the reach of the in­dustry’s cross-border companies.
US to Bully Germany on Trade Surplus at the G- 20
(Spiegel) The US thinks it knows who is to blame for its struggling economy: Germany and other countries with a trade surplus. Washington wants to see new rules that would punish such imbalances, but Germany says it shouldn’t be blamed for having more competitive companies than the US.
7 November
Zoellick seeks gold standard debate
Leading economies should consider readopting a modified global gold standard to guide currency movements, argues the president of the World Bank.
24 October
Imbalancing act as G20 ministers still fail to deliver
Outlook: If we treated the euro area as a single economy – as we treat the US – we would only worry about the eurozone as a whole
(The Independent) So there was some progress at the G20 finance ministers’ meeting in Gyeongju, South Korea, at the weekend after all. Specifically, membership of the International Monetary Fund (IMF) will now shift, raising the profile of some of the bigger emerging nations at the expense of Europe. It’s about time. Beyond IMF membership, however, there wasn’t much to cheer, largely because the world’s major political and financial players still can’t reach any meaningful agreement on the important things in economic life. The communiqué offered no more than the usual platitudes: G20 members will “move towards market-determined exchange rate systems that reflect market fundamentals and refrain from competitive devaluation of currencies”. … Yet there was more than a hint of the ways in which nations are beginning to re-think the architecture of global finance. The joint suggestion by Tim Geithner, the US Treasury Secretary, and the Korean hosts that countries should prevent their current account surpluses and deficits from rising beyond a certain specified amount is intriguing.
23 October
G20 ministers agree global banking reform
(AFP) GYEONGJU, South Korea — G20 finance ministers Saturday agreed tougher rules for big financial firms blamed for the global economic crisis as they tackled the problem of companies deemed “too big to fail”.
… The rules, known as Basel III, will raise the minimum capital reserves that banks must hold as insurance against any new financial tumult.
22 October
G20 finance chiefs face currency struggle
(FT) The talks in South Korea over the next few days will show whether cracks are emerging in the G20 process itself and whether the group continues to be relevant after its show of co-ordination in late 2008 and early 2009 U.S. plan for trade targets hits G20 headwinds (Reuters) – The United States struggled on Friday to win backing for a proposal to set limits on external imbalances as a way of pressing countries with surpluses such as China to let their exchange rates rise.
17 October
Surging euro and global currency battle builds up pressure on EU
(Canadian Business) European finance ministers plan to hash out a deal on stricter budget rules to avoid another government debt crisis, as a surging euro casts doubt on the continent’s fragile economic recovery.
12 October
Economist Raghuram Rajan Warns of Currency Conflict
(Spiegel) Renowned Chicago-based economist Raghuram Rajan discusses the dangers of a global currency war, the risks of persistently low interest rates and the growing income and wealth inequality in the United States
Labour market researchers share Nobel for economics As the world struggles to sustain a fragile economic recovery, the Nobel Prize for economics was awarded on Monday to three researchers whose work explains how market frictions can hinder the smooth functioning of an economy and its ability to adjust to shocks. Their work, which shows how markets can sometimes lead to inefficient outcomes, has influenced economists’ understanding of unemployment. See also The Economist And the Nobel goes to… and The Guardian Peter Diamond, Dale Mortensen and Christopher Pissarides share economics Nobel prize for jobs study
Nobel-winning analysis of benefits and labour markets chimes with governments preparing to slash spending and jobs
The Atlantic also has a good piece The Idea That Won The Nobel Prize in Economics “Harvard economist Edward Glaeser has a nice explainer about the ideas that won the 2010 Nobel Prize in Economics. The award went to three economists — including one, Peter Diamond, whose nomination to serve on the Federal Reserve board is being “held” by Republican Sen. Richard Shelby — for their work on “search frictions” in the labor market. In short: Why do employers and employees sometimes have such a hard time hooking up?”
Why America is going to win the global currency battle
To put it crudely, the US wants to inflate the rest of the world, while the latter is trying to deflate the US. The US must win, since it has infinite ammunition: there is no limit to the dollars the Federal Reserve can create. What needs to be discussed is the terms of the world’s surrender: the needed changes in nominal exchange rates and domestic policies around the world.
9 October
IMF leaves question unresolved: Can world avert harmful ‘currency war’?
(CSM) The International Monetary Fund gathering ended with nations going their own way on exchange rates. One reason: the difficult relationship between the US and China
7 October
In foreclosure controversy, problems run deeper than flawed paperwork
(WaPost) Millions of U.S. mortgages have been shuttled around the global financial system – sold and resold by firms – without the documents that traditionally prove who legally owns the loans.
6 October
IMF girds itself for exchange rate battle
(FT) The International Monetary Fund has stepped in between the US and China but has limited scope for action
4 October
Call for new global currencies deal
Institute of International Finance, which represents more than 420 of the world’s leading banks and finance houses, has warned a lack of such co-ordinated rebalancing could lead to more protectionism
A Inside View of the IMF’s Massive Global Influence
(Spiegel) Three years ago, the International Monetary Fund was irrelevant, an object of derision for all opponents of globalization. Under director Dominique Strauss-Kahn and as a result of the global economic crisis, the IMF has since become more influential — governing like a global financial authority. It is also putting Europe under pressure to reform.
UN to establish rules for sovereign debt
Governments and financial institutions are calling upon the United Nations to address issues of sovereign debt by creating rules that would help prevent irresponsible lending, and empower courts to resolve debt-related disputes. The initiative, which is expected to be taken up early next year by the UN Conference on Trade and Development, is intended to reduce the frequency, and intensity, of debt crises. Reuters (9/29)
24 September
House panel backs China currency bill
(Reuters) – A congressional panel turned up the pressure on China over the yuan on Friday, approving a bill that would let the United States slap duties on goods from countries with undervalued currencies.
Critics inside and outside Congress claim that China enjoys an unfair trade advantage by undervaluing the yuan against the dollar by as much as 25 percent to 40 percent, hurting U.S. exports and employment.
Obama urges Wen to act over renminbi
Barack Obama, US president, has pressed Beijing to do more on currency policy, protect intellectual property rights and guarantee ‘fair treatment’ for American companies, at a meeting with Wen Jiabao, the Chinese prime minister
Europe must make way for a modern IMF
A US initiative provides the Fund with an opportunity to increase the influence of emerging markets over its lending decisions, writes Paulo Nogueira Batista
21 September
Former officials oppose US renminbi bill
(FT) Eight former US trade representatives and commerce secretaries have implored the leadership on Capitol Hill not to use unilateral legislation to force China to revalue its currency
16 September
Nouriel Roubini: The Eurozone’s Autumn Hangover
After a summer of Europeans forgetting their woes and tanning themselves at the beach, the time for a reality check has come. For the fundamental problems of the eurozone remain unresolved.
First, a trillion-dollar bailout package in May prevented an immediate default by Greece and a break-up of the eurozone. But now sovereign spreads in the peripheral eurozone countries have returned to the levels seen at the peak of the crisis in May.
14 September
Dominique Strauss-Kahn: Saving the Lost Generation
Oslo was the scene this week of a remarkable event that brought together global leaders from government, business, trade unions, and academia to discuss what many of them said is the biggest issue facing the world today: the jobs crisis.
They spoke of the 210 million people currently out of work worldwide — the highest level of official unemployment in history. They spoke of the human impact in terms of persistent loss of earnings, reduced life expectancy, and lower educational achievement for the children of the unemployed. And they spoke of a potentially “lost generation” of young people whose unemployment rates are much higher than for older groups.
Fortunately, they also spoke of what can be done to save this lost generation.
Dominique Strauss-Kahn — Opening remarks at Oslo: The Challenges of Growth, Employment, and Social Cohesion
Cuba’s economic makeover to include mass layoffs
Cuban authorities have announced plans to cut 1 million public sector jobs and loosen controls on private businesses as part of economic reforms. The move follows comments from former Cuban President Fidel Castro that the Cuban economic model no longer functions effectively. More than 85% of the Cuban population is employed in state-owned enterprises, and authorities said they would provide land leases and create cooperatives to help workers make the transition. The Guardian (London) (9/14)
Paul Krugman: The International Monetary Fund Is Not Insane
That shouldn’t be startling; but these days it is. Given the way conventional madness has overtaken so many international institutions, the IMF’s reasonable, if much too cautious, new paper on employment [The Challenges of Growth, Employment and Social Cohesion (pdf)] is actually a welcome surprise. “A recovery in aggregate demand is the single best cure for unemployment” — what a relief to see the Fund actually saying that.
13 September
Parts Washington, Beijing and Delhi: The Jakarta Consensus
(Jakarta Globe) Today, given the current state of the US economy and the spectacular economic success of China, many suggest that the Beijing Consensus — a combination of a strong state and a market economy — might be a more workable approach for developing countries like Indonesia.
On Sept. 5, after a fast-breaking event with coalition leaders at his private residence in Cikeas, President Susilo Bambang Yudhoyono proposed a different idea altogether: the Jakarta Consensus.
7 September
Eurozone fears send investors to havens
Investor worries over the eurozone have deepened, hitting the markets of the single currency’s weaker economies and sparking a flight to the safety of US Treasuries, German bunds, the yen and the Swiss franc.
Concerns over the eurozone were sparked amid a revival of concerns that stress tests in July understated lenders’ holdings of risky government debt. German calls to water down regulatory rules to ease pressure on banks also hit sentiment.
13 August
Eurozone economy expands by 1%
(CBC) The economies of the 16 nations that use the euro expanded by one per cent in the second quarter, despite expectations that the region would lag behind the economy of the United States.
5 July
Eurozone Crisis Places Monetary Union in Doubt
(All Africa) The financial crisis in Greece that threatened the stability of the Eurozone has caused a rethink on the timeline of establishing an East Africa Monetary Union.
David Nalo, the permanent secretary in the Ministry for East Africa Cooperation, said the crisis in the Greece had showed the need to understand how the financial sectors of member states are managed because mistakes in one country may affect the financial stability of the whole region.
4 June
Joseph Stiglitz: Financial Re-Regulation and Democracy
It has taken almost two years since the collapse of Lehman Brothers, and more than three years since the beginning of the global recession brought on by the financial sector’s misdeeds for the United States and Europe finally to reform financial regulation.
Perhaps we should celebrate the regulatory victories in both Europe and the United States. After all, there is almost universal agreement that the crisis the world is facing today – and is likely to continue to face for years – is a result of the excesses of the deregulation movement begun under Margaret Thatcher and Ronald Reagan 30 years ago. Unfettered markets are neither efficient nor stable.
2 February
The End of the Beijing Consensus
Can China’s Model of Authoritarian Growth Survive?
(Foreign Affairs) Beijing’s ongoing efforts to promote growth are infringing on people’s economic and political rights. In order to survive, the Chinese government will have to start allowing ordinary citizens to take part in the political process.
31 January
IMF Managing Director Dominique Strauss-Kahn Says Economic Recovery Linked to Global Stability and Peace
In his keynote address to the 10th Annual Herzliya Conference in Tel Aviv, International Monetary Fund Managing Director Dominique Strauss-Kahn said the world economy was reviving faster than expected, but the recovery was still fragile. “Domestic demand, mostly in advance countries, is still driven by the public sector stimulus. Private demand is still rather weak,” he warned.
29 January
Chiang Mai Initiative to Allow Regional Currency Swap by March
he Association of Southeast Asian Nations (ASEAN), China, Japan, and South Korea will be able to draw from a foreign exchange reserves pool worth US$120 billion when the Chiang Mai Initiative is finally launched on March 24.
The initiative is a reaction to the effects of the 1997 Asian Financial Crisis on the region and will allow member countries to tap into a network of currency swap transactions to help manage balance of payments and short-term liquidity problems as well as supplement other international financial arrangements. It will also aid in abetting currency speculation because member countries can swap their currencies with U.S. dollars depending on the amount they contribute to the fund multiplied by their purchasing multiple.
January 27-31
CNBC coverage of Davos 2010
25 January
Davos 2010: The World is Broken
(Bloomberg|Business Week) As a Fellow of the World Economic Forum, I’ve been attending the annual meeting in Davos, Switzerland for a dozen years. But I’ve never anticipated the event more than I am this year (Jan. 27-31). The theme is to “Improve the State of the World: Rethink, Redesign and Rebuild.”
Dominique Strauss-Kahn pushes for Haiti debt cancellation
Yesterday on CNN, Christiane Amanpour interviewed the managing director of the International Monetary Fund. During the interview, Strauss-Kahn took the opportunity to clarify the IMF’s $100 million loan to Haiti, and his hopes for full cancellation of Haiti’s debt.