The early boost to the dollar following President Donald Trump's election—a Trump "bump"—has been replaced by a Trump "dump." The real effective exchange rate (REER) for the US dollar fell by 6.3 percent from its monthly peak in December 2016 to the October base period used in this study. As a...
Estimates of Fundamental Equilibrium Exchange Rates, November 2017
The early boost to the dollar following President Donald Trump's election—a Trump "bump"—has been replaced by a Trump "dump." The real effective exchange rate (REER) for the US dollar fell by 6.3 percent from its monthly peak in December 2016 to the October base period used in this study. As a...
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China's debt fail is nearly invisible and finally unsolvable. @gordongchang @thedailybeast Andrew Collier.
China's central bank governor, Zhou Xiaochuan, made global headlines with a warning last month of the risks of a "Minsky moment", referring to a sudden collapse in asset prices after long periods of growth, sparked by debt or currency pressures. On the sidelines of a key, twice-a-decade Communist Party Congress in October, Zhou referred to relatively high corporate debt and the fast pace of growth in household lending. While also pledging to fend off such risks, Zhou has acknowledged it will take some time to bring debt down to more manageable levels. Reuters analysis of 2,146 China listed firms showed their total debt at the end of September jumped 23 percent from a year ago, the highest pace of growth since 2013. The analysis covered three-fifths of the country's listed firms, but excluded financials, which have seen the brunt of government de-risking and deleveraging efforts so far. The analysis revealed that debt in the real estate sector multiplied the most over last five years, followed by industrials.
Effective Financial Reform
by John H. Cochrane via PolicyEd.org Financial crises come from bank runs. An innovative way to prevent bank runs is to use equity-financed banking. Equity-financed banks would replace debt with equity as their method of financing and back up all deposits with liquid assets like Treasury bonds. Since it would not hold any debt, bank runs would become a thing of the past.
How to improve the long-run outlook for US fiscal policy
Alex Brill | Macdonald-Laurier Institute The US is headed toward a federal debt crisis certain to inflict serious economic hardship on future generations. Over the next 30 years, the US economy is expected to grow 76 percent, but the debt burden will increase by more than 240 percent. Returning to a sustainable fiscal outlook will require hard choices and a clear understanding of both what led us to this point and the economic consequences of inaction.
The Trump administration has formally rejected China’s demand that it be treated as a “market economy” under global trading rules, a move likely to heighten tensions between the world’s two largest economies. - Wall Street Journal
Italy is the Achilles' heel of the eurozone
Desmond Lachman | Real Clear Market The Global Economy In 2018
by Michael Spence via Project Syndicate The global economy will confront serious challenges in the months and years ahead, and looming in the background is a mountain of debt that makes markets nervous – and that thus increases the system's vulnerability to destabilizing shocks. Yet the baseline scenario seems to be one of continuity, with no obvious convulsions on the horizon. Foreign investors flee Turkey
Turkey’s domestic political tensions and mounting rows with Western allies have fueled the flight of foreign investors, exacerbating the country’s economic woes. Raghuram Rajan Calls For Broad-Basing Economic Growth
featuring Raghuram Rajan via Live Mint Former RBI governor Raghuram Rajan argues that short-term political solutions to the job reservation issue can damage the fabric of the country. Tunisia doubles down on austerity Tunisia’s Prime Minister Youssef Chahed said Tuesday that his government will go ahead with a package of economic reforms that are strongly opposed by labor unions and business associations. The austerity measures include raising taxes and laying off thousands of government workers in order to cut Tunisia’s budget deficit. Speaking at a parliamentary session on the 2018 state budget, Chahed said, “We will seek consensus with all, but we go ahead with reforms needed to revive the economy.” The International Monetary Fund has been pressuring Tunisia to curb its budget deficit after a series of militant attacks damaged the country’s vital tourism sector. Read More Congress pushes Tunisia aid compact to counter Trump cuts
The fledgling North African democracy is dispatching dignitaries to argue for a multi-year memorandum of understanding to help combat terrorism and social unrest.
China moves to bolster nine key areas of manufacturing
BY ASIA TIMES STAFF NDRC releases new Three-Year Plan that targets significant improvement in manufacturing innovation capability and product quality
Beijing cracks down on P2P online lenders
BY ASIA TIMES STAFF All P2P platforms lending cash loans must meet strict requirements and obtain proper licences by Dec. 31 Should We Reject the Natural Rate Hypothesis?
Fifty years ago, Milton Friedman articulated the natural rate hypothesis. It was composed of two sub-hypotheses: First, the natural rate of unemployment is independent of monetary policy. Second, there is no long-run tradeoff between the deviation of unemployment from the natural rate and inflation... Forward Guidance Hasn't Made Markets Less Volatile
quoting John B. Taylor via Bloomberg One possibility comes from a proposal by John Taylor, a professor at Stanford University, who provided a formula in 1993 for setting interest rates. Policy Uncertainty In Japan
by Elif C. Arbatli, Steven J. Davis, Arata Ito, Naoko Miake, Ikuo Saito via Cato Institute Efforts to reinvigorate Japan’s economy have proved challenging. Despite significant policy accommodation, growth over the past two decades has been weak and the share of nonregular employment has increased. Wages have been stagnant, and inflation expectations lie below the Bank of Japan’s inflation target. Journal Graphics In A Bygone Era
by John H. Cochrane via Grumpy Economist To illustrate MV = PY. In Irving Fisher, "The Equation of Exchange 1896-1910," The American Economic Review Vol. 1, No. 2 (June, 1911), pp. 296-305, via JSTOR. Central bank official says credit activities must be monitored BY ASIA TIMES STAFF For real, data-driven credit products, Liu Qiang advocates capital controls, liquidity regulation and interest rate self-regulation Bond market financing on the rise, says chief economist BY ASIA TIMES STAFF Especially for those firms with a clean balance sheet and higher transparency, their cost of direct financing will be even lower Steven Davis And Raghuram Rajan: How Can Policy Makers Respond To Populist Politics? interview with Steven J. Davis, Raghuram Rajan via Chicago Booth Review Hoover Institution fellows Steven Davis and Raghuram Rajan discuss when we should normalize monetary policy; the consequences of unconventional monetary policy; the sustainability of China's growth; and the roots of populist politics. Will India's Jump In Ease Of Doing Business Rankings Foster Economic Growth? quoting John H. Cochrane via Live Mint India’s jump in ease of doing business rankings may not readily translate into investments and growth, an analysis of past changes in rankings suggests. How to Combat Populist Demagogues Dani Rodrik doubts that reformist politicians can win unless they come clean about the high costs of neoliberal policies. Democracy Beyond the Nation-State
Kemal Derviş thinks that empowering cities could be the key to reconciling popular sovereignty and globalization. The Real Questions The Fed Should Ask Itself by John H. Cochrane via Chicago Booth Review Don’t mistake relative calm in the financial system for a sign that the central bank’s work is done. Policy Implications of Sustained Low Productivity Growth
The Peterson Institute for International Economics will hold a major research conference on the "Policy Implications of Sustained Low Productivity Growth" on November 9, 2017. Conference organizers Jeromin Zettelmeyer and Adam S. Posen have assembled a group of leading policy economists to tackle... |
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