Finance & Economics
Finance & Economics
Fair Observer's analysis of important economic and financial issues, events and trends in global markets and the world economy.
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By Eric LoweDespite the relentless bad news concerning the Eurozone crisis, China remains confident that its economy is well prepared enough to withstand the worst effects. The current Euro crisis is strongly correlated with China’s economic stability and growth, with Europe being an important business partner and one of the main exporting areas for Chinese goods. Recently the Euro mess has caught on to trade, sending manufacturing activity to a halt. China has always wished to counterbalance the weak US Dollar (long pegged to the Chinese yuan) with a basket of currencies that it considers to be good alternatives. When the switch was finally made in 2005, one of the most important currencies in...
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Historical context suggests a Greek exit from the Euro would restore competitiveness faster and with less suffering than the current Troika plan of austerity and internal devaluation. Note: This article's co-author has asked to publish anonymously, and Fair Observer respects the author's right to privacy. Under the current EU - IMF austerity programme Greece is in danger of falling into an economic depression the likes of which has rarely been seen in a Western country in the post war era. The country has already suffered over a 15% drop in GDP since the start of the recession, and this looks set to fall further still. Unemployment has risen to a record high of over 20% by the end...
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360° Analysis / Banerjee / economic boom / economic problems / Gandhi dynasty / Manmohan Singh / Moody's / New Delhi / populism / The Economist / Trinamool Congress / Finance & Economics / BRIC / AsiaBy David KarlWhatever Singh’s own faults as a government leader, India’s economic malaise is due to more basic problems. Prime Minister Manmohan Singh is on the receiving end of a barrage of slings and arrows these days. The most recent salvo comes from Time magazine, whose Asian edition this week has a cover story labeling him “The Underachiever.” But his detractors are off target: Whatever Singh’s faults as a policymaker, India’s economic malaise is due to more basic problems. The article takes Singh to task for ineffectual leadership, asking whether the soft-spoken prime minister who turns 80 in September is still up to the demands of his office. This...
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As Europe continues to seek a solution to its ongoing financial crisis, it could benefit from understanding Asia’s definitive 1997/98 economic crisis, in particular the successful initiatives by Malaysia to counter the crisis. The debate and proposals currently under discussion in Europe regarding austerity, Euro bonds, easing of interest rates and other choices of economic direction to resolve the problem are akin to debates in Malaysia during the Asian Financial Crisis. Further, similar to Europe today, the Asian Financial Crisis saw the advent of proponents for tough austerity measures as some wished to punish countries for errors in economic management. Malaysia: A...
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Though two years into the European Financial Crisis political progress has been made to rebuild the economies of European Union countries, economic instability remains prevalent across the continent, particularly in Greece and Spain. Background Two years into the European Financial crisis, some political progress has been made. European Union members have agreed to a banking union and signed a fiscal compact. Germany has reversed its position on stimulus and now conditionally supports expansionary measures. However, uncertainty remains; the banking union is ill-defined and some legal observers question the added value of a fiscal compact when similar rules already existed. Meanwhile,...
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Harvard's Jeffrey Frankel notes that despite all of Europe's problems, a Eurobond would be attractive to investors if it is backed up with solid economic and political fundamentals. Any solution to the euro crisis must meet two objectives. One is short run and the other is long run. Unfortunately they tend to conflict. The first necessary objective is to put Greece, Portugal, and other troubled countries back on a sustainable debt path, defined as a long-term trajectory where the ratio of debt to GDP is declining rather than rising. Austerity won’t restore debt sustainability. It has raised debt/GDP ratios, not lowered them. A write-down would do it. New bigger bail-outs...
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360° Analysis / Libor / Liborgate / London / regulation / Europe / Finance & EconomicsAs the revelations pile up after the LIBOR rigging incident, it seems Europe and Britain are more committed to enforcement action than America. Real conservatives believe fully in market capitalism, that prices must come from uncorrupted market signals. Could this start a sea-change for enforcement globally? By Bob Dowling If you lived in Washington in the 1970s during Watergate, you picked up the Washington Post early each morning with palpable excitement. What new revelation about the Nixon White House would leap off page one? It was a story that never died. If you’re in the New York area this summer, there’s a similar vibe building. But this time it’s about Wall...
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By John BrutonEconomists and policymakers who devise remedies for the Euro crisis fail to appreciate that it is a process of negotiation, not an academic exercise The long running crisis in the euro area is caused, at least in part, by the fact that the participants in the bond markets have little understanding of, and for a long time had little interest in, how the Eurozone makes its decisions at political level. In the past, these bond market participants assumed, without much enquiry as to why, that Greek government bonds were no more risky than German Government bonds, simply because Germany and Greece had the same currency. At that time, they took no interest in the internal politics, or relative...
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360° Analysis / Europe’s Banking Union: Possible Next Steps on a Bumpy Path / Europe / Finance & EconomicsEurope's financial centers continue their slow march towards a common regulatory framework, but statements retain their characteristic vagueness In their summit statement of June 29, 2012, the heads of state and government of the euro area issued a declaration widely interpreted by investors as the founding act of a European banking union, about which European policymakers have been talking increasingly vocally in the past two months or so. Their commitment remains little more than a promise, with multiple caveats. But Europe’s leaders will now renege on this promise at their peril. The general perception is that an irreversible step has been made, with vast consequences that...