The A-List

Chastened by the explosive growth of credit-financed expenditures from the past stimulus program, China’s system now has to rely on the recently announced fiscal efforts to accelerate expenditures on infrastructure projects including roads, rail and power plants. While more transparent and less prone to waste, the fiscal channel is more bureaucratic with its expansionary impact less readily felt compared with the banking channel. Thus there continues to be a risk that Beijing’s fine-tuning of macro policies will fail to keep growth on the desired trajectory.

The relationship between Greece and the rest of the eurozone is increasingly reminiscent of the cold war’s balance of terror. Greece is not the Soviet Union, and this is a financial rather than a nuclear crisis, but the mechanics are strikingly similar.

The bank panic is Greece is now accelerating, and could easily push Greece out of the Eurozone unless decisive actions are taken to prevent a massive run on the Greek banks. If such a run occurs, and drives Greece to leave the euro, Greece’s exit would most likely create an even greater calamity, as Portugal, Spain and perhaps Italy, suffer rapid withdrawals of bank deposits as well. The Eurozone’s unwillingness to keep Greece in the union would create a powerful one-way bet against the survival of the currency union in several other countries as well.

When she was in India this month, Hillary Clinton proposed a new dialogue between China, India and America (CIA). Some in Beijing are likely to reject this suggestion instinctively. Yes, it is possible that two of the world’s largest democracies may gang up against China. However, before rejecting this idea, they should think twice. Indeed, Hillary may have presented a wonderful geopolitical opportunity for all three countries. It is not a given that America and India will see eye to eye against China on the main global challenges. It is equally likely that India and China, or even America and China, may see eye to eye on some issues.

Political observers are curious about why John Boehner would throw down the debt limit gauntlet now, especially since last year’s showdown is often credited for disturbing investor confidence.

We need to begin thinking concretely about a political path towards stabilising the country and what a negotiated settlement with the Taliban might look like once the bulk of US troops have pulled out.

Mitt Romney has two options to consider if he were to face the same problems experienced by Barack Obama in advancing his agenda.

Anyone who believes that US decline is inevitable ignores history. The US will almost certainly not face market pressure this year, or for several years to come. But there’s a catch: the very absence of market pressure makes it much harder for US policymakers to reach difficult compromises. This safe-haven curse imperils US efforts to foster robust economic growth and fiscal sustainability.

We need to accept without panicking that a bank may sometimes lose $2bn. After all, far more was lost from old-fashioned corporate loans turning sour during each of the last two recessions.

Given conditions on the ground, the current 17-member eurozone needs to evolve into a smaller and less imperfect union if it is to avoid the growing risk of total fragmentation – namely a closer economic and political union among the big four (France, Germany, Italy and Spain) along with other members with similar initial conditions.