There was a big kerfuffle in October when the IMF made a point of saying that it (along with a bunch of other forecasters) had underestimated the effect of fiscal tightening on European economic growth over the past couple of years, with obvious implications for the troika’s austerity programmes for the likes of Ireland, Greece and Spain.
The admission got some predictable pushback from troika members who have drunk deep from the austerian well. It was also questioned by my colleague Chris Giles, who pointed out that the results were highly sensitive to the inclusion in the sample of outlier countries – especially Germany (which, despite its frugal prescription for others, has itself followed expansionary fiscal policy and enjoyed good growth) and Greece (the opposite) – and possibly the exclusion of the Baltic states, which followed aggressive fiscal tightening to better effect than Greece. Read more
They say leading the IMF is like commanding the Red Army (top-down, hierarchical, fiercely cohesive) and running the World Bank like chairing a university social studies faculty (bureaucratic, fractious, ideologically riven). Heading up the WTO these days must be like operating a stable where all the horses are dead, dying or struggling to stand up.
The WTO’s negotiating function has all but seized up. The Doha round has crashed. The fate of plans for a plurilateral deal on services is unclear – and opposition from some emerging markets might force the agreement to be negotiated outwith the WTO. Brazil has made valiant attempts to get the WTO to address currency misalignments, but China has predictably squashed them. Read more
Another late-night Brussels meeting, though this one less shambolic than last week’s. The eurogroup announced it had managed to add up some numbers on a spreadsheet that has been kicking around and agree a debt reduction deal for Greece.
The IMF, which had been digging its heels over the need for the other two troika members to fill Greece’s financing gap, professed itself satisfied, even though the Greek debt:GDP ratio was projected at 124% in 2020 rather than the 120% the Fund had apparently drawn as a line in the sand two weeks ago.
Actually, as we reported after last week’s inconclusive eurogroup meeting, the Fund had already backed away from the 120% target in return for sharper reductions in the years following. That suggests it probably wasn’t a good idea to make a fuss about the figure in the first place, as it now makes it appear that, for the nth time, the IMF gave its assent to a deal it wasn’t happy with. Read more
If anyone should understand the benefits of open markets, it is a central bank. The Canadian Mark Carney’s appointment as Bank of England governor (unexpected, mainly because he had said he wasn’t interested) is a significant step even for a country that has had German, Swedish and Italian national football coaches, a Zimbabwean national cricket coach and various Dutch and German heads of state.
But it is not unprecedented. The Bank of England (more accurately HM Treasury, which makes these appointments) has form in bringing in foreigners. Read more
Like the European Christmas, America’s Thanksgiving is edging towards being an entirely retail-driven festival. Black Friday, the day after the holiday, has been the busiest shopping day of the year for a while; we now also have Small Business Saturday and Cyber-Monday (for online buyers), and no doubt some marketing fiend somewhere is seeking to theme Sunday and Tuesday also.
Those capitalistic Puritans would have been proud, right? Max Weber says so. Liberated from the clutches of a static and stultifying Europe (and skipping all those EU summits), they worked hard, saw profits and wealth as evidence of God’s calling, and we ended up with the greatest economy on earth.
Well, not really. Not only were they pretty feeble producers themselves to begin with – Bill Bryson claims the Mayflower carried not a single cow or horse or plough (plow, whatever) or fishing line – but the Massachusetts colonists had some peculiar views about business. Read more
The American Farm Bureau gladdens the hearts of ideas-strapped journalists every November by calculating the cost of a classic Thanksgiving dinner. This year’s reckoning shows the price up by a very reasonable 28 cents or 0.6% from last year: the turkey was more expensive but most of the other ingredients were cheaper.
Now, here’s the thing. Despite all the dire talk of food price shocks and drought in the Midwest and the newly meat-chomping Chinese and so on, the Thanksgiving dinner has not risen much in real terms since the global food price crisis in 2007-2008 and has been pretty stable for two decades. Read more
With friends like these…. Jean-Claude Juncker and Christine Lagarde. (AFP)
It’s not as if the troika of eurozone rescue lenders never falls out, but usually it takes a not-in-front-of-the-children attitude to airing its rows. A refreshing change on Monday night, as my colleagues Peter Spiegel and Josh Chaffin report, when the eurogroup summit, while not actually deciding anything substantive, made sure it would stand out from the dozens of other such gatherings by hosting a very public argument between the eurogroup’s Jean-Claude “We all know what to do, we just don’t know how to get re-elected after we’ve done it” Juncker and the IMF’s Christine Lagarde.
The actual substance of the spat looks laughably trivial. It’s about whether Greece hits its 120 per cent of GDP debt target in 2020 or in 2022, which, given the huge uncertainties in forecasting debt dynamics, is about as precise as a Florida election count. The 120 per cent target is itself pretty arbitrary, apparently based on what seems to be sustainable in Italy, which is a very different country with a more flexible economy and captive domestic investor base for government bonds. Read more
Well, trade reporters, you won’t have bananas to kick around any more. One of the world’s longest-running trade disputes, and one of the few with genuine comic potential, was fixed today as the EU signed an agreement with Latin American countries to end the banana wars.
As a WTO matter, it’s being going on for 20 years; as a source of trade friction, much longer. The political deal was actually done nearly three years ago, which gives you a sense of just how quickly trade diplomacy moves. Read more
Just a week till presidential election day, but still time for more dialogue of the deaf about offshoring. The latest iteration was kicked off by a Romney comment (and slightly less misleading ad) wrongly suggesting that Jeep, owned by Chrysler, was moving production to China. (In fact Chrysler is restoring capacity there to service the Chinese market.) The Obama campaign has just released its response, and so another bout of breast-beating economic nationalism gets under way.
More sympathy might be due to the Obama campaign if it didn’t itself routinely equate foreign investment with sending jobs overseas, particularly its ill-advised attacks on the idea that a territorial corporation tax system would reward US companies for offshoring employment. As informed opinion on the subject routinely points out, the overall evidence is that foreign investment is a complement rather than a substitute to domestic expansion. If you want the specifics, read this. Read more
I thought we’d dealt with this “naming China a currency manipulator will enable Mitt Romney to put tariffs on Chinese imports and send gunboats up the Yangtze and go round to Xi Jinping’s house and eat food out of his fridge” gibberish, but Tuesday’s presidential debate has kicked off another round of fretting about it.
So read it for yourselves: right here is the relevant part of the Omnibus Trade And Competitiveness Act 1988. Penalties for being a currency manipulator? Read more