Sunday 19 Aug 2018 | 10:14 | SYDNEY
Sunday 19 Aug 2018 | 10:14 | SYDNEY

Thursday economics linkage


Mark Thirlwell

19 November 2009 14:28

  • With President Obama's recent visit to his Chinese bankers, China's exchange rate policy has been getting lots of attention. Paul Krugman's column at the start of this week urged Obama to get tough on Beijing over the weak yuan, echoing a piece from last month. Martin Wolf used his mid-week column in the FT to deliver a similar message. The Economist explains why China is unlikely to pay attention to any of this. (If you can be bothered to plow through it, the joint statement from the US and China is here.)
  • This paper by the Bank of England's Andy Haldane and Piergiorgio Alessandri opens by describing the evolution of the relationship between banking and the state, from the Medicis to the GFC, noting the transition from banks as financiers of the sovereign to the emergence of the state as the last-resort financier of the banks (to the tune of over US$14 trillion during the current crisis). In the Middle Ages, they say, the biggest risk to the banks was from the sovereign. But '(t)oday, perhaps the biggest risk to the sovereign comes from the banks. Causality has reversed.' Simon Johnson at Baseline Scenario has further thoughts.
  • Related, this post by Brad DeLong suggests that the 'terrible optics' of the bailout plan – which from some perspectives looks like 'a giveaway to the undeserving and feckless superrich' – reduces the likelihood of future government action to prop up the US banking system and thereby increases the chances of another Great Depression (albeit to only 5%). Paul Krugman signs on to the argument but worries that the bigger cost is an increased chance of a Japanese-style lost decade. Over at The Economist's Free Exchange blog, however, they are not so sure about the trade-offs involved.
  • Staying with Free Exchange, this post directs us to the Economist's World in 2010 blog, which is asking for nominations for the world's best country. Apparently, Somalia has already 'won' their competition for the worst country on earth. Which reminds me of this:

  • At voxeu, Pradumna Rana discusses how Asia could leverage its growing economic weight into a more effective role at the G20. Steve Grenville and I recently wrote a Lowy Policy Brief that also looks at this question.
  • I've written a couple of short posts recently on the relationship between the resource curse, institutions and democracy. Daron Acemoglu has an essay in Esquire arguing that institutions are central to the wealth and poverty of nations and arguing for more transparency, openness and democracy as the solution to failed government (h/t Marginal Revolution).
  • Last month I flagged Brazil's experiment with capital controls as a sign of things to come. A couple of days later two economists from the Peterson Institute reached a similar conclusion. Dani Rodrik has a column arguing that the IMF needs to rethink its position on such measures, a point my colleague Steve Grenville has also made.