Prieur’s readings (October 16, 2009)
This post provides links to a number of thought-provoking articles I have read over the past few days that you may also find of interest.
• Fred Bergsten (Foreign Affairs): The dollar and the deficits: How Washington can prevent the next crisis, November 2009.
If the US is serious about recovering from the global economic crisis, it must balance the budget, stimulate private saving, and embrace a declining dollar.
• Randall Forsyth (Barron’s): Weak dollar equals strong stocks, for now, October 14, 2009.
As long as there is no ready substitute for the dollar, Wall Street can celebrate the currency’s steady decline. And U.S. GDP will be boosted by a cheap greenback’s spur to exports and deterrent to imports. This cannot go on forever, however. The dollar’s fall may not have started on President Obama’s watch, but it may become his problem. And it will take more than high-minded gestures and diplomacy to solve it.
• Daniel Gross (Newsweek): The $800 billion deception, October 13, 2009.
Conservatives claim the stimulus has already failed. But it has barely started.
• Andy Xie (Financial Times): Is China due a reality check? October 15.
The United States had 1929, Japan 1989, and south-east Asia 1997. Will China face a similar moment of reckoning a few years from now? The question is crucial, not just for those investing in Asia today, but for the wider global market. For as investors around the world reel from the recent financial crisis, many have clung to the idea of a Chinese boom, as the one bright spot of hope in an otherwise grim world. The trouble is that history suggests that much of this optimism may be misplaced.
• Mark Gimein (The Big Money): Stop worrying about China: they’re not going to stop propping up the dollar any time soon, October 14, 2009.
Whenever economists’ talk turns to the long-term health of the world economy, it’s not long before the discussion gets to “What about China?” In the last year, the financial crisis has been, understandably, the main entree in the buffet of economic news. But as we’ve all learned by now, big macroeconomic changes usually build for a long time before they whack us over the head. And of the biggest and most important shifts to watch now is one that you may very well have missed: the fall of the dollar and the slow but steady rise of China’s yuan renminbi.
• Antoine van Agtmael (Financial Times): Full ahead for emerging markets, October 14, 2009.
The recent global crisis did not derail the rise of emerging economies but only accelerated it. Investors were too quick to conclude the crisis was global as doomsday scenarios proliferated. It turned out to be only “half-global” because most emerging economies started out with resilient banking systems and prudent macro-policies.
• Mark Thoma (Economist’s View): Reviewing the recession: was monetary policy to blame? October 14, 2009.
Not having the models we needed led to uncertainty from policymakers that showed up in the seemingly, if not actual ad hoc and trial and error nature of many of the policy responses.
• Samuel Brittan (Financial Times): Whatever happened to imbalances? October 15, 2009.
In dollar terms the sums seemed huge. In relative terms they are less frightening. At their 2008 peak, on IMF estimates, global imbalances amounted to 2½% of world gross national product.
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