Prieur’s readings (February 24, 2009)

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This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.

• Martin Wolf (Financial Times): The world economy has no easy way out of the mire, February 23, 2010.
Finding an exit route from the extraordinary government deficits could lead to default unless there is a radical rethink.

reading240210

• Aki Ito and Jason Clenfield (Bloomberg): Harvard’s Rogoff sees sovereign defaults, “painful” austerity, February 24, 2010.
Ballooning debt is likely to force several countries to default and the U.S. to cut spending, according to Harvard University Professor Kenneth Rogoff, who in 2008 predicted the failure of big American banks. Following banking crises, “we usually see a bunch of sovereign defaults, say in a few years,” Rogoff, a former chief economist at the International Monetary Fund, said at a forum in Tokyo yesterday. “I predict we will again.”

• Gideon Rachman (Financial Times): Greece threatens more than the euro, February 22, 2010.
The Greek crisis is about the very basis on which European unity has been built for the last 60 years. It threatens not just the euro but the entire edifice of the European Union.

• Robert Barro (The Wall Street Journal): The stimulus evidence one year on, February 23, 2010.
The first anniversary of the Obama stimulus package generated a lot of discussion about whether and how much the package (originally estimated at $787 billion but now priced at $862 billion) moderated the recession. These are complex questions, and their answers require more than merely counting the quantity of goods and services that the government purchased or the number of people that the government hired.

• Michael Crittenden and Marshall Eckblad (The Wall Street Journal): Lending falls at epic pace, February 24, 2010.
U.S. banks posted last year their sharpest decline in lending since 1942, suggesting that the industry’s continued slide is making it harder for the economy to recover. While top-tier banks are recovering at a faster clip, the rest of the industry is still suffering, according to a quarterly report from the Federal Deposit Insurance Corp. Banks fighting for survival, especially those plagued by losses on commercial real estate, are less willing to extend loans, siphoning credit from businesses and consumers.

• Colin Barr (Fortune): Sick banks may mean feeble recovery, February 23, 2010.
The rot in the U.S. banking system threatens to warp an already weak economic recovery. The dynamics that made 2009 such a downer for banks are still in place, the Federal Deposit Insurance Corp.’s quarterly banking review showed Tuesday. FDIC chief Sheila Bair said she expects bank failures in 2010 to surpass last year’s 140, as institutions still struggling with mortgage losses gird for a massive commercial real estate bust.

• Michael Pettis (China Financial Markets): What the PBoC cannot do with its reserves, February 22, 2010.
It is a real toss-up as to which generates more bizarre comment in the international press: Beijing’s long-feared dumping of US Treasuries, or the use and value of the PBoC’s central bank reserves.

• Henry Siegman (Financial Times): For Israel, defiance comes at the cost of legitimacy, February 23, 2010.
Reasonable hopes for a two-state solution to the Israeli-Palestinian conflict have been dashed. The international community may now take away the respect the country craves.

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