News and Analysis: 28 Mar-8 Apr 11 | EmergingFrontierMarkets.com

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Posted on Fri, 8 Apr 11:

Republicans, Democrats scramble as shutdown looms (auto-updating link): Still no deal. A late-night meeting with House and Senate leaders Thu failed to break the budget deadlock with hours to go before a midnight deadline on a partial gov't shutdown. Pres Obama huddled with Democratic Senate Majority Leader Reid and Republican House Speaker Boehner at the White House twice Thu and said he hoped to be able to announce a deal Fri but "there's no certainty yet". Since taking control of the House in Jan, Republicans have vowed to slash spending and curb the deficit. Democrats say they are willing to make some cuts, but say the Republicans would cut vital gov't services and are pushing a social agenda,   Nat'l Public Radio, 8 Apr 11 (Q&A: Danger of gov't shutdown grows, Gannett News, 1 Apr)

Developing Asia on firm rebound but must tackle inflation: Developing Asia will continue to expand solidly over the next 2 years, even as inflation, geopolitical uncertainties and the need to develop new sources of growth present looming challenges to policy makers, acc to the latest yearly Asian Development Outlook 2011. At the same time, rising food and oil prices, stoked by upheaval in the Mideast and North Africa, along with the recent emergency in Japan, present a potential threat to sustained, inclusive growth,   Asian Dev't Bank, 6 Apr 11 (Emerging Asian bond markets register strong growth in '10, 29 Mar)

High times for the jet set: You can't avoid inequality these days. Lately, it's made the covers of news magazines, and rarely a week seems to go by without some new report examining its impact. Even those on the sunny side of the rich-poor gap seem concerned: The 'Davos Crowd' recently cited 'econ disparity' as one of the 2 biggest risks facing the global economy. And inequality hasn't just risen in the developed world. While emerging economies like India and China are enjoying huge reductions in absolute poverty, they are also seeing a widening gap between rich and poor. Even China's media uses words like 'unreasonable' to describe these disparities. Rising inequality is also being linked to the turmoil in North Africa and the Mideast,   OECD Insights, 14 Mar 11 (Atkinson: Unequal growth, unequal recession?, OECD Observer)

Posted on Wed, 6 Apr 11:

US, France lament exit of Grameen's Muhammad Yunus:  The US and France have lamented the removal of Nobel Laureate Yunus from the Grameen micro-finance bank he founded. On Tue, 5 Apr, the Bangladesh Supreme Court upheld the argument of the central bank that Yunus had been improperly appointed while past retirement age. However, Yunus said the attempt to remove him from Grameen Bank had been politically motivated. The bank has pioneered micro-lending to the poor by giving small loans to millions of borrowers. His supporters say he fell out with Prime Minister Hasina after trying to launch his own political party in '07,   BBC News, 6 Apr 11

J Fitoussi, H Gao, P Kenen and 15 economists: A modest proposal for the G20--In Mar, at a meeting in Beijing organized by Columbia U's Initiative for Policy Dialogue and China's Central Univ of Finance and Economics, scholars and policymakers discussed how to reform the int'l monetary system. After all, even if the system did not directly cause the recent imbalances and instability in the global economy, it proved ineffective in addressing them. Reform will, of course, require extensive discussion and deliberation. But the consensus in Beijing was that the G20 should adopt a modest proposal this year,   Proj Syndicate (courtesy Guatemala Times), 4 Apr 11 (Fitoussi, Stiglitz and the Paris Group: The G20 and recovery and beyond)

Esther Duflo: The big question - Paths out of the wilderness: How to sustain the global econ recovery--Learning to learn: The global financial meltdown exposed our unjustified faith in conventional solutions to social and econ problems. The recovery presents an opportunity to acknowledge our ignorance and learn how to learn. Consider the many programs being carried out by gov'ts and orgs all over the world: disease-prevention strategies, school-reform initiatives, job-training programs. We could all be learning a lot from the results of these projects. But there is no systematic process for aggregating lessons from individual experiences, says MIT economist,   World Policy Journal, Mar '11 ('Every problem does not have a solution', Financial Express/ India, 31 Mar | Banerjee and Duflo: Poor Economics - A radical rethinking of the way to fight global poverty[April 2011])

Posted on Mon, 4 Apr 11:

The global future of nuclear power after Fukushima: The crisis in Japan is sending shockwaves through nuclear planning agencies around the world. Policy makers are asking for reviews of safety regulations, publics are expressing concern, and it appears likely that some of the planned construction will be curtailed. Here are thumbnail sketches of how the discussion of nuclear energy is unfolding in 5 key nations where plans for nuclear growth are most significant - China, Russia, SKorea, India and Iran, Weblog at Harvard, 16 Mar 11 (The uncertain future of nuclear energy, Sep '10)

Gregory Mankiw: Emerging markets as partners, not rivals--In his last State of the Union address, Pres Obama set the stage for a coming policy debate and his re-election bid with a catch phrase. Six times, he called on citizens to 'win the future'. Is this really a good way to frame the econ challenge we face? To me as an economist, such a call to 'win the future' misleads us about the policy choices ahead. Achieving econ prosperity is not like winning a game, and guiding an economy is not like managing a sports team. To see why, let's start with a basic econ transaction, says fmr Council of Econ Advisers chair/ Harvard prof, NY Times (courtesy Harvard), Feb '11 [PDF]

Overheating in emerging markets - The next crisis?: With signs of overheating in the developing world, fears of a repeat of the '90s Asian financial crisis or the '80s Latin American debt crisis are surfacing. 'Overheating' manifests itself in one of 3 forms: domestic imbalances, indicated by rising prices of goods and services; financial asset bubbles, which occur when asset prices soar out of line with fundamentals; and external imbalances, esp. wide and unsustainable current account deficits. The absence of one of these 3 forms does not imply an economy is safe from overheating - a principle the US ignored before the financial crisis, when low inflation encouraged policy makers to largely disregard the bubble forming in the housing market and the unprecedented widening of the current account deficit, Carnegie Endowment, Feb '11 (Asia faces risk of overheating, needs quality growth, IMF Survey Mag)

Posted on Fri, 1 Apr 11:

Joseph Stiglitz: Of the 1%, by the 1%, for the 1%--We have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, the top 1% have the best houses, the best educations, the best doctors, and the best lifestyles. But there is one thing that money doesn't seem to have bought: an understanding that their fate is bound up with how the other 99% live. Throughout history, this is something that the top 1% eventually do learn. Too late, says Nobel Laureate '01/ Columbia U prof,   Vanity Fair, May '11 ('Top incomes database' - new Web site by Alvaredo, Atkinson, Piketty and Saez, Paris School of Economics, Mar '11)

Jeffrey Sachs: The Arab young and restless--Many factors underlay the ongoing upheavals in the Mideast: decades of corrupt and authoritarian rule, increasingly literate and digitally-connected societies, and skyrocketing world food prices. To top it off, throughout the Mideast (as well as Sub-Saharan Africa and most of South Asia), rapid population growth is fueling enormous demographic pressures. Egypt's population, for example, more than doubled over the course of Mubarak's rule, from 42 mln in '80 to 85 mln in '10. Cairo has become a sprawling region of some 20 mln people living cheek-by-jowl with inadequate infrastructure, says Columbia U Earth Inst dir,   Proj Syndicate (courtesy Jordan Times), 1 April 11

Oslo, Zurich and Geneva again the world's most expensive cities: The 3 cities are the world's most expensive cities once again this year, followed by Tokyo, Copenhagen and New York, acc. to the latest update of 'Prices and Earnings' study [PDF,1.6MB], which is published every 3 years. The lowest prices for a broad basket of goods and services can be found in Mumbai, Manila and Bucharest. Employees in Zurich, Sydney, Miami and Los Angeles enjoy the most purchasing power from their hourly wages (after taxes). In many cities in developing nations, significantly lower wages mean that domestic wage purchasing power is still more than 80% lower than in Zurich,   UBS, Sep '10

Posted on Wed, 30 Mar 11:

New nations emerge as major players in scientific world: A new group of nations, led by China and followed by others incl Brazil and India, are emerging as major scientific powers to rival the US, Western Europe and Japan, a new report from UK's national academy of science has found. The report, 'Knowledge, Networks and Nations: Global scientific collaboration in the 21st century', analyzed a wide variety of data, incl trends in the number of scientific publications produced by all nations. It also identified some rapidly emerging scientific nations not traditionally associated with a strong science base, incl Iran, Tunisia and Turkey,   UK Royal Society, 28 Mar 11

Joseph Stiglitz: Why I didn't sign deficit letter--I was asked to sign the letter from a bipartisan group of fmr chairs of the Council of Economic Advisers that stresses the importance of deficit reduction and urges the use of the Bowles-Simpson Deficit Commission's recommendations as the basis for compromise. The letter's signatories believed that their support would show that there was a core to scientific economics that crosses ideological boundaries. While I agree there is a core set of principles to which all card-carrying economists would (or should) subscribe -- resources are limited, incentives matter -- I did not sign, says Nobel Laureate '01/ Columbia U prof,   Politico, 28 Mar 11 (Deficit reduction - Stiglitz proposes principles and guidelines, Roosevelt Inst, Dec '10)

Rising oil prices highlight need for diversification: World oil prices are back above $100 a barrel, more than double what they were 2 years ago, but increased diversification of energy supplies has given many economies greater resilience to price fluctuations. But while countries have built up some ability to withstand oil price shocks and some are less sensitive, they remain vulnerable to severe supply disruptions or to the uncertainty induced by extreme oil price volatility, highlighting the need for a continuing multipronged policy response with 3 main elements,   IMF Survey Mag, 23 Mar 11

Posted on Mon, 28 Mar 11:

Coffers: A rush to buy Egyptian bargains as exchange opens--Bargain hunters are expected to be busy in the Egyptian stock market this week as undervalued shares are overriding uncertainty about the nation's political situation. Modest gains were a surprise last week after trading resumed for the 1st time in 38 business days, after being closed for almost 2 months. The benchmark index ended the week 0.9% higher as foreign investors swept in on shares available at 10% below their average trading value,   National (U Arab Emir.), 27 Mar 11 (Egypt share price surge triggers halt in trading)

Michael Spence: Observations on the evolution of economic policies -- It was a privilege to participate in the IMF confab on rethinking policy frameworks in the wake of the crisis. Highly encouraging was the openness of the discussion and the posture of humility. The good news is that we recognize that in finance and parts of macro the models or frameworks are incomplete. That means, in the short run, participants and regulators will be operating with incomplete models. This will require judgments, and there will be mistakes. This is relatively familiar territory in developing nations, where changes in the institutional depth of the economy mean that models (esp. advanced country models) are not very precise in predicting market responses to policy choices, says Nobel Laureate ’01/ NY Univ prof,   Weblog at IMF, 25 Mar 11

C Reinhart and V Reinhart: Japan must dip into its rainy day fund--The recent scenes of devastation in Japan were staggering. The price tag for rebuilding will be no less significant, running into hundreds of blns of dollars. Such a financial burden would be difficult to bear for a healthy economy. Japan is not a healthy economy. There has been much talk of the nation's resilience but, of late, it has shown few signs of being economically resilient. At the time of the disasters, national output had barely begun to recover from the '08-'09 global financial crisis, while its trajectory in the past 2 decades has been nothing short of depressing, say Peterson Inst and Amer Enterprise Inst senior fellows,   FT (courtesy Peterson Inst), 24 Mar 11

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