Finance / the Economy

• World Banks have the Power to save the Global Economy, if they want to

  The global economy appears to be headed over cliff this year.  The emerging world is experiencing a significant economic slow down, the Eurozone will probably break apart in the next few months, and the United States faces sharp austerity measures at the end of the year.  There are enough bearish developments here to make the original Mayan calendar look prescient after all.  So should we despair?  Is the global economy fated to collapse in 2012?No, says Willem Buiter and Ebrahim Rahbari of Citigroup.  Though the outlook is dire, they argue there is much more the Fed, the ECB, the Bank…

• Is Constant Economic Growth Possible?

  If we read the financial pages, economic growth seems to be viewed as the “normal” situation to which economies inevitably return. But is it really?If we look back over the past 50 years, or even over the past 100 years, economic growth has predominated. Over the longer term, we know that people have become more prosperous, and that world population has grown.  The natural assumption is that economic growth will continue in the future as it has in the past.Let’s think about this a little further. We live on an earth with a fixed surface area. If the population of…

• The Death of Global Integration

  The world's elites don't want to admit it. But the kind of global village that they have insisted on building--a vast free-trade paradise run by an ever more complex and opaque system of logistics and finance--isn't working, not even for many of them. The cost of maintaining this brittle, complex system and keeping the huge imbalances it creates at bay is becoming dizzyingly expensive.The consequences of those imbalances include heavily indebted countries such as Greece being driven into penury by the financial masters of Europe desperate to keep the Eurozone intact. They include an unsustainable system whereby the United States…

• Noble Notion vs Reality

  Seventy six years have passed since the first notion on taxing financial transactions first appeared under the pen of John Maynard Keynes in his study on Theory on Employment Interest and Money. But the idea to tax multi-billion financial transactions has remained yet to be implemented.The latest effort to introduce the financial transactions tax came from the very heart of the European Union.The European Commission, the executive arm of the EU, suggested last year in September that Europe should introduce a so-called Tobin Tax, a tax named after an American economist James Tobin. The purpose of the levy was to…

• What the Greek Debt Crisis Tells us about Governance and Public Finances

  The Greek sovereign debt crisis has captured the attention of the world, both for what it says about the viability of the Euro and the EU integration project, but also for the warning signs it sends to governments around the world about governance and public finances. In the U.S., politicians both on the right and the left are using Greece as an example of how bad management of public finances can lead to economic catastrophe. In particular, for the right, Greece is at the edge of the abyss because of the bloated government bureaucracy, unreasonably generous pensions and health-care benefits,…

• Ecological Economics: The Battle to Preserve the Natural World

  In September of 1982, a group of scholars met in Stockholm intending to reform -- even to revolutionize -- the study of economics. The new ecological economists saw the economy as embedded in, and supported by, natural systems; nature was not simply a factor in, but the foundation of, economic activity. By integrating models from ecology and economics, ecological economists sought to provide scientific arguments for preserving the natural world. The Stockholm meeting came at a critical time. During the 1970s, prominent environmentalists, encouraged by what they saw as a public awakening to environmental concerns, issued best-selling books and reports…

• Is a Reduction in Population Numbers the only Sustainable Solution?

  In a recent post, I talked about why we may be reaching Limits to Growth of the type foretold in the 1972 book Limits to Growth. I would like to explain some additional reasons now. Figure 1. Base scenario from 1972 Limits to Growth, printed using today's graphics by Charles Hall and John Day in "Revisiting Limits to Growth After Peak Oil" http://www.esf.edu/efb/hall/2009-05Hall0327.pdf In my earlier post, I talked about how rising oil prices are associated with rising food prices, and how these high prices can make it harder for borrowers to repay their loans, as is now happening in…

• Out of Africa - Portugal solicits Angolan investment

  The following is an interesting and cautionary tale for investors looking at relatively "stable" Old Europe and Africa, seemingly mired in perennial crisis. Since last year the Portuguese government has been heavily lobbying its former colony Angola to invest its petrodollars there as the nation struggles to comply with the terms of a $99 billion financial rescue package. For 500 years, Angola was Portugal's biggest and richest African colony, with huge reserves of oil, gas and diamonds. The event marks something unique in world history since Columbus first set sail, ushering in centuries of European colonial domination - reverse colonization…

• Argentina's Booming Economy Proves There Can be Life After Default

  Quick. Name the country whose economy despite the global recession nevertheless expanded 9.2 percent in 2010 and has kept growing in 2011 at an annual rate of about 8 percent. Still unsure? The nation defaulted on part of its external debt, roughly $93 billion, at the beginning of 2002 after undergoing three years of brutal recession. Argentina, Latin America's third largest economy. Quite a turnaround in nine years, when the nation quickly became a pariah state, foreign investment fled the country, and capital flow towards Argentina ceased almost completely. The government then decoupled the Argentine peso's parity with the U.S.…

• G20 and BRICs - Who's in Charge?

  As the representatives of G20 nations gather in Cannes, thrashing out a new way forward for the ailing European Union's economies, a major yet little observed economic sea change is underway, as the torch is passed from Europe's capitalist systems, forged over the past four centuries, to countries considered until a couple of decades ago "Second" and "Third World - the BRIC nations of Brazil, the Russian Federation, India and China. While it is as yet unclear what form this historic and dynamic shift will ultimately take, investors would be well advised to take notice of this historic economic tectonic shift. Furthermore,…