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In RealTime posts, PIIE senior staff and colleagues discuss the fast-moving economic news, financial developments, and public policy choices confronting the United States and the world.
The European Union Council has concluded its summit in Brussels by taking another incremental but significant step forward in what is still likely to be a long road toward completing the economic and monetary union. Several decisions stand out in the communiques.1 But what was striking was how their decisions on banking supervision followed the [...]
On June 20, 2012, the Federal Reserve System’s Federal Open Market Committee extinguished the last shred of doubt as to whether it intends to achieve its mandated objectives. Despite a substantial markdown of an already inadequate forecast, the Fed did not take any actions that would make it possible to achieve either of its objectives [...]
As economic and financial pressures rise in the euro area, the commentary often suggests that an economic collapse and an outgrowth of extremist political forces reminiscent of the 1930s are upon us. These alarmist analogies come from two groups of people. Some are global hedge fund specialists whose “tail-end event risk franchises” require predictions of [...]
Over this past weekend Egypt held presidential election runoffs with official results due on Thursday, June 21. But with more than 95 percent of votes counted, the Muslim Brotherhood claims their candidate Mohamed Morsi is the winner. Meanwhile, the Supreme Council of the Armed Forces (SCAF) issued a constitutional annex to its March 30 military [...]
As usually happens when important elections and EU Council meetings are approaching, several events took place in the euro area last week. Despite the generally negative bond market reaction1 to these events, nothing suggests that the euro area is about to fall off the cliff. Indeed, while Spanish and Italian bonds have risen this week, [...]
I recently left a comment on Paul Krugman’s blog post on financial repression in China. Krugman wrote: I have no idea whether this John Hempton piece on China is at all right, but it’s a terrific read, and provides food for thought. Hempton basically argues that China has turned financial repression—controlled interest rates on deposits, [...]
Internal devaluation has become a big issue in the euro area but it remains controversial. In the latest International Monetary Fund (IMF) letter of intent for Greece, box 3 on “Internal Experience with Internal Devaluation” (pp. 48–49) opposing internal devaluation has been incorporated. It summarizes the standard arguments, but the point of this comment is [...]
In a hopeful development for Europe’s struggle to stabilize its economy, Irish voters last week endorsed the proposed Fiscal Compact Treaty by a resounding 60.3 to 39.7 majority. For all the nonsensical predictions of a grass root rebellion against austerity across the continent, the striking thing in Ireland was not just the acceptance of fiscal [...]
Is the decade-old Indian growth miracle over? India’s latest growth number of 5.3 percent for the first quarter of the current fiscal year prompts that worrying question. It falls short of two important benchmarks in India: It is 3 to 4 percentage points below the growth in China, and, critically, it is almost 4 percentage [...]