Peterson Perspectives: Interviews on Current Issues
C. Fred Bergsten says the US intention to engage with the Trans-Pacific Strategic Economic Partnership (TPP) could address concerns about the emergence of a China-led, Asian-only trading bloc.
Audio | Transcript [pdf]
The global economic crisis has revealed the folly of large US budget and trade deficits, as well as the overvalued dollar that makes them possible. If it is serious about restoring long-term stable growth, the United States must balance the budget, stimulate private saving, and accept a declining international role for the dollar, writes C. Fred Bergsten. See also The Long-Term International Economic Position of the United States.
Simon Johnson testifies that passing TARP was the right thing to do, but if bank regulators do not limit the direct and indirect risk exposures of US financial institutions to the new “carry trade,” the United States faces the prospect of another even larger crisis [pdf].
The current global financial crisis can be attributed to many causes, but Edwin Truman argues that the main cause stems from many countries having monetary policies that were too easy for too long [pdf].
Peterson Perspectives: Interviews on Current Issues
Morris Goldstein rates the new legislation offered by Senator Christopher Dodd as a positive step, especially in its proposal to establish a tough new prudential regulator.
Audio
Peterson Perspectives: Interviews on Current Issues
Arvind Subramanian says that Prime Minister Manmohan Singh, in the first state visit of the Obama administration, will hold crucial talks on climate change, energy, the global economic crisis, Iran, and the wars in Afghanistan and Pakistan.
Audio
Obama's Asia Trip 
With APEC's 20th anniversary, serious consideration should be given to how to transform the "concerted bilateralism" of the past two decades into an integrated Asia-Pacific pact, writes Jeffrey J. Schott. See also "Obama Should Give a Qualified Endorsement to Asian Regionalism" by C. Randall Henning and "American Economic Relations with Asia" [pdf] by Marcus Noland.
Peterson Perspectives Interviews
with Jeffrey J. Schott | Transcript [pdf]
with Marcus Noland | Transcript [pdf]
with Nicholas R. Lardy | Transcript [pdf]
with Gary Clyde Hufbauer | Transcript [pdf]
We cannot expect that a dated global economic order—such as the one we have had since World War II—can thrive in the face of a dramatically altered power configuration; C. Fred Bergsten argues that we must provide a foundation for a viable blueprint for global leadership. Bergsten testifies that the Strategic and Economic Dialogue (S&ED) with China has made important contributions toward progress on the current economic crisis and global warming and in creating an informal G-2.
The recent global financial crisis has affected emerging Asia in numerous ways that Morris Goldstein and Daniel Xie explore in order to identify some of the key characteristics that have made these economies resilient or vulnerable to a transmission of crises from the advanced economies. Working Paper 09-11.
New Books on China China's Rise: Challenges and Opportunities
The Future of China's Exchange Rate Policy
Controlling climate change and expanding trade must be dealt with together as a global community, C. Fred Bergsten and Lori Wallach argue, before the challenges accumulate and produce paralysis instead of action. The climate change debate needs to redefine what is fair and shift from focusing on emissions to achieving energy equality so that developing countries can meet their energy needs in the greenest way possible, write Arvind Subramanian and Nancy Birdsall.
Simon Johnson testifies before the Joint Economic Committee on the impact of the Recovery Act on economic growth. See also related op-ed "Can Limits on Executive Pay Solve the Too Big To Fail Problem?"
Dan Magder evaluates existing mortgage loan modification programs and recommends how policymakers can refine the programs to more effectively avoid preventable foreclosures. Working Paper 09-13.
Peterson Perspectives: Interviews on Current Issues
Joseph E. Gagnon discusses the consequences of a declining dollar and sees little likelihood of the dollar crashing in relation to other currencies.
Audio
Peterson Perspectives: Interviews on Current Issues
Anders Åslund assesses the record of post-Communist Europe's transition to free markets and questions whether the United States has learned the right lessons from history.
Audio
H. Rodgin Cohen and Morris Goldstein evaluate the Obama Administration's proposed Orderly Resolution Regime (ORR), which would give the government special authority to resolve nonbank financial institution failures as the FDIC currently has authority to resolve bank failures.
Pierre-Olivier Gourinchas and Olivier Jeanne show that capital tends to flow more to countries with lower productivity growth and lower investment—the opposite of what the neoclassical growth model predicts—and that the relationship between growth and savings is key to understanding this puzzle. Working Paper 09-12.
In a new trade order, US and EU cooperation is still essential but no longer sufficient [pdf] for successful multilateral negotiations, as developing countries are now likely to play a pivotal role in directing the course of the WTO, writes Jeffrey J. Schott.
Adam S. Posen discusses the effectiveness of and issues related to the Bank of England’s use of quantitative easing [pdf] and notes that continued structural problems in the UK financial system, notably the underdevelopment of its domestic credit market, may constrain the emergence of a sustainable private-sector-led recovery in the United Kingdom.
Global Economic Prospects
Global and US economic growth in 2010 [pdf] will be much higher than anticipated, and US unemployment will fall below 9 percent by the end of 2010, predicts an optimistic Michael Mussa. Nicholas R. Lardy discusses the Chinese outlook at the Global Economic Prospects meeting with Mussa.
>> News Release
The euro's self-imposed limitations keep it firmly rooted as a regional currency with no signs of moving into a global role, note Jean Pisani-Ferry and Adam S. Posen. See also The Euro at Ten: The Next Global Currency? Richard N. Cooper reviews possible alternatives to the US dollar as an international reserve currency and concludes that no other currency seems likely to displace it in the foreseeable future. Policy Brief 09-21. John Williamson explains why special drawing rights (SDRs)—the IMF's unit of account—could rival the US dollar as an international reserve currency. Policy Brief 09-20. SDRs should play a large role in providing international liquidity because SDR allocation avoids making big, difficult reforms by making use of what already exists. Listen to related interview.
Jairam Ramesh's letter to the prime minister of India could spark productive debate on India's economic involvement with the rest of the world, writes Arvind Subramanian.
Brazil's move to impose a tax on some foreign capital inflows is of great substantive and symbolic importance, and the IMF's lukewarm response to the move is a disappointing reflection of its business-as-usual attitude to financial globalization, write Arvind Subramanian and John Williamson. Listen to related interview.
Adam S. Posen assesses the lasting damage the global financial and economic crisis has done to major economies on both sides of the Atlantic. While the world economy is in much better shape than it was a year ago, the trick will be sustaining this positive overall environment while major adjustments take place within and between economies.
The IMF can prove it has changed, Arvind Subramanian argues, by selecting a competent—preferably Asian—Managing Director and utilizing a macroprudential approach to capital flows.
Christopher Carroll and Olivier Jeanne model the motives of a country's residents to accumulate foreign assets, including as a precaution against risks associated with economic globalization. Working Paper 09-10.
Climate Change
Gary Clyde Hufbauer and Jisun Kim examine the nexus of the WTO and climate change and discuss challenges and options. Working Paper 09-9.
News Release: Peterson Institute and World Resources Institute Widen Scope of Climate Change Research
See related event: Linkages between Climate Change Policy and Trade Policy
Trevor Houser studies the economics of reducing greenhouse gas emissions through improvements in buildings' energy efficiency. Emissions abatement in the building sector would be more cost-effective than in other sectors, but overcoming the significant barriers to energy-efficient investments in buildings will require smart policy. Policy Brief 09-17. See also a guide to climate-change laws and the book Global Warming and the World Trading System.
Peterson Perspectives: Interviews on Current Issues
Michael Mussa, a former student and professor at the University of Chicago, assesses the influence—for good and for ill—of economics as espoused at the University of Chicago.
Audio | Transcript [pdf]
RealTime Economic Issues Watch:
The Global Financial Crisis
Views updated daily on the current crisis in global financial markets, its impact on the real economy, and the public policy choices confronting the United States and other countries.
Analysis of the Pittsburgh G-20
>> The Aftermath
The pledges made during the G-20 summit in Pittsburgh will place President Obama at odds either with his allies abroad or at home, but Steven R. Weisman argues that greater global cooperation can result if Obama is able to balance the desires of his domestic and foreign allies. See also "The G-20, the IMF, and Legitimacy" by Simon Johnson.
with Edwin M. Truman | Transcript [pdf]
with Morris Goldstein | Transcript [pdf]
To recover quickly from the current global financial crisis and enter a sustained period of global expansion, an exit strategy [pdf] that includes monetary, fiscal, and structural policies is needed, argues Edwin M. Truman.
Stephan Haggard and Marcus Noland document behavioral and institutional changes in North Korea resulting from the state’s failure to provide food following the famine of the 1990s. Working Paper 09-8. See also Korea after Kim Jong-il.
Russia should take action to correct past wrongs and improve its tarnished reputation by forming a constructive and respectful policy toward its Commonwealth of Independent States (CIS) neighbors, writes Anders Åslund. See also The Russia Balance Sheet.
Latvia can and will rein in its excessive budget deficit—caused by falling state revenues and rising social spending due to the global crisis—and will be ready to adopt the euro in 2014 [pdf] or even earlier, foresees Anders Åslund.
Most viewed pages for the past 7 days.
RealTime Economic Issues Watch
Warren Buffett Bets on Growth in Emerging Markets (and Against the Dollar)
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The Dollar and the Deficits: How Washington Can Prevent the Next Crisis
C. Fred Bergsten
Speech
A Blueprint for Global Leadership in the 21st Century
C. Fred Bergsten
RealTime Economic Issues Watch
The Liquidity Trap Does Not Make Monetary Policy Ineffective
Joseph E. Gagnon
Speech
Globalization: The Concept, Causes, and Consequences
John Williamson
Event The New World Order: The Influence of Asia and Emerging Countries
Policy Brief 09-21
The Future of the Dollar
Richard N. Cooper
Speech
Did the Washington Consensus Fail?
John Williamson
Speech
The Global Financial Crisis: Lessons Learned and Challenges for Developing Countries
Edwin M. Truman
Working Paper 09-11
The Impact of the Financial Crisis on Emerging Asia
Morris Goldstein and Daniel Xie
Most recently posted material.
Working Paper 09-13
Mortgage Loan Modifications: Program Incentives and Restructuring Design [pdf]
Dan Magder — November 20, 2009
Mortgage defaults and home foreclosures remain a growing problem that undermines the nascent US economic recovery. Delinquencies continue to skyrocket, up 300 percent since the beginning of the crisis, and the contagion has spread to prime loans where delinquencies have risen to over 11 percent of outstanding loans. The resulting foreclosures have broad consequences: Individuals lose their homes, banks take losses on the loans, neighbors suffer as area prices go down, and localities lose on property taxes. The economics of modifying loans to avoid defaults appear strong: Lenders lose an average of $145,000 during a foreclosure compared with less than $24,000 on a modified loan. Yet the track record of modification programs has been surprisingly poor. Potential lawsuits over modifying loans in securitization trusts may be a less important obstacle than many claim. More significant are misaligned incentives that put mortgage servicers in opposition to both investors and borrowers, conflicts between investors holding different tranches of mortgage-backed securities (MBS), operational impediments, and problems in loan modification design that contribute to redefaults. Policymakers should improve reporting metrics to highlight servicers' conflicts of interest, shift the emphasis of loan modifications from short-term fixes to making the new loans more sustainable, and use government resources to drive operational/capacity improvements in the industry.
RealTime Economic Issues Watch
Dr. Singh of India Comes to Town
Arvind Subramanian — November 20, 2009
Hard on the heels of his tour of China—a visit that produced mixed results and even more mixed reviews—President Obama welcomes Prime Minister Manmohan Singh to the White House in the first state visit of his presidency. For both Mr. Obama and Dr. Singh, the trip will be important symbolically, ...
Peterson Perspectives Interview
A Seminal Visit by India's Prime Minister
Arvind Subramanian — November 19, 2009
Arvind Subramanian says that Prime Minister Manmohan Singh, in the first state visit of the Obama administration, will hold crucial talks on climate change, energy, the global economic crisis, Iran, and the wars in Afghanistan and Pakistan.
Event
Global Lessons on Healthcare Reform
T.R. Reid —November 19, 2009
Journalist and author T. R. Reid delivered the speech "Global Lessons on Healthcare Reform: What the United States Can Learn from Other Countries," at the Peterson Institute for International Economics on November 19, 2009. His is the author of the book, The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care, published August 2009, and was the lead correspondent for the 2008 Frontline documentary "Sick Around the World."
Testimony
The Impact of the Troubled Asset Relief Program on the US Financial System and Economy [pdf]
Simon Johnson — November 19, 2009
To save the banking system in the face of generalized panic, the United States must: 1) prevent banks from collapsing in an uncontrolled manner; 2) take over and implement orderly resolution for insolvent banks; and 3) immediately address underlying weaknesses in corporate governance that created potential vulnerability to crisis. Considering these three recommendations, Simon Johnson testifies that the Troubled Asset Relief Program (TARP) has been badly mismanaged. Its funds supported troubled banks and the executives who ran them into the ground. Additionally TARP's implementation exacerbated the perception that some financial institutions really are too big to fail.
However, the overall US policy response did well by preventing a collapse in spending via monetary policy that responded quickly and appropriately. The 2009 stimulus kept domestic spending relatively buoyant despite the credit contraction and rising unemployment. In the midst of what is arguably the largest global financial shock the world has seen, things could have been a lot worse. There is no question that passing TARP was the right thing to do, but if bank regulators do not limit the direct and indirect risk exposures of US financial institutions to the new "carry trade," we face the prospect of another even larger crisis.
Op-ed
Forget Emissions, Focus on Research
Nancy Birdsall and Arvind Subramanian — November 18, 2009
President Barack Obama reflected the consensus view this week when he acknowledged that no agreement on climate change—at least not with specific commitments—would be reached at next month's Copenhagen summit. Environmentalists and policymakers in many countries are dismayed and discouraged. But now they have an opportunity to fix the problem that has stymied successful cooperation on climate change. International negotiations to cut emissions of the heat-trapping gases driving climate change are gridlocked in part because of a fundamental misunderstanding about what is fair. The focus has been on greenhouse gas emissions, and on who bears responsibility for cutting them, by how much and when.
Article
American Economic Relations with Asia [pdf]
Marcus Noland — November 18, 2009
The United States and Asia have an enormous stake in each others' continuing prosperity. This outcome is linked to the preservation of the open international economic order, which in turn faces challenges at both the interstate diplomatic level and at the domestic political level. The global financial crisis is probably the worst since the Great Depression and the domestic politics makes it increasingly difficult to formulate a constructive trade policy. In the absence of adequate reform at the global level, the alternative could be further fragmentation into competing regional blocs. Asia holds the key, combining both dissatisfaction with existing global arrangements with the resources to reconstitute, at least at the regional level, an alternative set of institutions and practices. How Asia responds, acting to strengthen reformed global institutions or undermine them in favor of regional alternatives, will partly depend on the policies of the dominant global power, the United States.
Working Paper 09-12
Capital Flows to Developing Countries: The Allocation Puzzle [pdf]
Pierre-Olivier Gourinchas and Olivier Jeanne — November 18, 2009
The textbook neoclassical growth model predicts that countries with faster productivity growth should invest more and attract more foreign capital. The authors show that the allocation of capital flows across developing countries is the opposite of this prediction: Capital seems to flow more to countries that invest and grow less. They introduce wedges into the neoclassical growth model and find that one needs a saving wedge in order to explain the correlation between growth and capital flows observed in the data. They conclude with a discussion of some possible avenues for research to resolve the contradiction between the model predictions and the data.
Speech
India's Role in the World Economy and the Future of India-US Relations
Meera Shankar — November 18, 2009
Thank you, Dr. Bergsten, for hosting me today to discuss India's role in the global economy and the future of India-US relations. These are two different, but I believe, inter-related ideas. It could not be at a more appropriate time, with less than a week left for Prime Minister Manmohan Singh's official visit to the United States. In this city of great institutions, the Peterson Institute is of special significance for me, because on my last tour of duty here as Minister for Commerce at the Embassy in the early 1990s, I relied a great deal on the wisdom and analysis of the Peterson Institute to make sense of a world that was then caught in tectonic political and economic shifts.
Event
Ambassador Shankar on the Future of US-India Relations
Meera Shankar —November 18, 2009
Ambassador of India to the United States Meera Shankar delivered her speech, "India's Role in the World Economy and the Future of US-India Relations," at PIIE on November 18, 2009. Her speech came just a few days in advance of Indian Prime Minister Dr. Manmohan Singh's state visit with President Obama.
RealTime Economic Issues Watch
Senator Schumer's Blowhard Moment?
Jacob Funk Kirkegaard — November 18, 2009
"American taxpayer dollars should not be used to finance those Chinese jobs."
Who could disagree with Senator Schumer's statement, which accompanied his recent call for cancellatio ...
RealTime Economic Issues Watch
Is the Financial System Condemned to a "Doom Loop"?
Simon Johnson — November 18, 2009
"Banking on the State" [pdf] by Andrew Haldane and Piergiorgio Alessandri is making waves in official circles. ...
Peterson Perspectives Interview
Obama Embraces Trans-Pacific Partnership
C. Fred Bergsten — November 16, 2009
C. Fred Bergsten says the US intention to engage with the Trans-Pacific Strategic Economic Partnership (TPP) could address concerns about the emergence of a China-led, Asian-only trading bloc.
RealTime Economic Issues Watch
Turbulence Ahead for the City of London
Nicolas Véron — November 16, 2009
The city of London has been Europe's dominant financial center since the 18th century, and its prominence has been especially marked in the decade before the current financial crisis. The city has succeeded by combining the intermediation of global financial imbalances, channeling Asian and Midd ...
Peterson Perspectives Interview
Financial Regulatory Reform Moves Ahead
Morris Goldstein — November 16, 2009
Morris Goldstein rates the new legislation offered by Senator Christopher Dodd as a positive step, especially in its proposal to establish a tough new prudential regulator.
