Europe’s sovereign debt crisis, fiscal challenges in advanced economies, concerns about overheating in emerging market countries, and the impact of rising food prices. These are the hot topics at this year’s World Economic Forum in Davos, Switzerland, and a clear sign of the tensions and risks as the global economy recovers.
In an interview from Davos, the IMF’s First Deputy Managing Director John Lipsky tells us that, with the return of global growth, the mood is certainly more optimistic than it was a year or two ago. But there is also a clear sense among delegates that this has not solved some of the world’s important economic problems.
I must admit that I was surprised by the tepid response to the advance release of the 4q2010 GDP data. Mark Thoma catalogues the most common critiques – the negative contribution from government spending and the minimal reduction in the output gap. My review of the data differs. In my opinion, this is the first GDP report since the recession “ended” that offers a certain optimism, a glimmer of hope that perhaps that light at the end of the tunnel is not simply an oncoming train. If it is an oncoming train, it’s not the train of sagging government spending, but instead a train of imports blasting forward.
(Yes, I know that isn’t saying much.)
Most people think that Fannie Mae and Freddie Mac had something to do with the financial crisis. Some people think that they were the major reason the crisis happened, which (to them) proves that activist government policy was the cause of the crisis. Other people, including me, think they were a modest contributing factor because they did buy a lot of securities that were backed by subprime loans, but they were well behind the curve when it came to mortgage “innovation” and the creation of toxic assets. But that’s not the question here.
Based on this news-item
, I presume that bankers would have told the finance ministers, gathered in Davos, in a private meeting that they should stop bashing bankers. I presume Mr. Geither would have been there in that room as well.
Reserve Bank of India’s monetary policy decision on Jan. 25th was disappointing and lame.
Summary: One of the saddest aspects of the Internet is that it so often fails to make us smarter. In a mutant version of Gresham’s Law, loud amateurs too-often drown out the voices of experts. Here we have an excerpt from a 1975 book that tells us more about Peak Oil than a typical dozen posts on most peak oil websites. It’s an example of expert knowledge effectively lost to society by the proliferation of mental chass. At the end are links to more on this subject.
Change is on the way in the Arab world, with Egypt the latest focal point. Here I review recent events and their implications for world oil markets.
Source: Google maps.
Michael Pettis has released one of his carefully reasoned posts, this one on the dark art of guesstimating what China’s GDP really is, given the notorious unreliability of its official data.
The strength of Pettis’ approach sometimes works to his advantage. He does a great job in breaking down his arguments to clear, easy to understand, step-by-step reasoning. That tends to make his posts pretty long. In this case, that meant that the part I thought was most provocative came towards the end, when impatient readers might have figured they had gotten the drift of his gist and moved on.
Most of this week’s newsletter was about the release last week of China’s fourth quarter GDP growth numbers by the National Bureau of Statistics (NBS). You can find the full NBS report on their website, but here is the key paragraph:
According to preliminary estimation, the gross domestic product (GDP) for the year 2010 was 39,798.3 billion yuan, up by 10.3 percent at comparable prices, or 1.1 percentage points higher than that in the previous year. In terms of growth by quarters, it was up 11.9 percent for the first quarter, 10.3 percent growth for the second quarter, 9.6 percent for the third quarter and 9.8 percent for the last quarter.
On the fringes of the World Economic Forum meeting in Davos this week, there was plenty of substantive discussion – including about the dangers posed by our “too big to fail”/”too big to save” banks, the consequences of widening inequality (reinforced by persistent unemployment in some countries), and why the jobs picture in the U.S. looks so bad.