When the External Debt Is Not External

The debate about increasing the ceiling for the US public debt has generated some peculiar exchanges. For instance, this weekend Herman Cain, a GOP presidential candidate, was interviewed by Chris Wallace in “Fox News Sunday,” and there was a short discussion about a potential trade-off between paying Chinese creditors versus maintaining public services and retirement […]

Volatile Volatility

Everybody seems to agree that there is more volatility in commodity markets.  But it is not clear whether everybody is talking about the same. Let me focus on food commodities to elaborate the point.

The recently-leaked report for the G-20 is an example of how the issue of volatility is being approached (see http://www.boell.org/downloads/G20PriceVolatilityMarch3version-1(1).pdf).  Under the title “What is volatility?” it goes to explain the issue as follows: “In a purely descriptive sense volatility refers to variations in economic variables over time. Here we are explicitly concerned with variations in agricultural prices over time…”  Then, the Charts included in the document show real (I did not find what the deflator was) and nominal prices in levels for some commodities and a chart with the standard deviation of monthly price inflation for a selected period (it does not say whether they have been annualized or not).  If the last chart with the volatility measure follows the studies presented in the references of that paper, then it has been calculated as the standard deviation of a series constructed as:

Ln(Pt) –Ln(Pt-1), where T is defined in months, P refers to prices in levels and Ln is the natural logarithm.

Competitive Devaluations and Related Issues

There has been a lot of debate lately about competitive devaluations, “currency wars” and QE2.  Some of the commentary seems to jump from the accounting fact that world current account balances should add up to zero (although in the real world, and for different statistical reasons, this accounting identity shows a non trivial discrepancy from zero) to the wrong inference that a devaluation in a specific country, while expanding output there, always does that at the expense of output and employment opportunities from the rest of the world (thus becoming a policy of “begging-your-neighbor”).

Alan Greenspan Keeps on Saying He Did Not Do It…

Recently, Robert Samuelson (Washington Post, Newsweek) (http://newsweek.com/id/235202) analyzed Alan Greenspan’s standard response to his critics: “I (Alan) only controlled the short-term rate, but what determines mortgage rates is the long term rate and I did not control it; it depends on the Chinese (and other people) saving too much at the global level.” Samuelson goes on to argue that in fact Greenspan was at fault not for having been a bad central banker but for having been too good at his job; in fact Greenspan’s Fed was so successful in smoothing the business cycle that people forgot about it and underestimated risk. 

Some Thoughts on Haiti’s Suffering and Courage

Most of us have seen the heart-wrenching images of indescribable suffering, some of which has sadly affected people I knew and that are now gone.  One can only pray that God receive them in His glory and give strength to their families and friends.  At the same time you marvel at the courage, resilience and solidarity shown by the Haitian people, and also by many foreigners affected by the disaster that were working in the country.  The support from a lot of people outside and inside Haiti to the victims of the tragedy has been very generous, and we all should be thankful for this display of human kindness.

USA, Argentina and Alan Beattie: Wrong Starting Point. Act II

I appreciate that Alan Beattie took time to comment on my blog.  He mentions that he does not find my critique of the book very convincing.  It is clear from my blog that I was referring to the article (http://www.ft.com/cms/s/2/778193e4-44d8-11de-82d6-00144feabdc0.html).  When I read the article I was disappointed and decided not to buy the book.  […]

USA, Argentina and Alan Beattie: Wrong Starting Point

I was intrigued by the early announcements of Alan Beattie’s book ‘False Economy: A Surprising Economic History of the World.’   So I read with interest his shorter piece summarizing the opening chapter of the book that presents his interpretation of the history of USA and Argentina (“Argentina: The superpower that never was” May 23 2009, […]

Mr. Obama heads South (geographically speaking, of course…)

Now that President Obama is heading for Trinidad and Tobago for the Fifth Summit of the Americas, I was thinking about the previous one.  For reasons too long to explain, in the previous Summit of the Americas in Mar del Plata, Argentina, I ended up in the same room with all the Presidents, and was able to listen to the debates (and no, I did not just walked in, as some German journalists are supposed to have done at the recent G-20 meeting; I had a proper identification…). The Presidential debate was presented in the press as one in favor or against of free-trade.  In my mind it was rather a debate on what does it mean that the Americas get “integrated,” and the possible dimensions of such integration.

As I recall, then President Bush had two interventions, a longer one and the other very brief (the latter was to support a proposal that the President Fox had presented in favor of setting a date for the resumption of the negotiations for the FTAA).  The longer one was a substantive one explaining that there was a window of opportunity in Congress to move with the FTAA negotiations, but that window was short, and therefore it was important to move fast. But to me the most interesting part was the rationale for the FTAA: he said that it was very important for the Americas to be together, because that was the only way we all could really interact with China.  As far as I can recall, he did not use words such as confront or compete.

The G-20 and the IADB


The world is facing two imbalances without clear coordination mechanisms, and significant consequences for mankind, particularly the poor and vulnerable. One is relatively shorter term: the global macroeconomic imbalances at the heart of the current crisis.  The other is longer term, related to the sustainability of our global growth given the energy and climate constraints (I discuss these two issues in somewhat greater detail in http://www.ifpri.org/pubs/dp/IFPRIDP00766.pdf).  The global coordination failure in macroeconomic matters is a central issue of world governance, with crucial implications for poverty alleviation. For the medium to long term, a second key topic of world governance is how to solve the market and institutional failures associated with energy issues, which over time will be more relevant for poverty trends in developing countries than the question of how to solve the shorter-term global macroeconomic imbalances. Building a world economy that is macroeconomically stable, based on sustainable energy, and capable of ensuring the benefits of progress to everyone requires that humankind properly address those two crucial issues.  In turn, their resolution requires better and more democratic global governance.