Fragile and Unbalanced in 2012

From Project Syndicate: The outlook for the global economy in 2012 is clear, but it isn’t pretty: recession in Europe, anemic growth at best in the United States, and a sharp slowdown in China and in most emerging-market economies. Asian economies are exposed to China. Latin America is exposed to lower commodity prices (as both […]

How to Prevent a Depression

The latest economic data suggests that recession is returning to most advanced economies, with financial markets now reaching levels of stress unseen since the collapse of Lehman Brothers in 2008. The risks of an economic and financial crisis even worse than the previous one – now involving not just the private sector, but also near-insolvent […]

Paying Greece’s Creditors: History Teaches Us Only So Much

Now that the ECB has—for the time being—effectively vetoed any bail-in of Greece’s creditors—even a modest reprofiling of the debt, which would push maturities out at unchanged coupon while keeping face value at par—the official sector is running out of options for a meaningful bail-in of creditors. The latest idea—apparently deemed acceptable even by the […]

Double-Dip Days

The global economy, artificially boosted since the recession of 2008-2009 by massive monetary and fiscal stimulus and financial bailouts, is headed towards a sharp slowdown this year as the effect of these measures wanes. Worse yet, the fundamental excesses that fueled the crisis – too much debt and leverage in the private sector (households, banks and other financial institutions, and even much of the corporate sector) – have not been addressed. Private-sector deleveraging has barely begun. Moreover, there is now massive re-leveraging of the public sector in advanced economies, with huge budget deficits and public-debt accumulation driven by automatic stabilizers, counter-cyclical Keynesian fiscal stimulus, and the immense costs of socializing the financial system’s losses.

Sagging Global Growth Requires Us to Act

From the Financial Times:

Sagging Global Growth Requires Us to Act

By Nouriel Roubini and Ian Bremmer

It looks as if the global economy is heading for a serious slowdown this year. Emergency austerity programmes in some countries will put a drag on growth. Inventory adjustments will run their course. The effects of tax policies that steal demand from the future – such as the US “cash for clunkers” scheme, tax credits for home buyers or cash for green appliances – will fizzle out. Labour market conditions will remain weak. The slow and painful deleveraging of balance sheets and income-challenged households, financial institutions and governments will continue.