EconoMonitor

Peterson Institute for International Economics

Archive for March, 2009

  • Financing Woes for the Developing World

    Arvind Subramanian says developing countries have many reasons for resenting the IMF, but they need to work together better to achieve reform at the Fund. Recorded March 12, 2009. © Peterson Institute for International Economics. Steve Weisman: This is Steve Weisman at the Peterson Institute for International Economics. Our guest on Peterson Perspectives today is Arvind Subramanian, […]

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  • Bank Nationalization: A Debate

    William R. Cline and Simon Johnson debate the pros and cons of bank nationalization.

    Recorded March 9, 2009. © Peterson Institute for International Economics.

    Steve Weisman:

    This is Steve Weisman at the Peterson Institute for International Economics. Today’s session of Peterson Perspectives will be with both William Cline and Simon Johnson, senior fellows at the Peterson Institute, who have different perspectives on the issue of bank nationalization. I thought we could benefit from hearing a discussion between them.

    Simon, what is meant by bank nationalization?

    Simon Johnson:
    .
    Well, I think, Steve, different people use that term to mean very different things. The issue to my mind in the United States right now is whether you should have an FDIC-type takeover or bankruptcy procedure, if you like, managed by the FDIC for major US banks. Obviously, the FDIC does this for smaller banks on a routine basis. Now, this kind of FDIC takeover is, I think, what people are referring to in many contexts as nationalization. And some people think it’s a bad idea. Some people think the FDIC would not be able to handle this and there are other ways to proceed with regard to any big banks that may be technically or otherwise deemed insolvent.

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  • Pressing the “Reset Button” on US-Russia Relations

    The global financial crisis offers all world leaders an opportunity to think big and reach out to international cooperation. President Barack Obama should seize this opportunity to dramatically turn around US-Russia relations by establishing a positive interaction with President Dmitri Medvedev based on an early formulation of a Russia policy. Aslund and Kuchins recommend that integration, as opposed to isolation, is the best way to “manage Russia’s rise.” They identify six key areas of desired cooperation: Iran and missile defense, European and regional security including Afghanistan, arms control, commercial relations, energy policy, and democracy and human rights. The US approach to Russia should foster an environment of mutual trust in which Russians are likely to make choices that will both promote global security and enhance their own prosperity. A Russia with a mature market economy and robust democratic institutions will be the most constructive and effective partner for the United States.

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  • US Pension Reform: Lessons from Other Countries

    With the onslaught of the economic crisis and the United States projected to run historically large budget deficits in the near term, the imperative to reform America’s entitlement programs is stronger than ever. Only via combining the large short-term crisis-related outlays with expeditious long-term government budgetary correction can confidence be restored in the US government’s […]

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  • Green and Mean: Can the New US Economy be both Climate-Friendly and Competitive?

    Testimony before the Commission on Security and Cooperation in Europe, US Congress March 10, 2009

    Introduction

    Mr. Chairman and Cochairman, members of the Commission, thank you for inviting me to testify on this important and timely topic. My name is Trevor Houser and I am a visiting fellow at the Peterson Institute for International Economics and Director of the Energy and Climate Practice at the Rhodium Group (RHG), an economic research firm based in New York. Last year the Peterson Institute, in partnership with the World Resources Institute, launched a multiyear initiative to examine the international economic, trade, and financial dimensions of energy and climate policy. It is a great pleasure to be able to share with the Commission our research on ways that the US economy can, as the title of this hearing suggests, be both climate friendly and competitive.

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  • What Comparing Healthcare Costs Really Reveals

    It is common knowledge that the cost of Medicare and Medicaid will grow to become an unsustainably large part of the US federal budget in coming decades. Perhaps less well known is that more than 80 percent of the projected increases derive from “excess cost growth,” unrelated to expansion in coverage or the effects of an ageing population. Excess cost growth refers to the fact that the cost of treating each beneficiary is growing faster than the growth in nominal US per capita GDP.1 In other words, the problem stems from it becoming more and more expensive to treat each person and not increases in the number of people covered. It’s the cost (not the demography) stupid!

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  • Global Warming and the World Trading System

    Global warming is the most pressing environmental challenge of our time, and how we address it will have far-reaching effects on the world economy. Scientific opinion has coalesced around the view that human activity has added great amounts of greenhouse gases to the atmosphere even though natural forces are also at work.

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  • Whistling Past the Graveyard

    Expectations were low for this weekend’s G-20 meeting of finance ministers and central bank governors. Despite that, we should be disappointed with the outcome.

    There was no substantial progress on any policies that will help pull us out of a severe recession. The United States made a tactical mistake of pushing for a uniform two-percent fiscal stimulus across the G-20; not even the International Monetary Fund (IMF) is arguing for something so unrealistic. The Europeans were easily able to fight this off, pointing out that their stronger social safety nets mean they automatically stabilize their economies in ways that the United States can only do through discretionary fiscal packages.

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  • How the Fund Can Help Save the World Economy

    From the Peterson Institute for International Economics. :

    When the leaders of the Group of 20 nations gather in April, they will have one policy instrument available to address the financial crisis cooperatively, concretely, and credibly. They should make a commitment to an immediate, one-time allocation of $250 billion in special drawing rights (SDR) by the International Monetary Fund (IMF) to its 185 member countries.The summit statement will contain pledges to adopt expansionary policies, avoid protectionism, and mobilize the IMF and multilateral development banks to help the weakest countries. A large, one-time allocation of SDR would do most to address these issues.

    Special drawing rights are assets and liabilities of the Fund provided to each member in proportion to its quota share in the institution. A member receiving SDR can transfer some or all of its allocation to another member country and receive credit in a convertible currency to spend on its domestic or international needs. The interest rate on this credit is now about 0.6 percent—a good deal for most countries.

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  • Blaming the United States for the Developing Countries’ Financing Difficulties

    From the Peterson Institute for International Economics:

    Does the United States’ need to borrow undercut the needs of others?

    That was the argument of a front page article in the New York Times on March 9, reporting that the global flight to dollar-denominated US government securities had contributed to a sharp reduction in the external financing for developing countries. The article strongly implied that emerging-market countries were struggling to gain access to lenders, and that their difficulties had exacerbated the ongoing financial crisis.

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