1) A last (I hope!) follow-up of the highly discussed and debated IMF-morph into pragmatism and shying away from austerity, i.e: that the impact of fiscal consolidation on growth has been understimated. Wolfgang Munchau says something quite simple and what I think is most important to remember,
"The IMF does not say that austerity is too hard, too unfair, causes too much pain in the short term or hits the poor more than the rich. It says simply that austerity may not achieve its goal of reducing debt within a reasonable amount of time."
Brad Plumer at the WaPo has a succinct summary on why the change in stance is unexpected, creditable and what it actually implies for policy in the short-term future.
Meanwhile, Chris Giles had a write-up on the susceptibility of the robustness in the results. That Greece and Germany data might be skewing the conclusions.
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2) Roubini has the latest take on what QE3 means to the US economy - how the usual transmission channels are still severely impaired (bonds, credit, currency, stock markets). What's interesting here (to me of course!), is the impact on the dollar. Firstly, the Fed isn't the only central bank indulging in easing. Furthermore, (similar to what India went through recently), the US is a net-importer of commodities so a weaker dollar will create a drag on the trade balance in this respect. There's a bit more on the equity-market "wealth-effect" but I won't get into detail.
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3) Jacob Kirkegaard at the PIIE has brief analysis out at voxeu on the contrasts between youth unemployment in the US and the EZ where he concludes with:
"American youth is today idler and worse affected by the crisis than their EZ and UK counterparts. This result probably reflects both the depth of the labour market contraction in the US (which has been worse than the EZ and UK aggregate) and the fact that many American youth have fewer education and training opportunities than in Europe – especially following the dramatic cuts to US state and local government education budgets during the crisis."
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4) Simon Johnson and Peter Boone had this piece in The Atlantic on Japan's doomsday scenario fuelled by rising debt and a shrinking tax base (When will the Bond Vigilante's demand a higher risk premium!). There are eerie parallels in some minor ways between the US and Japan, namely the fiscal gridlock and the inability of tax increases. Does inflation need to be 'created'? Is some outright monetization required? Read on, along with this take from Noah Smith who argues that Japan's euro-style social spending and american levels of taxation is unsustainable. And Tim Duy waxes eloquent about the trappings of the zero bound and why we need to return to the 'normal' (not the 'new normal') as soon as possible.
"The IMF does not say that austerity is too hard, too unfair, causes too much pain in the short term or hits the poor more than the rich. It says simply that austerity may not achieve its goal of reducing debt within a reasonable amount of time."
Brad Plumer at the WaPo has a succinct summary on why the change in stance is unexpected, creditable and what it actually implies for policy in the short-term future.
Meanwhile, Chris Giles had a write-up on the susceptibility of the robustness in the results. That Greece and Germany data might be skewing the conclusions.
==================================
2) Roubini has the latest take on what QE3 means to the US economy - how the usual transmission channels are still severely impaired (bonds, credit, currency, stock markets). What's interesting here (to me of course!), is the impact on the dollar. Firstly, the Fed isn't the only central bank indulging in easing. Furthermore, (similar to what India went through recently), the US is a net-importer of commodities so a weaker dollar will create a drag on the trade balance in this respect. There's a bit more on the equity-market "wealth-effect" but I won't get into detail.
==================================
3) Jacob Kirkegaard at the PIIE has brief analysis out at voxeu on the contrasts between youth unemployment in the US and the EZ where he concludes with:
"American youth is today idler and worse affected by the crisis than their EZ and UK counterparts. This result probably reflects both the depth of the labour market contraction in the US (which has been worse than the EZ and UK aggregate) and the fact that many American youth have fewer education and training opportunities than in Europe – especially following the dramatic cuts to US state and local government education budgets during the crisis."
===================================
4) Simon Johnson and Peter Boone had this piece in The Atlantic on Japan's doomsday scenario fuelled by rising debt and a shrinking tax base (When will the Bond Vigilante's demand a higher risk premium!). There are eerie parallels in some minor ways between the US and Japan, namely the fiscal gridlock and the inability of tax increases. Does inflation need to be 'created'? Is some outright monetization required? Read on, along with this take from Noah Smith who argues that Japan's euro-style social spending and american levels of taxation is unsustainable. And Tim Duy waxes eloquent about the trappings of the zero bound and why we need to return to the 'normal' (not the 'new normal') as soon as possible.
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