Call to End Support for South Korea
Cloud Design sparks calls to end support to South Korea.
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Iraqis Still Ungrateful Bastards
After 8 years, hundreds of billions of dollars and countless lives lost – Iraqis still ungrateful.
The middle class: Bourgeois and proud
The ever-expanding middle class in developing countriesTHE past four years have seen a sharp contrast between recession-hit rich countries and buoyant emerging giants. Estimates from the Asian and African Development Banks, using a rather broad definition of middle class as living on $2-20 a day, confirm the picture. On this measurement, which includes many people who are only just above the poverty line, a third of Africans and three-quarters of Latin Americans were middle class in 2008. Meanwhile, the evidence that this progress will bring political demands that will reshape the developing world is mounting.
International financial flows: Around the crisis carousel
I’VE been thinking a lot about this Michael Pettis post from the weekend, in which he offers some economic predictions for the remainder of the decade. What’s most interesting about his thinking is the way he orients his model of economic activity around balance of payment dynamics. Here’s an example:Since most global consumption comes from the US, Europe and Japan, the collapse in their demand will ultimately be very painful for the BRICs and the rest of the developing world. The latter have postponed the impact of contracting consumption by increasing domestic investment, in some cases very sharply, but the purpose of higher current investment is to serve higher future consumption. In many countries, most notably China, the higher investment will itself limit future consumption growth, and so with weak consumption growth in the developed world, and no relief from the developing world, today’s higher investment will actually exacerbate the impact of the current contraction in consumption.Mr Pettis argues that the pivot around which the BRIC economies (and China especially) swing is reliance on advanced-country demand. As that anchor (sorry, mixing metaphors) becomes dislodged, BRIC economies will face difficult internal structural changes.You might not buy all of his predictions, but it’s a compelling way to view the big trends in the global economy, and especially the …
Letters from our readers: The editor’s inbox
We received this interesting insight on the famine in the Horn of Africa from the head of DARA, an organisation that evaluates humanitarian aid operations:SIR – Your article on the situation in the Horn of Africa is sadly correct: in effect the world failed to react to the warning signs that a famine was imminent in the region until images of emaciated children were on our television screens. In February we sent a team to Nairobi to assess the response to the drought in Kenya and the crisis in Somalia for the Humanitarian Response Index. All the representatives from donor governments, the UN and other aid agencies interviewed were concerned that the situation would worsen dramatically if the April seasonal rains did not come.Even back in February there was a daily increase in the number of Somalis seeking access to refugee camps in Kenya and Ethiopia in large part due the severity of the drought, a clear indicator that the problems were getting worse. Clearly, it was not a lack of information that impeded the international community to take early action to prevent loss of lives and minimise suffering. So why did it take so long for the world to react?One of the explanations for the delayed response is the highly politicised nature of the Somali crisis, where many of the different actors—al-Shabaab, the Transitional Federal Government, governments in neighbouring Kenya and …
Energy: That’s oil she wrote
I’VE been meaning to draw attention to this analysis from Stuart Staniford (brought to my attention by Kevin Drum). In it, Mr Staniford asks what the world might have looked like had oil demand continued to grow from 2009 on at its 2000-2008 rate of increase:In the counterfactual world, 2009 gross world product would have been 6.4 percent larger than in the actual world. We can estimate the implications for oil supply because we know that the global income elasticity of oil demand is about 2/3. Thus the counterfactual world would have required an additional 4.5 percent more oil than the real world.…2009 oil production was around 85 [million barrels per day] (depending on what source you like) so in the counterfactual world we would have needed it to be around 88-89mbd. Now, in 2008, oil production got up to around 86mbd (on an average basis) but doing so triggered (or required) an oil shock in which prices briefly reached $135/barrel on a monthly basis and almost $150 on a daily basis. What would the likely price path have been had the world then needed an additional 2-3mbd the following year?To give an indication of the scale of 2-3mbd, note that the loss of 1.6mbd of oil this year (Libya) triggered something like a $30 increase in the price of oil (before it became clear that the global economy was slowing again causing prices to fall). That, along with other commodity …
Kim’s Special Day ®
While average families are buckling down and watching every last dollar, some people continue to live in a world blissfully detached from grim economic reality. Among the members of this elevated class are politicians, celebrities — and the Kardashian clan. But even if we can’t all be celebrities (or even Kardashians), we can at least gawk at Kim’s wedding extravaganza last week. So let’s. I don’t know about you, readers, but on the wedding invitations I receive, recommended attire is listed simply as either “Black tie” or “Black tie optional.” There are no specific instructions beyond that. So you can imagine my surprise when I heard that all guests at the Kim Kardashian / Kris Humphries nuptials were required to purchase either a white or a black outfit for the ceremony. Keep reading this post . . .
The world economy: A call to arms
IT IS largely a gathering of central bankers; at the outset of her speech she apologised for not being one. Yet by far the most hard-hitting words at this year’s Jackson Hole symposium came from Christine Lagarde, the former French finance minister and new managing director of the IMF. The world economy, she said, was entering a “dangerous new phase” driven by a sense that “policymakers do not have the conviction” to take decisions that are needed. That must change, and now. Ms Lagarde laid out a bold to-do list to support growth, including a forced capital injection into Europe’s banks, aggressive new action to deal with America’s foreclosure crisis, and a broad rebalancing of fiscal priorities.The most headline-grabbing prescription was for Europe’s banks. More capital, Ms Lagarde argued, was essential to “cutting the chains of contagion” in the euro crisis. Without it there could easily be “the further spread of economic weakness to core countries, or even a debilitating liquidity crisis”. She called for what would essentially be a European version of America’s policy for its biggest banks in 2008—a mandatory capital increase using public funds if necessary. Those funds could come from the European Financial Stability Fund. America, in turn, needed to do more to halt the downward spiral of foreclosures, falling house prices and weak household spending. Ms Lagarde …
Tabloid’s Pursuit of Missing Girl Led to Its Own Demise
A look at how the News of the World’s pursuit of the Milly Dowler story led to its downfall in the phone-hacking scandal—and News Corp.’s crisis today.
Tail risks: Increased Armageddon odds
KEVIN DRUM published a post last night titled, “Watching Armageddon from an armchair”, in which he wrote:Watching the world slide slowly back into recession without a fight, even though we know perfectly well how to prevent it, is just depressing beyond words. Our descendents will view the grasping politicians and cowardly bankers responsible for this about as uncomprehendingly as we now view the world leaders who cavalierly allowed World War I to unfold even though they could have stopped it at any time.I had two thoughts when I read the post. One concerns the nature of panic in the journalistic world. The world is not ending, and while a renewed fall into recession across the developed world would be very costly and painful, especially for the unemployed, it probably wouldn’t be an unmanageble situation. Growth would probably return fairly quickly, and the march of technological progress would probably go on, improving living standards for most people. Probably. The problem is that a renewed decline into recession increases the small but not insignificant odds of a true disaster—major debt or financial crisis, for instance, or major geopolitical instability. The kind of thing that isn’t at all manageable. The situation is analogous to global warming. Given expected increases in global temperature, the world will suffer nasty consequences down the road, that may …