5.9 C
New York
Friday, March 29, 2024

China’s Bubble, Vanis Varoufakis, Too Big To Fail & About that Trans-Pacific Partnership

Need some Sunday reading? Project Syndicate has an interesting lineup of articles…

Letting China’s Bubble Burst

By

NEW YORK – The problems with China’s economic-growth pattern have become well known in recent years, with the Chinese stock-market’s recent free-fall bringing them into sharper focus. But discussions of the Chinese economy’s imbalances and vulnerabilities tend to neglect some of the more positive elements of its structural evolution, particularly the government’s track record of prompt corrective intervention, and the substantial state balance sheet that can be deployed, if necessary.

In this regard, however, the stock-market bubble that developed in the first half of the year should be viewed as an exception. Not only did Chinese regulators enable the bubble’s growth by allowing retail investors – many of them newcomers to the market – to engage in margin trading (using borrowed money); the policy response to the market correction that began in late June has also been highly problematic.

[…]

The Lethal Deferral of Greek Debt Restructuring

By 

ATHENS – The point of restructuring debt is to reduce the volume of new loans needed to salvage an insolvent entity. Creditors offer debt relief to get more value back and to extend as little new finance to the insolvent entity as possible.

Remarkably, Greece’s creditors seem unable to appreciate this sound financial principle. Where Greek debt is concerned, a clear pattern has emerged over the past five years. It remains unbroken to this day.

In 2010, Europe and the International Monetary Fund extended loans to the insolvent Greek state equal to 44% of the country’s GDP. The very mention of debt restructuring was considered inadmissible and a cause for ridiculing those of us who dared suggest its inevitability.

[…]

Yanis Varoufakis

[EU Council/Flickr, via Project Syndicate]

In Defense of Varoufakis

By 

LONDON – From blaming him for the renewed collapse of the Greek economy to accusing him of illegally plotting Greece’s exit from the eurozone, it has become fashionable to disparage Yanis Varoufakis, the country’s former finance minister. While I have never met or spoken to him, I believe that he is getting a bad rap (and increasingly so). In the process, attention is being diverted away from the issues that are central to Greece’s ability to recover and prosper – whether it stays in the eurozone or decides to leave.

That is why it is important to take note of the ideas that Varoufakis continues to espouse. Greeks and others may fault him for pursuing his agenda with too little politesse while in office. But the essence of that agenda was – and remains – largely correct.

Following an impressive election victory by his Syriza party in January, Greece’s prime minister, Alexis Tsipras, appointed Varoufakis to lead the delicate negotiations with the country’s creditors. His mandate was to recast the relationship in two important ways: render its terms more amenable to economic growth and job creation; and restore balance and dignity to the treatment of Greece by its European partners and the International Monetary Fund.

[…]

Still Too Big to Fail

By 

WASHINGTON, DC – Nearly seven years after the global financial crisis erupted, and more than five years after the passage of the Dodd-Frank financial-reform legislation in the United States, the cause of the crisis – the existence of banks that are “too big to fail” – has yet to be uprooted. As long as that remains the case, another disaster is only a matter of time.

The term “too big to fail” dates back several decades, but it entered wide usage in the aftermath of the collapse of Lehman Brothers in September 2008. As problems spread throughout the financial system, the US authorities decided that some banks and other financial companies were so large relative to the economy that they were “systemically important” and could not be allowed to go bankrupt. Lehman failed, but AIG, Goldman Sachs, Morgan Stanley, Citigroup, Bank of America, and others were all rescued through various forms of massive – and unprecedented – government support.

[…]

Getting the Trans-Pacific Partnership Right

By 

WASHINGTON, DC – The United States Congress has now given President Barack Obama so-called fast-track negotiating authority to conclude the Trans-Pacific Partnership (TPP), the proposed mega-regional free-trade agreement among the US and 11 other countries. But Obama’s victory was not an easy one: Members of his own Democratic Party overwhelmingly opposed fast-track authority, which limits Congress to a single up-or-down vote on finished trade agreements, thereby ruling out amendments. The fast-track measure, officially known as Trade Promotion Authority, passed only because Obama was able to rely on rare backing from the Republican majority in both the House of Representatives and the Senate.

But the Democrats have a point. They want the Obama administration to ensure that the TPP includes core international labor standards for all participants, a high level of environmental protection, and access to affordable medicines, among other measures. If the administration takes these entirely reasonable demands on board, the resulting agreement would have considerable bipartisan support. If it chooses to ignore such demands, the final agreement would be much more polarizing – and would be approved by Congress with very little Democratic support.

[…]

Dollar picture by William Banzai7 at Flickr.

Subscribe
Notify of
0 Comments
Inline Feedbacks
View all comments

Stay Connected

157,450FansLike
396,312FollowersFollow
2,280SubscribersSubscribe

Latest Articles

0
Would love your thoughts, please comment.x
()
x