Category Archives: Uncategorized

The transmission of the Great Depression provides the following lessons for the present. It is best to avoid macroeconomic shocks. But when they hit, then the second-best alternative is to suspend or discard the fixed exchange rates that linked economies together in the early years of the Great Depression. When is a shock large enough […]

Stephen King (HSBC) in the FT:In Japan’s case, previous experiments with QE – admittedly not on the same grand scale – mainly served to boost exports without any significant impact on domestic demand. In a world where other nations are struggling for growth, a yen-induced export-led Japanese economic recovery might not be enthusiastically received.We are […]

Reading this update on Greece’s fascist Golden Dawn party. Be clear that a group like this, in power, is not consistent with being in the euro-area: they would not want to be in, and they would not be welcomed to stay in the EU. But let’s make it clear right now: membership in the euro-area should […]

Does globalization undermine workers’ income in the developed economies? Put slightly differently: Does globalization Gatsby-ize the developed economies, insofar as the rewards from productivity growth are reaped by owners of capital rather than labour?The logic of this proposition seems pretty straightforward. In a world of tradable goods and services, wage competition is a lever against […]

So the debate is on. Should Cyprus leave the euro-area (i.e. issue its own currency)? Alexander Apostolides says No. I’ve suggested recently that even the best-performing of the euro-adjustment group (i.e. Ireland, Spain, Italy, Portugal, Greece and now Cyprus) hasn’t performed as well as the least-well-performing East Asia crisis group. For Cyprus, the comparators are all-too-closer, both in […]

One more go at the East Asia 1997 versus Euro Area 2008 comparison. The back story is that East Asia underwent a severe crisis in 1997-98, which saw the collapse of its overvalued currency pegs. But, surprise surprise, this “devaluation devaluation” was followed by robust growth. By contrast, the “internal devaluation” (ID) strategy is to achieve the […]

The problem in Cyprus is the banking sector. To get this, you just need to look at the balance sheet of a bank, as above. Cyprus banks saw the value of their assets fall in several categories above. They were exposed to mortgages in Cyprus itself (in other words: they were mortgage lenders), which has seen […]

Probably for anyone with an expertise not shared widely, there are frustrations about what people seem to “know” about your field. I’ll be less oblique:People seem to “know” that one of the causes of the Great Depression (globally) was competitive devaluation (a.k.a.  “beggar-thy-neighbour” policy). It wasn’t. But let me back up and re-tell the story that […]

A friend recently mused that, if the euroarea periphery were not in a single currency area, the crisis we’ve seen so far would look a lot more like the 1997-98 East Asia crisis. Greece would have ‘fallen’, and contagion would have knocked down the remaining ‘weak’ countries. Bear in mind the endogeneity of such contagion: […]

Plenty of good commentary out there. See here and here especially. Cyprus’ EU partners are saying: “Not me — we didn’t insist on a haircut for small depositors.” So Nicosia wanted to protect its position as a banking centre. This is less permissible in view of the fact that it has simultaneously agreed to shrink its banking […]