January 2009 - Global Economic Watch


Global Economic Watch


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Sachs, Roubini, and Rohatyn On Saving the Economy

01-30-2009 1:33 PM with no comments

We're always on the lookout for good overviews on the crisis.  The New York Public Library has just made available video of a very interesting roundtable discussion.  Jeffrey Sachs, Nouriel Roubini, and Felix Rohatyn joined moderator Charlie Rose to answer the question on everybody's mind, "Can the economy be saved?"  Below is an excerpt.  You can watch the full discussion here, or listen to it here.

Posted by Graham Griffith

Managing Crisis into Opportunity

01-30-2009 8:20 AM with no comments

Management guru Jim Collins--he of such bestsellers Built to Last, and Good to Great--certainly knows how to turn crisis into opportunity.  He's been working on a book on how successful companies manage turbulent times.  He told Fortune some of what he has found in his research.  His big takeaway, it appears, is that it is all about people.  In downturns and recessions, companies have an opportunity to bring in talent.  The businesses that bite the bullet and acquired the key ingredient to success--the right people--will reap the benefits.  

The right people don't need to be managed. The moment you feel the need to tightly manage someone, you've made a hiring mistake.

The right people don't think they have a job: They have responsibilities. If I'm a climber, my job is not [just] to belay. My responsibility is that if we get in trouble, I don't let my partner down.

The right people do what they say they will do, which means being really careful about what they say they will do. It's key in difficult times. In difficult environments our results are our responsibility. People who take credit in good times and blame external forces in bad times do not deserve to lead. End of story.

You can read the full article here, or watch a short video with Jim Collins here.  


Posted by Graham Griffith

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'A Nation of Children Drowning in Debt'

01-30-2009 7:53 AM with no comments

At The Atlantic's Brave New Deal, Jim Manzi wonders whether American comsumers are learning their lesson about buying beyond their means.  

American consumers are awash in debt, drowning in it. This is the fundamental issue with the stimulus proposal. We're trying to borrow our way out of debt. Unfortunately, we need a recession. That is, consumption must decline because for some time we have been consuming more than we produce or have reasonable prospects of producing. Monetary policy has been used to inflate a series of bubbles to avoid the consequences of excess debt, and the more we try to hold it off, the worse it's going to be. Bourbon works as a hangover cure, but only for a while.

Read the full article here



Posted by Graham Griffith

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Nouriel Roubini: Risk of a "Near Depression"

01-29-2009 5:17 PM with no comments

NYU Stern Business School Professor Nouriel Roubini was one economic forecaster who predicted the credit crunch, and this week he has been predicting more dire economic news ahead in 2009.  He's in Davos this week for the World Economic Forum, and he sat down with Bloomberg TV for an extended interview.  In this clip, he says the US may eventually need to "nationalize banks."


Posted by Graham Griffith

What Would No Mail on Saturdays Mean for Small Businesses?

01-29-2009 12:32 PM with no comments

The financially-strapped US Postal Service estimates that it would save billions of dollars if it cut back to five days a week, and yesterday it asked Congress to end the Saturday delivery requirement.  What would be the larger impact of such a move on American businesses [not named Federal Express, or UPS]?  And specifically what does one less day of service mean for smaller businesses who depend on the Post Office? 

Posted by Graham Griffith

Back to the Beginning, WSJ Reporters Explain Crisis

01-29-2009 11:53 AM with no comments

Gail Hiduke, business professor at Saddleback College and co-author of Small Business: An Entrepreneur's Business Plan, alerted us to a useful online resource from the Wall Street Journal.  WSJ.com has a series of videos featuring Journal reporters explaining the economic crisis, from its root causes to what's ahead for the financial sector.  Hiduke is using these videos in her classes this semester.  Here's the first installment:

the end of wall street.html


Posted by Graham Griffith

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Freakonomics: 'The Failure of Macroeconomics'

01-29-2009 9:09 AM with no comments

The econonoblogosphere is ripe with healthy debate of late over macroeconomic theory and fiscal stimulus.  And frankly, sometimes even when economists seem to agree, they still disagree.  Over at the Freakonomics blog, Justin Wolfers of Wharton makes an argument that we are relatively unprepared to understand fiscal stimulus because macroeconomic theorizing on the subject has evolved so little over the last half century. 

If you took your first economics class 50 years ago, you’ll recognize all this talk about marginal propensities, multipliers, and crowding out. Fifty years later, it’s still the same debate, and it’s still unresolved. Why are we so reliant on mid-century macro for understanding our current predicament? And why haven’t we developed better answers?

Monetary policy, it seems, has been in the driver's seat.  Wolfers plugged the numbers and found that since 1970, economic papers published on monetary policy have outpaced papers on fiscal policy 3 to 1. 

I’m not sure why fiscal policy is the ugly stepsister. Perhaps the problem is ideology, and pro-market economists don’t like any discussion that gives government a greater role. Or perhaps there are just too many temptations for young economists — monetary policy research pays off because there’s a comfortable career path running from monetary research to the money markets.

Wolfers goes on to suggest that part of the reason for the imbalance is because of funding.  With a dozen Fed branches, funding for monetary policy research has many rich uncles, while there are far fewer funders for fiscal policy research.  Might we expect some change there given that fiscal policy discussions are now the rage--and for good reason?  You can read the full post here

Posted by Graham Griffith

Stimulus Debate at Larry King Live

01-29-2009 8:51 AM with no comments

Marsha Blackburn (R-TN) and Chair of the House Finance Committee Barney Frank (D-MA) debated the merits of the stimulus bill last night, with John King filling in for Larry King on CNN. 

Posted by Graham Griffith

Feldstein Says Delay and Fix Stimulus Bill

01-29-2009 7:19 AM with no comments

Earlier this week we highlighted a fascinating interview with Martin Feldstein.  We noticed that Feldstein didn't really answer when questioned which was more important: passing a stimulus bill now to staunch the bleeding in the economy, or waiting and getting a plan that more closely fits with Feldstein's view of what is needed.  Today, after the bill made it through the House, we have Feldstein's answer in the Washington Post:

As a conservative economist, I might be expected to oppose a stimulus plan. In fact, on this page in October, I declared my support for a stimulus. But the fiscal package now before Congress needs to be thoroughly revised. In its current form, it does too little to raise national spending and employment. It would be better for the Senate to delay legislation for a month, or even two, if that's what it takes to produce a much better bill. We cannot afford an $800 billion mistake.

Read the full piece here

Posted by Graham Griffith

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House Passes Stimulus Bill

01-28-2009 8:21 PM with no comments

In the end, President Obama did not get any GOP support, but he did get his stimulus bill through the House, with a 244-188 vote. 

Posted by Graham Griffith

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The IMF's (Gloomy) Outlook

01-28-2009 4:04 PM with no comments

The International Monetary Fund has just updated its World Economic Outlook, and the outlook is anything but bright.  The report projects world growth to fall to its lowest rate since World War II. 

Global growth in 2009 is expected to fall to ½ percent when measured in terms of purchasing power parity and to turn negative when measured in terms of market exchange rates (Table 1.1 and Figure 1, view: Data Figure 1). This represents a downward revision of about 1¾ percentage point from the November 2008 WEO Update. Helped by continued efforts to ease credit strains as well as expansionary fiscal and monetary policies, the global economy is projected to experience a gradual recovery in 2010, with growth picking up to 3 percent. However, the outlook is highly uncertain, and the timing and pace of the recovery depend critically on strong policy actions.

Read the full report here, and watch Charles Collyns, Deputy Director for Research at the IMF, explain the report here

Posted by Graham Griffith

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WashPost Highlights Small Business Online Resources

01-28-2009 3:44 PM with no comments

Sharon McLoone writes about small business at washingtonpost.com, and her most recent posts merit a read.  Today she points to a helpful, state by state analysis of small business activity put out by the Small Business Administration, titled Small Business Profiles for the States and Territories.   The title may not be the most captivating, but McLoone is right in pointing out that it is a great resource for checking out small business activity in specific regions.

McLoone also highlights a Kauffman Foundation sponsored report on the role business startups play in creating new jobs. 

The data show that employment accounted for by U.S. startups from 1980 to 2005 was about 3 percent per year. That's a small fraction of overall employment, but the jobs from startups reflect new jobs, which is a large percentage compared to the average annual net employment growth of the U.S. private sector for the same period -- about 1.8 percent. This pattern suggests that -- if you exclude the jobs from new firms -- the U.S. net employment growth rate is negative on average, according to the study.

Posted by Graham Griffith

Klaus Schwab on Global Business Leadership

01-28-2009 9:10 AM with no comments

In 1971, Klaus Schwab launched the Davos Symposium, in large part because he "felt there was a gap between management methods [in American and Europe]."  Nearly four decades later, the Davos Symposium is now the World Economic Forum.  This year's Forum begins today, and while the immediate backdrop of Lake Geneva remains as beautiful as ever, the larger global picture is a murky one at best.  In this interview with CNBC Europe's interview program, The Leaders, Schwab recounts the growth of the summit and discusses growing controversy around the meeting, and his belief that business leaders are best equipped to deal with global issues.  Though this interview dates to last year's summit, we doubt Schwab has changed his belief in the potential of strong global business leaders.  For a more recent, though longer, take on Schwab's expectations for this year's World Economic Forum, you can watch this press conference.  Otherwise, here's Schwab on Leaders:

Posted by Graham Griffith

Layoff Advice from Fortune

01-28-2009 8:48 AM with no comments

Fortune has some advice on how to handle getting laid off.  First, stay calm.  And if you can't stay calm, appear to stay calm.  Then pursue the best deal you can and negotiate on vacation pay, bridging to retirement, stock options, and noncompete agreements.  The article is not only good reading for someone getting laid off.  Any manager who might be preparing to let valued employees go (and that covers a lot of managers these days), ought to take a look as well.  If job cuts are the harsh reality at your company, it pays to make the departure as smooth as possible.  Read the article here

Posted by Graham Griffith

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Stimulus Debate Excerpt

01-27-2009 4:02 PM with no comments

House leaders decided to push up debate over the economic stimulus bill to today, so it's on.  Here's an excerpt of Reps. Dodgett (D-TX), Dreier (R-CA), and McGovern (D-MA) mixing it up on the House floor this afternoon. 

Dreier takes the discussion to 1981 and Reagan's challenges at the dawn of his presidency.  With so much discussion of FDR here and elsewhere, it is an interesting place to turn.  We're curious to know the strongest parallels, and welcome your comments. 

Posted by Graham Griffith

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