KnowNOW!

Global Economic Watch

Syndication

Recent Posts

Tags

Archives

  • IMF's Blanchard: Focus of Global Recovery Should Now Be On Supply Side

    The global economy has a supply side problem. That is, the global marketplace needs more buyers. IMF director of research Olivier Blanchard notes that while he and his team are projecting 3.6 percent growth this year, and 3.9 percent growth next year, it all depends on a "broader" recovery. First, potential growth in many advanced economies is very low. This is bad on its own, but it also makes fiscal adjustment more difficult. In this context, measures to increase potential growth are becoming more important—from rethinking the shape of some labor market institutions, to increasing competition and productivity in a number of non-tradable sectors, to rethinking the size of the government, to reexamining the role of public investment. Second, although the evidence is not yet clear, potential growth in many emerging market economies also appears to have decreased. In some countries, such as China, lower growth may be in part a desirable byproduct of more balanced growth. In others, there is clearly scope for some structural reforms to improve the outcome. Finally, as the effects of the financial crisis slowly diminish, another trend may come to dominate the scene, namely rising inequality. Though inequality has always been perceived to be a central issue, until recently it was not seen as having major implications for macroeconomic developments. This belief is increasingly called into question. How inequality affects both the macroeconomy, and the design of macroeconomic policy, will likely be increasingly important items on our agenda for a long time to come. Read the full post here . And watch Blanchard discuss the global recovery below:
  • China's Premier Says No to Stimulus Measures

    If you are waiting on China's government to make some policy moves to jump-start growth, you may want to find something to do with your time. As Aileen Wang and Adam Rose report for Reuters , Chinese Premier Li Keqiang has quashed any rumors of pending fiscal and/or monetary policy shifts. The almost unabated run of disappointing data this year has fuelled investor speculation the government would loosen fiscal or monetary policy more dramatically to shore up activity. But authorities so far have resisted broad stimulus measures. On Wednesday, the top economic planning agency said the government had less room to underpin growth because it did not want to inflate local debt risks. Still, authorities have take some steps to bolster growth. Earlier this month, they announced tax breaks for small firms and plans to speed up some infrastructure spending, including the building of rail lines. The national railway operator now plans to raise its annual investment by 20 billion yuan (1.9 billion pounds) to 720 billion yuan in 2014. There have also been moves to cut down on bureaucracy and to open up state-dominated sectors to private investors. In his speech, Li said China was positioned to sustain a reasonable level of growth over the long term. "We have set our annual economic growth target at around 7.5 percent," he said. "It means there is room for fluctuation. It does not matter if economic growth is a little bit higher than 7.5 percent, or a little bit lower than that." Read the full article here .
  • Dan Ariely on the Cost of Dishonesty

    Most organizations have problems with dishonesty. Not necessarily big acts of cheating (those exist, of course), but rather a lot of little acts of cheating. Those little acts don't seem so bad when looked at one at a time. But added up they are problematic. Dan Ariely 's latest book is The Honest Truth About Dishonesty: How We Lie to Everyone -- Especially Ourselves , and he has spent a lot of time examining the costs of dishonesty. He speaks openly about the experience in this conversation with Knowledge@Wharton 's Adam Grant .
  • The Rise and Fall of Real Interest Rates

    Ahead of biennial meetings with the World Bank in Washington this week, the IMF 's research department has put out an interesting analysis of interest rates around the world. In the last thirty years, real interest rates have plummeted, from an average of 5.5% in the early 1980s to 0.33% post global economic crisis. From the report: The decline in real interest rates in the mid-2000s has often been attributed to two factors: • a glut of saving stemming from emerging markets economies, especially China; and • a shift in investors’ preferences toward fixed income assets—such as bonds—rather than equity, such as stocks. Both these factors put downward pressure on real interest rates globally while the expected return to invest in equities increased. The substantial increase in saving in emerging market economies, especially China, in the middle of the first decade of the 21st century was responsible for more than half of the decline in real rates (Chart 2). This was only partly offset by the reduction in saving in advanced economies. High-income growth in emerging market economies during this period seems to have been the most important factor driving the increase in savings. The IMF is now projecting a rise in real interest rates, but not to anywhere near the levels of the 1980s: Read the report here .
  • Nouriel Roubini's Top Six Risks for Global Markets

    At Project Syndicate , Nouriel Roubini writes that the major risks to global markets have shifted. The leading risks from the last two years, while not quite resolved, are not as predominant. But there is plenty to be concerned about. Namely: For starters, there is the risk of a hard landing in China. The rebalancing of growth away from fixed investment and toward private consumption is occurring too slowly, because every time annual GDP growth slows toward 7%, the authorities panic and double down on another round of credit-fueled capital investment. This then leads to more bad assets and non-performing loans, more excessive investment in real estate, infrastructure, and industrial capacity, and more public and private debt. By next year, there may be no road left down which to kick the can. There is also the risk of policy mistakes by the US Federal Reserve as it exits monetary easing. Last year, the Fed’s mere announcement that it would gradually wind down its monthly purchases of long-term financial assets triggered a “taper” tantrum in global financial markets and emerging markets. This year, tapering is priced in, but uncertainty about the timing and speed of the Fed’s efforts to normalize policy interest rates is creating volatility. Some investors and governments now worry that the Fed may raise rates too soon and too fast, causing economic and financial shockwaves. Third, the Fed may actually exit zero rates too late and too slowly (its current plan would normalize rates to 4% only by 2018), thus causing another asset-price boom – and an eventual bust. Indeed, unconventional monetary policies in the US and other advanced economies have already led to massive asset-price reflation, which in due course could cause bubbles in real estate, credit, and equity markets. Fourth, the crises in some fragile emerging markets may worsen. Emerging markets are facing headwinds (owing to a fall in commodity prices and the risks associated with China’s structural transformation and the Fed’s monetary-policy shift) at a time when their own macroeconomic policies are still too loose and the lack of structural reforms has undermined potential growth. Moreover many of these emerging markets face political and electoral risks. Fifth, there is a serious risk that the current conflict in Ukraine will lead to Cold War II – and possibly even a hot war if Russia invades the east of the country. The economic consequences of such an outcome – owing to its impact on energy supplies and investment flows, in addition to the destruction of lives and physical capital – would be immense. Finally, there is a similar risk that Asia’s terrestrial and maritime territorial disagreements (starting with the disputes between China and Japan) could escalate into outright military conflict. Such geopolitical risks – were they to materialize – would have a systemic economic and financial impact. Read The Changing Face of Global Risk here .
  • Michael Lewis on 'Flash Boys'

    Michael Lewis takes on Wall Street in his latest book, Flash Boys . The markets, Lewis argues, are rigged, as "a handful of insiders" have an inordinate amount of control. Lewis sat down with Charlie Rose to talk about the book, about high frequency traders, and the problems with the system. In this excerpt, he shares how he came across the story behind the book: In this clip, Lewis discusses his intended impact for the book on behavior on Wall Street: Watch the full episode here .
  • The Case for Data Driven Management

    The Wharton School is hosting a conference on people analytics this weekend. What are people analytics? In this case, the term refers to a data-driven approach to management, in which human resource decisions are made through analyzing information rather than intuition. As Wharton professor Cade Massey notes in this Knowledge@Wharton interview, there is so much data about human behavior available, that shrewd managers can be much more strategic and forward thinking about how they build teams and organizations. IF they know how to use the data effectively:
  • Business Strategy and Curation of Big Data

    Philip Evans starts this recent Ted Talk by urging us to recognize that "assumptions about technology" have always been central to business strategy. He then proceeds to argue that past assumptions about technology have been invalidated, and that successful business strategy today requires a contemporary understanding of how to use big data, and of "curation of these kinds of horizontal structure, where things like business definition and even industry definition are actually the outcomes of strategy, not something that the strategy presupposes."
  • China Investment in French Milk Production

    One Chinese company is looking to some French cows for a little assistance. Apparently, China, which seems to have more of everything than other countries these days, does not have enough suitable dairy cows to keep up with demand for milk. So Synutra is building a fancy new milk factory in Brittany. The story of these French cows and China's need for milk presents an interesting case study into how the global marketplace works today. Wall Street Journal 's Ruth Bender reports:
  • World Bank Investing in Gender Equality

    The World Bank is doubling down on women ( with a little help from Goldman Sachs ). World Bank president Jim Yong Kim explained why investment in women entrepreneurs specifically, and in improving the lives of girls and women around the world, is necessary on moral and economic grounds. Here is an excerpt: Conservative estimates of lost productivity resulting from domestic violence are roughly equal to what most governments spend on primary education. For me, the economic case for giving women and girls the same opportunities as men and boys is crystal clear. Last year Japanese Prime Minister Shinzo Abe put his support behind “womenomics” – a term asserting that the advancement of women in society improves productivity, as the best talent can be employed regardless of gender. But a strong, evidence-based economic case, no matter how irrefutable, won’t necessarily sway the hearts and minds of people for whom gender inequality is justified as a “cultural norm.” As an anthropologist, I see cultural norms as social constructs that are contested, embedded in unequal power relations, and, ultimately, changeable. But in so many societies, cultural norms can yank the rug from under women and girls just as they start to gain their footing. A math class can teach girls multiplication, but their male teachers and, tragically, their mothers and female relatives can teach them to have limited aspirations. As a result, many women enter into a small range of jobs which have lower barriers to entry, but offer less stability and lower wages. Overwhelmingly, girls and women perform the unpaid work of caretaker, penalizing them with poverty when they grow old. Worst of all, cultural norms can become institutionalized discrimination. In 128 countries, legal differences in how men and women are treated constrain their economic opportunities. This includes laws that make it impossible for a woman to independently obtain an ID card, to own or use property, to access credit, and to get a job. In 15 countries, husbands can even prevent their wives from working. Cultural norms can become deeply entrenched but we know -- based on enormous evidence from all around the world -- that customs and attitudes can change, sometimes very quickly. One good example is son preference. Countries where parents show a strong preference for sons report some 1.5 million fewer female births every year than demographers would predict. But look at South Korea. In the 1990s it had one of the worst sex ratios at birth in the world – more than 116 boys born for every 100 girls -- but now the ratios at birth are close to normal. What are our next steps? What’s the plan? Clearly, we need to address our blind spots. We need to draw more attention to the major constraints for women and girls that are right in front of us. Read the full speech here .
  • Singapore Now The World's Priciest City

    You think New York City is expensive? San Francisco? Then don't move to Singapore. The Economist Intelligence Unit now ranks Singapore as the most expensive city to live. With the yen losing value over the last year, Tokyo lost its hold at the top if the EIU list. EIU economist Edward Bell talked about the rankings, and the key factors that make a city pricey or affordable, with the Wall Street Journal 's Deborah Kan :
  • Buffett Forever Bullish on U.S. Economic Future

    Warren Buffett has always bet on economic growth in America, and he is not stopping now. In his annual letter to Berkshire Hathaway shareholders, Buffett comes across as being as bullish as ever, despite the impact of the Great Recession and the slow recovery. Here is an excerpt that explains his thinking: Late in 2009, amidst the gloom of the Great Recession, we agreed to buy BNSF, the largest purchase in Berkshire’s history. At the time, I called the transaction an “all-in wager on the economic future of the United States.” That kind of commitment was nothing new for us: We’ve been making similar wagers ever since Buffett Partnership Ltd. acquired control of Berkshire in 1965. For good reason, too. Charlie and I have always considered a “bet” on ever-rising U.S. prosperity to be very close to a sure thing. Indeed, who has ever benefited during the past 237 years by betting against America? If you compare our country’s present condition to that existing in 1776, you have to rub your eyes in wonder. And the dynamism embedded in our market economy will continue to work its magic. America’s best days lie ahead. With this tailwind working for us, Charlie and I hope to build Berkshire’s per-share intrinsic value by (1) constantly improving the basic earning power of our many subsidiaries; (2) further increasing their earnings through bolt-on acquisitions; (3) benefiting from the growth of our investees; (4) repurchasing Berkshire shares when they are available at a meaningful discount from intrinsic value; and (5) making an occasional large acquisition. We will also try to maximize results for you by rarely, if ever, issuing Berkshire shares. Those building blocks rest on a rock-solid foundation. A century hence, BNSF and MidAmerican Energy will still be playing major roles in our economy. Insurance will concomitantly be essential for both businesses and individuals – and no company brings greater human and financial resources to that business than Berkshire. Moreover, we will always maintain supreme financial strength, operating with at least $20 billion of cash equivalents and never incurring material amounts of short-term obligations. As we view these and other strengths, Charlie and I like your company’s prospects. We feel fortunate to be entrusted with its management. Read the letter here .
  • 'What Makes a Great Leader in the 21st Century'

    Want to be a great leader in today's digitally-driven, global business world? Ask yourself these three questions: Where are you looking to anticipate the next change to your business model or your life? hat is the diversity measure of your personal and professional stakeholder network? Are you courageous enough to abandon a practice that has made you successful in the past? Boston Consulting Group's Roselinde Torres studies leadership, and those are three questions she poses in this Ted Talk . They are part of what she calls "preparation practice" for leaders of forward thinking organizations.
  • McKinsey Quarterly: Disciplines for Leaner Management

    In the 21st century's smaller, faster, more efficient business climate, organizations have been able to increase revenue share by paring down their operations, thanks to advancing technologies. McKinsey's David Jacquemot argues that smart companies can also reap rewards by paring down management. In the McKinsey Quarterly , Jacquemot shares four "integrated disciplines" for leaner management: •Delivering value efficiently to the customer. The organization must start by understanding what customers truly value—and where, when, how, and why as well. It must then configure how it works so that it can deliver exactly that value, no more and no less, with the fewest resources possible, improving coordination, eliminating redundancy, and building quality into every process. The cycle of listening and responding never ends, as the customer’s evolving needs reveal new opportunities to attack waste, create new worth, and build competitive advantage. •Enabling people to lead and contribute to their fullest potential. The organizations that get the most from their people provide them with support mechanisms so that they can truly master their work, whether at the front line or in the boardroom. Revamped physical space fosters collaboration, visual-management techniques let everyone see what needs to be done, targeted coaching builds capabilities, and simple “job aids” reinforce standards. These and other changes enable employees to own their own development, without leaving them to figure it out by themselves. •Discovering better ways of working. As customers, competitors, and the broader economic and social context change, the whole enterprise must continually think about how today’s ways of working and managing could improve. To guide the inquiry, people will need a clear sense of what “better” means—the ideal that the organization is reaching toward—as well as an unvarnished view of current conditions and the ability to work with others to close gaps without fear of reprisal. Problem identification and resolution must become a part of everyone’s job description, supported by structures to ensure that problems flow to the people best able to solve them. •Connecting strategy, goals, and meaningful purpose. Organizations that endure operate from a clear direction—a vision of what the organization is for, which in turn shapes their strategy and objectives in ways that give meaning to daily work. At every level, starting with the CEO, leaders articulate the strategy and objectives in ways that their people can understand and support. The final step aligns individual goals to the strategy and vision, with the result that people fully understand their role in the organization and why it matters. Read the full article here.
  • Keith Ferrazzi: 'Relationships Power Growth' in Today's Global Economy

    Some people may define success as being able to get what you want. But in order to get that, Keith Ferrazzi says, you need to focus on "what's in it" for them --your customers and colleagues. Because success in today's global economy is all about building relationships. Keith Ferrazzi describes his company as a "research institute on relational and collaborative sciences." In this interview with Knowledge@Wharton 's Adam Grant , Ferrazzi shares some of his findings into the how and why of relationship building. Spoiler alert: turns out it is more important for leaders to project authenticity and vulnerability than charm and power.
1 2 3 4 5 Next > ... Last »