• Jean Tirole's Nobel Prize Lecture: The Science of Taming Powerful Firms

    It seems fitting to end the year, and our time here, by sharing the annual Nobel lecture from the winner (and yes, this year there was only one winner) of the Sveriges Riksbank Prize in Economic SciencesJean Tirole did not seem to get a lot of attention--at least in the U.S.--for the prize, which he earned for his work on regulation and market power.  In his lecture earlier this month, he spoke about his own academic path and our understanding of deserved and undeserved market power. 

  • Income and Spending Jump in November

    Personal income picked up the pace a little in November, rising 0.4%, according to the Commerce Department.  That followed a 0.3% rise in October.  Real consumer spending rose 0.7%. That may not be enough to please retailers who base a lot of their revenue goals on holiday shopping in a shopping season that seems to start earlier every year, but it is a big jump on the 0.2% rise in October.

    From the Bureau of Economic Analysis release:

    Private wages and salaries increased $38.7 billion in November, compared with an increase of $24.9 billion in October. Goods-producing industries' payrolls increased $7.3 billion in November, the same increase as in October. Manufacturing payrolls increased $3.9 billion in November, compared with an increase of $4.6 billion in October. Services-producing industries' payrolls increased $31.5 billion, compared with an increase of $17.6 billion. Government wages and salaries increased $1.8 billion, compared with an increase of $1.2 billion.

    Read the BEA's full report here.

  • Mercer: Holidays Around the Globe

    Offices across the US are winding down.  The holiday season has many workers focused on travel plans and gift lists.  Managers are going through the yearly stress of figuring out how to cover shifts and meet end of year goals while workers are halfway out the door.  It might help them to realize that their counterparts in other regions of the world have it much worse when it comes to holidays.  In some countries, there are just more official days off.  In others, the most important holidays land at different dates each year.  Mercer MThink has put together a very interesting guide to holidays around the globe (full size graphic here):

  • The Economist: Russia Set for Dismal 2015

    Russia's central bank decided to raise rates by 6.5% this week.  Such a startling move only just begins to reveal the dire circumstances Russia is facing.  The Economist points out that all signs point to things getting worse in 2015. 

    The dollar-debt problem will get worse. Credit-rating agencies including Standard & Poor’s and Fitch were already pessimistic about Russia. With the central bank forecasting a 4.5% drop in GDP in 2015 a downgrade is a certainty. If debt is reclassified as junk, Russia’s investor base will shrink. The volume of debt may jump too. The blurred lines between the state and Russian firms mean the Kremlin may end up on the hook for much of the $614 billion in external debt owed by banks and other firms. No wonder confidence in the prop provided by the Kremlin’s foreign-exchange reserves, officially valued at $370 billion, is draining.

    With rate rises and sales of foreign reserves proving ineffectual, Russia needs other options to stem the rouble’s plunge. One would be to try to negotiate extensions to bonds coming due in the hope of trimming demand for dollars, says Tim Ash of Standard Bank. A more muscular option, to which the central bank and the ministry of finance are opposed, is capital controls: the Kremlin could limit people’s ability to convert roubles into hard currency and take it out of the country.

    Mr Putin may be inspired by Malaysia, which in September 1998, at the height of the East Asian financial crisis, choked off ringgit speculation by fixing the exchange rate and cutting interest rates. It capped the amount of currency residents could take abroad, and forced foreigners to hold proceeds from ringgit asset sales within the country. But Russia’s economy is in a worse state than Malaysia’s was and its lawless financial system would prove leaky.

    Even if Russia does manage to impose capital controls 2015 will be grim. Before this week’s turmoil inflation was running at 9.1%. Now creeping price rises have been replaced by something more ominous: Russian shopkeepers have started to re-price their goods daily. Less than two weeks ago one dollar could be bought with 52 roubles; on December 16th between 70 and 80 were needed. Shops defending their dollar income need a price rise of 50% to offset this. Russian workers’ pay will be cut massively in real terms.

    Read the full article here.

  • Fed Keeping Near-zero Interest Rates, But Be Prepared For Shift Later in the Year

    The Federal Reserve announced yesterday that, while "the economy is expanding at a moderate rate," it is maintaining the near-zero target interest rates.  At least for the time being.  The door appears to be open for a change later in the year should the economy pick up the pace even more.  Here is a key paragraph from the Fed following the Federal Open Market Committee meeting:

    To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy. The Committee sees this guidance as consistent with its previous statement that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program in October, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored. However, if incoming information indicates faster progress toward the Committee's employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated. Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated.

    Fed Chair Janet Yellen discussed the decision and the overall state of the economy following the meeting:

  • McKinsey: American Consumers' Morale Still Low

    While American consumers feel a little better about the economy than they did during the recession, "consumer morale, although stable, remains stubbornly low," according to the results of McKinsey's Customer Sentiment Survey.  So if you see a wave of stories over the next two weeks that imply shoppers haven't carried their weight during the holiday season, then perhaps you have one more reason not to be surprised.  Here is an excerpt:

    Our report in September 2012 showed that things were looking up for most Americans. Many aspects of consumer sentiment indicated marked improvement. Yet from there, things have either plateaued or gotten worse. Consumers are still worried about losing their jobs (39 percent in 2014), and 40 percent of the consumers we surveyed said they are coping with the challenge of living paycheck to paycheck, up from 31 percent in 2012.

    The significant economic pressure that families earning less than $75,000 a year feel has caused many of them to make spending adjustments in order to make ends meet. Roughly 40 percent of these households say they are making changes, including cutting back and delaying purchases, as compared with 22 percent of those in households earning at least $150,000 a year. Americans at all income levels have yet to return to their prerecession positive feelings about the country’s economy. Today just 23 percent say they are optimistic about the economy, down from 27 percent at the beginning of the recession in 2009.

    Read more here.

  • Planet Money: Iceland's Jubilee and Forgiving Debt

    Here's an idea.  Forgive debt.  Everybody's debt.  It is a pretty old idea, actually.  But now Iceland is thinking of giving it a try.  And Planet Money went to Iceland to explore this key question: "What happens when you wipe debt clean?"

    Take a listen.

  • El-Erian on Impending Divergence in Global Economy

    We must prepare for a "year of divergence."  So says Mohamed El-Erian in a column at Project Syndicate.  El-Erian projects a 2015 global economy with added complications for policymakers.  There will be enough different needs and approaches from major economies that it will be hard for leaders of these different countries to come together on any "effective action." 

    The multi-speed global economy will be dominated by four groups of countries. The first, led by the United States, will experience continued improvement in economic performance. Their labor markets will become stronger, with job creation accompanied by wage recovery. The benefits of economic growth will be less unequally distributed than in the past few years, though they will still accrue disproportionately to those who are already better off.

    The second group, led by China, will stabilize at lower growth rates than recent historical averages, while continuing to mature structurally. They will gradually reorient their growth models to make them more sustainable – an effort that occasional bouts of global financial-market instability will shake, but not derail. And they will work to deepen their internal markets, improve regulatory frameworks, empower the private sector, and expand the scope of market-based economic management.

    The third group, led by Europe, will struggle, as continued economic stagnation fuels social and political disenchantment in some countries and complicates regional policy decisions. Anemic growth, deflationary forces, and pockets of excessive indebtedness will hamper investment, tilting the balance of risk to the downside. In the most challenged economies, unemployment, particularly among young people, will remain alarmingly high and persistent.

    The final group comprises the “wild card” countries, whose size and connectivity have important systemic implications. The most notable example is Russia. Faced with a deepening economic recession, a collapsing currency, capital flight, and shortages caused by contracting imports, President Vladimir Putin will need to decide whether to change his approach to Ukraine, re-engage with the West to allow for the lifting of sanctions, and build a more sustainable, diversified economy.

    Read the article here.

  • Small Firms and Job Creation

    We hear a lot of talk about how small businesses are the engines of growth and job creation.  But we don't often see data backing up this "conventional wisdom."  (To be clear, job creation isn't the only reason to support small businesses.)  Wharton professor Ann Harrison has looked into efforts to promote small and medium businesses in India.  The government there put measures in place to "reserve" certain manufacturing investments for small and medium sized businesses.  Harrison's research focused on the impact of these measures on job creation (and investment, and productivity, and wages).  In this Knowledge@Wharton interview, she talks about what she learned.

  • Stiglitz on 'Tectonic Shift' in Global Economy

    Joseph Stiglitz has penned a must-read piece for Vanity Fair.  Earlier this year the World Bank’s International Comparison Program projected that China's economy would surpass the U.S. as the world's largest by the end of this year.  and a lot of political leaders in both China and the U.S. would really prefer that the citizenry ignore the ranking.  But we can't ignore that we may be crossing a line, no matter how inevitable that crossing has been. 

    The source of contention would surprise many Americans, and it says a lot about the differences between China and the U.S.—and about the dangers of projecting onto the Chinese some of our own attitudes. Americans want very much to be No. 1—we enjoy having that status. In contrast, China is not so eager. According to some reports, the Chinese participants even threatened to walk out of the technical discussions. For one thing, China did not want to stick its head above the parapet—being No. 1 comes with a cost. It means paying more to support international bodies such as the United Nations. It could bring pressure to take an enlightened leadership role on issues such as climate change. It might very well prompt ordinary Chinese to wonder if more of the country’s wealth should be spent on them. (The news about China’s change in status was in fact blacked out at home.) There was one more concern, and it was a big one: China understands full well America’s psychological preoccupation with being No. 1—and was deeply worried about what our reaction would be when we no longer were.

    Of course, in many ways—for instance, in terms of exports and household savings—China long ago surpassed the United States. With savings and investment making up close to 50 percent of G.D.P., the Chinese worry about having too much savings, just as Americans worry about having too little. In other areas, such as manufacturing, the Chinese overtook the U.S. only within the past several years. They still trail America when it comes to the number of patents awarded, but they are closing the gap.

    The areas where the United States remains competitive with China are not always ones we’d most want to call attention to. The two countries have comparable levels of inequality. (Ours is the highest in the developed world.) China outpaces America in the number of people executed every year, but the U.S. is far ahead when it comes to the proportion of the population in prison (more than 700 per 100,000 people). China overtook the U.S. in 2007 as the world’s largest polluter, by total volume, though on a per capita basis we continue to hold the lead. The United States remains the largest military power, spending more on our armed forces than the next top 10 nations combined (not that we have always used our military power wisely). But the bedrock strength of the U.S. has always rested less on hard military power than on “soft power,” most notably its economic influence. That is an essential point to remember.

    Stiglitz proceeds to remind us of past "tectonic shifts" in global economic power, and changes in the global economy as a whole.  Read the full article here.

  • U.S. Economy Adds Over 300,000 jobs

    The U.S. economy added 321,000 jobs in November.  While that number is startlingly high relative to just about any month in the last three years, it was not enough to push the unemployment rate needle--which still sits at 5.8%, according to the Department of Labor.  The labor force participation is held at 62.8%.  Here's a look at the unemployment trends from the Bureau of Labor Statistics:

    Here are some of the key data from other areas we like to track in the monthly jobs report:

    The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 6.9 million, changed little in November. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job.

    In November, 2.1 million persons were marginally attached to the labor force, essentially unchanged from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey.

    Among the marginally attached, there were 698,000 discouraged workers in November, little different from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.4 million persons marginally attached to the labor force in November had not searched for work for reasons such as school attendance or family responsibilities.

    Read the full report from the BLS here.

  • Barbara Corcoran 'Building a Powerful Brand'

    Barbara Corcoran knows brand. As she says in this Big Think video, she owes her wealth to her success in building her brand more than anything else.  And she says brand is now even more important than ever, with the barriers for entry in publicity so low. 

  • Old Power, New Power, and the Changing World

    In the December issue of the Harvard Business Review, Jeremy Heimans and Henry Timms break down power in this period of disruption.  They write that we are moving through a very complicated period, "one driven by a growing tension between two distinct forces: old power and new power."

    Power, as British philosopher Bertrand Russell defined it, is simply “the ability to produce intended effects.” Old power and new power produce these effects differently. New power models are enabled by peer coordination and the agency of the crowd—without participation, they are just empty vessels. Old power is enabled by what people or organizations own, know, or control that nobody else does—once old power models lose that, they lose their advantage.

    Old power models tend to require little more than consumption. A magazine asks readers to renew their subscriptions, a manufacturer asks customers to buy its shoes. But new power taps into people’s growing capacity—and desire—to participate in ways that go beyond consumption. These behaviors, laid out in the exhibit “The Participation Scale,” include sharing (taking other people’s content and sharing it with audiences), shaping (remixing or adapting existing content or assets with a new message or flavor), funding (endorsing with money), producing (creating content or delivering products and services within a peer community such as YouTube, Etsy, or Airbnb), and co-owning (as seen in models like Wikipedia and open source software).

    Read the full article here.

  • Knowledge@Wharton: Time and Happiness

    Time is money.  Or so we're told.  But time is also happiness.  That is what Wharton professor of marketing Cassie Mogilner has found.  She studies happiness, and in that she has been looking at the effect of "drawing people's attention to time" on people's sense of their well-being. 

  • Reasons for Optimism in U.S. Economy

    Tim Duy sees a lot of progress in the U.S. economy, though he is surprised at how the public conversation seems to be missing it.  In his most recent Fed Watch post at Economist's View, Duy warns us to look away at the annual holiday retail sales analysis--which "tell you little if anything about the overall economy"--and look at the signs of the U.S. economy's overall strength.

    Overall, I find the pessimism (from the right and the left) inconsistent with the fact that despite the ups and downs of the quarterly data, throughout the recovery, GDP has grown at a fairly consistent rate:


    And even that might hide the strength of the recovery this year. GDP growth has exceeded 3% in four of the last five quarters. In two of those quarters, growth was in excess of 4%. It is simply reasonable to believe that the first quarter GDP report was largely an aberration. Do not dismiss the real improvement in the economy since 2009. It is not unimportant that 2014 is likely to be the biggest year for private sector employment since 1999 and that auto sales will reach a level not seen since 2001. It is not unimportant, in contrast to the conventional wisdom, that "in the post-Great Recession era, the growth in full-employment is, without a doubt, way out ahead." These are just three of many genuine signals of economic strength. It seems to me that in the effort to find what is wrong with the economy, everyone misses what is right.

    The US economy is far more resilient than it is given credit for. None of the downside risks of recent years have been sufficient to derail the recovery, nor will the supposed downside risks of next year. They are mostly external, while the primary engine of US growth is internal and flexible. The decline in energy prices (another purported reason to fear the new year) will prove to be no exception. I believe we are witnessing a supply driven dynamic, not collapsing global demand. The US economy will adjust as the balance shifts from energy producers to energy consumers. While this will have some concentrated, negative implications for a handful of sectors and geographies (I would hope but find it unlikely that state and municipal leaders in North Dakota recognized the boom-bust nature of the commodity cycle well in advance of the bust part), I expect that the net impact will be modestly positive.

    Read the full post here.

  • Noah Smith's Investment Advice for Millenials: Pay Off Student Debt

    Noah Smith has seen some finance experts encouraging millenials to stop stressing about the stock market and start investing.  Smith does not argue that returns, over the long term, are not worth the investment.  But he sees a better investment strategy: pay off student loans.  From Bloomberg View:

    The interest rates on much of this debt are surprisingly high. The rate on the cheapest kind of federal student loan, Direct Subsidized Loans for undergraduates, is now 4.66 percent. The most expensive, Direct PLUS loans, will cost you 7.21 percent. That doesn’t sound like a lot compared with a credit card, but remember that we’re in an environment where the yield on 30-year Treasury bonds is only about 3 percent.

    Paying down student debt is an investment. It’s the same kind of activity as investing in stocks or bonds. If you pay down $1,000 of student debt that was costing you 7 percent interest, you just effectively achieved a 7 percent return!

    How does this stack up against stocks? The historical annualized return of the Standard & Poor's 500 Index, going back as far as we can go, is 9.07 percent (all the returns in this article are in nominal terms). That is more than 7.21 percent, and significantly better than 4.66 percent. The annualized return over the last 30 years has been even better, at 11.14 percent. But the annualized return over the last 10 years has only been 7.36 percent. And measures such as the Robert Shiller's cyclically adjusted price-earnings ratio (CAPE), or alternatives, predict relatively modest returns from the stock market over the next few decades - perhaps only 2 percent to 5 percent.

    Read the full article here.

  • WSJ: Impact of Oil Price Slide on Global Markets

    For those of us traveling this past week, our thoughts about oil prices extended only as far as the next gas station (where we were probably relatively happy about the impact of low oil prices on the price at the pump).  But the continuing decline in the price of oil is having wider reaching impact around the globe.  Especially in Russia.  The Wall Street Journal's Katie Martin reports:

    Read Oil Slide Deepens, Ruble Crumbles here.

  • NY Fed Quarterly Debt Report: American Households Continue to Increase Debt Levels

    American households continued to increase debt levels in the third quarter of 2014, according to the New York Fed.  Household debt overall increased $78 billion during the quarter.  Our collective household debt as a nation now stands at $11.71 trillion.  From the NY Fed quarterly report:

    As anyone who looked at a tuition bill this last quarter knows, student loan debt makes up a growing percentage of the non-housing debt.  The non-housing debt breaks down like this:

    Download the full report here.

  • Case Shiller: Deceleration of Home Prices Continues

    The deceleration of home prices continued in September, according to the Case-Shiller Home Price Indices.  And for the first time in months we actually see a drop in from the previous month.  The 10 and 20-city composites each dropped 0.1% from August levels. The year-over-year gains came in at4,8% for the 10-city composite and 4.9% for the 20-city composite--down from 5.5% and 5.6%.

    From the release:

    “The overall trend in home price increases continues to slow down,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The National Index reported a month-over-month decrease for the first time since November 2013. The Northeast region reported its first negative monthly returns since December 2013 and its worst annual returns since December 2012 due to weaknesses in Washington D.C. and Boston. The West and Southwest, previously strong regions, are seeing price gains fade. The only region showing any sustained strength is the Southeast led by Florida; price gains are also evident in Atlanta and Charlotte.

    “The 10- and 20-City Composites continued their year-over-year downward trend, gaining 4.8% and 4.9% compared to last month’s year-over-year gains of 5.6%. Las Vegas, which has shown double- digit annual gains, posted an annual return of 9.1%, its first time below 10% since October 2012. Miami, however, continues to impress with another double digit annual gain of 10.3%. It is the only city that currently has a year-over-year double digit gain. Charlotte was the only city in September to show an annual increase relative to last month. Eighteen of the 20 cities reported slower annual gains compared to last month.

    “Other housing statistics paint a mixed to slightly positive picture. Housing starts held above one million at annual rates on gains in single family homes, sales of existing homes are gaining, builders’ sentiment is improving, foreclosures continue to be worked off and mortgage default rates are at pre- crisis levels. With the economy looking better than a year ago, the housing outlook for 2015 is stable to slightly better.”

    Read the full release here.

  • Guardian: GDP's Shortcomings

    We crazy humans.  Sometimes (always?) we set up a goal, or a measure to drive ourselves to success.  But what happens when the goal and success no longer match up?  Well, it seems we just stick with that goal because that is what we understand.  Why we do this is for the neuroscientists and behavioral scientists to explain.  At The Guardian, Diane Coyle uses the UK's soon to be released data on that country's overall wellbeing to remind us of the GDP's shortcomings as a leading indicator. 

    GDP is a measure of economic activity in the market and in the moment. So its key shortcoming is that it collapses time and makes us short-term in focus. It counts investment and consumption in the same way – an extra £100 spent on education is equivalent to the same amount spent on fizzy drinks.

    Studies have repeatedly shown that the time horizon of the financial markets in particular is ever more short-term. Shaving about 0.006 seconds off the time it takes computer orders to travel from Chicago to the New Jersey data centre which houses the Nasdaq servers made it worth investing several hundred million dollars in tunnelling through a mountain range to lay the fibre optic cable in a straighter line. More than two-thirds of trades in US equity markets are high-frequency automated orders. How has the search for profit so foreshortened our vision?

    It wasn’t always so. The term “Victorian values” now speaks to us of characteristics such as narrow-mindedness, hypocrisy and conformity, but it could also speak of hard work, self-improvement and above all self-sacrifice for the future. The list of the Victorians’ investments in our future is staggering. It includes railways, canals, sewers and roads; town halls and libraries, schools and concert halls, monuments and museums, modern hospitals and the profession of nursing; learned societies, the police, trades unions, mutual insurers and building societies – organisations that have often survived more than a century.

    Why the Victorians managed to be so visionary is not entirely clear, but it had something to do with the confidence of an age of discovery both in science and other areas of knowledge, and also in geographical exploration and empire building. They made such strides against ignorance and the unknown, firm in their sense of divine approbation, it seems a belief in progress came naturally to them.

    Read the full article here.

  • Vox: A Simple Plan (Difficult to Execute) To End Poverty

    This Vox explainer tackles poverty.  Or rather, it tackles one of the ways the government could try to tackle poverty--by offering a basic income.  So why have policy makers not been able to put the idea into action?  Watch:

    For more on basic income from Vox, click here.

  • Home Sales Rise Again After One Month Stumble

    After slipping in August, existing-home sales rose in October.  Sales increased 1.5% in October, according to the National Association of Realtors.  Sales for the month were also 2.5% higher than October 2013.  From the release:

    Lawrence Yun, NAR chief economist, says the housing market this year has been a tale of two halves. “Sales activity in October reached its highest annual pace of the year as buyers continue to be encouraged by interest rates at lows not seen since last summer, improving levels of inventory and stabilizing price growth,” he said. “Furthermore, the job market has shown continued strength in the past six months. This bodes well for solid demand to close out the year and the likelihood of additional months of year-over-year sales increases.”

    The median existing-home price2 for all housing types in October was $208,300, which is 5.5 percent above October 2013. This marks the 32nd consecutive month of year-over-year price gains.

    Total housing inventory3 at the end of October fell 2.6 percent to 2.22 million existing homes available for sale, which represents a 5.1-month supply at the current sales pace – the lowest since March (also 5.1 months). Unsold inventory is now 5.2 percent higher than a year ago, when there were 2.11 million existing homes available for sale.

    Read the full release here

  • The Cost of Bad Meetings

    Here's a movement people from just about any office setting can get behind.

    David Grady works in information risk management for State Street.  And he's come to believe that one of the biggest risks to his productivity is the overload of bad meetings.  In this TedX talk, Grady says the growth of bad meetings has become "an epidemic."  Far beyond being an annoyance, the epidemic of bad meetings has cost our economy with a massive loss in productivity. 

  • Project Syndicate: 'Europe‚Äôs Ukrainian Road to Normality'

    Twenty-five years (and one week) after the fall of the Berlin wall, people in Europe are in a reflective mood about the rapid changes across the continent--especially the eastern nations--a quarter-century ago. Erik Berglöf, Chief Economist of the European Bank for Reconstruction and Development, sees lessons for today in discussion of the past. At Project Syndicate, he makes a case for looking "for new bargains where all parties stand to gain."  

    One area on which to focus is the Ukrainian financial sector, where both Russian and Western European banks are highly exposed – and thus have a strong incentive to work together to maintain financial stability. Since June of this year, the affected banks and key authorities, together with the international financial institutions, have met in Kyiv under the Vienna Initiative framework (the next meeting is in two weeks). The banking system is in deep crisis, but at least there is a constructive dialogue involving the Russian banks present in the country.

    Common interests are also evident in the gas sector – a crucial item in the Ukrainian government’s budget and perhaps the main source of corruption in the country. All sides want greater energy security: Russia wants guaranteed demand, and Europe and Ukraine want stable prices and no supply disruptions. Last month’s agreement, brokered by the European Union, to resume supplies of Russian gas to Ukraine must now be followed by genuine reform of the sector, eventually involving an international operator of the network.

    A third area is trade. The deal negotiated between Russia, Ukraine, and the EU regarding the provisional application of the EU Association Agreement offered yet another opportunity to recognize joint interests. The agreement came into force on November 1, but it remains uncertain whether everyone will abide by it. If played right, ideologically less-charged trade negotiations could be an area where all parties can find common ground.

    Read the full article here.

  • The Economist: Economic Power in the Pacific, Today and 500 Years Ago

    Asia is the manufacturing center of the global economy now, and so one can argue that the Pacific is the center of global trade once again.  We say once again, because, as this Economist video explains, Pacific ports like Malacca had much greater influence in the early days of global trade--the 15th Century--than we realize.