Chrystia Freeland

As Chrystia threatened at the end of her interview with Mohamed El-Erian today, we’ve compiled all the questions our readers submitted via the Newsmaker blog and Twitter and e-mailed them to him. El-Erian will be flying to Europe tonight after he finishes up his business in New York, and while we do hope he gets a little sleep, we also hope he stays up long enough to answer all of your questions.  We’ll post his answers right here once we receive them.

Global Markets

Are the current “mixed signals” by the various markets similar to the ones you said were being transmitted before the financial crisis, and do you think that the current stock market trading activity signals caution, confidence or complacency? (from i8emallup)

Are the markets too complacent about potential risks to growth (disturbance in global production chains, fiscal tightening) and inflation (Japans expected demand for resourses, continued strength in China, core EMU)? (From Michael D-R)

What percentage chance exists of default by G20 & G7 governments? (from Mark Melin)

Middle East

How can the Middle East conquer corruption and power-abuse that has been inherited for generations? is there hope in the new “governments”? (From Lalla Nashta)

Would you give us your views on how Egypt shall grow economically and socially ?? (From mohamedino)

Japan

What do you think about the next steps for BOJ in the near term? (from Murad Halaiqa)

U.S. Economy

The US is approaching the end of QE2. What do you think would have been a better option? (question from GKhalifa)

Do you really feel the full faith and credit of the US Government is at risk? from (amj)

Why should the Fed permit large US banks to return the $1T in cash on their balance sheets to stockholders when several are technically insolvent now? (from triwealth)

Posted by Peter Rudegeair.

To Mohamed El-Erian, the world’s major reserve currencies — the dollar, the euro, and the yen — are a bit like your dirty laundry; every shirt is dirty, but compared to the alternatives, they historically have been the “cleanest dirty shirts.”  El -Erian thinks that arrangement will not last forever.  He tells Chrystia that a long-term trade that PIMCO likes is a long position in the currencies of the successful emerging markets — the clean shirts — funded by the currencies of the U.S., the EU, and Japan.

El-Erian forecasts a medium-term weakening of the yen as Japan will repatriate more funds than the market currently expects in order to finance reconstruction.  Of the three options Japan has for funding reconstruction — borrowing, repatriating funds, or monetizing debt — repatriation has the fewest risks.  With a debt-to-GDP ratio well north of 200% and a diminished credit rating of AA-, borrowing money or monetizing debt could each cause a rise in Japan’s interest rates.

In the near-term, though, before Japan can think about reconstruction it will have to muddle through the immediate aftereffects of the tsunami: a one-off destruction of wealth and a 25% reduction in Japanese energy generation.  El-Erian pointed out that auto companies and tech firms around the world continue to announce production slowdowns due to the tsunami’s of supply chains — just two days ago Ford announced a temporary shutdown of a factory in Belgium in order to preserve car parts.  His biggest worry is the “stagflationary wind” that’s blowing from Japan towards the rest of the global economy.

Posted by Peter Rudegeair.

Reuters finance blogger Felix Salmon has previously written that “if you wanted to put a face to the famous bond vigilantes, it would probably feature that famous moustache” of PIMCO CEO Mohamed El-Erian.  Well, this morning Chrystia sat down with this famous bond vigilante for an hour-long Thomson Reuters Newsmaker interview and asked him why PIMCO decided to dump all of its holdings of U.S. government bonds earlier this month.  Here’s what he had to say:

Everything you buy and hold must have value; it’s that simple…  And our estimation at the time was that there was better value elsewhere…  Now if the valuations of Treasuries change — and it has been changing; they have been getting cheaper — we will revisit that.  But when we looked at what else was available, you have Treasury-like instruments that offer you a lot more value than Treasuries.  You have government instruments in other countries that offer you more value.  We made a portfolio decision that said at these prices we find better value elsewhere in the fixed-income market for this mutual fund, and as it turned out, that was the right decision to make.

El-Erian listed three concerns PIMCO had about the market for U.S. bonds.  First, the Fed, which has been buying 70% of new Treasury issuance in its second round of quantitative easing, will cease it purchases in June, and it is unclear who will step in to buy Treasuries at current prices.  As El Erian said, “when you can’t identify a buyer, you don’t want to hold that instrument.”  Second, El-Erian doubts that Washington can find a political solution to the U.S.’s medium-term fiscal problem in the near future.  Finally, U.S. inflation is a worry for PIMCO.  Though increases in the prices of food and energy have yet to feed back into core inflation, El-Erian’s experience investing in emerging markets has taught him that the convergence point between headline and core inflation will be higher this time around than it has been in recent decades.

In response to questions via Twitter about the Fed’s latest round of quantitative easing, El-Erian said “I would not have done QE2.”  He speculated that the only reason the Fed undertook a second round of asset purchases was because it believed Congress would not pass an additional fiscal stimulus, and that had the Fed known there would be an extension of the Bush tax cuts and a payroll tax cut, it would not have started QE2.  El-Erian also doubted the Fed would embark upon a third round of quantitative easing after the current program ends in June, citing an improving economic outlook at a bleaker political situation:

Posted by Peter Rudegeair.

Fresh off of last week’s announced bid for T-Mobile, AT&T CEO Randall Stephenson sat down with Chrystia following a breakfast this morning at the Council on Foreign Relations in New York.  He explained why this deal is good for his shareholders:

Over the last four years, since the mobile broadband era was introduced, the volumes on our network are up 8,000%.  We’re investing an incredible amount of capital, but we look out into the future and we do not believe, that given the growth rates we expect in the future, that there is adequate spectrum in the industry to accommodate this growth.  The infrastructure, the sell-side infrastructure — the build requirements –  are really extensive.  You do this transaction, it gives you an immediate lift of capacity in the neighborhood of about 30% in most of our major metropolitan areas.  That kind of capacity lift is future growth and future opportunity to serve customers, so this good for the shareowners.  The synergies associated with this from a shareowner standpoint represent in excess of $40 billion of synergies.

The AT&T chief was sanguine that the Department of Justice would ultimately bless the T-Mobile acquisition sometime next year, noting that in 18 of the top 20 mobile telecommunications markets in the U.S., consumers have a choice of at least five providers. When asked if he was prepared to offer consumer guarantees like price caps, Stephenson replied that recent history clearly shows consumer prices fall in the wake of this type of big merger.

Moreover, Stephenson said the growth of wireless broadband telecommunications has had a profound effect on U.S. productivity, especially via the acceleration of commercial transactions and via capital investment.  AT&T spends more on capital investment than any other publicly traded U.S. company, he said. The firm plans to invest $19 billion domestically this year.

Head to CFR.org to watch the video from full event.

Posted by Peter Rudegeair.

Shakespeare was wrong. He assured us that a rose by any other name would smell as sweet. One reason that is such a beloved line is its comforting message that intrinsic quality, rather than external labels, is what really counts. But recent research from a Harvard Business School professor suggests that, at least when it comes to the written word, labels matter quite a lot.

That is one of the conclusions of not-yet-published work by Bharat Anand, the professor at Harvard, and Alexsander Rosinski, a former visiting researcher there. The two wanted to figure out two things: whether brands influence our perceptions of quality, and whether adjacent advertising does.

It has become conventional wisdom to believe that information has been commodified. Google is the great leveller, with algorithms that can promote content-farm stories ahead of Pulitzer Prize-winning investigations. But it turns out that, to readers, provenance still matters a lot.

The two researchers took a story about Greek public finances that appeared online on the Huffington Post and showed it to a test group of 700 readers in three forms: as an unlabeled piece published online, as an online piece published by the Huffington Post and as an online piece published by The Economist.

The scent of this rose depended very much on its name: When respondents believed they were reading an Economist story, they rated its quality at 6.9 on a scale of 10; when the same piece was attributed to the Huffington Post, it drew a score of 6.1; and when it had no label, it scored just 5.4.

This is a terrific finding for the beleaguered mainstream media, which may not be quite so lame after all in the eyes of their readers.

The researchers’ findings about the relationship between ads and perceptions of quality were equally intriguing. Conventional wisdom is that advertising is a mild annoyance for readers (some websites offer ad-free versions as a perk for paying subscribers). To investigate this, the researchers placed two types of ads alongside the article about Greece, ones they describe as “cheap” and “good.”

The biggest surprise was that “good” ads had almost as powerful an impact on perception of quality as an editorial brand. When the article was viewed beside ads for Jaguar and Credit Suisse, but without a brand, readers rated it a 6, nearly high as the 6.1 it received as an ad-free Huffington Post piece. Even the “cheap” ads (for online card games and astrology) earned a slightly higher rating of 5.6 for the no-brand story.

But if the article appeared under an editorial brand, readers saw advertising as a negative. The impact was greatest for the most lustrous masthead. The “cheap” ads reduced the perceived quality of the Economist story to 6.2, nearly the ranking it earned as a Huffington Post story with no advertising. Even the “good” ads made readers a little more critical.

This finding may not be quite so uplifting for legacy media companies. It is bad enough that even classy ads slightly depress the value that readers see in their content. More worrying, if you are a publisher, is the apparent power of “good” consumer brands to confer a quality halo on editorial content.

The obvious conclusion to draw is that owners of “good” brands may be able to cut out the publisher altogether and produce their own content. Sure enough, that is one of the emerging trends on the Internet. Retail sites such as Groupon, Gilt Groupe and Net-a-Porter publish their own editorial material. One reason it works is that it is good; Groupon’s writing is smarter and sharper than that of many pure publishers. But the Harvard researchers’ findings suggest we may also like the stories on these sites partly because of the borrowed luster of the branded goods sold on them.

The great virtue of Prof. Anand and Mr. Rosinski’s work is that they produced some empirical answers to questions – the value of brand, the impact of advertising – that we often talk about in abstract and emotional terms.

Here are two other big issues I would like to see them tackle in the same way. First, how do personal brands (think Oprah Winfrey) stack up against institutional ones? And second, what is the impact of social networks, such as Facebook? If brands can increase our perceptions of quality, it would be useful to learn whether personal recommendations have the same power.

Americans actually live in Russia, although they think they live in Sweden. And they would like to live on a kibbutz. This isn’t the set-up for some sort of politically incorrect Catskills stand-up joke circa 1960. It is the takeaway from a remarkable study by Michael Norton and Dan Ariely on how Americans think about income inequality.

The right likes to argue that income inequality as an issue doesn’t win elections because Americans don’t begrudge the rich so much as they want to join them. The Norton and Ariely study suggests otherwise. Given a choice, the authors find, Americans would prefer to live in a society more equal than even highly egalitarian Sweden.

Another popular view is that income inequality isn’t experienced as acutely by most Americans as the numbers suggest because of how much can be “consumed” by the lower rungs of the nation’s socioeconomic ladder. No less a figure than Alan Greenspan, the maestro himself, once made this case at the Federal Reserve’s annual Jackson Hole conference, presenting data on the consumption of dishwashers, microwaves and clothes dryers showing that if measured by the possession of these goods – as opposed to the huge and growing income divide — inequality was decreasing.

That interpretation is not without merit. But it turned out that allowing Americans to prosper by using their homes as A.T.M.’s and maxing out on their credit cards was maybe not such a great idea.

Personally, I lean toward two other theories. Americans are mistaken about income inequality because of national self-confidence and the lottery effect.

By national self-confidence, I mean the widespread conviction that the American way is probably right because all those other ways don’t seem to work out so well. This is a wonderful national quality and one of the reasons America has such resilience. But confidence in the American way can make it hard for the country as a whole to recognize when things aren’t working.

Take, for instance, the health care debate, when a politically effective criticism of what has come to be known as Obamacare was to argue that it would destroy the “best” health care system in the world. Mary Meeker, a Silicon Valley guru of impeccably capitalist and American credentials debunked that idea in her recent USA, Inc. presentation, in which she pointed out that “U.S.A. per capita health care spending is 3x OECD average, yet the average life expectancy and a variety of health indicators in the U.S. fall below average. But if you spend way more than everyone else, shouldn’t your results (a.k.a. performance) be better than everyone else’s, or at least near the top?”

Aside from faith in American national excellence, the other main reason Americans seem so unperturbed by the widening chasm between the rich and everyone else is what I like to call the lottery effect. Buying lottery tickets is clearly an irrational act — the odds are hugely stacked against us. But many millions of us do, because we see the powerful evidence that an ordinary person, someone just like us whose only qualifying act was to buy a ticket, wins our favorite lottery every week.

For many Americans, the nation’s rowdy form of capitalism is a lottery that has similarly bestowed fabulous rewards on the Everyman. The current leading exemplar of self-made billions is Facebook’s Mark Zuckerberg, and he may soon be outstripped by the even more instant cyber-star Andrew Mason, the founder of Groupon.

But the problem with lotteries is that there are only a few winners. That is the story the numbers tell us about American capitalism today — and unless that underlying reality changes, at some point all those folks who think they already live in Sweden will realize they live in a winner-take-all society, and that most of us aren’t winning.

This originally appeared on the New York Times’ Room for Debate on “Rising Wealth Inequality: Should We Care?”

It is a truth universally acknowledged that a dictator who wants to be accepted by polite Western society should look for a charming, glamorous wife. That, at least, is what the world’s autocrats are learning from the example of Bashar al-Assad, the president of Syria.

First, his wife, Asma al-Assad, was the subject of a glowing profile in the March issue of the U.S. edition of Vogue, which described this ‘‘rose in the desert’’ as ‘‘the freshest and most magnetic of first ladies’’ and reported on the ‘‘wildly democratic principles’’ that govern family life chez Assad. Now, the Harvard Arab Alumni Association has organized an event in Damascus, ‘‘under the patronage’’ of Mrs. Assad, who was scheduled to deliver a keynote address on Thursday.

On Wednesday, the day before the planned Harvard alumni event, security officers beat and detained a group of nonviolent demonstrators who gathered to call for the release of the estimated 3,000 to 4,000 political prisoners in the country.

On its Web site earlier this week, the Harvard Arab Alumni Association highlighted its connection with the dictator’s wife: ‘‘We are greatly honored to hold our Arab World Conference under the esteemed patronage of Her Excellency Mrs. Asma al-Assad, The First Lady of Syria, and are privileged that Her Excellency will deliver the conference’s keynote address. A thought-provoking, inspiring and tireless leader and advocate, the First Lady’s address will certainly be the highlight of our event.’’

The Web site was enthusiastic about Mrs. Assad’s role in Syrian national life and the connection between her work and that of her husband’s regime: ‘‘In her role as Syria’s first lady, Her Excellency Asma al-Assad applies her experience, energy and influence to her country’s social and cultural development. Her role reflects the significant economic, political and social change that is happening in Syria today. Asma al-Assad’s work supports that of President Bashar al-Assad by fostering the emergence of a robust, independent and self-sustaining civil society.’’

According to a Human Rights Watch report released in January, the Syrian authorities were among the worst violators of human rights in the world in 2010, torturing their opponents, imprisoning lawyers and violently repressing ethnic Kurds. Human Rights Watch said it had ‘‘credible reports that security agencies arbitrarily detained dissidents and criminal suspects, held them incommunicado.’’ It also said that those detained were subjected to ‘‘ill- treatment and torture.’’

Nadim Houry, the senior researcher on Syria and Lebanon for Human Rights Watch, said the prominent role for Mrs. Assad was ‘‘part of a general charm offensive.’’ He took particular issue with the Harvard Arab Alumni Association Web site’s reference to the first family’s support for independent civil society.

‘‘This is definitely crossing the line,’’ he said. ‘‘There is nothing independent and nothing self-sustaining about what the government is doing with civil society in Syria.’’

Richard N. Haass, president of the Council on Foreign Relations, said he was surprised that Syria — which effectively occupied Lebanon for almost 30 years, allied itself with Iran and aided groups like Hamas — had faced less scrutiny than other local dictatorships. ‘‘It is ironic that it has escaped, for the most part, criticism,’’ Dr. Haass said.

The Harvard Arab Alumni Association’s Web site includes a disclaimer describing itself as an independent, not-for-profit organization and stating: ‘‘Nothing that is published by the HAAA should be taken to represent the opinions or endorsement of Harvard University, the President and Fellows of Harvard College, or the Harvard Alumni Association.’’

According to the program, six people with Harvard affiliations were scheduled to speak at or moderate sessions at the daylong event, including the ‘‘Harvard Guest Address,’’ one of three keynote speeches, to be delivered by Jorge Dominguez, Harvard’s vice provost for international affairs.

In an e-mail, John Longbrake, a Harvard spokesman, said that the Harvard Arab Alumni Association was an independent organization but that ‘‘we are supportive of any alumni group that hosts a conference encouraging open dialogue and the exploration of ideas.’’

‘‘In his talk, Professor Dominguez will be highlighting Harvard’s engagement in the Arab world and discussing the value of freedom of inquiry and why liberty of the mind builds a democratic society,’’ Mr. Longbrake wrote.

The positive references to the Syrian government in a conference with Harvard involvement provoked intense debate among U.S. political scientists this week, with one e-mailing a colleague to say it was ‘‘shocking and disgusting.’’

But others said the event highlighted how hard it was to strike precisely the right balance between engaging authoritarian regimes and appearing to legitimize them.

‘‘To me, the real challenge is to navigate simultaneously working with governments and civil society,’’ said Anne- Marie Slaughter, a professor of politics and international affairs at Princeton University.

Dr. Slaughter, who has been a dean and has just completed a stint as director of policy planning for the U.S. State Department, has been a strong advocate of a no-flight zone over Libya. However, she argued: ‘‘It can’t be either/or. You can’t just abandon the government and focus on the protesters. The world doesn’t work that way. The question is on which side of the line does this fall.’’

*****

UPDATE: I had e-mailed Harvard Professor Jorge Dominguez on Wednesday asking for his thoughts on the Harvard Arab Alumni Association event, but my deadline passed before we had an opportunity to connect.  Subsequently Professor Dominguez sent me the following e-mail outlining the subject of his keynote speech.  What follows is not a response to my column since he has not yet had a chance to read it, but rather a bit of supplementary information.

“I spoke this morning on several themes. One is Harvard’s long engagement with the Arab world, which started with the teaching of the Arabic language sporadically since the late 17^th century and regularly since an endowment for that purpose was established 75 years ago. Similarly, Harvard’s library resources in Arabic are approximately 270,000 volumes, which makes it the largest research university library collection in Arabic materials in the world. Moving closer to the present, I noted that we’ve increased the number of students from the Arab world from 47 to 96 over the past decade, and discussed how the University’s admissions and financial aid policies span the world. Harvard is the best university in the world for a poor person.

“I went on to discuss the meaning of education. Some examples are case-based student-focused learning of the type evident in case discussions in our professional schools (business, law, public policy). There is no right or wrong answer to such discussions but, rather, a vigorous analysis of varying approaches.

“Then, I illustrated my own understanding of a “liberal education” in terms of a course I teach, in which in each lecture I present an argument and deliver it as persuasively as I can, only to have it contradicted in subsequent lectures where the lecture is also delivered as persuasively as I can. I noted that in exams and papers I never ask for the “right” answer because each student must be able to formulate two answers. I described how competition between ideas and interpretation is a key to free inquiry in any society, and how the liberty of the mind, open to the world, is both the most effective way to learn about citizenship as well as professional life, and to construct a democratic society. Finally, I turned to research in various endeavors that Harvard faculty and students carry out in various parts of the Arab world.

“I closed by praising the Harvard Arab Alumni Association for bringing the discussion to a city in the Arab world, to build on the value of freedom of inquiry and competition between ideas and interpretations through the manner in which they built the conference program. There were several panelists per panel and a vigorous moderator who kept the dynamics going and prevented ossified speeches. Each session had a good chunk of time for many questions and comments where, of course, the recent developments across the Arab world were raised and addressed. The HAAA deserved praise, therefore, for bringing vigorous debate to a discussion in an Arab city about problems in the Arab world, presumably a value many of your readers may share as well.”

Warning — unashamedly patriotic Canadian content to follow!!! If you are a member of the “Blame Canada” constituency, or if you share Michael Kinsley’s view that the world’s most boring headline is “Worthwhile Canadian Initiative,” then please read no further ….

I, however, am an enthusiastic Canadian, and I was absolutely thrilled earlier this year when Morris Rosenberg, the Deputy Minister of Foreign Affairs, invited me to deliver the annual O.D. Skelton lecture on foreign policy at the Department of Foreign Affairs and International Trade in Ottawa.

At the beginning of my talk last week, I asked for feedback and promised to post my lecture online so that anyone who is interested could read it and respond. Here it is. The O.D. Skelton lectures are published online and in pamphlet form by the DFAIT and before mine appears I would love to take advantage of your ideas to improve it.

*****

(more…)

Mary Meeker first became famous as Queen of the Net. That is the title Barron’s magazine granted her in 1998, after a 1995 report she wrote for Morgan Stanley predicted the power and shape of the then still exotic World Wide Web. Ms. Meeker, who recently moved to San Francisco to become a partner at the venture capital firm Kleiner Perkins Caufield & Byers, continues to be a forward-thinking guide to the global technology revolution: Her recent reports on mobile devices and the Internet in China have joined her 1995 ‘‘Internet bible’’ as instant classics among the digital cognoscenti.

One of the secrets of Ms. Meeker’s success is her flair for PowerPoint. In the hands of most of its users, PowerPoint is both an excuse for fuzzy thinking and one of its causes. But Ms. Meeker, who told me working with PowerPoint was a fun personal hobby, is a poet of this usually dreary and bureaucratic medium.

Ms. Meeker’s PowerPoint presentations pack a powerful numerical punch — which appeals to everyone’s inner geek and confers a potent aura of legitimacy in this age of the supremacy of data. But her real genius is using those charts and graphs to tell a story, always with an emotive zing and a dramatic narrative arc.

Ms. Meeker has now turned those skills to America’s fiscal woes, with a presentation called ‘‘USA Inc.’’ in which she examines U.S. finances as if the country were a business, then asks what a turnaround expert would do to put USA Inc. back in the black. Not surprisingly, it has been a huge hit with America’s business and finance chiefs: Michael Bloomberg and Paul Volcker were among the five wise men who blessed ‘‘USA Inc.’’ with a glowing foreword.

But it has been a popular success, too. Seeing Charlie Sheen instantly attract more than a million Twitter followers may have made you mourn the state of the republic. So take heart from the fact that over the past month, Ms. Meeker’s collection of 460 decidedly wonkish slides has been viewed some 40,000 times.

Budget experts are good at making the United States’ finances seem mysterious. That is why one of the most bracing features of Ms. Meeker’s presentation is its simplicity.

Ms. Meeker said she got the idea to produce ‘‘USA Inc.’’ from her day job of analyzing businesses: ‘‘I’m constantly watching the economic data. I need to know the trends so I can understand how companies I follow may be impacted.’’

So, one day, she thought it might be interesting to present those government numbers in the same way she dissects financial information from companies. Her colleague Liang Wu thought he could create a ‘‘simplified income statement, of the kind we prepare for Google’’ using public information, in about three hours. Ms. Meeker thinks he did it even more swiftly than that.

When Ms. Meeker looked at the income statement, her takeaway was straightforward, and it remains the main message of ‘‘USA Inc.’’: ‘‘Revenues have been flat, while expenses have gone up dramatically.’’ You can spend a lot of time and ink dissecting the economic problems the U.S. government faces, but you will not get far from that one-liner as a succinct diagnosis of the nation’s financial dilemma.

Ms. Meeker’s other big observation — which is both obvious and yet being studiously ignored in the current budget battles in Washington — is that the United States’ single largest budget problem is government-funded health care. It accounts for 21 percent of USA Inc.’s total expenses and is much less sustainably financed than the other big-ticket entitlements: Social Security and unemployment insurance.

Ms. Meeker’s final slide on the subject (page 113) asks the question that should be at the heart of the budget debate: ‘‘USA per capita healthcare spending is 3x OECD average, yet the average life expectancy and a variety of health indicators in the US fall below average. But if you spend way more than everyone else, shouldn’t your results (a.k.a. ‘performance’) be better than everyone else’s, or at least near the top?’’

For everyone who has decided that the 2009 health care battle was a pointless exercise in naïveté and hubris (and that seems to be most of America’s political class at the moment), that slide and that question are useful reminders that USA Inc. will not get its finances in order until it reorganizes health care.

One reason Ms. Meeker’s presentation has had so much resonance is that it plays to the country’s strengths. The 2008 financial crisis was a big black eye for Wall Street, but, overall, America is still pretty good at business. It is pretty awful at government. Ms. Meeker’s report is smart because it takes the country’s strengths and applies them to its weakness.

Ms. Meeker really is Queen of the Net, so her report is available online for free, and she encourages readers to contribute their own insights.

Here is mine. The one big issue that is largely missing from Ms. Meeker’s analysis is careful consideration of the distributional implications of the U.S. budget crisis and its likely solutions.

Balancing the budget is not just a math problem. It is a question of specific groups of people paying higher taxes or receiving fewer benefits from the state. If USA Inc. really were a business, you can bet these distributional questions would be central to any analysis. When KPCB makes an investment, who gets the loot is not a secondary concern. It is the main one. America’s budget debate would be more effective if Americans were not so shy about facing that fact head-on.

Regular readers of Chrystia’s column will remember that she recently called out the IMF for failing to foresee the destabilizing effects of rising youth unemployment in Egypt. Specifically, in its April 2010 Article IV assessment of Egypt, the IMF concluded the country’s economy was in fact more resistant to external shocks thanks to “sustained and wide-ranging reforms.” Well, it turns out that the IMF has evolved in its thinking.  In an exclusive interview today with Chrystia and Reuters IMF correspondent Lesley Wroughton, IMF First Managing Director John Lipsky announced that going forward the Fund will more heavily weight unemployment risks in its annual country assessments.  “We think that these are very important issues and need to be looked at, and again, not just in cases where it might result in political turmoil but just as a matter of course in examining economic developments and policies,” Lipsky said.

Watch the whole exchange here:

Posted by Peter Rudegeair.