Opinion

The Great Debate

Get ready for the “Great Immoderation”

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

The recession will soon be dead, laid to rest alongside the idea of the “Great Moderation”, a set of hopeful assumptions that underpins expectations about economic growth and asset valuations.

This, when investors, bankers and executives ultimately realise it will cause them to pull in their horns, take less risks and be less willing to pay high prices for assets.

Economists, observing that since the 1980s recessions have been mild and short and expansions long and robust, developed the theory that better economic management, namely cutting rates in the aftermath of bubbles, globalisation and, get this, improvements in financial markets, had led to a sort of best-of-all-possible-worlds “Great Moderation”, in which economic volatility fell and with it the risk premia required for holding financial assets.

This little theory has, needless to say, come somewhat unstuck during the current downturn which has been great but far from moderate.

Iran sanctions and wishful thinking

Bernd Debusmann - Great Debate
– Bernd Debusmann is a Reuters columnist. The opinions expressed are his own –

So what’s so difficult in getting Iran to drop its nuclear program? All it needs is a great American leader who uses sanctions to break the Iranian economy so badly that popular discontent sweeps away the leadership. It is replaced without a shot being fired.

That simplistic solution to one of the most complex problems of the Middle East was part of a keynote speech greeted with thunderous applause by 6,000 delegates to the annual policy conference of the American Israel Public Affairs Committee (AIPAC). The speaker: Newt Gingrich, a former speaker of the U.S. House of Representatives and a likely Republican presidential candidate in 2012.

China economic forecasts: go herbal or Western?

wei_gu_debate –Wei Gu is a Reuters columnist. The opinions expressed are her own–

Which would you believe when it comes to diagnosing the health of China’s economy — the pulse-taking of the herbal doctor or the lab tests of Western medicine?

Beijing’s leaders are like the herbal doctors, using creative metrics such as power output and shipping indexes that can give a relatively accurate snapshot of manufacturing activity.

Private-sector economists, by comparison, believe in more mainstream data such as money supply and fixed asset investment even though they might not be completely useful in measuring a transitioning economy such as China.

Two cheers for the walking wounded

ws2– Mark Hannam is a guest columnist, the views expressed are his own. He formerly worked at the Bank of England and Barclays. He is currently chairman of Fair Finance, a microfinance company –

Some banks have come out of the financial crisis in better shape than others. We should encourage them rather than lump them together with the failures.

Public anger at the recent failings of many of our leading banks, while justified, is not a sound basis for future policy. The temptation facing policy makers — that of failing to distinguish between better capitalized, better managed banks and under-capitalized, poorly managed banks — should be avoided.

Lessons from Jack Kemp

 Diana Furchtgott-Roth – Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. —

Jack Kemp, who died on May 2 at the age of 73, lived the American dream as the football star who was elected to the House of Representatives. He had the vision to translate his intellectual ideas into the practical tax cuts, housing vouchers, and enterprise zones that sparked not only the Reagan revolution in America but also similar economic revolutions in many countries around the globe.

Jack Kemp spent his life as a champion of the little guy, the forgotten man, the person left behind in a world too busy to care. It is easy to look to other way and ignore the cries of the weak and the helpless. Jack Kemp could have done that. But Jack Kemp always stopped to listen. And when he listened, he stood up for the downtrodden.

President Obama’s three percent solution

Jonathan Hoganson– Jonathan R. Hoganson is the deputy executive director of the Technology CEO Council, a public policy advocacy group that includes the CEOs of Intel, HP, Dell, Applied Materials, EMC, Motorola, Micron Technology and IBM. He previously was the legislative director for Rep. Rahm Emanuel and policy director for the House Democratic Caucus. The views expressed are his own. –

A few years from now, when our economy has regained its stride, we may look back to a little-noticed announcement last Monday that spurred the resurgence. Amid swine-flu hysteria and First 100 Days hoopla, President Obama quietly announced a commitment to spending three percent of the U.S. GDP on science research and development.

This is a profoundly important step, but if we are to continue to lead the world, the United States must also develop a comprehensive policy to foster innovation. For too long, the United States has lived in a “next month” mindset when it came to our economy. This short-termitis has led to sub-prime lending, credit card debt and a general lack of long-term planning. And in no place has this been more evident than in the sciences.

New BofA chairman must prove independence

bofa– Jonathan Ford is a Reuters columnist. The opinions expressed are his own –

Shareholders in Bank of America must be hugging themselves at their sheer audacity. They have plucked up the courage to say boo to Ken Lewis, the bank’s all-powerful chairman and chief executive.

A shareholder vote on April 29 forced Lewis to relinquish the first of those roles to an “independent chairman”. This role will now be taken by Walter Massey.

A chink of light for the euro zone

James Saft Great Debate – James Saft is a Reuters columnist. The opinions expressed are his own –

Even without a huge fiscal boost or a hell-for-leather central bank, Europe could have a recovery, albeit a tepid one, on the cards by the end of the year.

Recent forward looking economic data is still grim, but hides within it the seeds of a rebound, as the absolutely brutal fall in manufacturing over the past six months burns itself out.

Drugs, elephants and American prisons

Bernd Debusmann - Great Debate–Bernd Debusmann is a Reuters columnist. The opinions expressed are his own–

Are the 305 million people living in the United States the most evil in the world? Is this the reason why the U.S., with 5 percent of the world’s population, has 25 percent of the world’s prisoners and an incarceration rate five times as high as the rest of the world?

Or is it a matter of a criminal justice system that has gone dramatically wrong, swamping the prison system with drug offenders?

Uncertain Fed support sinks bonds

John Kemp Great Debate– John Kemp is a Reuters columnist. The views expressed are his own –

The bond market’s adverse reaction after the Fed announced no new asset purchase facilities or bond buyback programs highlights the fundamental difference between interest rates and quantitative easing (QE).

Rate cuts provide ongoing support for an indefinite period until the Federal Open Market Committee chooses to reverse them. In contrast, QE programs provide a one-off, time-limited boost that has to be continually reapplied to have the same effect.

  •