MacroScope

Americans are all too acquainted with the shouting-match politics that tends to accompany any debate over economic policy: everyone is yelling and nobody is listening. The toxic political discord in Washington has become so familiar it is almost a cliché.

It turns out high levels of income inequality, which the United States is also famous for, could be to blame. According to Anders Borg, the Finance Minister of Sweden, a large wealth gap makes it harder to achieve political consensus because the debate is poisoned by mistrust. Speaking at the Peterson Institute this week, Borg said high inequality in Southern Europe was a factor preventing those countries from achieving agreement as they struggle with a deep financial crisis:

You need to deal with the social cohesion issue. You cannot have a society where the conflicts that are built in become so strong that you undermine the political ability to deal with problems. If I compared Sweden with Spain or Italy or Greece, one of the reasons we have been able to these reforms is that our income differences are substantially lower which also means that the political tension is on a completely different level.

Interesting to see that Poland wants to squeeze out more income from its state-owned enterprise (SOE) sector in the face of slowing economic growth and financing pressures.

Warsaw wants to double next year's dividends from stakes in firms ranging from copper mines to utility providers to banks.

Fellow euro zone aspirant Lithuania has also embarked on reforms aimed at increasing dividends sixfold from what UBS has dubbed "the forgotten side of the government balance sheet". It wants to emulate countries such as Sweden and Singapore where such companies are managed at arm's length from the state and run along strict corporate standards to consistently grow profits.

The Federal Reserve’s long-quiet doves are becoming increasingly louder about championing more aggressive forms of monetary easing, including possibly setting employment and inflation targets and/or engaging in another round of bond purchases. Most prominent among these have been Charles Evans, the Chicago Fed president who openly favors more transparent policy guidance and Eric Rosengren, who told CNBC on Wednesday a third round of monetary easing could be in store:

If the economy were to be weaker than most people are forecasting, that would certainly be cause for doing additional monetary policy.

Rosengren also said he favors more explicit policy targets, which could take a rather controversial form known as price-level targeting. Under this arrangement, the Fed would temporarily shoot for higher inflation to make up for the almost deflationary readings seen late last year, in an effort to boost investment, spending and hiring.

Trade protectionism – or at least the threat of it — has raised it head as the global economy has declined, bringing with it all the historical fears about the Great Depression. Consider the flurry of concern about a “Buy American” clause in one of the U.S. stimulus bills.

It is traditionally assumed that widespread protectionism would most hurt the biggest economies, the United States and Japan. But Barclays Capital analyst David Woo says this is not so and that Russia, Canada, Australia and Sweden are the most vulnerable.

Woo studied various factors that would play on the effect of protectionism on a country, from openness and flexibility to its dependence on trade and it savings.