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Trends and prospects for private-sector deleveraging in advanced economies

Trends and prospects for private-sector deleveraging in advanced economies

Major advanced economies have made mixed progress in repairing the private sector’s balance sheets. This column explores private sector deleveraging trends and calls for a set of policies that will return debt to safer levels. Monetary policies should support private sector deleveraging and policymakers should not ignore the positive impact of debt restructuring and write-offs on non-performing loans.

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How do you say “dead cat” in Latvian?

How do you say “dead cat” in Latvian?

By Frances Coppola This, my third post on Latvia, looks at its recovery from the 2008-9 recession. Latvia is often held up as the “poster child” for harsh austerity measures as the means of returning to strong economic growth. In order to hold its currency peg to the Euro, it embarked on a brutal front-loaded fiscal consolidation in 2009, sacking public […]

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Property, inequality and financial crises

Property, inequality and financial crises

So where did they get the money?

It’s an all too familiar story. Inflows of foreign capital, mainly from Scandinavian banks, attracted by low interest rates and a population hungry for credit – credit advanced, of course, against property. Latvian house prices soared and there was a construction boom. Easy credit, wealth effects and incomes from construction and real estate activities also fuelled a consumption boom: suddenly Latvia, one of the poorest countries in Europe, was flooded with Porsches and Bentleys.

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A parallel currency for Greece: Part II

A parallel currency for Greece: Part II

Introducing a currency in parallel to the euro could help Greece repay its external debt and resume economic activity. This second column in a two-part series evaluates the different options and their effects on aggregate demand and fiscal sustainability. The authors propose a tax credit certificates programme, which they argue could generate new spending capacity and avoid the adoption of new austerity measures.

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A parallel currency for Greece: Part I

To prevent it from defaulting on its debt, the Greek government might need to introduce a new domestic currency, in parallel to the euro. This column, the first in a two-part series, compares the current proposals for a parallel currency and discusses how such a policy instrument could promote economic recovery.

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The Latvian financial crisis

The Latvian financial crisis

In the 2008-9 crisis, Latvia suffered more than any other country despite its extensive bank reforms after the 1995 crisis. Yet only one of its banks failed (Parex): the rest were bailed out by their foreign owners. So the question is, if Latvia’s banks were actually in better shape than those in other countries, why did Latvia suffer the worst recession in the world? To be continued……

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Are The IMF and the EU at Loggerheads Over Greece?

Are The IMF and the EU at Loggerheads Over Greece?

It is now clear that Greece’s economy has been going backwards over the last 6 months, and that it has once more fallen back into recession. Greek GDP fell by 0.4% in the last three month of 2014, and by a further 0.2% in the Jan – March 2015 period. As a result at the end of March Greek GDP was only 0.3% above the year-earlier level. This is a lot lower than expected in IMF forecasts, and – perhaps more importantly – well out of line with what is needed to maintain the 2022 debt sustainability targets on which continuing Fund support for Greek programmes depends.

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What multiple should we give China’s GDP growth?

What multiple should we give China’s GDP growth?

By Michael Pettis Last week Derek Scissors, a think tank analysts at the American Enterprise Institute, published an articlein which he referred to an October, 2014, study by Credit Suisse that attempts to measure total household wealth by region and by country. Scissors argues that in the interminable debate about whether or not China will overtake the US as the […]

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How to dress for a rainy day (of low nominal investing returns)

How to dress for a rainy day (of low nominal investing returns)

A typical portfolio will almost certainly not deliver the required returns over the next decade. If ‘typical’ means a 60/40 approach, as already mentioned, then 2-4% annualised returns are what can realistically be expected. If ‘typical’ means an entry into alternative investment strategies but only mainstream alternatives such as equity long/short and nothing else, you will almost certainly also end up short of your own expectations.

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The coming defaults of Greece

The coming defaults of Greece

It seems that there will be no agreement between Greece and its Eurozone partners. Short of cash, the Greek government will have no choice but to suspend payment of its maturing debts. This column looks at what happens next. In brief, it will be very much up to the ECB to decide.

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Moral Hazard Taken Too Far

By Marc Chandler There is an element that links the terrible human tragedy in the Mediterranean and the ongoing Greek crisis.  It is Europe’s over-emphasis on moral hazard. Moral hazard is the idea that people will act irresponsibly if they do not have to bear the consequences.   No doubt, the concept offers valuable insight, up to a point.  The problem […]

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Rediscovering old economic models

By Frances Coppola Krugman says we do not need new economic models, we just need to make better use of the ones we already have. Indeed, even very old models that we long since consigned to dusty archives can help remind us of things we have forgotten about. Financial crises, for example….. In his response to my speech at Manchester […]

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