The bad news is that it has become increasingly clear that, at least for large countries, currency areas will be highly unstable unless they follow national borders.
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in title, tags, annotations or url"A Centerless Euro Cannot Hold" by Kenneth Rogoff | Project Syndicate - 0 views
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With youth unemployment touching 50% in eurozone countries such as Spain and Greece, is a generation being sacrificed for the sake of a single currency that encompasses too diverse a group of countries to be sustainable?
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What of Nobel Prize winner Robert Mundell’s famous 1961 conjecture that national and currency borders need not significantly overlap? In his provocative American Economic Review paper “A Theory of Optimum Currency Areas,” Mundell argued that as long as workers could move within a currency region to where the jobs were, the region could afford to forgo the equilibrating mechanism of exchange-rate adjustment.
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Europe Can't Handle the Euro - 0 views
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When leaders of the 11 nations that agreed to combine their currencies gathered in January 1999, they predicted great things: the single currency would shift global portfolios to euro assets, depressing the value of the dollar relative to the euro, and the new eurozone would be a strong player in the global economy, reflecting the size of an integrated European market. Instead the euro plummeted, Europes economy remains weak, and unemployment is more than twice the U.S. level.
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The ECB will eventually be judged not by its words but by whether it achieves low inflation and does so without increasing cyclical unemployment. I am not optimistic about either part of this goal.
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The ECB must make monetary policy for "Europe as a whole," which in practice means doing what is appropriate for Germany, France and Italy, the eurozones three largest countries. Last year demand conditions in those countries were relatively weak, while demand conditions in Spain and Ireland were very strong. That meant a monetary policy that was too expansionary for Spain and Ireland, causing a substantial acceleration of their inflation and threatening their competitiveness.
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Op-Ed Contributor - The Greek crisis shows why Germany should leave the European Monetary Union. - NYTimes.com - 0 views
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THE European Monetary Union, the basis of the euro, began with a grand illusion. On one side were countries — Austria, Finland, Germany and the Netherlands — whose currencies had persistently appreciated, both within Europe and worldwide; the countries on the other side — Belgium, France, Greece, Italy, Portugal and Spain — had persistently depreciating currencies.
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Rather than pulling the lagging countries forward, the low interest rates of the European Central Bank have lured governments and households, especially in the southern part of the euro zone, into frivolous budgetary policies and excessive consumption.
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the solution is clear: the only way to avoid further harm to the global economy is for Germany to lead its fellow stable states out of the euro and into a new and stronger currency bloc.
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PrudentBear - 0 views
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German exporters were major beneficiaries of this growth. German banks and financial institutions helped finance the growth.
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Exports have provided the majority of Germany’s growth in recent years. Germany is heavily reliant on a narrowly based industrial sector, focused on investment goods—automobiles, industrial machinery, chemicals, electronics and medical devices. These sectors make up a quarter of its GDP and the bulk of exports.
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Germany’s service sector is weak with lower productivity than comparable countries. While it argues that Greece should deregulate professions, many professions in Germany remain highly regulated. Trades and professions are regulated by complex technical rules and standards rooted in the medieval guild systems. Foreign entrants frequently find these rules difficult and expensive to navigate.
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Colm McCarthy: The eurozone is still at risk and we need to get our house in order - Analysis, Opinion - Independent.ie - 0 views
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Friday's two-notch downgrade of Italy by ratings agency Moody's explicitly mentions default risk and eurozone fracturing.
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History teaches that muddle rather than conspiracy lies behind even the greatest turning points and the doubters are being too quick on the draw.
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accompanied by some rowing back from the apparently significant decisions taken at the summit on June 28 and 29.
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The Nation: Who Will Avert A Euro Collapse? : NPR - 0 views
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Even as the mainstream media warned that Hollande's populism would be punished by the bond markets, the IMF's chief economist, Frenchman Olivier Blanchard — who is closer to Hollande's heterodoxy than might be expected — confessed that "schizophrenic" investors are now as scared by the impact of austerity on growth as they are of fiscal largesse.
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"With zero growth and rising interest costs in Spain and Italy, no debt is sustainable," Fitoussi said. "Even France will be challenged if it goes into recession."
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which, despite their recently elected conservative governments, are aware that only pan-European investment, eurobonds and the full support of the ECB can save the eurozone.
"Which Eurobonds?" by Jeffrey Frankel | Project Syndicate - 0 views
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Any solution to the eurozone crisis must meet a short-run objective and a long-run goal. Unfortunately, the two tend to conflict.Illustration by Paul LachineCommentsView/Create comment on this paragraphThe short-run objective is to return Greece, Portugal, and other troubled countries to a sustainable debt path (that is, a declining debt/GDP ratio). Austerity has raised debt/GDP ratios, but a debt write-down or bigger bailouts would undermine the long-term goal of minimizing the risk of similar debt crises in the future.CommentsView/Create comment on this paragraph
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it is hard to commit today to practice fiscal rectitude tomorrow. Official debt caps, such as the Maastricht fiscal criteria and the Stability and Growth Pact (SGP), failed because they were unenforceable.
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The introduction of Eurobonds – joint, aggregate eurozone liabilities – could be part of the solution, if designed properly. There is certainly demand for them in China and other major emerging countries, which are desperate for an alternative to low-yielding US government securities.
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United Nations Statistics Division - Classifications Registry - 0 views
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National Classifications
Bershidsky on Europe: Euro Crisis Nations Turn Tax Havens - Bloomberg - 0 views
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Foreign dividends transferred to an ETVE are not taxed in Spain if their recipient paid corporate tax in the country of the dividends' origin, and the money can then be moved to the U.S. and many other countries without incurring withholding tax. ExxonMobil used its ETVE to receive dividends from its Luxembourg profit center and then transfer them tax-free to the U.S
RealTime Economic Issues Watch | Transatlantic Economic Sanctions Against Russia - 0 views
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Transatlantic Economic Sanctions Against Russia
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First, I have recommended to government officials that US and EU negotiators give priority to energy cooperation and promotion of US exports of liquefied natural gas to Europe during the fourth round of talks on the Transatlantic Trade and Investment Partnership (TTIP) that start on March 10 in Brussels. Efforts should be made to conclude this part of the agreement quickly and immediately implement the obligations on a provisional basis
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Second, the United States and the European Union should call for special consultations in the International Energy Agency (IEA) to review current oil and gas supply arrangements and reserves in Europe. The IEA should also be called on to assess the implications of the crisis in Ukraine for member and nonmember countries and their options for dealing with potential supply disruptions. Ukraine participates in consultations with IEA members on a regular basis anyway and clearly should be doing so now.
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Why Do Americans Stink at Math? - NYTimes.com - 0 views
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Why Do Americans Stink at Math?
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The Americans might have invented the world’s best methods for teaching math to children, but it was difficult to find anyone actually using them.
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In fact, efforts to introduce a better way of teaching math stretch back to the 1800s. The story is the same every time: a big, excited push, followed by mass confusion and then a return to conventional practices.
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Apple's Tax Strategy Aims at Low-Tax States and Nations - NYTimes.com - 0 views
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How Apple Sidesteps Billions in Taxes
Learning about global value chains by looking beyond official trade data: Part 1 | vox - 0 views
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Gross trade accounting: A transparent method to discover global value chain-related information behind official trade data: Part 1
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With the rapid increase in intermediate trade flows, trade economists and policymakers have reached a near consensus that official trade statistics based on gross terms are deficient, often hiding the extent of global value chains. There is also widespread recognition among the official international statistics agencies that fragmentation of global production requires a new approach to measure trade, in particular the need to measure trade in value-added. This led the WTO and the OECD to launch a joint “Measuring Trade in Value-Added” initiative on 15 March 2012, which is designed to mainstream the production of trade in value-added statistics and make them a permanent part of the statistical landscape.
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All the estimation methods used in recent efforts to measure trade in value-added are rooted in Leontief (1936). His work demonstrated that the amount and type of intermediate inputs needed in the production of one unit of output can be estimated based on the input-output structures across countries and industries.
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Are National Champions Really Winners? by Michael Hüther - Project Syndicate - 0 views
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Are National Champions Really Winners?
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Although the proportion of imported intermediate goods in German manufacturing exports has risen from around 19% to 30% since 1995, the globalization of value chains during this period has improved competitiveness, and dramatically increased manufacturing value.
Rent Seeking: The Concise Encyclopedia of Economics | Library of Economics and Liberty - 0 views
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Tullock’s insight was that expenditures on lobbying for privileges are costly and that these expenditures, therefore, dissipate some of the gains to the beneficiaries and cause inefficiency. If, for example, a steel firm spends one million dollars lobbying and advertising for restrictions on steel imports, whatever money it gains by succeeding, presumably more than one million, is not a net gain. From this gain must be subtracted the one-million-dollar cost of seeking the restrictions. Although such an expenditure is rational from the narrow viewpoint of the firm that spends it, it represents a use of real resources to get a transfer from others and is therefore a pure loss to the economy as a whole.
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For India in 1964, for example, Krueger estimated that government regulation created rents equal to 7.3 percent of national income; for Turkey in 1968, she estimated that rents from import licenses alone were about 15 percent of Turkey’s gross national product.
Euro zone, IMF agree on Greece aid deal - The Washington Post - 0 views
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To reduce Greece’s debt pile, ministers agreed to cut the interest rate on official loans, extend their maturity by 15 years to 30 years, and grant Athens a 10-year interest repayment deferral.
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They promised to hand back $14 billion in profits accruing to their national central banks from European Central Bank purchases of discounted Greek government bonds in the secondary market.
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They also agreed to finance Greece to buy back its own bonds from private investors at what officials said was a target cost of about 35 cents in the euro.
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Treat debt with caution: SARB - Times LIVE - 0 views
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"Be extremely cautious that you don't take more than you can service. Try to issue liabilities that involve an element of risk sharing between the creditor and the debtor," he said.
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"As for international contracts, be very careful that you treat the business cycle symmetrically. If you stimulate and borrow when the economy goes down then you must tighten... when the economy grows."
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He said governments of developing nations needed to be innovative in borrowing contracts they devised to grow their infrastructure.
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