Thursday, July 31, 2008

Links of Interest

The world cannot grow its way out of this slowdown 

Kenneth Rogoff raises the inflationary alarm: "In policymaker’s zealous attempts to avoid a plain vanilla supply shock recession, they are taking excessive risks with inflation and budget discipline that may ultimately lead to a much greater and more protracted downturn." Well, I would be more worried about a fire engulfing my house right now then a potential fire that would engulf my house! Inflation does posses a risk but it is in the long run, when according to Keynes "we all are dead." That said, I believe that we can manage the dangers of inflation as time passes by being particularly careful with embedded inflation expectations. Mark Thoma weighs in: "Inflation is a concern, but raising interest rates too fast risks throwing the financial sector into a tailspin, and that would bring the economy down with it, and that's a risk I'd rather not take. We need to keep an eye out for signs that inflation is becoming embedded and self-reinforcing, but we need to be even more concerned about a domino effect taking hold in the financial sector. That danger is not yet over." More by Krugman here

Is the WTO no-deal a big deal?

If the real effects of a no-agreement are not likely to be important, is all this noise about the Geneva failure justified? Yes. Perhaps. To the extent that an agreement in the WTO would have strengthened (or at least would have not weakened) the multilateral trading system, the no-agreement may well be a setback. Such a system binds countries to respect a certain set of trading rules, for example preventing possible temptations towards self-sufficiency in the face of difficult domestic and international situations. This is not to deny the importance of domestic policy space. Allowing for moderate policy space is welcome to satisfy particular domestic needs, but a weak multilateral trade regime may allow for an abuse of domestic policy, which may promote protectionism. This is especially the case in a time of adverse international economic environment, as the current one.

Collapse of the WTO trade talks: A pity, and potentially a problem, but not a disaster

Putting a lasso on inflation

There are other ways to approach the challenge of high prices, of course. In its paper, the Asian Development Bank recommended income support to poor families...It's a cheaper and more economically efficient solution than one-size-fits-all subsidies, and it also allows households to prioritize their own purchases. Moreover, once people have the ability to pay global prices for the commodities they need, the problem of guaranteeing supply to the local market simply disappears.

What is Called Development? Exploring the Nexus of Economy

India lags behind Ethiopia in child nourishment