1 World economy on only one engine (Nouriel Roubini
in The Guardian) The global economy is like a jetliner that needs all of its
engines operational to take off and steer clear of clouds and storms.
Unfortunately, only one of its four engines is functioning properly: the
Anglosphere (the US and its close cousin, the UK).
The second engine – the eurozone – has now stalled
after an anaemic post-2008 restart. Indeed, Europe is one shock away from
outright deflation and another bout of recession. Likewise, the third engine,
Japan, is running out of fuel after a year of fiscal and monetary stimulus. And
emerging markets (the fourth engine) are slowing sharply as decade-long global
tailwinds – rapid Chinese growth, zero policy rates and quantitative easing by
the US Federal Reserve, and a commodity super-cycle – become headwinds.
The risk of a global crash has been low, because
deleveraging has proceeded apace in most advanced economies; the effects of
fiscal drag are smaller; monetary policies remain accommodative; and asset
reflation has had positive wealth effects. But serious challenges lie ahead.
Private and public debts in advanced economies are still high and rising.
Rising inequality is redistributing income to those with a high propensity to
save (the rich and corporations), and is exacerbated by capital-intensive,
labor-saving technological innovation.
Fortunately, rising geopolitical risks – a Middle
East on fire, the Russia-Ukraine conflict, Hong Kong’s turmoil, and China’s
territorial disputes with its neighbors – together with geo-economic threats
from, say, Ebola and global climate change, have not yet led to financial
contagion. So the global economy is flying on a single engine, the pilots must
navigate menacing storm clouds, and fights are breaking out among the
passengers. If only there were emergency crews on the ground.
2 End of US QE is whimper, not bang (Robert Peston
on BBC) As the Fed Reserve ends quantitative easing, those who prophesied that
these trillions of dollars of debt purchases would spark uncontrollable
inflation have been proved wrong. But QE could still prove toxic. The most
striking thing about quantitative easing, the unprecedented massive purchases
of debt by the central banks of the big rich developed countries, and
especially by the US Federal Reserve, is how anti-climactic it has all been.
When QE started at the end of 2008, many were the
voices warning that the economy of the world was heading into dangerous
uncharted territory. Well, on the day the US Federal Reserve brings to a close
this intriguing chapter in the long and not always distinguished history of
central banking, by ceasing its exceptional purchases of bonds, it may be fair
to say that QE has all been a bit dull - or 50 shades of grey, without any sex.
That said. we have probably learned two things. First,
that if there has been inflation, it has been in asset prices, rather than in
items of everyday consumer expenditure. And by boosting share prices, the cost
of capital was cut for businesses, and should have stimulated investment by
them.
When launched, QE was billed as a big, bold and
imaginative way of restarting the global economy after the 2008 crash. t
probably helped prevent the Great Recession being deeper and longer. But by
inflating the price of assets beyond what could be justified by the underlying
strength of the economy, it may have sown the seeds of the next great markets
disaster.
3 Fixing India’s graft problem (Amrit Dhillion in
Straits Times) Only the prospect of jail frightens corrupt Indian politicians.
They are impervious to all other humiliations. Jayalalithaa Jayaram, the
colourful chief minister of Tamil Nadu and one of India's top women leaders,
recently experienced one such.
A court found Jayalalithaa guilty of corruption on
Sept 27, in a case that began 18 years ago when income tax officials raided her
home. This is the first time a serving chief minister has been convicted under
the Prevention of Corruption Act and gone to jail. The sentence is four years
in jail. She will also be disqualified from holding office because the Supreme
Court last year ruled that convicted MPs cannot continue as MPs. She has also
been fined one billion rupees.
Hardly any Indian politician has gone to jail for
corruption. If this ruling is to do any good, it will be to deter other corrupt
leaders. But an 18-year trial? There lies the problem. Who is going to be
deterred when it takes so long for the wheels of justice to get going?
Recent developments in India have indicated a rising
intolerance for corruption. Why does India have fewer than 15 judges per
million population, compared with the US, which has over 100 judges per
million? Is it really impossible to produce more judges? As a result of these
flaws, India has 30 million pending cases clogging the system. According to
legal experts, it will take 466 years for the Delhi High Court alone to clear
its backlog.
If one reason had to be singled out to explain the
audacity of politicians over corruption, it must be this. Apart from the Law
Ministry needing to reform the legal system to make it faster, India could set
up fast-track courts to handle corruption cases involving MPs or civil
servants. Only fast and draconian punishment can be effective in dealing with
the greed psychosis that afflicts Indian politicians.
No comments:
Post a Comment