Since China’s domestic consumption is unlikely to grow fast enough to adequately balance the rising savings rate in the United States, global trade tensions are going to continue to escalate until a long-term solution is reached.
Exports have become an important contributor to U.S. growth in recent years and will be crucial to the recovery. President Obama’s recently announced target of doubling exports in five years, however, appears overly ambitious.
While China is likely to enjoy solid growth again this year, its policy solutions to achieve short-term economic objectives have made long-term rebalancing even more difficult.
During the financial crisis, exchange rates adjusted in a remarkably orderly way. Policy makers should be aware, however, that severe exchange rate tensions still require their attention.
Google’s defiance of the Chinese government will likely remain a crucial moment in China’s relations with the West in general, and should be viewed as a lesson on China’s political calculations behind its policy toward Western companies.
The idea that massive levels of foreign currency reserves are a guarantor of economic stability is based on a profound misunderstanding both of history and of the nature of reserves, which are almost totally useless in protecting large economies from domestic bubbles.
Skyrocketing government debt is emerging as a new risk to the global recovery, prompting calls for stimulus withdrawal. Sustaining growth, however, should remain policy makers’ top priority.
The Obama administration’s deadline for Iran to enter discussions on the nuclear issue has passed. In spite of claims from Washington that “all options are on the table,” the economic crisis makes a military response to Iran infeasible.
The annual World Economic Forum meeting at Davos is not about deal-making. It is about networking and status-seeking behavior among people with a common background, and the emerging world, women, and the poor are hugely under-represented.
The contraction in global demand set off by the financial crisis has led to escalating trade tensions between China and the United States, and a breakdown in trade will slow the global recovery and create hostility and mistrust between major economies whose cooperation is necessary to resolving important global problems.























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