Tyler Cowen on the Eurozone

Cowen writes:

WHAT form could a crash take? Imagine a situation where the sounder countries need to put up more money, or the troubled countries need to make bigger financial adjustments, or — most likely — both. Yet power vacuums on each side, or voter rebellions against cross-national agreements, could stop these responses from being applied in a timely way. Political paralysis could then become the harbinger of disaster.

The mess won’t be resolved until the various governments raise their hands and announce transparently just how much of the mess they will pay for — and how. Such announcements will then need to be validated by elections. That means sending a consistent message to other countries and to their own domestic electorates and interest groups. Until then, the game of chicken will continue, and the risks of financial catastrophe will remain high.

Unfortunately, the relevant governments — and their citizens — still don’t seem close to accepting the onerous financial burdens they need to face. And when those burdens are unjust to mostly innocent voters, no matter whose particular story you endorse, acceptance becomes that much tougher.

Still, we shouldn’t forget that a solution exists. In essence, the required debt write-down is a large check lying on the table waiting to be picked up. No one knows how costly it is, but estimates have ranged from the hundreds of billions to the trillions of dollars. It need only be decided how to divide the bill. The reality is this: The longer that the major players wait, the larger that bill will grow. That they’ve yet to split the check is the worst news of all.

Trade in Emerging Markets

From Buttonwood’s notebook at The Economist:

But when you break the numbers down, you can see that trade in the developed economies has yet to recover its 2008 level; indeed it is back where it was in 2006. In contrast, imports in the developing economies are more than 40% higher than their 2009 low. Go back even further and you can see that imports in Asia, eastern European and the combined middle-east and Africa region are all between two and three times higher than they were in 2000. Of course, much higher commodity prices have boosted the spending power of many countries.

Sorry for no AM Reads, here’s an interesting news item though

After emerging from their last recession in Q3 2009, the UK has officially fallen into a double-dip.

History of Reserve Currency

This is an essay Barry Eichengreen in Foreign Affairs.

Productivity Visualized

In this mornings AM Reads I linked an article from The Economist about American productivity. I wanted to follow that up by showing how the U.S. ranks in the developed world in productivity improvements. According to the OECD data displayed below, the U.S. growth rate from ’09 to ’10 ranked 12th in OECD countries.

Depressing News from Europe

The Economist‘s Free Exchange blog reports some fairly disparaging news from Europe:

Markets were still digesting news of Spain’s terrible bond auction yesterday, in which the yield on its 3-month debt more than doubled, from 2.3% to over 5%. That was but an appetizer, however; in an auction of 10-year debt today, Germany failed to place some 40% of the issuance.

It appears that the increasing panic is not isolated to bond markets, there is growing concern of a bank run on European banks. (more after the jump)