European Confidence Improves to Highest in 14 Months

This article mainly states that European confidence improved in November to its highest level since the collapse of Lehman Brothers. It suggests that the recovery of the EU is moving forward. Consumer sentiment index rose from 86.1 to 88.8 in November. The author points out that the euro-area economy slowly recovers from its worst recession in 60 years mostly due to numerous bailouts and decreased interest rates.

Dmitry Medvedev's Building Project

The article discusses attempts by the Russian government to modernize the economy. The Russian president expressed recently his concern with strong dependence on natural resources, corruption, and rent-seeking. Now, he is planning on putting resources into various nanotechnology projects.

Even though the idea seems to be right, it is highly unlikely that Russia is going to reach desirable results any time soon. The author believes that unless the political system is reformed, there simply won't be incentives for the government to modernize the economy because it would definitely cut into politicians own profits.

I believe that the situation as we observe it now is not only the result of corrupt actions of the government, but also the result of incompetent transition to a market economy. The infamous "shock therapy" and rapid privatization created the severest inequality in the country, which resulted into concentration of monopoly power, corruption, and more importantly into the draining of human capital. Consequently, the level of innovation in Russia is very low, and the government does not provide any incentives for companies to innovate.

Unfortunately, I don't think that there is a quick remedy that would improve the situation somehow. The country needs reforms both in political and economic systems that if done right require a great amount of time. Still, I agree with the author that the political and, to say more precisely, judicial system should be reformed first to provide basis of institutions on which a market economy could be built.

Bernanke Warns of Risks in Push to Revamp Fed

This article discusses how Chairman of the Fed Ben Bernanke is warning politicians to take a step back from bank regulations and allow the central bank to do its job.  Does the Fed function as a political entity or a bank trying to make a profit?

Beijing Plans to Continue Its Stimulus Next Year

In this Wall Street Journal article China's plan to continue its stimulus into 2010 is discussed. Despite issues or concerns about the plan on the economy, the Chinese government will continue with their same stimulus. Accordingly, "the Politburo of China's Communist Party met Friday to discuss economic policy for next year, and decided it will 'maintain the continuity and stability of economic policies, and continue to implement the proactive fiscal policy and loose monetary policy.'" The Politburo promises for more economic growth and efficiency by leaving room for a few changes within the next year. But the real issue is that there has been nothing done for long term sustainable growth, only short term. A few Chinese economists are also voicing concerns about this plan wasting investment money. There are is much that needs to be done in order for China to prosper in future years. 

An Economist's Invisible Hand

At the Heavenly Models home for deceased economists, an award is being presented to the resident whose work best explains financial crises, global warming, and other pressing issues of today. The favored candidates include John Maynard Keynes, the patron saint of stimulus programs; Hyman Minsky, an American disciple of Mr. Keynes who warned about the dangers of financial deregulation; and Milton Friedman, the late Chicago economist. (Mr. Friedman's free market principles are out of vogue, but Federal Reserve Chairman Ben Bernanke recently took his advice on how to prevent depressions by pumping money into the economy.)

Obama should dine with Singh more often

Why are US-India relations important for many years to come?

This article was published in the NewYork Times on the eve of the Obama's state dinner with the Indian Prime Minister- Manmohan Singh. The article talks about the importance of US's relations with India especially in comparison to the US-China relations.
The US-China trading relationship is gigantic but very one-sided. America's imports from China are 4.5 times its exports to China. On the other hand, America's trade with India is small but growing. However it is more balanced than not when compared to that of China. Indian exports to USA are only 25 percent larger than U.S exports to India. Moreover, India is more open to FDI than it was before which is a postive sign for the near future.
What America's partnership with India does is to balance out the politics and trade in the Asian region. India is indeed the largest democracy in the world. However, America cannot afford to ruin its relations with China. The only way to tackle its one-sided trade affair with China is to look for alternatives, and India provides a perfect one.

The Lehman Crisis: An Unhappy Anniversary

One year after the collapse of the Lehman Brothers, many are still discussing the causes and impact of the financial crisis that has crippled our economy. The roots of the crisis, lay in the real-estate debacle, where CEOs of major financial institutions failed to control risk and over-leveraging in real estate and real-estate related assets. As a result there was a huge exodus from private capital to safe Treasury securities, paralyzing capital markets, freezing lending, and send risk premiums on corporate and personal debt to record highs. The Feds definitely shoulder some of the blame for not anticipating the crisis, however they should receive some credit for their immediate response. There is dire need for a reform to establish procedures for winding down and liquidating large, troubled nonbank financial institutions. It is critical that we learn from our mistakes and prevent such an event from occurring in the future.

O.E.C.D. Cautious in Economic Forecast

This article discusses a particular role China has had in the recession. China has helped pull many OECD countries out of a recession, mostly due to easy bank lending and their large stimulus package. These things have allowed China's economy to expand rapidly. However, it will still be a difficult journey toward sustained growth. Growth is expected to be stuck at a low level for a while due to high debt levels. Still, hopefully this growth trend in China will contribute to an eventual full recovery.