Peterson Institute for International Economics Update Newsletter
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PIIE Update Newsletter
December 20, 2012

"Washington's premier think tank on the global economy"
—The Washington Post
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FEATURED
 
  PIIE President-designate Adam S. Posen Featured in the New York Times Magazine
God Save the British Economy
   
  Adam S. Posen featured in The New York Times Adam Davidson writes that Adam S. Posen has been leading the argument for macroeconomic stimulus in response to the global financial crisis. Davidson tells the tale of how central banks and finance ministries have had to make policy in real time despite confusing data and while caught between two schools of thought, those advocating stimulus and those in favor of fiscal austerity. While at the Bank of England, Posen won the argument to get creative expansionary monetary policies adopted, but was unable to directly confront the aggressive fiscal austerity measures of the current British government. Drawing on his prior work and influence on Japan's recovery from its post-crisis recession, Posen argued that the UK—and the US and Europe—are facing a slump in demand, not a contraction in productive potential. Davidson depicts Posen taking leadership of the Peterson Institute as an opportunity to continue changing the global economic policy narrative.

>> Read full article
>> See also What Is Wrong with the UK Economy?

  New Book
Understanding the Trans-Pacific Partnership

Jeffrey J. Schott, Barbara Kotschwar, and Julia Muir
   
  Understanding the Trans-Pacific Partnership The Trans-Pacific Partnership (TPP) is a big deal in the making. With the Doha Round of multilateral trade negotiations at an impasse, the TPP negotiations have taken center stage as the most significant trade initiative of the 21st century. As of December 2012, negotiators have made extensive progress in 15 negotiating rounds since the talks began in March 2010, though hard work remains to finish the deal in the coming year or so.

Despite this effort, however, the TPP is not well understood. In part, the reason lies in the dynamism of the TPP initiative. Unlike other free trade pacts, the growing membership as the talks have proceeded and the broad range, complexity, and novelty of the issues on the agenda have made it difficult to track the substantive detail and progress of the talks.

This Policy Analysis aims to remedy this problem by providing a reader's guide to the TPP initiative. It first assesses how much the TPP countries are alike and like-minded in their pursuit of a comprehensive trade deal. It then examines the current status of the talks, the major substantive sticking points, and the implications of Canada and Mexico joining the talks as well as prospective membership of other countries. The Policy Analysis then looks ahead to how the TPP could advance economic integration in the Asia-Pacific region and the implications for trade relations with China.

>> Preview and purchase online

  Op-ed
Obama's Historic Budget Opportunity

Robert B. Zoellick
   
  Robert B. Zoellick Since the election, President Obama has focused the debate about the fiscal cliff on taxes. This tactical political positioning is putting at risk the strategic objective of a pro-growth budget package to reduce US debt. Unless the president pushes to slow the growth of spending, he will fail to strike a deal, undermine US growth prospects, and ultimately erode America's safety-net programs. Such a negotiating ploy will squander a historic opportunity to achieve a true economic legacy. All major legislative accomplishments require the president to lead in shaping the deal. He can bargain hard, but he needs to build trust. The president needs to represent the country, not just a party. Mistaken tactics now could lead to four years of political trench fighting, sinking other possible reforms, such as immigration. If President Obama is unable to signal a move toward real spending discipline, he will start his second term with a tragedy, not a legacy.

>> Read full op-ed

  RealTime Economic Issues Post
Thoughts on the Euro's Outlook in 2013

Jacob Funk Kirkegaard
   
  Jacob Funk Kirkegaard Despite the numerous predictions of its demise, the euro is alive and well at the end of 2012. Indeed, it has again held its value against other currencies during the year, confounding skeptics just as it did a year ago. As 2012 comes to a close and the last European Union Council of the year has ended, it is time to take stock. Pessimism will never go out of style, of course. The next year will no doubt be littered with more predictions of gloom from commentators. English-speaking market economists will pontificate about the euro area breakup or the rush by Greece, Spain, Portugal, Finland, and Britain to return to their national currencies. These predictions rest on the dubious assumption that the 1930s are here again, and that economically distressed euro area populations can again be expected to make rash and dangerous political choices. But in all euro area elections in 2012 in which incumbents were booted out, centrist and pro-euro governments replaced them. The pessimistic predictions ignore decades of successful consensus building by the European elite, and the risk-averse nature of an aging and still prosperous European electorate. The euro outlook remains positive for 2013.

>> Read full post


Peterson Perspectives Interviews

audio  A New Era in South Korea?
Marcus Noland assesses the election of South Korea's new president Park Geun-hye, daughter of a former military dictator, and her pledge of "economic democracy" and less confrontation with North Korea.

audio  Russia's Economy: Challenges Amid the Boom, Part I
Anders Åslund says the Russian economy is growing briskly but remains hobbled by high-level corruption and expanding state control and ownership.

audio  Russia's Economy: Challenges Amid the Boom, Part II
Anders Åslund says that despite enactment of permanent normal trade relations, Russia is retaliating against the United States in the areas of human rights, trade, and security.

audio  Will Italy's Political Turmoil Slow Its Reform?
Angel Ubide says that Italian Prime Minister Monti's resignation may bring in a center-left government that will continue fiscal consolidation but slow down labor reforms.


Recent Blog Posts

RealTime Economic Issues Watch   China Economic Watch    North Korea:  Witness to Transformation
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Thoughts on the Euro's Outlook in 2013

Europe Takes an Important Step Forward on Banking

What Is Wrong with the UK Economy?

Mario Monti's Political Gambit: Does It Jeopardize Reform?

Euro Countries (and the IMF) Can Learn from Latvia's Economic Success
  Land Reform and Local Government Finances

The Return of the RMB

Time to Address Income Inequality in China?

A Legacy of Inland Development

China's Dream Team
  Marcus Noland Interview on the South Korean Elections.

Jamming continues

Information—and Disinformation—on the North Korean Political Scene

American attitudes toward North Korea

North Korea Themed Holiday Gifts


PIIE Noted in the News and on the Web

New York Times Magazine
God Save the British Economy
Adam Davidson writes that Adam S. Posen has been leading the argument for macroeconomic stimulus in response to the global financial crisis and sees his new leadership of the Peterson Institute as an opportunity to continue changing the global economic policy narrative. This article will appear in print in the New York Times Magazine on Sunday, December 23, 2012.

BBC News
North Korea Missile Launch
Marcus Noland says that "we're on a bad trajectory," as North Korea's missile launch shows that it is only a matter of time before the rogue country can successfully combine its missile and nuclear programs. While North Korea is far from launching a nuclear missile, Noland notes that its government is "remarkably insensitive" to other nations' efforts to divert or halt it in carrying out its political goals.



Preview of Our Next Issue

Op-ed
Rise and Fall of Russia's Economic Think Tanks
Anders Åslund

 
 
In This Issue
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Event
Jeffrey J. Schott Understanding the Trans-Pacific Partnership

Jeffrey J. Schott and Peter A. Petri present the main conclusions of two new Policy Analyses focused on the TPP.
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Featured Book
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