In The News

Read China’s Lips

Stephen S. Roach July 28, 2011
China funded US government spending in recent decades with low-interest loans. But the threat of default may end that free ride. China is the largest foreign holder of US Treasuries and other agency notes, with about $2 trillion invested. US financial woes have prompted China to adjust its growth strategy, explains economist Stephen Roach in an essay for Project Syndicate. Beijing worries about...

With US on the Brink of Default, Eyes are on Rating Agencies

David Dapice July 26, 2011
Governments have long operated by borrowing, not just for long-term projects but also daily operations. The US, with a self-imposed debt ceiling, borrows more than 40 cents for every dollar it spends. With the government about to exceed spending limits, global investors are on edge, waiting to see if the US Congress lifts the current debt ceiling, allowing continued operations, or goes into...

Employment Versus Debt

Nayan Chanda July 26, 2011
Confronting an ongoing economic crisis, US politicians have assigned greater priority to the nation’s large deficit rather than an unemployment rate officially listed at 9.2 percent. Also overlooked is a report from the US Department of Labor that 3 million job openings go unfilled. It’s a head-scratching moment, suggests Nayan Chanda, YaleGlobal editor in his regular column for Businessworld,...

China Urges US to Protect Creditors by Raising Debt

Bettina Wassener, Matthew Saltmarsh July 15, 2011
China, a major lender to the US, urges the president and US Congress to reach agreement on lifting the nation’s debt limit, so that bills can be paid. “China holds more than $1 trillion in United States Treasury securities, making it highly sensitive to any developments that could lower the value of those holdings,” reports the New York Times. Statutory limits have been in place since 1917, an...

The Next Domino? Italy Suffers from Euro-Zone Contagion Fears

Carsten Volkery July 13, 2011
After Greece and Portugal, the markets are sending signals of turning on Italy, and investor fears are raising rates on the nation’s government bonds. Analysts have issued warnings about the country’s aging population, weak economic growth, low productivity and rigid labor market, reports Carsten Volkery for Spiegel Online. Should Italy fall into the vicious circle of downgrades and rising bond...

Europe Seeks to Free Itself From Rating Agencies' Grip

David Böcking July 8, 2011
Risk and creditworthiness of state debt are largely assessed by three major agencies based in the US. Nations rated low – due to low revenues, excessive borrowing or threat of default – pay high interest rates to borrow. As Greece and Portugal struggle to repay massive debt, facing steep downgrade by the agencies, European politicians renew calls for an independent credit-rating agency based in...

Playing Make-Believe With Greece

Floyd Norris July 4, 2011
Operating under the assumption that their economy is “too big to fail,” Greeks anticipate an infusion of new loans and are in no hurry to embrace austerity. Despite their role in failing to regulate the excessive lending, central bankers resist accountability for the crisis in Greece. Floyd Norris of the New York Times compares central and commercial bankers: Both loaned funds without adequately...