In The News

Sovereign Wealth to the Rescue

Michael Pettis August 20, 2007
A US consumption spree has spawned a global savings glut, and nations such as China and Japan with large reserves of cash still hope for sizable returns. “Every period of globalization in the past has had its origins in one or more events that gave a big boost to global liquidity,” writes finance professor Michael Pettis for the Wall Street Journal. “As liquidity expanded and risk appetite rose,...

US Mortgage Crisis Hits Pacific Rim Markets

Carter Dougherty August 7, 2007
Lured by low adjustable-interest rates, US homeowners bought larger homes than many could afford. Mortgage companies bundled those loans into bond packages, selling them to investors worldwide. But the credit was too easy, and wages are stagnant for many. For homeowners who can’t handle automatic rate increases, loans go into default. Trying to sell homes and escape the trap, homeowners discover...

Grand Strategy for a Divided America

Charles A. Kupchan August 1, 2007
The US has overextended itself on international security matters, failing to gain widespread cooperation with the international community in recent years. As a result, the US has failed in achieving some major goals – promoting democracy, defeating terror and encouraging free trade to alleviate poverty. US voters, observing mounting debt, with little results, are increasingly divided about how to...

Summer of Setbacks

Ernesto Zedillo August 1, 2007
Summer of 2007 may well be remembered for a string of bad financial news: increasing numbers of homeowners in the US struggling to pay home mortgages, the decline of the US dollar, and climbing oil prices as conflict and tension linger in the Middle East. Yet the world economy flourishes despite shocks in foreign exchange and the debt markets. Ernesto Zedillo, director of Yale Center for the...

Free Rider Not Free Market

July 18, 2007
France argues that the euro’s increasing value undermines French exports. But finance ministers from other nations disagree, arguing that French labor policies, offering lavish benefits for workers, discourage interest in French exports. At a meeting with eurozone finance ministers, French President Nicolas Sarkozy demanded a two-year extension on an agreement that requires France to balance its...

Debtor Nation

Jonathan Shaw July 6, 2007
Americans continue to buy only because they easily borrow from abroad. For now, the cost of borrowing is low, as countries buy low-interest US Treasury bills and bonds. Why foreign lenders send the US money in exchange for low interest rates is a “profound question,” suggests Professor Lawrence Summers. He and other Harvard professors analyze the sustainability of such lending, borrowing and...

The Rising and Falling Power of Hydrocarbon States

Dilip Hiro July 3, 2007
The global economy runs on oil. Unequal distribution of oil throughout the world bestows power on the few states with ample supplies. Venezuela is one example of a nation that uses oil as leverage in foreign affairs: Besides consolidating his popular base at home, President Hugo Chavez has helped debt-ridden countries in that region, openly mocks the US and signed an arms-procurement deal with...