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Analysis

Commentary

A low-growth decade

by Brian Reading in London | Fri 23 Jun 2017

News broke exactly 10 years ago that investment bank Bear Stearns had 'rescued' two of its worthless subprime mortgage funds. This fired the starting gun on the 2008 financial crisis. The consequences haunt us still. The overall response to the crisis may have been inevitable, but it was mistaken. 'Bail-outs' over the last decade have transferred resources from the 'have-nots' to the 'haves'. Angry voters have had their say. The overall result has exacerbated inequality and social divisions, and depressed economic growth.

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Building China's unified pension system

by National University of Singapore authors | Thu 22 Jun 2017

China's 13th five-year plan includes policies for a unified, national pension system. These are intended to consolidate dozens of funds run by local governments into a single scheme by 2020. But not all regional governments support these plans. The authorities, too, are concerned a unified system may overburden the central government. Resistance in the regions and concerns among central agencies need to be overcome. Much will depend on how much political capital Beijing is willing to expend.

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Defending the dismal science

by Miroslav Singer in Prague | Wed 21 Jun 2017

In public debates I am continually asked – in my capacity as a former central bank governor – whether economics as a science has failed. People are quick to cite how most economists did not foresee the source or severity of the 2008 financial crisis. But recent normalisation of the world economy makes it easier to argue No. Although the West in the last decade faced the worst economic crisis since the 1930s, the dismal science was essential for implementing appropriate macroeconomic policies to avoid the gravest consequences.

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Learning from Danish example

by Joergen Oerstroem Moeller in Singapore | Tue 20 Jun 2017

Theresa May, the embattled UK prime minister, is fighting on multiple fronts. The EU exit negotiations which started yesterday will be far from easy. Her government, deprived of a majority in the 8 June election, cannot master the struggle by itself. The British should form some kind of national unity government. Even if no formal unity government is realisable, it should be possible – as Denmark did 25 years ago – to establish a functioning national compromise between the Conservative and Labour parties.

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Uberising France

by Jean-Jacques Barbéris in Paris | Mon 19 Jun 2017

Emmanuel Macron has won an overwhelming majority in the French National Assembly. He is now free to implement his reform agenda. Some may see the pragmatic nature of Macron’s proposals as a euphemism for right-wing policies. The reality is more nuanced. As a force for change, Macron has ‘uberised’ the French political system, seeing off hundreds of established politicians. This demonstrates his willingness to promote progress rather than keep things as they are. These ambitions lay down profound challenges to fundamental aspects of French culture.

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Kohl and currencies

by David Marsh in London | Mon 19 Jun 2017

Helmut Kohl, the former German chancellor who died on Friday aged 87, was inextricably bound up with three great monetary transformations. But he did much else besides. Most importantly, he presided over a dramatic period of peaceful change in which Communist-run East Germany was merged expensively but bloodlessly with its powerful, unrequited neighbour, the Federal Republic, in 1990.

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Project Fear ‘got its figures wrong’

by Brian Reading in London | Fri 16 Jun 2017

Before last year’s UK referendum on membership of the European Union, the Treasury produced dire warnings that a vote to leave would cause severe damage to UK growth. Now the predictions are being challenged. Project Fear, it seems, did exaggerate the potential harm to the economy, but the fact remains that Brexit will hit UK prospects, and those of the rest of the EU too.

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Identifying ‘Uber risk’

by David Bholat and Chiranjit Chakraborty in London | Fri 16 Jun 2017

Data-driven analytics are being developed at the Bank of England to complement more theoretically-rich models. Fintech is one sector where this is being applied. Although in the long term fintech may improve the efficiency of the financial sector, in the short term there is the risk that entrepreneurs and new technologies destabilise incumbents, creating financial instability. This is known as ‘Uber risk’, after the popular taxi-hailing service, and the aim is to identify these ‘disruptive’ firms.

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Brazil's prolonged political paralysis

by Desmond Lachman in Washington | Thu 15 Jun 2017

The corruption scandal threatening Brazilian President Michel Temer comes at an inopportune time. He has already lost half of his cabinet due to the recent Petrobras scandal, and his approval ratings are down to single digits. Unless Temer resigns soon, belligerent impeachment proceedings may threaten Brazil with a prolonged period of political paralysis. That would almost certainly delay the implementation of the far-reaching reforms necessary to reinvigorate the economy.

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Brexit: a dreadful experiment

by Jacques Lafitte in Brussels | Wed 14 Jun 2017

Perhaps the UK’s main error in its plans for leaving the European Union is the belief that the EU has to grant it a ‘fair deal’ that satisfies at least half of British demands. Both sides in Britain – Leave and Remain – may see the negotiating stance of the other 27 EU members as excessively tough, but the EU has not the slightest reason to change it after Theresa May lost the Conservative party’s majority in last week’s general election.

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