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Sun 14 Aug 2016 / Europe

Importance of ECB’s expanding Target-2

While financial markets have paid vast attention to the European Central Bank’s efforts to inject additional liquidity into the financial system through quantitative easing, much less scrutiny has been applied to the relatively meagre outcome in terms of ‘broad money’ expansion. A primary reason for this has been the ‘peripheral’ banking system’s increased requirement to draw on funding under the Eurosystem’s intra-central bank Target-2 system, under which NCBs manage their assets and liabilities vis-a-vis the ECB.

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Thu 11 Aug 2016 / North America

Millennial rallying cry

The Millennial vote can massively influence the US presidential election. Members of the Millennial generation such as myself – Americans born in 1981-98 – have drawn more or less level in numbers with the 1946-64 Baby Boomers, who up to now have formed the clear majority of the US electorate. Young Americans may be the king-makers. There’s only one thing we need to do: go out and vote. Breaking the cycle of low Millennial turnout is vital for the future of American politics.

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Fri 26 Aug 2016 / Europe

Disproving the doomsayers

The overdone pessimism whipped up by a very political Treasury before the UK’s referendum on EU membership was based on a short-term shock to confidence. The good news is that, nine weeks after the vote, when the UK should have felt the worst of the immediate shock, none of the Treasury's most dire predictions have come to pass. It is high time that those who put out such negative forecasts before the referendum revised their view and explained why they got it wrong.

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Mon 22 Aug 2016 / Europe

Beating the UK downturn

The UK authorities are right, after the referendum decision to leave the European Union, to take action to counter the immediate downturn. The Bank of England monetary easing announced on 4 August will buy time until fiscal measures can be enacted. Since the long-term fiscal outlook is poor, the government must find ways of temporarily expanding the budget deficit with a return that will more than meet the very low extra interest rate costs.

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Wed 17 Aug 2016 / Europe

Dollar and euro asset risk

As one of the world’s largest exporters, Germany saw an important part of the political and economic rationale of entering European economic and monetary union in 1999 as lowering risks on its international commercial interactions. According to the OECD, it will record the world's largest trade surplus this year and will amass a record current account surplus of 9.2% of GDP. Yet, as a result of the large imbalances within EMU that these surpluses symbolise, Germany is a long way from insulating itself against foreign risks.

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Sun 28 Aug 2016 / North America

Trump’s real effect

Europeans often ask me: What would happen if Donald Trump were actually elected? I answer that American election arithmetic makes it unlikely that Trump, or any other Republican, will be elected president for some time to come. Of greater concern than the actual vote is the long-term effect of the anger Trump has engendered in the overall US body politic. A significant realignment of American politics could be in store: the Republican party may not survive.

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Tue 2 Aug 2016 / Europe

Britain’s complex road to Brexit

To reach acceptable outcomes from negotiations on Britain’s new relationship with the European Union, Prime minister Theresa May’s government needs to earn the goodwill of 27 EU partners and the EU institutions which must vote on both the Article 50 divorce settlement and the free trade agreements. Her ministers will also need to charm governments across the world if they want the World Trade Organisation talks and the FTA negotiations with non-EU countries to run smoothly.

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Mon 1 Aug 2016 / Europe

As UK exits, goodwill is crucial

Britain’s exit from the European Union will require not just a single deal, but at least six interlocking sets of negotiations. If the British government wants the talks to run smoothly, it will need to earn the goodwill not only of the countries in the EU, but also of those in the World Trade Organisation. We will probably see a bespoke interim deal to provide temporary cover to the British economy, while UK participation in EU policies and programmes is phased out.

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Wed 24 Aug 2016 / Asia Pacific

China’s long march on SDR, renminbi

The World Bank’s forthcoming launch of $2.8bn worth of bonds denominated in special drawing rights on the Chinese market is a further landmark step in China’s long march to support the International Monetary Fund’s accounting unit as a potential rival to the dollar. The relaunching of SDR-denominated bonds after a three-decade absence is linked to the renminbi’s entry into the SDR on 1 October, where it will join the dollar, euro, yen and sterling as an acknowledged reserve currency.

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Tue 30 Aug 2016

Charter cities boost for developing world

Paul Romer, a respected economics professor known for his unorthodox ideas about urbanisation and growth-generating ‘charter cities’, takes over in September as the World Bank’s chief economist. Assuming the Bank embraces his ideas and can translate them into workable policies, Romer’s charter cities construct offers one possible solution to the problems of many fast-expanding megacities in developing economies, including the fate of millions of migrants facing poverty in new urban environments.

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