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Trade War Not Acceptable

FT: UK cuts won’t help help the economy. WSJ: China’s social-political transformation will be momentous. Hindu: India must stand on its own at the UN.

Emerging nations must treat foreign investments with caution

An editorial in the New York Times argues that emerging nations must be cautious as rich countries increase their investments in their markets. Foreign investments can cause inflation and inflate asset bubbles. Plus, they threaten to cause future financial crises if the money gets pulled out quickly.

QUOTE: There is little policy makers in the rich world can do to stop these flows. Governments in the developing world must prepare now for when the money masters change their minds.

We must avoid a trade war

An opinion piece in the Economist argues that global leaders must do everything they can to avoid an actual trade war. A multilateral, diplomatic approach that includes emerging nations is needed to persuade China to change its currency policies.

QUOTE: Global demand needs rebalancing, away from indebted rich economies and towards more spending in the emerging world. Structural reforms to boost spending in those surplus economies will help, but their real exchange rates also need to appreciate. And, yes, the Chinese yuan is too low.

UK cuts won’t help stimulate the economy

Robert Skidelsky, professor emeritus at Warwick University, writes in the Financial Times that Britain’s economy is not threatened by a growing deficit but rather by less spending and a smaller economy. He argues that the government’s proposed budget cuts will therefore not help the economy recover.

QUOTE: The deficit is the stimulant the economy needs to start growing again: its withdrawal guarantees stagnation or worse.

China’s social-political transformation will be momentous

Edward Steinfeld, an associate professor at the Massachusetts Institute of Technology, writes in the Wall Street Journal that China’s socio-political transformation over the next few years will be as important to the country as its restructuring of the economy. China must rebuild its social contract with its people in the wake of increased income disparity and great financial risks.  

QUOTE: Citizens now are promised not merely stuff, but a whole new way of life. That includes rights of a decidedly political and participatory nature. If people are treated unfairly on the job, they are encouraged, albeit ambivalently, to sue. If they feel wages are too low, they are encouraged to turn to their union.

With smart policies, Obama can prevent a double-dip recession

Nouriel Roubini and Michael Moran of Roubini Global Economics write in Foreign Policy that President Obama must act quickly and decisively to prevent the country from experiencing a double-dip recession.

QUOTE: The administration should focus on policies that create a revenue-neutral fiscal stimulus -- one that targets both labor demand and consumption.

Let China rebalance slowing

Michael Pettis, a professor of finance at the Guanghua School of Peking University and a senior associate at the Carnegie Endowment, writes in the Financial Times that allowing its currency to rise would be good for China’s economy, but the country should not be forced to do so too quickly. If it rebalances too fast, it would drastically increase its unemployment.

QUOTE: The profitability of the export sector would decline so quickly that exporters would be forced either into bankruptcy or into lower-wage countries. They would fire workers, who would then consume less.

In private, Obama tries to court big business

Author Charlie Gasparino writes in the Daily Beast that President Obama and the US Democrats have been publically bashing big business ahead of the election. However, privately, the White House has been attempting to convince business leaders that the president’s policies will help them. Gasparino argues this tactic is not working.

QUOTE: I'll be the first to hammer greedy bankers on Wall Street when they deserve it, and point out the absurdity of corporate welfare, but class warfare only gets you so far with voters most of whom apparently understand that without rich people (even fat-cat bankers) creating jobs and spending money, everyone would be poor.

Debate about freedom peeks through in China

An editorial in the Wall Street Journal argues that China’s journalists and citizens feel increasingly emboldened to discuss social and political reforms every chance they can. The piece argues that more access to free information is enabling the public to be better informed.

QUOTE: When China's leadership signals a tolerance, however slight, for openness, debate about freedom flowers.

Americans must end their denial over the state of economy

Columnist Michael Snyder writes in Business Insider that Americans must stop their denial and acknowledge the serious economic problems – ranging from debt to world trade – that face the nation.

QUOTE: Our forefathers handed us the greatest economic machine in history and we have allowed it to fall apart right in front of our eyes.  A national economic crisis of historic proportions is getting worse with each passing month, and yet most of our leaders seem to be asleep at the switch. 

India must stand on its own at the UN

Siddharth Varadarajan writes in the Hindu that when India takes its seat on the UN Security Council it must act according to its own interests and political views and not as merely an extension of the United States. This would help its objective to obtain a permanent seat.

QUOTE: If the non-permanent seat India has just won is indeed to become a stepping-stone for a permanent seat, the Manmohan Singh government will have to focus less on convincing the U.S. about how “responsible” it can be.

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