LONDON (Reuters Breakingviews) - Is money more like gold or like motor oil? The answer to that fundamental question helps determine how large fiscal deficits should be, and how best to find the money to close the gap between tax revenues and government expenditures.
LONDON (Reuters Breakingviews) - Politicians are once again trying to push central banks around. Donald Trump and his counterparts in India, Turkey, Russia and South Africa are complaining that the monetary authorities are resisting the popular will. The pressure is quite justified, and also totally wrongheaded.
LONDON (Reuters Breakingviews) - Like its erotic namesake, wealth-porn can distract otherwise sensible people. It is all too easy to stare mindlessly at descriptions of billions and trillions of dollars and to relish tales of grand excesses of spending. What really matters about the rise of big fortunes, though, is not the thrill of luxury, but the effect of concentrated wealth on society.
LONDON (Reuters Breakingviews) - Many economists love Uber. They look at the quasi-taxi company’s aggressive disruption of local monopolies as a case study in the power and wonder of free markets. They could hardly be more wrong.
LONDON (Reuters Breakingviews) - Financial markets have some things in common with professional sport. Investors and fans are both desperate for winners and despondent about losing. They are passionate about little ups and downs, while outsiders often find the rules arcane and the enthusiasm weird. And for both, all the jumping and screaming has little effect on the rest of the economy.
LONDON (Reuters Breakingviews) - Monday’s 2018 Nobel economics prize can be looked at in two ways. On the bright side, it is an award for long-term thinking and common sense. Less charitably, Paul Romer and William Nordhaus were rewarded for pushing pointless economic modelling in new directions.
LONDON (Reuters Breakingviews) - Ask almost any resident of London or the San Francisco bay area about the price of housing, and you can expect a diatribe. The most common conclusions are that everything is too expensive and only massive construction can solve the problem. That’s not quite right.
LONDON (Reuters Breakingviews) - For the Vatican, China is basically business as usual. For Google, it is a new frontier forcing compromise. And for almost any enterprise with global ambitions, the People’s Republic makes offers that are nearly impossible to refuse. The Holy See has been dealing with recalcitrant political regimes for centuries. From the Catholic perspective, one high point of church diplomacy probably came in 1077, when the Holy Roman Emperor Henry IV waited three days, barefoot in the snow, to ask Pope Gregory VII for absolution. A low point was in 1933, when Pope Pius XI authorised a concordat which helped legitimise the then-new Nazi regime in Germany. Pope Francis hopes that the Vatican’s newly signed but not published agreement with Beijing will end persecution of the country’s roughly 10 million practicing Catholics and give the Vatican some influence on the selection of bishops. It might, but the Communist Party government likes to keep tight control and does not like foreign religious influence. The Vatican judged that a bad deal was better than no deal. The people at Google may be edging towards the same sort of thinking. The search engine subsidiary of Alphabet effectively withdrew from the country in 2010 to protest government controls. Now, according to a report on The Intercept website, it has developed a censorship-friendly search app. Google says that it is “not close to launching” the Dragonfly product, which would reportedly connect search queries to telephone numbers and block politically sensitive searches. However, one senior scientist, Jack Poulson, has resigned in protest over the company’s willingness even to think about collaborating with the oppressive authorities in Beijing. Poulson has some right to be surprised. Google, founded by idealists who promised to do no evil, is still relatively new to the world of grubby compromises. Besides, it would be easier for Alphabet to stand on principle than it is for the Vatican. The internet company does not claim to save souls, and it has hardly any users to protect inside the People’s Republic. Still, there are some good reasons for any ambitious enterprise, religious or secular, to be willing to work with the Chinese government. The commercial logic is obvious. Not only does the country have 47 percent more people than the European Union, the United States and Japan put together, but its people are becoming more educated and a lot wealthier. With the economy growing 6 percent annually, every year brings an Australia-sized increment to the national purchasing power. That is a lot of potential business to walk away from. Also, China is increasingly integrated into the global network of soft capital. Its domestic market, research budgets and international ambitions are all so large that they will inevitably influence how technologies and standards develop. Even with trade wars, foreign companies that choose to cut themselves off from the Chinese idea flow are taking a big risk. More controversially, both the Catholic Church and Google can also make a moral argument for cooperating with the Communist Party government: the alternative is worse. What could be worse than religious authorities validating anti-religious policies or an information company enabling a government to spy on its people? Many things, actually. Autocratic leaders have a strong tendency to paranoia. The fear of real and imagined enemies often leads to terrible violence, both at home and abroad. Up to now, China’s President Xi Jinping has not succumbed. Respectful cooperation from respected international groups is more likely than a hostile boycott to keep him from the worst excesses. The choices may be grim, but outsiders in Rome and Silicon Valley have to be realistic. Whether they decide to stay away or to insinuate themselves into the system, they are not strong enough to crush the Chinese political-economic model. Still, the authority of governments which smother dissent is always brittle. The authorities in Beijing are strong, but it is always difficult to keep tens of millions of bureaucrats and soldiers unswervingly loyal. And the Chinese system has some obvious flaws. Religious leaders can exploit one of them – spiritual emptiness. On that score, Christians, Muslims and Buddhists have more to offer than the Communist variation, Xi’s thought on “Socialism with Chinese Characteristics for a New Era”. Google’s executives might work on another weakness – the desire of many members of the Chinese technical and social elite to throw off the government’s thought control. Of course, neither Pope Francis nor Larry Page, the chief executive of Alphabet, will announce their ultimate goal in cooperating with the Chinese government is to undermine the host government’s moral authority. On the contrary, they will furiously deny any such intention. As far as it goes, the leaders at the Vatican and Google probably really do want to get along. However, they may still be agents of change. After all, despite many weaknesses, they both still have a good deal of what political experts call soft power, the appeal of values and culture. In the long and slow battle of ideas, this soft power may be the decisive weapon. At any rate, outsiders making unpleasant compromises to get into China must hope so.
LONDON (Reuters Breakingviews) - The bankruptcy of Lehman Brothers 10 years ago justified one standard recommendation for economic policy: If a big financial institution collapses in a heap, be sure to keep money flowing through the economy.
LONDON (Reuters Breakingviews) - Charles Calomiris has a new twist on his old theory about what’s wrong with banking. Unfortunately, the Columbia Business School professor is not pushing his valuable insight in the right direction.