Sunday, May 16, 2010

Moneywatch ::: World Economy » 16 May 2010

Each week, usually on Sunday, I post an article about the state of the global economy. You can check my world markets widget in the sidebar to keep abreast of stocks. There are a few things happening that I am not sure I fully understand:

The Gulf Oil Disaster has sent x number of barrels of crude into the water, but gasoline prices are now tumbling... could it be the puppetmasters behind the curtain of the economy realized they'd better "back off" when prices began to drift closer to that $3.25 a gallon mark?

No one is talking about the alarming rise in the market prices of metals, a certain indicator that economic disaster is at the door.

Now, let's explore...

Fault Lines: How Hidden Fractures Still Threaten the World Economy.

Matthew Yglesias: Spain Deflation Sends Markets Tumbling"Austerity not working out so well for Spain.... I don’t mean to deny the need for some governments to get their budget situations under control including, in the medium-term, the United States. But across the world, this only works if monetary authorities are taking vigorous measures to ensure growth...

THE IMF Global Financial Stability Report is always worth a read, especially in the wake of the credit crunch.

IMF report predicts long, painful road ahead for Greece's recovery

"Most people who look at the IMF report will... read it as telling a tale of government profligacy.... But... the report... says that the financial crisis has made us permanently poorer... and governments have to tighten their belts to make up for that loss....

Bruce Bartlett: The IMF's New Fiscal Monitor
"To be sure, the means by which revenues are raised is critical. Raising income tax rates more than already projected would be a bad idea, although new research by Anthony Atkinson and Andrew Leigh suggests that there is still a lot of potential revenue available from taxing the rich even accounting explicitly for Laffer Curve effects. The IMF suggests—and I agree—that it would nevertheless be preferable to raise additional revenue by taxing consumption. The best way of doing so would be by imposing a value-added tax. The IMF estimates that 10 percent VAT could raise revenues equal to 4.5 percent of GDP. If we don’t raise the additional revenue that is inevitably going to be raised in this way, it is a certainty that it will be raised in ways that will be far more debilitating to growth."

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