Benn Steil

Geo-Graphics

A graphical take on geoeconomic issues, with links to the news and expert commentary.

China’s Bond Market Can’t Handle a Global RMB

by Benn Steil and Emma Smith Thursday, December 1, 2016
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The Chinese RMB’s ascension into the IMF’s SDR currency basket in October has been widely seen as an important first step on its path to becoming a global reserve currency.  But we would argue that the path is a very long one, and that even rivaling the euro for the number two spot may, without implausible reforms to China’s political economy, be beyond the RMB’s reach. Read more »

History Shows Trump’s Trade Policy Is a Recipe for Recession

by Benn Steil and Emma Smith Wednesday, October 12, 2016
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The central theme of Donald Trump’s economic policy is trade.  He promises to slash America’s trade deficit by tearing up international agreements and imposing massive new tariffs on imports from China (45%) and Mexico (35%).  By cutting the trade deficit from $500 billion to zero, according to his senior economic advisers, $1.74 trillion in new tax revenue will accrue to the Treasury over the next decade.  Trump will use this massive windfall to fund two-thirds of his proposed tax cuts.  If true, this will indeed go some way toward Making America Great Again. Read more »

The Geo-Graphics Mini Mac Index Deep Fries the Big Mac Once Again

by Benn Steil and Emma Smith Tuesday, September 13, 2016
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The “law of one price” holds that identical goods should trade for the same price in an efficient market.  But to what extent does it actually hold internationally?

The Economist magazine’s famous Big Mac Index uses the price of McDonald’s Big Macs around the world, expressed in a common currency (U.S. dollars), to estimate the extent to which various currencies are over- or under-valued. The Big Mac is a global product, identical across borders, which makes it an interesting one for this purpose. Read more »

Italy’s (Not So) Big Bad Bank Bailout

by Benn Steil and Emma Smith Wednesday, August 24, 2016
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Italy’s recovery from the crisis lags even the rest of laggard Europe. Its economy remains 8 percent smaller than in 2007; among EU members, only Greece and Cyprus have done worse.

Top of the list of challenges it faces is bank balance sheets clogged with €360 billion of bad loans, crowding out new lending. Around €40 billion of additional capital is needed to write down nonperforming assets to something approximating market value. Read more »

What If Japan Becomes Treasury’s First Currency ‘Manipulator’ in 22 Years?

by Benn Steil and Emma Smith Thursday, July 7, 2016
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In May, Japanese Finance Minister Taro Aso and colleagues warned of their willingness to intervene in currency markets to counteract upward pressure on the yen.  And in the wake of Britain’s historic Brexit vote on June 23, which prompted another surge in the currency, even Prime Minister Shinzo Abe joined the chorus. Read more »

Consumer Confidence Suggests Clinton Victory in November

by Benn Steil and Emma Smith Monday, June 20, 2016
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Going back to 1952, consumer confidence has been a fair guide to presidential election outcomes. Confidence has been 12 points higher on average in years the incumbent party has won than in years the opposition party has won.  The difference is statistically significant at the 1 percent level.  As shown in the graphic above, average confidence over 2016 to date is right at the average level for an incumbent party victory.  This is good news for Hillary Clinton—though there is still plenty of time for bad news to boost Donald Trump.