Benn Steil

Geo-Graphics

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

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

by Benn Steil and Emma Smith Tuesday, September 13, 2016
MiniMac

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
image (latest)

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
Japan currency

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
Consumer confidence election

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.

The World Economy is Running on Monetary Fumes

by Benn Steil and Emma Smith Friday, May 6, 2016
Global monetary policy rates

With global growth stalling, the IMF is calling for more assertive policy action to boost it.  In normal times, monetary stimulus is—even for liberal Keynesians like Paul Krugman—sufficient to address deficient demand.  But these are most surely not normal times. Read more »

Has the Fed Become More Accommodative than the ECB and BoJ?

by Benn Steil and Emma Smith Friday, April 15, 2016
Real vs. Nominal Interest Rates

A Japanese interest-rate strategist recently told the Wall Street Journal that “every day is like being Alice in Wonderland” since the Bank of Japan’s foray into negative deposit rates on January 29. Though the yen initially fell, as the BoJ wanted, it reversed course quickly.  The yen has of late been trading near 18-month highs.  What is going on? Read more »