Robert Kahn

Macro and Markets

Robert Kahn analyzes economic policies for an integrated world.

Britain’s Bold Leap into the Unknown

by Robert Kahn Friday, June 24, 2016

Britain’s vote to leave the European Union was fueled by a broad range of social and political concerns, including a fear of immigration, resurgent nationalism, and a populist rejection of UK and European policies, institutions and policymakers. But is also an extraordinary economic experiment. Here are a few things to look for in coming days as the global economy tries to absorb the implications of this leap into the unknown.

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Venezuela’s Descent Into Crisis

by Robert Kahn Thursday, May 5, 2016

In my May monthly, I make the case that the crisis in Venezuela has intensified to the point where a chaotic default is a question of when, not if. Economic activity is falling sharply and the seeds of hyperinflation have been planted, a downward spiral reinforced by political paralysis, widespread electricity shortages, and a breakdown in social order. Reserves are falling sharply, driven by capital flight and a fiscal deficit that has swelled to over 20 percent of gross domestic product (GDP). Although the government has made enormous efforts to continue making debt payments, a default now appears likely sooner rather than later, and possibly even ahead of large debt service payments due this fall

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G20 Hopes for a Cure

by Robert Kahn Sunday, February 28, 2016

Five things we learned from this weekend’s G20 meeting of finance ministers and central bankers.

  1. A desire for better. The communiqué candidly acknowledges growing threats to the global economy, and signals a desire for stronger growth at a time when “downside risks and vulnerabilities have risen.” There also was recognition that monetary policy has carried most of the load in recent years, and going forward more responsibility rests on governments to accelerate long-promised fiscal and structural reforms.

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Venezuela on the Edge

by Robert Kahn Tuesday, February 23, 2016

The Venezuelan government has a $2.3 billion debt payment due this Friday. Most believe the government has the resources to make the payment, though it is hard to see a coherent economic reason to do so. The economy is descending into a deep and profound crisis—reflected in severe shortages, hyperinflation, and a collapse in economic activity. It faces a widening financing gap, and has imposed highly distortive foreign exchange controls. Debt service far outstrips dwindling international reserves. Recent policy measures by the government, including a rise in gasoline prices, fail to meaningfully address the imbalances. A default increasingly appears to be a question not of “if,” but “when.”

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Economic Optimism in the State of the Union

by Robert Kahn Wednesday, January 13, 2016

The central economic message from President Obama in his State of the Union (SOU) speech last night was that the U.S. economy was on a strong footing and well prepared to prosper in a dynamic and rapidly changing global environment. This is hardly a surprising message, but notable coming at a time when the 2016 presidential campaign is being driven by populist messages of economic decline and aversion to globalization. Running briefly through a list typical of SOUs, the president noted job growth including in manufacturing, developments in clean and conventional energy, educational improvements including rising high school graduation rates and student loan relief, improved medical insurance coverage, and the recent bipartisan agreement on No Child Left Behind among his achievements. Indeed, with unemployment at 5 percent and growth at around 2.5 percent backed by highly accommodative monetary policy, the president had a good macroeconomic story to tell, while acknowledging that a great deal more had to be done to boost middle class incomes and improve economic security.

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Macri-economics in Argentina

by Robert Kahn and Ted Liu Tuesday, December 22, 2015

While markets have focused attention on China as the primary source of market risk in 2016, Latin America has provided the more significant headlines in recent weeks.  Political turmoil in Brazil has resulted in the resignation of a market-friendly finance minister, and default looms in Venezuela.  But perhaps nowhere in Latin America is more at stake than with the economic revolution now underway in Argentina.

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After the Fed

by Robert Kahn Wednesday, December 16, 2015

The Federal Reserve today delivered exactly what was expected: a liftoff in interest rates from the zero lower bound, coupled with strong assurances that the future rise in interest rates will be moderate. Markets reacted hardly at all to the statement and Janet Yellen’s press conference, beyond a bit of short covering, by and large seeing the decision as a comforting first step towards normalization at a time of significant global tensions. In sum: Read more »

IMF Reform Moves Forward

by Robert Kahn Wednesday, December 16, 2015

There are reports this morning that House and Senate legislators have included language authorizing U.S. support for International Monetary Fund (IMF) reform in the $1.1 trillion spending package funding the government for the rest of FY16.  If this language reaches the president’s desk and is signed into law, it would be an important achievement and a positive reflection on the perseverance of U.S Treasury officials and congressional leaders to get this deal done. The package—first agreed to by the Obama administration in 2010—changes voting shares and governance for the institution at a critical time, bolstering the IMF’s credibility and its ability to play a lead firefighting role at times of crisis.  Failure to pass the legislation had become a substantial irritant for U.S. influence internationally, and resolving this is a win for good global economic governance.

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Addressing Economic Populism in Europe

by Robert Kahn Tuesday, December 8, 2015

My latest global economic monthly looks at rising economic populism in Europe and how it constrains the capacity of policymakers to get a robust recovery going and deal with shocks. Some of the drivers of populism—on the left and right, in creditor and debtor countries—are cyclical but many including globalization, income inequality and insecurity are likely to be more persistent and resent a long-term threat to greater European integration. The strong showing of the National Front in last weekend’s French regional elections, Denmark’s referendum rejection of further EU integration, and Britain’s debate over its EU future are recent reminders of the fraying consensus on further integration, which has strong implications for economic cooperation. Easy money from the European Central Bank (ECB) can only do so much, and a broader policy response including a faster pace of economic integration and more flexible fiscal policies now are needed.