Robert Kahn

Macro and Markets

Robert Kahn analyzes economic policies for an integrated world.

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Showing posts for "Debt"

When meetings matter—The World Bank and IMF Convene

by Robert Kahn

There are many reasons cited for this week’s market turndown and risk pullback, including concerns about global growth, Ebola, turmoil in the Middle East, and excessive investor comfort from easy money. What has been less commented on is the role played by last weekend’s IMF and World Bank Annual Meetings. Sometimes these meetings pass uneventfully, but sometimes bringing so many people together—policymakers and market people—creates a conversation that moves the consensus and as a result moves markets. It seems this year’s was one of those occasions. As the meetings progressed, optimism about a G-20 growth agenda and infrastructure boom receded and concerns about growth outside of the United States began to dominate the discussion. The perception that policymakers—particularly European policymakers—were either unable or unwilling to act contributed to the gloom. Time will tell whether macro risk factors that markets have shrugged off over the past few years will now be a source of volatility going forward. But if that is the case, perhaps these meetings had something to do with it.

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Argentina Defaults: The Day After

by Robert Kahn

Argentina has defaulted. The long-running court drama that ran for over ten years and pitted Argentina against a small group of holdout creditors was decided decisively in favor of the holdouts in June, and Argentina subsequently refused to make payments as required by the courts. As a result, neither the holdouts nor the holders of restructured external debt will get paid, resulting in S&P placing the country in “selective default.” (Payment on the restructured bonds was due June 30, and the grace period for making those payments expired yesterday.)

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BRICS and Mortals

by Robert Kahn

Leaders of the BRICS–Brazil, Russia, India, China, and South Africa–meet in Rio today to swap World Cup stories and launch a long-discussed “BRICS Bank.” The bank creates two funds–a development lending facility (New Development Bank or NDB) backed by $50 billion in capital ($10 billion from each of the BRICs), and a $100 billion rescue fund (Contingent Reserve Arrangement, CRA) for countries suffering from exogenous shocks.

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Ukraine and IMF: Step Forward Now

by Robert Kahn

The IMF announced today that it has reached an agreement in principle on a two-year program (stand-by arrangement) with Ukraine. The headline numbers are $14-18 billion of IMF money and overall financing of $27 billion, which is lower than some had hoped, but don’t be fooled. This is a three-to-six month program, designed to meet Ukraine’s critical near-term financing needs and to get reforms going. Both are essential tasks, and rightfully the focus. The program will be revised (and likely boosted) after elections. It will be at that point that thorny issues like debt restructuring will be addressed.

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Five Financial Questions for Ukraine

by Robert Kahn

There is an interesting debate going on in Western capitals over financial support for Ukraine.  The possibility of political change, coupled with Russia’s decision to suspend disbursements on its $12 billion financial package, has created an opening for meaningful economic reforms and renewed ties with global financial bodies.  There are compelling political arguments for the West to respond with a financing program that makes it economically viable for Ukraine to choose the EU Association Agreement that it rejected last year.  But the economics make a deal hard to put together.  For now, the ball is in Ukraine’s court—tensions remain high and Western aid will require at a minimum a technocratic and reform oriented government be put in place.  But should that happen, here are five economic questions on the table. Read more »

What’s So Special About November 1?

by Robert Kahn

It is starting to sink in that October 17 is not a hard deadline for default by the U.S. government on its obligations.  Senator Corker for instance says “I think the real date is around the first of November.” Some of the talk of later dates is posturing by the president’s opponents seeking leverage in the negotiations, and their willingness to go so close to the edge of the cliff is disturbing. But it also reflects the real uncertainty about when the debt limit will cause serious economic and political distress.  It is worth examining whether November 1 is a drop dead date for negotiations.

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The Government Shutdown: How This Ends?

by Robert Kahn

It’s day one, and there is agreement that we don’t know where we are headed or how we get there.  Both sides are playing a long game and seem unified in their brinkmanship.  If current market and political realities are any indicator, we’re a long way off from there being enough pressure on either side to deal.  Indeed, as my colleague Ted Alden emphasizes, the areas of government hit the hardest by the shutdown don’t provide services that the hardliners value, making compromise more difficult.  This could go on for a while (the on-line betting odds look about even for the shutdown to go more than 7 days), but when we do get to making a deal, here is one idea on the way forward.

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Argentina End Game

by Robert Kahn

In a clear and tough decision, the U.S. Second Circuit Court of Appeals has ruled against Argentina in its legal battle against holdout creditors.  A good analysis is here.

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