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December 30, 2014

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Posted: 30 Dec 2014 12:06 AM PST

'The Second Age of Imperialism'

Posted: 29 Dec 2014 11:08 AM PST

Branko Milanovic:

The second age of imperialism: As we enter 2015, it is not useless to look backwards in order to try to guess the trends of the future. I would  argue that the age that we are, to some extent exiting now, and which extended from the early 1980s, can be called the "second age of imperialism"--the first one, in the modern history, having been the age of high imperialism 1870-1914.              I will focus here on some of its key manifestations in the ideological sphere, in the areas I know, history and economics. But it should be obvious that ideology is but a manifestation of the underlying real forces, which were twofold: (i) the failure of most developing countries by 1980 to become economically successful and self-sustaining after decolonization and the end of Communism as an alternative global ideology, and (ii) the relatively solid economic record of Western countries (masked by the expansion of borrowing for the lower classes), and regained self-confidence of the elites in the wake of the Reagan-Thatcher (counter-) revolutions and the fall of Communism.  The violent manifestations of the second age of imperialism were invasions of Afghanistan and Iraq, brutal war in Libya, and the defensive imperialism of Russia in Ukraine and Georgia. But here we are concerned with the superstructure. ...

Financial Innovation and Risk Management

Posted: 29 Dec 2014 10:53 AM PST

Cecchetti & Schoenholtz

Financial Innovation and Risk Management: "We allow our standards of living to be determined essentially by a game of chance." -- Robert Shiller, Macro Markets, 1993.
In 2013, Robert Shiller shared the Nobel Prize for Economics with Eugene Fama and Lars Peter Hansen for their research on asset pricing. While Shiller is known as a critic of the efficient markets hypothesis and as a proponent of behavioral finance, less appreciated is his work on advancing financial technology to help societies manage fundamental economic risks.
At a time when the recent crisis has given financial innovation a bad name, Shiller's contrarian message is that well-designed financial instruments and markets are an enormous boon to social welfare. We agree.
Historical examples supporting Shiller's view abound. ...

'Data Insight: Which Growth Rate? It’s a Weighty Subject'

Posted: 29 Dec 2014 10:53 AM PST

Richard Crump, Stefano Eusepi, David Lucca, and Emanuel Moench at the NY Fed's Liberty Street Economics:

Data Insight: Which Growth Rate? It's a Weighty Subject:  The growth rate in real gross domestic product (GDP) is a conventional indicator of the economy's health. But the two ways of measuring annual GDP growth can give very different answers. In 2013, GDP grew 2.2 percent on a year-over-year basis, but at a faster 3.1 percent rate on a Q4-over-Q4 basis. So, which measure is more meaningful? We show in this post that the Q4/Q4 metric is better since it only considers quarterly growth rates during the current year, while the Year/Year measure depends on quarterly growth rates in both the current and previous year and puts considerable weight on growth around the turn of the year. ...

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