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In his April 2009 article for Vanity Fair (no longer fully available), Michael Lewis told the story about how Iceland's banking system basically imploded during the financial crisis. One of my favourite stories from the article is the one he tells about the fate of the country's many Land Rovers.

Presumably because they are a great tool for hauling fish across the Icelandic tundra, Land Rovers were a popular item for the small island nation. They were even more popular as the result of the availability of cheap financing during the pre-crisis boom in credit. The problem was, this cheap financing was provided in foreign currency; the interest rate for euros, pounds and dollars was far lower than that for the domestic currency, the krona. This is all fine and good if your salary is paid in euros, pounds and dollars, but in fact most people in Iceland are paid in krona. 

When Iceland's economy went down the crapper, the value of the krona went with it. Since the value of their income had just plunged relative to the value of their debts, many civilized citizens of Iceland were forced to make one of two choices:

1. Attempt to pay back their car loans in salted cod
2. Do something crazy

"Icelandic Bank: Dear Mr. Ragnar Hjalrnarsson, the monthly payments on your Land Rover are 3 months overdue."


Mr. Hjalrnarsson: *panting furiously, having just run for cover*


"Iclelandic Bank: Mr. Hjalrnarsson?"


*KABOOOM*


"Mr. Hjalrnarsson: Land Rover? What is this Land Rover of which you speak?"

FIN

Over the past few weeks, my occasional glances at the market reporting pages suggested that there was some positive news to be had. Markets were launching small rallies. There was a return to risky assets. The UK and Germany, among others, were turning out surprisingly positive signs of economic recovery. But upon taking a step back from the day-to-day churn of financial reporting, I have to admit I'm a bit baffled by all of this: where are these positive vibes coming from?

Although the recession probably ended (technically) in the United States sometime last summer, the global recovery - such as it is - seems remarkably fragile. Unemployment is obviously the biggest indicator. German unemployment continues to drop, but in the US the there are some 15 million unemployed, and even more who are underemployed. Nearly half of the unemployed have been off the job for 6 months or more. That's a deep hole. (More charts here)

Moreover, many of the underlying problems have not gone away. Sovereign debt concerns are still a biggy. The collapse of the Eurozone has been staved off through the promise of access to an unprecedented level of EU-backed funds for the weakest members. But most analysts agree that, as far as Greece is concerned, the can has simply been kicked down the road. Only Spain, the UK, and some Baltic states seem to be taking the necessary steps to address the underlying problems. Even there, the steps being taken should raise worry about delaying the recovery even further.

Another underlying problem is that of macroimbalances. Any movement towards re-balancing over the past two years was the result of the peculiarities of the financial crisis. We're seeing quite clearly now that the fundamental asymmetries of the global market for goods & assets have not gone anywhere. Capital flows have started returning to their pre-crisis trends. Moreover, everyone (everyone!) is talking about exporting their way out of recovery.

That is literally not possible. Where is the demand going to come from? US household wealth is low (decimated by decline in housing & job losses), consumer spending is weak, while savings will likely increase. The EU is fragile, and the best-performing country (Germany) is growing from...you guessed it: exports.

What about demand in emerging markets? The biggest, China, is currently trying to delicately apply the brakes to avoid domestic overheating and still does not have sufficient demand to offset the decline in the US/EU. Capital flows into India have slowed in recent months, which restricts their ability to fund further growth and demand. News out Japan is underwhelming.

On top of this, many of the East/Southeast Asian countries that built up their domestic currency reserves during the lead-up to the Great Recession to act as a buffer against crises will feel vindicated: they have fared relatively well. Why on earth would they change strategies now?

As noted below, the fragility of the situation is not lost on Mervyn King, head of the Bank of England. Similarly, US Federal Reserve's beige book recently described a decidedly "beige outlook" for the United States. In fact, even this morning, the estimates of US GDP growth disappointed market watchers.

The only good news I can think of is that we are not hurtling down an economic crevasse. And let's be clear: this is really REALLY good news. Catastrophe was a definite possibility a couple of months ago as observers watched the European sovereign debt problems cause the EZ to teeter on the precipice. But despite their dithering, the euro-zone economies have, for the moment, escaped the worst possible outcomes. The bank stress tests, despite widely reported weaknesses, have been met by a neutral-to-positive response. Tyler Cowen suggests that wages in Europe have been less sticky than he predicted, which seems to be prompting some signs of recovery. Another indicator of uncertainty - both for inflation and deflation - is gold. Gold is holding steady at the moment, suggesting that fear of impending doom is abated.

But if not hurtling down an economic crevasse is the best news you've got, things are still pretty grim. Taking stock of the situation from my little peephole, I have really got to ask myself: where is the recovery going to come from?

UPDATE: Some honesty from Tyler Cowen: "Macroeconomics is rarely simple... We still don't know what we are doing." Read the rest.

As I am currently a resident of an airport for the near future, I feel it best to catch up on some long overdue blogging. Having spent the better portion of 2 weeks in Singapore, that seems like as good a topic as any. I don't pretend to have become an expert on the place, but I have picked up a few tidbits which have piqued my interest. Many of these have derived from my favourite source of information: taxi drivers.

Singapore is an interesting case, to put it mildly. Much of its recent history is a blur, cobbled together from various travelers' notebooks, journals and the occasional scribbled map. For much of the 17th and 18th centuries it was probably uninhabited. As recently as 50 years ago, the place was still a backwater entrepot, with very little in the way of a diverse economy.

Yet in visiting modern Singapore, this is difficult to imagine. The city-state is modern, vibrant, wealthy, and stuffed with the sort of cultural icons we associate with truly global cities. New resorts and theme parks are sprouting up left and right, while international business people continue to arrive in droves to the business district and conference centers. Next month, the city state will be hosting the 2010 Youth Olympics.* And despite a huge number of foreign workers (a million, according to one cabbie), there is a continuing need for more.

Because it is so tiny, Singapore's success has not been able to rely on natural resources or a large labour force to drive its economic growth. Instead, its limited resources have been carefully "channeled" towards certain key areas to create an open and highly competitive economy. What's more, as they are so vulnerable to the shifting economic winds, the city state has been forced to continue to innovate and shift to new areas. For instance, they are now making a concerted effort towards becoming a world leader in biotechnology research, while the financial services sector continues to grow in regional importance. There is also the recently announced launch of the largest power grid research station in Asia. Further examples abound.

Clearly Singapore has had success where other countries in the region have not. So are there lessons to be learned for other emerging markets? Many appear tempted to dismiss Singapore as a "unique case" that is difficult to copy. There are some good reasons for this.

Obviously, it is small. This makes it easier for the government to carefully allocate economic resources. But many other countries are small and fail to achieve something similar. Access to water and its position along a major shipping route clearly helps, but this does not account for the diversity of Singapore's economy. The colonial background has also left its mark on certain ways in which the country functions, notably the legal system.

The stable political situation certainly plays a role. Although the system is nominally a representative democracy, in practice it is a semi-authoritarian one-party state. Freedom House ranks the country as "Partly Free" (up from "Not Free" a little while back) due to what they label as draconian restrictions on freedom of speech and assembly. Yet, according to one senior diplomat here, the system still kind of works. The ruling party is scared of losing power and local government representatives hold regular council meetings wherein residents can air their grievances. Voices are heard, potholes are fixed. The Lion State's size once again makes this a workable option.

So while its true that, in many respects, Singapore is a unique case, this does not mean that its lessons are not transferrable. This is not news to some; China has long been watching its tiny neighbour grow from a poor nation to an immensely prosperous one, looking for hints on how to do the same. I would also wager to guess that a number of the Gulf Emirates have attempted to out-Singapore Singpore - they certainly share an obsession with heavily air-conditioned shopping malls and a need for economic diversification.

But just what kind of lessons are we talking about? To my eyes, one of the most striking things about Singapore is how multicultural it is - there are people living in Singapore from just about every country in the region. What's more, they appear to do so harmoniously. This is something supposedly modern European cities struggle to achieve. My most recent cabbie, of Indian descent, seemed to agree. Despite being a minority, he felt reasonably well represented. For instance, although the Chinese population dominates the government, there are a number of senior ministers with important portfolios who are Indian.

The noticeable exception is the substantial Malay minority who, despite being the indigenous population and still more populous than the Indians, are less well represented in government. They continue to face restrictions on practicing their culture are also economically disadvantaged (although policies are being developed to mitigate this).

But despite this imbalance, things in Singapore are a far cry from the race riots which apparently caused havoc in the slums of Singapore back in the 1960s. One possible explanation for this are the ubiquitous HDB flats, or subsidized housing projects nicknamed after the Housing and Development Board, which oversees them.

Some 85% of Singaporeans live in HDB flats (private property on the island is obscenely expensive). Although some HDBs can themselves still be quite costly, they offer what appears to be an intelligent solution to addressing the imbalance between the wealthy and the poor. For instance, although HDBs are subsidized, they do seem to be mere handouts. There are conditions attached, and there is the possibility for upward mobility if you work hard and achieve economic success. This creates positive incentives for HDB-dwellers, whereas most public housing projects tend to leave their residents to stagnate.

At least that's the theory. Whether this is true in practice, I have no idea. But the results would appear to speak for themselves. It's not for nothing that, as noted above, China has been closely watching the HDB system's progress over the years as it searches for ways to deal with the challenges caused by a huge increase in urban populations.

More importantly, my taxi driver thought the system works pretty well. That's good enough for me.


----------------------------
*I confess to have never heard of the Youth Olympics before; I felt slightly less stupid upon discovering that this is the very first time such an event has been held. Now ya know.

The WSJ has an interesting article on the golf course industry in China. I discovered this via a link in FT's Beyond Brics which asks:

"Golf in China - under par?"

Which in turn leads me to ask this question:

"Why does "under par" or "sub-par" mean something is less good or less-than-average when in golf it means the opposite? In a reference to an article about golf, no less"

I suspect that Twitter was invented to answer this very question.

- Shanghai Expo: Yawn.

- China's central bank continues to turn the screw, gently, by raising lending requirements

- Francisco Blanch of BoA/Merril Lynch presents his theory for why emerging markets have a greater capacity than the rich world to absorb higher oil prices.

- 'Switzerland Should be Dissolved as a State' - That would be none other than Col. Ghadhafi, bringing the AAA-rated Crazy to the table once again. There is some truly fantastic bullshit in here - too much to quote here - so I encourage you to check it out.

- Greece offers to repay loans with giant wooden horse. Suspicious.

- Hey look! Belgian politicians can agree about some things after all: cultural intolerance.

- What makes charities special?

If you answered in the affirmative, check out the Financial Times' brand spanking new emerging markets blog: Beyond Brics. There's some really good stuff on there already (including a conversation with an Estonian cabbie about the euro), so be sure to check it out.

- Buttonwood: The debate over financial reform in the US is taking place in an ideological fog: "Anyway, it wouild [sic] be nice if the tenor of the discussion dealt with [the] difficult issues. Instead, of course, the Democrats will accuse the Republicans of being in the banks' pockets and the Republicans will accuse the Democrats of being socialists." As opposed to the debate over health care, which was civilized.

- Hot money into China is being sterilized, but at the expense of the very imbalances that set the stage for the financial crisis.

- Can greater domestic consumption in China save the world? Nope.

- The backroom soap opera that is life among the German wikipedians (via The Browser)

- Do people work less in the US when the World Cup is going on?

This post was meant to have been written a couple of months ago, as a follow-up to this piece, but as I am easily distracted – especially by shiny objects – the draft was set aside and ultimately forgotten. Forgotten, that is, until the IMF went ahead and published their take on the matter. Since the IMF report is an Official Publication and contains things called “Granger causality tests,” and other such statistical chicanery, I will leverage from it quite heavily:

The issue at hand is the increase in capital flows from rich countries to “receiving” economies, and how that will affect the latter. Starting in 2003, but really expanding from 2007-present, the Liquidity-Time Explosion (that’s my term, not the IMF’s) resulted in large outflows of capital from the G4 (US, UK, then later Japan and the Euro-area). This was the result of interest rates in those economies hitting rock bottom, or close to it. Cheap money in the G4 (if one can get any) is logically channelled from the low-interest rate environment to economies that have higher rates of return.

The receiving economies are mainly emerging markets in Asia, emerging Europe, Latin America, the Middle East and Africa. To be clear, capital inflows can be a very good thing for these countries as it helps fund domestic investment and long-term growth. It especially makes sense for capital to be flowing to countries that have rosy growth prospects, which is the case for many emerging markets.

However, the IMF looks at the rapid rate of asset price growth in some emerging markets recently and asks the following, crucial question: “Are capital flows into receiving economies primarily driven by the countries’ strong economic fundamentals and, therefore, likely to remain stable over the medium to long term, or are they primarily driven by the abundant global liquidity?”

Looking at the data, the IMF concludes that, yes, global liquidity is playing a significant role. But the effect is not uniform: the type of exchange rate regime in the receiving economy plays an important role in determining how it is affected: “… the higher the flexibility of the exchange rate, the lower the spillover of global liquidity and the more the cushioning impact of domestic asset returns.”

So countries with fixed exchange rates should expect to have seen a significant impact on domestic asset valuations. And wouldn’t you know it! Just last week, fixed-exchange-rate China announced almost 12% growth in their economy last year and almost 12% growth in their housing market last month alone. That’s not to say that China doesn’t have huge growth potential, but you’ve really got to wonder.

So what are the implications of this Liquidity-Time Explosion, anyway? As the IMF paper explains, benefits aside, surges in capital flows can lead to large swings in the exchange rate (which can be de-stabilizing), or it can lead to a boom in domestic credit creation, possibly resulting in inflation, asset bubbles, and a general overheating of the economy.

Indeed, historically speaking, financial crises in emerging markets are usually preceded by a surge in capital inflows from abroad - often linked to factors identified in the previous paragraph. The recent work by Reinhart and Rogoff provided further evidence for that trend. The capital inflows are particularly de-stabilizing if they are short-term debt and denominated in a foreign currency.

Aware of all of this, the IMF paper explores the various policy options available for receiving countries, including an in-depth look at capital controls. Explore that if you wish. In macro-terms, I think it’s important to recognize that this situation exists and that it is a source of vulnerability. Remember that the capital is flowing out of the G4 due to low interest rates – if those rates go up, the capital inflows to emerging markets could slow down or even reverse. It is here that policy coordination in bodies like the G20 will prove to be crucial.

But even policy coordination cannot insure against the fact that Shit Happens – there are outlying events, black swans, fat tails of all kinds that can rapidly change the situation in any given economy. We have seen two examples of that recently with Iceland’s volcano and the tragic plane crash in Poland. This uncertainty about the future means that economies on the receiving end need to insulate themselves from potential shocks, while sending countries need to be aware of the knock-on effects of their policies. What seems clear, however, is that the status quo has potential for disaster.

Avinash Pursaud is clearly a bright and well-respected chap. His list of positions ranges from Chairman of this, Member of the Board of that, Co-chair of another thing to Emeritus professor of whathaveyou. All the more confusing, then, when he writes the following in a VoxEU article entitled "Why China's Exchange Rate is a Red Herring":

China held to the same exchange rate peg to the dollar for ten years up to 2005. Under a fixed exchange rate, a country only develops increasing trade surpluses as a result of improving price competitiveness. Of course, for your average American voter familiar with floating currencies, the whole idea of a fixed exchange rate smells of manipulation, but in fact it is easier to "manipulate" a floating exchange rate than a fixed one.

The US will deliberately pursue a policy of a loose monetary policy, partly in order for the dollar to weaken and US exports to grow at the expense of others. Many Europeans would like their central banks to follow a similar path.

This US policy was precisely the kind of beggar-thy-neighbour currency manipulation the IMF was set up to avoid. Instead the IMF is questioning whether a pegged exchange rate is manipulative. Welcome to doublespeak.

- Get yer T-shirts here: US health care reform is a BFD (explanation here)

- Nigerian President Goodluck Jonathan continues to clean house: following an earlier decision to replace the cabinet (entirely), Jonathan has now sacked the head of the national oil company. Despite the herculean efforts of the Economic and Financial Crimes Commission, Nigeria is almost a parody of corruption. It remains to be seen whether Jonathan's purges are a step in the right direction, or just more of the same. The BBC is skeptical.

- A brief history of Afghanistan & Waziristan and just what the hell the Taliban is fighting for (not much, it turns out). It has videos and photos and such.

- Average flag 1: weighted by colour (or: the Netherlands)

- Average flag 2: weighted by population

There's no question that "globalization" has been a defining feature of the political economic landscape for the last seven decades. It has led to phenomenal increases in living standards for a huge portion of the world's population. It has revolutionized the way the global community interacts. It has also resulted in a fierce backlash from those who feel threatened by the changes it has wrought, and by those who have been left behind.

But what is globalization, anyway? Economic globalization, in a classic definition, is described by Stanley Fischer as: "the ongoing process of greater interdependence among nations [and] is reflected in the increasing amount of cross-border trade in goods and services, the increasing volume of financial flows, and the increasing flows of labour." For the most part, this definition holds true. However, it's the "for the most part" bit that Paul Romer takes issue with in a recent NBER paper. I can't find an un-gated version, so I'll lay out the basic argument here.

Let's start with the fundamental assumption in economics that more world trade = good, due to comparative advantage. We then add another basic argument: that the life expectancy of the vast majority of mankind depends upon ideas: techniques, therapies, and treatments developed in the health sciences. Capiche?

Now consider this scenario: you have pill X and pillY. A rich-world worker can produce 10X and 10Y pills per hour, using the latest formulas; a worker in a poor country can only produce 3x pills or 5Y pills per hour, and uses and older, generic formula that is less effective. In a typical textbook trade model, the rich-world has a comparative advantage and should export their (more effective) pills to the poor world. However:

"Trade in pills is an obvious sign of inefficiency. The efficient form of trade would have the workers in the poor country making pills that use the same formulas as the workers in the rich country. If the rules in these two countries give workers in the poor country access to the formulas for the pills at no charge, we would have large gains from globalization and no conventional trade in goods or services.

Just to make sure that I am not cited by the thought police, this does not show that trade restrictions are good. Nor does it show that intellectual property rights are bad (or good). It does show that we need a richer vocabulary, one that can allow for the possibility that such ideas as the formula for a pharmaceutical can also flow across a border. If flows of conventional goods and services are the only things we see and describe, we will miss the deeper forces and sometimes get the sign wrong. More conventional trade can be a sign of something wrong: inefficiently low cross-border flows of ideas."

"Not Boring" could be how one describes politics in South America these days. Not content with President Cristina Fernandez de Kirchner's preferred candidate, the Argentine Senate rejected the nomination of Mercedes Marco del Pont to the head of the Central Bank.

You may recall that del Pont's precedessor was pushed aside last month after refusing to use the central bank's currency reserves to fund the government's plans. With approval ratings already down to about 20%, Cristina Fernandez' government is looking increasingly weak and unpopular.

If you're interested, The Economist has a useful backgrounder on Argentina under the Kirchners.

Dept. of Checks and Balances
After refusing to bow to the government's policy whims, the previous head of Argentina's central banker was dropped like a sack of rice. One is not suprised to learn that his replacement is decidedly more cooperative. There has been some debate recently as to whether inflation targeting should be the only goal of central banks (see here). With inflation running about about 32%/year, Argentina does not figure in this debate.

Sacrilege
Adair Turner, the head of Britain's Financial Services Agency (a position not known for siding with the pitchfork-waving anti-capitalist crowd) calls into question the prevailing dogma about the value of financial liberalization. Ditto over at the IMF blog, where the notion of capital controls is beginning to take hold as part of a 'reasonable' policy approach.

Mine is 1 louder
Last weekend, the Sunday Times published a letter from 20 economists supporting the British Conservatives' plan for fiscal, er, conservatism. This week, 60+ economists responded that the risks of cutting spending are far too high, and could tip the UK back into a recession. So the question is this: are we 1981 or 1997?

Communication Gap
Mobile/cell phone usage, worldwide. I'm guessing that using public transit in Puerto Rico is super-annoying for this reason alone.

- John Kay creates analogy between investors and tailgators; proceeds to beat metaphor to death.

- The New York Times to imitate the Financial Times' gated system; Felix Salmon analyzes

- Zimbabwe becomes more mobile, faces dollarization difficulties and even, um, deflation

- Why cable television is bundled. (But just because consumers prefer flat rates, it doesn't necessarily make them a good idea for most people - ditto with gym memberships).

- "If you find yourself in a suddenly resource-rich emerging market and you're interested in knowing whether revenues are being put to the proper uses, just go find the houses of the local government leaders."

- More evidence that Britain is drinking more, binging more, and being less social about it (as if we needed any)

The FT's profile this weekend of Jim O'Neill, the Goldman Sachs economist who coined the now ubiquitous acronym 'BRICS,' got me thinking about one of my main objectives for IPE Journal: a dedicated focus on the 'rise of the rest.' In looking back over the history of my posts, I realized that the financial crisis, perhaps inevitably, distracted me from this emphasis as my coverage became far more US-centric than I anticipated or desired. That is partly a reflection of the US' role in the crisis and the overwhelming media coverage of the US financial sector over the past year, partly my own engrained anglo-saxon bias in choice of literature and media outlets, and partly a recognition that the majority of our readers are in fact based in North America.

But the pace with which countries like China, Brazil and Indonesia have emerged from the Great Recession has crystalized the importance of the emerging economies to not just my own worldview, but I suspect those of our readers as well. So the following links represent a shift back to the emerging markets and issues that are likely to play a defining role in the years ahead. That is not to say my coverage of US banks or Gordon Brown will cease entirely, but expect a much smaller role for Lord Mandy in the months ahead. This is, after all, a blog on International Political Economy. But I do love Mandelson.

-Via Free Exchange, The Economist looks at a McKinsey study on deleveraging that partly demonstrates why the big emerging markets have emerged far quicker from the crisis than the major economies (Russia aside). If you follow the links to the actual article, I found it interesting that when viewed through the prism of crises, countries like the US and Spain currently look a lot like emerging markets have historically in the aftermath of such episodes.

-China finally takes its foot off the gas by raising reserve requirements on lenders and reimposing a sales tax on certain home sales, fearing that the economy is overheating (asset bubbles and inflation). Conventional wisdom six months ago held that China was likely to allow a gradual depreciation of the renminbi to export its way out of the economic slowdown. Six months later, is a gradual appreciation more likely in 2010?

-A constitutional crisis looms in Nigeria, threatening a recovery in oil output and social/political stability.

-Chile continues the resurgence of the right in the Americas. With Venezuela plunging quite literally into darkness and (hyper)inflation, the 'Bolivarian Revolution' that swept the region looks less-than-promising ten years on.

-Finally, and contrary to the first link, the future may be bright for the emerging economies, but are investors touched by a bit of irrational enthusiasm at the moment?

-A leadership challenge to Gordon Brown has once again thrown Labour into disarray, just as the party managed to reverse the Tory poll momentum. Who knew British politics could be so fun! (Update: he has survived, again...)

-The president of Iceland, a country on a fast-track to EU accession, has refused to sign off on legislation that would have repaid the UK and Netherlands some $5.5 bn lost in failed 'Icesave' accounts. He has instead decided to put the matter to a referendum. The move seriously jeopardizes Iceland's EU prospects and threatens to further isolate the tiny nation. The economy minister says the referendum decision has effectively put on hold both the country's IMF program and any decision to lift capital controls. Ouch.

-Argentina's president has fired the president of the central bank over his refusal to back a government plan to tap the country's $48 billion reserves to pay off $6.6 bn in debt this year. One problem: Martin Redrado says he won't go! He says the power to fire the central bank chief rests with Congress and he has no plans on going. Further, the man tapped by Fernandez de Kirchner to replace Redrado, former central bank president Mario Blejer, has declined the offer. Blejer resigned in 2002 due to government interference in the bank's independence. Argentina has finally been making progress in negotiations with defaulted creditors who refused the previous government's offer to renegotiate their portion of the $95 bn 2001 debt default, and was aiming to return to international markets this year for the first time in nearly a decade. The president's intervention does little to bolster the confidence Argentina has taken so long to recover.

In looking back at the past decade, most commentators have forfeited any meaningful narrative in favor of the proverbial 'better luck next time.' But if the following trends are taken in toto, the past decade in the markets looks downright revolutionary:

-The S&P500 fell 24%, its worst performance since the 1930s, FTSE down 7.3%, DJIA down 9.3%, Nikkei down a massive 44% over the past ten years. Contrast that with the major emerging markets: Russia's Micex index hit the moon with an astounding 802% rise, Brazil's Bovespa jumped 301%, India's Sensex rose 249% and the Shanghai Composite closed 140% higher.

-The benchmark Nymex crude oil contract ended the decade up 210%, but the story in between is among the most volatile in memory. Oil closed out 1999 at $25.60 a barrel, hit $147.27 in July 2008 and ended 2009 at $79.36.

-Spot gold closed the decade up 281%, while copper ended 290% higher.

-Two major stories in the currency markets: the dollar's long decline and the euro's rise to viability. The dollar ended the decade down 23.5% on a trade weighted basis, while the euro gained 43% on the dollar.

So what can we extrapolate from the data above? The 'rise of the rest' is the defining trend of the past decade; loose monetary policy contributed to a great capital flight from developed market equities; the dollar's long relative decline has eroded the US' influence internationally and will shape the coming decade as much as any other trend (politically, financially and economically); emerging market industrialization made commodities a really, really good bet; and precious metals retained their mystical aura in uncertain times.

-Should the IMF embrace Brazil's imposition of (selective) capital controls? These two think so. Also, FT Alphaville had a good analysis of the decision (I realize we are a bit late on this.)

-Nouriel Roubini takes aim at the 'mother of all carry-trades.'

-Is the democratization of FX trading a good thing? Or is it really just another hustle?

Last week, the Dow surpassed the 10,000 point mark. A meaningless number, but to many an important psychological marker of the recovery. The financial markets are back...or not?

The IMF meetings in Istanbul are something of a victory lap following what many consider a banner year for the Fund. Faced with questions of relevancy just two years ago, the Fund is now globally lauded for its role in fighting fires from Pakistan to Ukraine. While critical questions remain over funding and governance, the IMF looks certain to assume a central role in the post-crisis global financial regulatory regime.