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Barry Eichengreen

Barry Eichengreen

Barry Eichengreen is Professor of Economics at the University of California, Berkeley; Pitt Professor of American History and Institutions at the University of Cambridge; and a former senior policy adviser at the International Monetary Fund.

Articles by Barry Eichengreen

Managing the Coming Global Debt Crisis

25 days ago

The economic crisis that has befallen emerging and developing economies is being treated as temporary, with a moratorium on interest payments and a promise of commercial credits remaining valid only through the end of the year. In other words, the policy response is woefully inadequate to these countries’ situation.

BERKELEY – The developing world is on the cusp of its worst debt crisis since 1982. Back then, three years had to pass before creditors mounted the concerted response known as the Baker Plan, named after then-US Treasury Secretary James Baker. This time, fortunately, G20 governments have responded more quickly, calling for a moratorium on payments by low-income countries.

The

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Alice in Libraland

April 22, 2020

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The Human-Capital Costs of the Crisis

April 10, 2020

Unlike a hurricane or earthquake, the coronavirus pandemic has caused no damage to physical capital stock. But firm-specific skills have no value when the firm that uses them goes out of business, which is one reason why US productivity, wages, and economic growth are likely to be affected for years to come.

BERKELEY – US President Donald Trump tells us that once COVID-19 is contained and it is safe to go back to work, the economy will be “great again.” Is he right?

Witnessing Wuhan

PS OnPoint

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The Trump

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Coronanomics 101

March 10, 2020

In the fight against the COVID-19 pandemic, economists, economic policymakers, and bodies like the G7 should humbly acknowledge that “all appropriate tools” imply, above all, those wielded by medical practitioners and epidemiologists. Coordination, autonomy, and transparency must be the watchwords.

BERKELEY – Last week, G7 finance ministers and central bank governors vowed to use “all appropriate policy tools” to contain the economic threat posed by the COVID-19 coronavirus. The question left unanswered is what is appropriate, and what will work.
Plagued by Trumpism

Sean Gallup/Getty Images

COVID-19 Trumps Nationalism

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America’s Isolationist Default

February 11, 2020

There is much truth to the view that President Donald Trump’s "America First" policies are an abdication of global leadership, sounding the death knell of the post-World War II multilateral order that the United States shaped and sustained. At the same time, this troubling turn represents a reversion to long-standing US values.

BERKELEY – Donald Trump’s “America First” policies are widely regarded as an abdication of global leadership, sounding the death knell of the post-World War II multilateral order that the United States shaped and sustained. There is much truth to this view. At the same time, this troubling turn represents a reversion to long-standing US values. Acknowledging that the second half of the twentieth century

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Democratizing the ECB

January 14, 2020

Recent tensions within the European Central Bank’s Governing Council have underscored the need to manage disagreement better. The status quo, whereby the president presents a policy decision as a consensus, after which one or more Governing Council members may issue a dissenting statement, makes everyone look silly.

AMSTERDAM – The European Central Bank is undergoing a changing of the guard: a new president, a new chief economist, and two new Executive Board members. And the ECB’s new leadership is facing a contentious year in 2020.
Financial Markets’ Iran Delusion

Wang Ying/Xinhua via Getty Images

Trump’s Near Miss with

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The Policy Debate Europe Needs

December 9, 2019

How can the eurozone get the fiscal stimulus it needs, and which European Central Bank President Christine Lagarde is urging, in the face of the refusal by some countries, starting with Germany, to run budget deficits? There is a good answer, but it doesn’t involve attempting to cicumvent the intent of the ECB’s statute.

SASKATOON – The eurozone is in a bind. Despite successive doses of monetary stimulus by the European Central Bank, inflation remains stubbornly below target. Conventional monetary policy and even quantitative easing evidently have limited potency when interest rates are at or near zero.
Is Growth Passé?

Kanok Sulaiman/Getty Images

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Will China Confront a Revolution of Rising Expectations?

November 11, 2019

Amid much discussion of the challenges facing the Chinese economy, the line-up of usual suspects typically excludes the most worrying scenario of all: popular unrest. While skeptics would contend that widespread protest against the regime and its policies is unlikely, events elsewhere suggest that China is not immune.

ZURICH – For over a decade, China has accounted for a quarter or more of global economic growth. With its economy currently navigating a rough patch, the question is whether this impressive performance will persist.
The Rise of Nationalism After the Fall of the Berlin Wall

Patrick PIEL/Gamma-Rapho via Getty Images

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Tales of the Economy

November 1, 2019

While economic textbooks have long relied on a utility-maximization model of economic decision-making, Robert J. Shiller and other behavioral economists continue to demonstrate that human behavior is not so simple. The stories we use to frame our thinking and guide our actions might not always make sense, but they play a crucial role nonetheless.

LONDON – Robert J. Shiller needs no introduction. Having made fundamental contributions to finance theory and behavioral economics, he was awarded the Nobel Memorial Prize in Economic Sciences in 2013. In his new book, he pushes his interest in behavioral economics in new directions, highlighting the role of economic narratives in individual decision-making, macroeconomic

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Will Libra Be Stillborn?

October 14, 2019

Where the problem for economies and financial services is lack of competition, residents of developing countries need to look to their own regulators and politicians. The remedy for their woes is not going to come from Mark Zuckerberg.

CHICAGO – Plans for Facebook’s proposed “stablecoin,” Libra, appear to be unraveling with the withdrawal of PayPal, Visa, Mastercard, Stripe, eBay, and Mercado Pago as potential sponsors. This is hardly surprising, given growing awareness of Libra’s potential adverse consequences. If it offers anonymity to its users, Libra will become a platform for tax evasion, money laundering, and terrorist finance. If, on the other hand, its privacy protections are lax, Libra will give Facebook

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Did Dudley Do Right?

September 10, 2019

The New York Federal Reserve’s immediate past president recently caused controversy by calling on the Fed to make it “abundantly clear" that President Donald Trump will bear "the consequences" of his fiscal and trade policies. But what does "abundantly clear" entail?

HANALEI, HAWAII – William Dudley, the immediate past president of the Federal Reserve Bank of New York, recently stirred up a hornet’s nest when he called for the Fed to consider the impact of its policies on the 2020 presidential election. In fact, Dudley performed a valuable public service by observing that Fed policy can influence politics, sometimes with profound implications for the course of the United States. But that doesn’t mean his

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The Central Banker Europe Needs

July 9, 2019

While having a president with specialized training as a monetary economist would benefit the European Central Bank, such training is not essential. If Christine Lagarde is confirmed for the position, Europe will learn that other attributes matter much more.

CAMBRIDGE – The selection of the International Monetary Fund’s managing director, Christine Lagarde, to succeed Mario Draghi as the next president of the European Central Bank caught most observers by surprise. Now the critics are making up for lost time. Some commentators object that Lagarde lacks experience as a central banker. Others complain that she lacks an advanced degree in economics.
What’s Driving Populism?

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Unconventional Thinking about Unconventional Monetary Policies

June 10, 2019

Defenders of central-bank independence argue that quantitative easing should have been avoided last time and is best avoided in the future, because it opens the door to political interference with the conduct of monetary policy. But political interference is even likelier if central banks shun QE in the next recession.

KONSTANZ – The policy interest rates of advanced-country central banks are stuck at uncomfortably low levels. And not just for the moment: a growing body of evidence suggests that this awkward condition is likely to persist. Inflation in the United States, Europe, and Japan continues to undershoot official targets. Measures of the “natural” rate of interest consistent with

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The Return of Fiscal Policy

May 13, 2019

Public debt is not a free lunch in an economy close to full employment. But when investment demand tends to fall short of saving, as it does when monetary policymakers are unable to push inflation higher to reduce real interest rates, there is a risk of chronic underemployment – and a stronger argument for deficit spending.

FRANKFURT – Five years ago, the French economist Thomas Piketty made a splash with his book Capital in the Twenty-First Century, in which he argued that there is an innate tendency toward wealth concentration in market economies. The mechanism to which Piketty pointed was that the rate of interest, r, is higher than the rate of economic growth, g. With r>g, owners of the

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Emerging Risks for Emerging Economies

April 10, 2019

The US Federal Reserve’s pause on further monetary-policy tightening has fueled a revival of capital inflows. But, given the uncertainties about US policy and Chinese growth prospects, it is too early to conclude that emerging economies are out of the woods.

EDINBURGH – Suddenly it seems that emerging-market economies have gained a respite. Capital flows to these economies dried up in the second half of last year as the US Federal Reserve raised its policy rate for five consecutive quarters and shrank its balance sheet. But in January, the Fed announced a pause, which now looks to be extended: the dot plots of Federal Open Market Committee members currently indicate no rate rises for the remainder of the year.

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How Europe Can Trade with Iran and Avoid US Sanctions

March 12, 2019

Since President Donald Trump withdrew the United States from the 2015 Iran nuclear deal, European firms and banks have risked incurring US sanctions if they do business with the Islamic Republic. Fortunately for European leaders, who are eager to engage with Iran to keep the deal alive, a solution can be found in Europe’s recent past.

BERKELEY – US President Donald Trump’s unilateral withdrawal from the 2015 Iran nuclear deal – formally known as the Joint Comprehensive Plan of Action – has put Europe in a bind. Its governments remain committed to economic engagement with Iran as a way to encourage compliance with the JCPOA, which means providing not just humanitarian assistance, but also other goods. Firms supplying these

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A Survival Kit for the City of London

February 13, 2019

Edouard-François de Lencquesaing, the president of the European Institute of Financial Regulation, recently dismissed London’s post-Brexit prospects as a global financial center, calling the City’s rise “a mere accident of history.” But some accidents have enduring consequences, and the consequences of this one are not going away.

BERKELEY – Only now, as we approach the third anniversary of the United Kingdom’s referendum on membership in the European Union, are the implications of leaving the bloc finally sinking in. One indication, amusing to those with a taste for black humor, is the marketing success of Brexit survival kits containing a water filter, fire-starting equipment, and enough freeze-dried food for 30 days.

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Shelter from the Storm in 2019

January 10, 2019

In the coming year, global economic, financial, and political stability will depend on outcomes in four areas. And what happens on one front is likely to affect the prospects for positive outcomes on all the others.

BRUSSELS – What would have to happen for this to be a tranquil year economically, financially, and politically? Answer: a short list of threats to stability would have to be averted.

JIM WATSON/AFP/Getty Images

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First, the trade war between the United States and China would have to be placed on hold. In November and December, financial markets reacted positively to each hint of a negotiated settlement and negatively to each mention of

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The Phony US-China Truce

December 8, 2018

There is no shortage of precedents for the approach to the escalating trade dispute taken by Donald Trump and Xi Jinping. But if the US economy shows signs of falling into recession, Trump will need to blame someone – and in this case, we can be relatively certain about who that will be.

BEIJING – On December 1 in Buenos Aires, US President Donald Trump and his Chinese counterpart, Xi Jinping, agreed on a 90-day moratorium on increases in import tariffs to provide a window for negotiations. Unfortunately, this approach to mediation does not always succeed, and investors were not impressed – as was evident in the 800-point fall in the Dow Jones Industrial Average on December 4. And if markets were skeptical then, they will be

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Populism’s Common Denominator

November 9, 2018

What unites supporters of authoritarian, upstart politicians like US President Donald Trump and Brazilian President-elect Jair Bolsonaro is revulsion against the corruption of the political process. But voters will learn the hard way that strongman rule exacerbates rather than mitigates corruption.

BRUSSELS – Following Emmanuel Macron’s election as president of France in May 2017, global elites breathed a sigh of relief. The populist wave, they reassured themselves, had crested. Voters had regained their sanity. Helped along by an electoral system in which the two leading candidates faced off in a second round, the “silent majority” had united behind the centrist candidate in the runoff.

Brendan Smialowski/AFP/Getty Images

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The Dollar and its Discontents

October 10, 2018

Having unilaterally reimposed sanctions on Iran, US President Donald Trump’s administration is threatening to penalize companies doing business with the Islamic Republic by denying them access to US banks. But that could hasten the dollar’s demise as the main global currency.

BRUSSELS – US President Donald Trump’s unilateralism is reshaping the world in profound and irreversible ways. He is undermining the working of multilateral institutions. Other countries, for their part, no longer regard the United States as a reliable alliance partner and feel impelled to develop their own geopolitical capabilities.

NAZEER AL-KHATIB/AFP/Getty Images

ADRIAN DENNIS/AFP/Getty Images

Previous

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The Stable-Coin Myth

September 11, 2018

The problems with the latest wave of cryptocurrencies will be familiar to anyone who has encountered even a single study of speculative attacks on pegged exchange rates, or to anyone who has had a coffee with an emerging-market central banker. But this doesn’t mean that the flaws in these schemes will be familiar to investors.

BERKELEY – While the mania for cryptocurrencies may have peaked, new units continue to be announced, seemingly by the day. Prominent among the new arrivals are so-called “stable coins.” Bearing names like Tether, Basis, and Sagacoin, their value is rigidly tied to the dollar, the euro, or a basket of national currencies.

Carl Court/Getty Images

Melanie Stetson Freeman/The Christian Science

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Globalization with Chinese Characteristics

August 10, 2018

The Trump administration’s “America First” policies have done more than disqualify the United States from global leadership. They have also created space for other countries to re-shape the international system to their liking.

BERKELEY – US President Donald Trump’s erratic unilateralism represents nothing less than abdication of global economic and political leadership. Trump’s withdrawal from the Paris climate agreement, his rejection of the Iran nuclear deal, his tariff war, and his frequent attacks on allies and embrace of adversaries have rapidly turned the United States into an unreliable partner in upholding the international order.

FRED DUFOUR/AFP/Getty Images

AFP/Getty Images

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The Economic Consequences of Trump’s Trade War

July 12, 2018

For those who observe that the economic and financial fallout from US President Donald Trump’s trade war has been surprisingly small, the best response is that a lagged effect is exactly what we should expect. Just wait.

BERKELEY – US President Donald Trump’s phony, blowhard’s trade war just got real.

Spencer Platt/Getty Images

Justin Sullivan/Getty Images

Drew Angerer/Getty Images

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The steel and aluminum tariffs that the Trump administration imposed at the beginning of June were important mainly for their symbolic value, not for their real economic impact. While the tariffs signified that the United States was no

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The Populists’ Euro

June 12, 2018

It is not hard to imagine that if Italy’s new government proceeds with its ambitious fiscal plans, instituting both a flat tax and a universal basic income, it could blow up the budget deficit. In that case, Italy could quickly find itself out of the eurozone and ring-fenced by capital controls, whether the government intended this or not.

BERKELEY – The majority of Italians want two things: new political leadership and the euro. The question is whether they can have both.

 South Korean Presidential Blue House via Getty Images

GraphicaArtis/Getty Images

Twiter

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The point about new leadership is uncontroversial.

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China and the Future of Democracy

May 10, 2018

China’s growing geostrategic influence, rising soft power, and, above all, continued economic success suggest that other countries will see it as a model to emulate. But will China’s power and prosperity really boost the global appeal of its authoritarian model?
LONDON – Will China soon be the world’s leading economic and geopolitical power? Has it achieved this status already, as some suppose? And if the answer to either question is yes, what are the global implications for the future of democracy?

EZEQUIEL BECERRA/AFP/Getty Images

Alexander Koerner/Getty Images

Win McNamee/Getty Images

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The indicators of China’s rise are clear. China is poised to overtake the

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Can a Trade War be Averted?

April 10, 2018

Because China has a higher export-to-GDP ratio than the US, its leaders are more concerned with defending the global trading system than with preserving any particular bilateral balance. By eschewing escalation in response to the Trump administration’s widening tariffs on its exports, China avoids jeopardizing the system.
BERKELEY – Probably the question most frequently asked of international economists these days is: “Are we seeing the start of a trade war?” This is not a question that admits of a simple yes-or-no answer. In contrast to a shooting war, there’s no government declaration to mark the official outbreak of hostilities. Tariffs have been raised and lowered throughout history, for reasons both good and bad.

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The Dollar’s Doldrums

March 14, 2018

Economic commentators are better at rationalizing past exchange-rate movements than at forecasting future trends. So, when it comes to explanations for the dollar’s decline over the past year, we are confronted by an embarrassment of riches.
BERKELEY – Donald Trump’s first year as US president has been, if nothing else, a bounteous source of surprises.

The Year Ahead 2018

The world’s leading thinkers and policymakers examine what’s come apart in the past year, and anticipate what will define the year ahead.

Order now

One of the big ones in the circles I frequent is dollar weakness. Between January 2017 and January 2018, the broad effective

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The Lessons of Black Monday

February 12, 2018

When interpreting sharp drops in stock prices and their impact, many will think back to 2008 and the market turbulence surrounding Lehman Brothers’ bankruptcy filing. But a better historical precedent for current conditions is the huge one-day drop on October 19, 1987.
BERKELEY – US President Donald Trump has regularly pointed to the stock market as a source of validation of his administration’s economic program. But, while the Dow Jones Industrial Average (DJIA) has risen by roughly 30% since Trump’s inauguration, the extent to which the market’s rise was due to the president’s policies is uncertain. What is certain, as we have recently been reminded, is that what goes up can come down.

The Year Ahead 2018

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Ready or Not for the Next Recession?

January 10, 2018

COPENHAGEN – A sunny day is the best time to check whether the roof is watertight. For economic policymakers, the proverbial sunny day has arrived: with experts forecasting strong growth, now is the best time to check whether we are prepared for the next recession.

The Year Ahead 2018

The world’s leading thinkers and policymakers examine what’s come apart in the past year, and anticipate what will define the year ahead.

Order now

The answer, for the United States in particular, is a resounding no. Policymakers normally respond to recessions by cutting interest rates, reducing taxes, and boosting transfers to the unemployed and other casualties of the downturn.

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