Monday , January 22 2018
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Venezuela’s Ill-Advised “Cryptocurrency” Scheme: An Update

Beset by political and economic crises, the Venezuelan government provided more details in early January about its plan to issue a new so-called cryptocurrency called the “petro,” which it hopes to use to avoid a financial meltdown. Venezuela’s plan is to raise up to $6 billion by issuing 100 million petros, which will supposedly be backed by the equivalent number of barrels of oil. It hopes to attract investors who have made a fortune in bitcoins by offering them a way to “diversify part of...

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Initial Coin Offerings Require New Regulations

The term “initial coin offering” (ICO) has entered the lexicon to describe the method used by thousands of individuals and businesses to raise more than $3 billion in bitcoin and other digital currencies to fund new enterprises and products. Regulators across the globe are struggling to assess the risks and potential for fraud posed by this promising phenomenon. Their challenge is to balance the benefits of new classes of investors who are funding innovative ideas and turning them into...

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Mixed Reviews for the Single Resolution Board

The establishment in 2015 of the Single Resolution Board (SRB), a new agency of the European Union, is one of the most significant European banking reforms of recent years. The SRB was set up to quickly resolve banks that are failing or likely to fail, as part of a wider effort to break the vicious cycle between banks and sovereigns that nearly destroyed the euro area in 2011–12. A first assessment of this reform came up just before Christmas, when the European Court of Auditors (ECA)...

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A Look under the Hood of the Precoalition Deal in Germany

Three and a half months after German voters dealt a setback to Chancellor Angela Merkel’s Christian Democrats (CDU), its Bavarian sister party, the Christian Social Union (CSU), and their coalition partners, the Social Democrats (SPD), the three parties have concluded a preliminary deal that could lead to a formal coalition agreement. The result, a 27-page statement of policy objectives, is fundamentally an exercise in continuity. What else can you expect from parties that have collaborated...

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Corporate Tax Reform Favors Domestic Production, Not US Multinationals

The Tax Cuts and Jobs Act of 2017 (TCJA) signed into law by President Donald Trump in December slashed the US corporate tax rate from 35 to 21 percent, starting January 1, 2018. The new law makes the United States a more attractive place for both US and foreign firms to do business. But for US multinational corporations (MNCs), the law is not exactly a New Year’s gift for their operations abroad. To pay for the massive corporate tax cut, estimated to cost $1,349 billion over a decade, the...

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Ryan Avent’s “The Wealth of Humans” and the Future of Work

Despite low unemployment rates in the United States, more Americans than ever are either not working or not even looking for work. Because of these trends, and also because of wage stagnation for the working class, American income inequality continues to widen. Yet single American parents can purchase an iPhone, with parts made in China, allowing them to Facetime with their children while rushing between part-time jobs. Americans without economic opportunity, especially in rural parts of the...

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An Unusually Balanced US Recovery

Economic expansions come to an end in many ways. Usually they succumb to an unanticipated, adverse shock. Sometimes however, they die from their own dynamics, from imbalances that sustain the expansion but that cannot go on forever: An increasing current account deficit leads to worries about external debt and triggers a sudden stop; a consumption boom naturally comes to an end when consumers have adjusted to their new level of spending; a housing boom turns out to have been excessive,...

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A New Roadmap for EU Reform in 2018

Despite the political stalemate in Germany, the recent publication of the European Commission's new roadmap for completing the Economic and Monetary Union (EMU) signals that progress toward economic reform in Europe is on track for 2018. The Commission's new proposals follow the 2015 Five Presidents' Report with short-term steps in the next 18 months and medium-term steps for 2019–25. Ultimately, the political power to reform European institutions lies with member states, but the Commission...

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Is the Prospect of a Trade Deficit Reduction an Accounting Illusion?

Will the new US tax overhaul passed by Congress reverse a longstanding incentive that causes multinational corporations to shift profits away from their US operations into affiliates in low-tax jurisdictions? A story in the Wall Street Journal by Greg Ip raises the possibility that such a shift might shrink the trade deficit by more than $250 billion and boost US GDP by more than 1 percent. But it is not clear whether the new legislation will change profit shifting so dramatically. Even if it...

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Brexit Readiness Update: The Players Improved Their Score

In the past three months the possibility for an orderly Brexit has increased markedly. In particular, the European Union and United Kingdom have negotiated a transition period lasting two years. And several thorny issues around the treatment of EU citizens in the United Kingdom have been clarified. The inaugural Brexit Readiness Score gave low grades on the preparedness of the UK government in nearly all areas, cumulating to an aggregate score of 9 out of 100 points. After progress in several...

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