Oil and the Tenuous Global Balance C.P. Chandrasekhar and Jayati Ghosh

High and rising levels of the prices of oil have stoked dormant fears of a global economic shock comparable to those experienced in the 1970s. However, early evidence points to a strengthening of growth in the US, despite the current tenuous equilibrium in which global surpluses finance an ever widening US current account deficit.  The authors discuss the possible reasons for this tendency. Oil_Tenuous_Global _Balance (Download the full text in PDF format)

Argentina Unveils Sweeping New Economic Plan Thomas Catán

The government of Argentina on Sunday set out a sweeping new plan to deal with the country's economic, social and constitutional crises. At the heart of the new plan is an effort to end Argentines' long love-affair with US dollar, which for 10 years has been used interchangeably with the peso. The government, which jettisoned the dollar peg last month, plans to float the currency entirely as early as this week, albeit with heavy state regulation to stop it from plunging. "We are going to 'pesify' the entire Argentine economy," said Jorge Remes Lenicov, economy minister. "We want our own…

What happened to Argentina? Mark Weisbrot and Dean Baker

Policy failures played a role in Argentina’s economic collapse. The most important mistake was the fixed exchange rate. But the immediate cause of Argentina’s crisis was a series of external shocks that were beyond its control, beginning with the US Federal Reserve Board’s decision to raise interest rate in February of 1984. The effect of these shocks was much worse than it otherwise would have been because of the fixed exchange rate. But the commonly believed story that the government could not accept a sufficient dose of the painful medicine of austerity, or spent its way into a hole, is…