An Irish joke runs that a tourist, lost in the countryside, asks a local the way to Dublin. The Irishman ponders the question carefully and looks at the puzzled foreigner, and after a good while responds, “It’s complicated, I wouldn’t start from here.” And so it is with most sovereign debt restructurings, but does it always have to be this way? Delay risks dire consequences; … [Read more...] about Debt and Money: Tales from Greece, Argentina and Puerto Rico and the Danger of Delay
Banks in Latin America and the Caribbean have been through a lot. At times they have been culprits and, through excessive risk-taking or fraud, provoked crises, while at other times they have been victims as fiscal profligacy and/or currency crises lead to financial disaster. In some cases, the interaction between macroeconomic policies and financial sector risks led to deep … [Read more...] about Boring Banks, Safe Economies?
Commodity prices are very persistent. During booms we seem to forget that they have always (yes, always) been followed by busts (see Figure 1). And during a slump we forget that a boom is surely going to come along— we just have to wait long enough. What determines such booms and busts? Was the last boom exceptional? Where are prices today relative to long-run trends? And the … [Read more...] about Commodity Prices: over 100 Years of Booms and Busts…
The fiscal outlook for Latin America and the Caribbean is reminiscent of the story of Joseph, arguably the first documented fiscal policy advisor in the history of civilization. Asked to interpret the famous Egyptian Pharaoh’s dream, in which seven ugly and gaunt cows devoured seven fine and fat cows, Joseph predicted seven years of abundance to be followed by seven years of … [Read more...] about Joseph and the Seven Cows: A Parable for Latin America and the Caribbean
Most countries in Latin America and the Caribbean are running significant structural fiscal deficits and debt levels are rising. At current rates of growth, the unpleasant arithmetic of debt sustainability indicates that unless something changes the continent will soon lose its much heralded “improved fundamentals” and may even risk becoming the “continent of crises” once … [Read more...] about Time to Adjust: But How, and When?