November 23rd, 2011
01:00 PM ET

Shenai: The infection of French markets

Editor's Note: Neil K. Shenai is doctoral candidate in International Political Economy at SAIS, writing his dissertation on the global financial crisis. Visit his blog here and follow him on Twitter

By Neil K. Shenai - Special to CNN

This is what contagion looks like: France’s ten-year interest rates have risen to 3.5%, while this month, the spread between French and German borrowing costs reached its highest level since 1990, indicating that Europe’s sovereign debt crisis – once mistakenly believed to be a problem unique to Greece – has now engulfed the entire European periphery and now threatens the financial stability of the largest economies in the world. Rising bond yields show that investors are betting that Standard & Poors and Moody’s rating agencies will strip France of its AAA rating – another blow to Europe’s fragile financial system.

How did we get here? After all, France has an ostensibly healthy economy – it boasts strict real estate lending standards, scores reasonably well on income inequality, has a relatively benign sovereign debt to GDP ratio at 85%, and avoided and even shunned the Anglo-American neoliberal “financialization” of the last thirty years. Surely this is just a matter of financial market speculators run amok, targeting the next innocent victim on their crusade to bankrupt Europe.

Unfortunately, it’s not that simple. FULL POST

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Topics: Economy • France
October 31st, 2011
02:44 PM ET

Why the G-20 matters

Editor’s Note: Neil K. Shenai is an Instructor of International Economics and Ph.D. Candidate at the Johns Hopkins School of Advanced International Studies (SAIS).

By Neil K. Shenai – Special to CNN

This week, leaders from the world’s top 19 economies plus the European Union meet in Cannes, France to discuss the future of the global economy. The sixth meeting of the G-20 since 2008 comes on the heels of Europe’s most recent summit to solve its sovereign debt crisis. The pressures of the world economy today underscore the need for a global cooperative policy-making body like the G-20.  Americans concerned about the health of the U.S. economy should watch this week’s G-20 summit with great interest.

Last week, my colleague and I wrote about the divide between countries that borrowed their way into this crisis, like Greece and the United States, and the countries that lent to them, like Germany and China. The policymaking divide that has emerged between these two blocs highlights the fact that the world’s level of economic integration has rapidly outpaced its level of political integration. FULL POST

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Topics: Economy • Global • Multilateral institutions
August 9th, 2011
07:00 AM ET

A grim economic reality

Editor’s Note: Neil K. Shenai is an Instructor of International Economics and Ph.D. Candidate at the Johns Hopkins School of Advanced International Studies (SAIS).

By Neil K. Shenai – Special to CNN

Since late 2008, when the Treasury and Federal Reserve bailed out the banks, AIG, Fannie Mae and Freddie Mac, commentators have been predicting a sovereign debt calamity for the United States.  These doomsayers argue that runaway deficits and stagnant economic growth, set against a backdrop of political deadlock and a Central Bank that seems content to print dollars and inflate every asset it can, will cause investors to shun U.S. treasuries, sending bond prices down, interest rates up and choking off America’s fragile recovery.

Fine research by economists Carmen Reinhart and Kenneth Rogoff shows that historically, financial crises are usually followed by sovereign debt crises, as states have to battle the twin menaces of falling tax revenues and greater fiscal outlays to counterbalance falling aggregate demand.  With this in mind, it is not surprising that countries like Portugal, Italy, Ireland Greece, and Spain are experiencing sovereign debt crises of their own.  FULL POST

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Topics: Economy • Global
China overtaking the U.S.? Not so fast
April 26th, 2011
02:00 PM ET

China overtaking the U.S.? Not so fast

Editor’s Note: Neil K. Shenai is an Instructor of International Economics and Ph.D. Candidate at the Johns Hopkins School of Advanced International Studies (SAIS).

by Neil Shenai – Special to CNN

The International Monetary Fund (IMF) just announced that China is on track to have a larger economy than the United States' by 2016.  There are a few reasons why we should take the IMF report with a grain of salt.

First, when measuring the wealth of an economy, total GDP is not as useful a metric as GDP per capita.  Even if the United States and China were to have the same real GDPs by 2016, the United States would be roughly four times as wealthy when measured in per-capita terms based on IMF projections.  Even if the Chinese economy were to be double the size of the United States', the United States would still be two times wealthier than China.  From the standpoint of welfare, it is far better to be an American than a Chinese person, regardless of the country’s total economic size.

FULL POST

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Topics: China • Economy • United States
3 fault lines running through China's economy
April 21st, 2011
02:35 PM ET

3 fault lines running through China's economy

Editor’s Note: Neil K. Shenai is an Instructor of International Economics and Ph.D. Candidate at the Johns Hopkins School of Advanced International Studies (SAIS).

By Neil K. Shenai, Special to CNN

The notion of “American decline” is once again en vogue. Emerging powers such as Brazil, India, and China pose a threat to U.S. dominance, the argument goes. They undermine U.S. interests while the U.S. battles economic stagnation.

This seems corroborated by the facts: U.S. share of global GDP is down to approximately 19%, from 25% in 2000. China recently replaced Japan as the world’s second-largest economy with current estimates projecting that China’s economy will overtake America’s by 2020.

But Americans should not let paranoia cloud a reasoned appraisal of China’s strengths and weaknesses. China’s economy contains three potential fault lines that threaten its long-term economic stability. Consider the following questions:

1) Can China handle its infrastructure bubble?
2) Can China become an innovation economy?
3) Can China manage its long-term demographic and political challenges?

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Topics: China • Economy