Back in Business

Again, my apologies for the lack of posts recently. It certainly has not been due to the lack of newsworthy events. Indeed, here's some important stuff that I have missed:

1) Latvia had a failed debt auction. This is not the first failed auction in Europe - I already wrote about Germany and UK debt auctions here. But the size of this failure and it coming even as the economy improves suggests selling government debt is going to be somewhat difficult in coming months. Indeed, the Financial Times reports the calendar for selling debt is becoming so crowded, traders are going to have to cancel their summer vacations.

2) There has been a rowdy and fun debate between economists Paul Krugman and Niall Ferguson about the implications of the rising Federal bond yields and the growing spread between short term and long term yields. (See here and here for the original two articles that sparked the debate.) I highly recommend reading both articles and making your own conclusions. For me, Krugman's article reinforces what I have been writing for the past four months, namely Bernanke's quantitative easing is working but only at the cost of long-term inflation. The best recent analysis I have seen on this situation comes from Martin Wolf here.

3) There have been a number of very interesting elections lately. First, the European Parliament elections showed that Europeans are not simply a stereotypical bunch of socialists who are prone to communism at every economic downturn. Instead, they are regular citizens who vote based on the performance of their elected representatives. A hearty congratulations to the Green party who were most successful in increasing their clout in the Parliament. (Disclaimer: I interned with the Greens in the EP in 2007.) And we'll have to wait and see what the rise in extremist parties in the Parliament mean.

Second, the Lebanese elections are an early hopeful sign of a stronger American position in the Middle East. The American-backed coalition won strongly against Iranian-backed Hezbollah. A stable, western-looking Lebanon is a crucial precondition for peace in the Middle East. Combine that with a peaceful Syria willing to reconcile with the West, and one can feel downright positive about the Middle East.

Third, the Iranian election is coming up shortly and there are increasing signs that the reformers are making dramatic gains there. Ahmadinejad is increasingly desperate in his attacks and the youth appear dissatisfied with the lack of economic progress and the regression in women's rights. This is the one election that really, really matters this summer. If Ahmadinejad is out, we could see real progress on world peace.

4) Almost as if all this good news had created a dearth of really bad guys, North Korea has taken upon itself to be the world's big villain. Launching missiles, detonating a second nuclear bomb, condemning foreign journalists to decades of hard labor and threatening, well, everyone is North Korea's new national sport. Hopefully, the world will be able to work together to compel North Korea to accept reality, namely that it is a pathetically small country with a woefully underdeveloped population and a madman for a leader. China is the key on this issue.

Alas, there are more issues but I am out of time. I will just have to start from where we are now. My blogging will be somewhat different this summer though, as I am interning with the State Department. As a consequence, I cannot blog about the issues I am working with in State so I will be focusing more on economic news in the upcoming weeks. This summer will be an important phase of our economic recovery, and the next few months should be exciting!