Winds of change

The Guardian has an article today on a topic which we will be hearing a lot more about in the months to come, the ways in which many corporations exploit the possibilities afforded them by globalization to minimise their tax burden. It followed a short piece in yesterday’s Tribune on reports that Ireland is on a list of tax havens currently doing the rounds in Washington. According to the paper,

The Department of Finance told the Sunday Tribune the list had been rejected by the previous Bush administration, which said it oversimplified the issue. It said that it shared the Bush administration’s assessment of the list.

So that’s alright then.

One to watch

This is very worrying.

Trade collapses

Jim O’Leary had a piece yesterday in the Irish Times which was worth reading for a couple of reasons. First, he has a nice account of the incentives facing economic forecasters. Second, he draws attention to a truly astonishing forecast, or assumption, in the Central Bank’s recent Quarterly Bulletin: that, while domestic demand will collapse in 2009 (which makes sense: the Central Bank assumes that gross domestic expenditure will fall by 7.6%), our exports will only decline in volume by 0.7%. If true, this would obviously mute the overall fall in Irish GDP, and the Central Bank is forecasting a decline of just 4%.

Jim convincingly shows why the assumption regarding exports is implausible. Here are a few more facts. According to the CPB Netherlands Bureau for Economic Policy Analysis, the volume of world trade fell by 6% last November. That’s right: by 6%, in one month. US imports fell by 7.8%; Japanese exports fell by 10.8%.

The CPB cautions that monthly world trade figures are volatile, and that one should focus on moving averages. Of course, that becomes a less useful strategy when one has just passed the peak! More evidence of the extraordinarily rapid collapse in world trade comes from IATA, which reports that the volume of international cargo shipped by air was 22.6% lower in December 2008 than in December 2007 (HT Calculated Risk).

By way of comparison, the volume of world trade fell by a little more than a quarter over the 3 years 1929-1932.

As Jim says, it seems safe to assume that exports will contract by a lot more than the Central Bank is currently forecasting, and that the same will therefore be true of GDP and employment as well.

The Global Crisis

VOX has launched a new initiative that is intended to act as a central forum for an open-format discussion of the global crisis.  This promises to be quite interesting  (I am acting as moderator for the macroeconomics theme; Luigi Zingales on regulation;  Francesco Giavazzi on institutional reform; Dani Rodrik on development; and Richard Baldwin on open markets).  You can read more about it here.

Simon Johnson doesn’t like the three letter word

It is just as well that Simon Johnson didn’t read this Sunday’s Irish newspapers, since they would have spoiled his weekend.

He also calls for more coordination within the Eurozone. After what happened in September so should we all.