Monday, Jan. 13, 2014
The World's Most Powerful Person: Janet Yellen
The Bank Stops Here.
By Rana Foroohar
When the right person is holding the right job at the right moment, that person's influence is greatly expanded. That is the position in which Janet Yellen, who is expected to be confirmed as the next chair of the Federal Reserve bank in January, now finds herself. If you believe, as many do, that unemployment is the major economic and social concern of our day, then it is no stretch to think Yellen is the most powerful person in the world right now.

Throughout the 2008 financial crisis and the recession and recovery that followed--a period made more painful by Washington gridlock--central banks have taken on the role of stimulators of last resort, propping up markets and the global economy with vast amounts of money in the form of asset buying. Yellen, previously a Fed vice chair, was one of the principal architects of the Fed's $3.8 trillion money dump. A star economist known for her groundbreaking work on labor markets--including the contrarian idea that low wages can actually increase unemployment--Yellen was a kind of prophetess early on in the crisis for her warnings about the subprime meltdown and devotion to fortifying the financial system. Now it will be her job to get the Fed and the markets out of the biggest and most unconventional monetary program in history without derailing the fragile recovery. In her November Senate confirmation hearing, Yellen spoke compassionately (and unusually for a Fed official) about the huge strain the past five years have placed not only on income in America but also on families and marriages, especially among the long-term unemployed. "We know that these long spells of unemployment have been particularly painful for such households," she said.

The good news is that Yellen, 67, is particularly well suited to meet these challenges. Nobel laureate and Columbia economics professor Joseph Stiglitz remembers Yellen, whom he taught at Yale in the late 1960s, as one of his brightest students, someone with a keen understanding of financial markets, an appreciation for their imperfections and a strong belief "that human suffering was more related to unemployment than anything else."

That gives a key insight into a woman who will have to balance the Fed's dual mandate of keeping both unemployment and inflation down over the next four years. Some experts, like the pre-eminent Fed historian Allan Meltzer, worry that Yellen will be inclined to "chase unemployment to the detriment of inflation." But with wages still relatively flat and the economy increasingly divided between the well-off and the long-term unemployed, more people worry about the opposite, deflation that would aggravate the economy's woes.

Either way, the incoming Fed chief will have to walk a fine line on timing the taper--the plan to slowly wean markets off the stimulus Yellen helped design. It must be steady enough to deflate bubbles and bring markets back down to earth but not so quick that it creates another credit crunch. Yellen's communication skills will likely help. History shows that exiting from periods of asset buying need not be painful, as long as central bankers effectively and clearly communicate their goals--something Yellen has thus far achieved.

While much of Yellen's tenure is likely to be dominated by managing tapering, she'll also have a unique opportunity to shape postcrisis efforts to regulate the financial-services industry and "rebalance the relationship between finance and society," says Rob Johnson, a financial-reform expert and head of the Institute for New Economic Thinking. While her priority will be making sure that the existing Dodd-Frank banking reforms are properly implemented, she's already indicated her support for new ideas like cutting the interest rates that banks are paid to park spare cash with the Fed, boosting margin requirements on riskier derivatives trades and requiring big banks to hold more capital. Addressing the too-big-to-fail issue "has to be among the most important goals of the postcrisis period," Yellen said during her November hearings.

And unlike many past Fed leaders, including Alan Greenspan and, to a lesser extent, Ben Bernanke, she's not one to buy into the finance industry's argument that it should be left alone to regulate itself. Princeton professor Alan Blinder, who was the Fed vice chair in the 1990s, remembers speaking many times with Yellen "about how the Fed was being too lax on regulation of finance. And since then," says Blinder, "it's only gotten worse."

That's an issue Yellen is likely to address--right after she pushes unemployment below 6%, stabilizes markets and makes sure that the recovery is more inclusive and robust. As Blinder says, "she's smart as a whip, deeply logical, willing to argue but also a good listener. She can persuade without antagonizing." All those traits will be useful as the global economy's new power player takes on its most vexing problems.










Make or Break Year for China
By Fareed Zakaria
Corruption. Pollution. Debt. Will Beijing’s leaders tackle the challeges before the bubble burst?

2014 is the year of the horse in China. But for the rest of us, it might prove to be the year of China. The country faces a historic turning point: either it will revamp its economic system, deal with some of its growing environmental and social problems and set itself up for another decade of growth and stability that will ensure it becomes the world's largest economy, or 2014 will be the year that the great Chinese miracle hits a serious road bump--with seismic consequences.

People have been making such predictions about China for years, even decades, and the worst has never come to pass. While it has faced formidable challenges--creating a market economy from scratch, building world-class infrastructure, urbanizing hundreds of millions of peasants--Beijing has adjusted its policies along the way and continued to grow at an unprecedented pace.

But this time it feels different. China has built up economic imbalances for some years, and they are not sustainable for much longer. The basic problem is that for almost a decade, China's economic growth has been fueled by cheap credit and government spending--a classic developing-nation problem. Even before the financial crisis of 2008, Beijing's top officials acknowledged that the economy was, in former Premier Wen Jiabao's words, "unstable, unbalanced, uncoordinated and unsustainable." The government needed to stop the flow of easy money to infrastructure, state-owned companies and the housing sector. But this decision was tough to implement, since growth was dependent on easy money. In addition, those getting the money were politically powerful, including state-owned companies and local party bosses.

Then came the financial crisis and the global economic slowdown. But slowing down was not an option for Beijing: the Communist Party's legitimacy derives not from ideology but from competence. So it pursued the world's largest Keynesian response to the crisis, spending over 10% of GDP to keep the economy going. It worked. China's growth rate has averaged more than 9% in the past few years.

But the price has been high. According to a column in the Wall Street Journal by Morgan Stanley's Ruchir Sharma, China's total public and private debt is over 200% of GDP, an unprecedented level for any developing country. Businesses and local governments have piled on debt. Borrowing has fueled a property boom. Without serious policy changes that wean large sectors of the economy off cheap credit relatively soon, this is a bubble that is going to burst and a model that cannot keep performing.

Beijing faces other serious challenges. Chinese people almost anywhere in the country experience serious air and water pollution, and they have begun to complain vocally. They are also increasingly outraged by something almost as ubiquitous: corruption. China's corruption is masked because of the state's tight control of the media, but the Communist Party is well aware of the problem and has pledged to revamp its systems of promotion and party discipline to ensure that officials are less corrupt and more focused on ecological damage, not just growth.

Any such changes are bound to face political resistance and backlash from within the Communist Party and from some powerful sectors of society. President Xi Jinping has launched an anticorruption campaign, though many in China believe enforcement has been selective. He has also sought to stabilize the party's power by tightening the noose on any critics in the media and universities and even those who are private businesspeople. Xi has created a national security council focused largely on internal security, a sign of not only where his priorities lie but also where he sees his greatest challenges.

I'm not ready to bet against China. Its leadership has shown itself to be capable of difficult decisions and smart execution. Xi has accumulated an unusual degree of authority and clearly intends to use it to go down in history as the man who reformed China's system to make the country stronger and more powerful.

If China's leaders manage this transition well, the country will emerge stronger and more stable and become the largest economy in the world. If they don't, China will likely face a slump, one that will look a lot like those of other high-flying developing countries--such as South Korea and Taiwan--that ended a period of rapid growth and settled into a more normal trajectory. In many of those cases, slow growth coincided with widespread protests and the opening up of the political system.

Keeping China's growth model going will prove hard enough. But to do that with all the associated political challenges will test even China's extraordinary leaders.

Make or Break for China












All U.S. combat troops are set to leave Afghanistan by year’s end.
Monday, Jan. 13, 2014
By Michael Crowley
America's longest war will finally end this year, when the last of the U.S. combat troops who stormed into Afghanistan in 2001 withdraw by Dec. 31. While that will be cause for relief in the U.S., Afghanistan is bracing for possible disaster. What happens over the next 12 months could determine whether that ill-fated country limps toward stability or plunges into even greater violence.

Afghanistan has paid dearly for more than a decade of war but is better off in many ways. Al-Qaeda is gone, the Taliban control little territory, millions of girls are attending school, and such metrics as cell-phone access and public health have soared. Those gains will long be fragile, however, and whether they promptly collapse after Uncle Sam departs will depend on how 2014 unfolds. Perhaps the most important question is the fate of a security agreement negotiated between the Obama Administration and Afghan President Hamid Karzai. Under a deal struck with handshakes and smiles in November, the U.S. will leave behind a residual force of up to 12,000 troops to conduct training and counterterrorism operations. That will be crucial to shoring up a 320,000-man Afghan military and police force that is short on discipline, airpower and logistical support.

But soon after the agreement was unanimously endorsed by a 2,500-member loya jirga, or grand council, Karzai balked. He demanded more concessions from the U.S., including an end to military raids on Afghan homes suspected of harboring Taliban and the possible release of prisoners from Guant*namo Bay. He also suggests his country might be best served by breaking entirely from the U.S., which he likens to a "colonial power."

Obama officials suspect Karzai is bluffing, asserting his influence and relevance as his presidency winds down before an April 5 election picks his successor. Yet the bluster risks forcing the U.S. and its NATO partners to walk away from Afghanistan entirely. That would mean leaving behind no residual troops and cutting off most foreign aid, including the $4 billion per year needed to sustain the Afghan security forces. The result could be a savage civil war--reminiscent of the one that followed the Soviet exit in 1989--among the country's many fractious ethnic groups. Afghanistan will already be hard pressed to survive a gradual weaning from Western economic aid and could face an all-out crash if that spigot closes entirely.

A full break with Afghanistan would also bring real risk for the U.S., especially if anarchy allows for an al-Qaeda resurgence. Drone strikes from afar can limit the threat, but counterterrorism experts say there's no substitute for the intelligence that boots on the ground working with locals can provide. "Even with core al-Qaeda removed, it's likely that there would be some residual al-Qaeda or related affiliates that persist," says a senior official. "We would retain the requirement to disrupt any threats. The preferred way for us to do that is in partnership with the Afghans."

Not that many in Washington or elsewhere in the U.S. would object to saying goodbye. It was once smart politics to argue that America couldn't walk away from Afghanistan. No longer. "If we withdraw, Afghanistan could go back to the 1990s and a civil war could break out again," says Jonah Blank, a regional expert at the Rand Corp. "And the American public would not particularly care." Representative Ted Deutch, a Florida Democrat, put it more bluntly: "Many of our constituents want us to bring home every last U.S. soldier, every one."

Karzai may just be delaying the security agreement so his successor can ink the deal next spring--which would make post-2014 planning more difficult but not impossible for Washington. The leading candidates include two figures respected in the West: Abdullah Abdullah, a former Foreign Minister, and Ashraf Ghani, an ex--Finance Minister. (Karzai, who will move into a mansion adjacent to the presidential compound, is expected to maintain plenty of informal power.) Both are expected to welcome an extended NATO presence, and either would be a refreshing change from the mercurial Karzai, who exhausted Washington's patience long ago.

The election process is another danger spot, however. Karzai's 2009 election was fraud-ridden, creating a legitimacy crisis that crippled his government's credibility. "If the spring elections are anything like the last ones, that will be a disaster for the country," says Brian Katulis, a foreign policy expert at the left-leaning Center for American Progress.

The first task for whoever takes over will be guiding the country through the exit of the U.S.'s 48,000 remaining troops. (Few of them see regular combat these days; by late December, 117 Americans had been killed in Afghanistan in 2013, down from 492 in 2010. The 12-year war has left 2,161 Americans dead and more than 19,500 wounded.) The exact pace of the U.S. withdrawal has yet to be determined and may depend on how well Afghan forces--whose combat performance remains worryingly uneven--can manage alone.

Achieving something like real peace, which means a settlement with the Taliban and other power-hungry warlords, will be even harder. The Taliban remain unwilling to deal with the government in Kabul, and armed ethnic militias are girding for battle. Says Katulis: "We are not leaving behind a society poised to heal itself and move beyond its divisions." But we're not prepared to keep fighting a war for it either.













Thursday, Jan. 02, 2014
By Joel Stein
Let the simpletons over at the International Monetary Fund predict that in 2014 inflation will drop below GDP growth in sub-Saharan Africa. I could do that too if I wanted to get some graduate degrees in GDP, inflation and sub-Saharan Africa. But instead of just estimating the direction of known variables, I'm going to predict great philosophical shifts. Will they definitely happen in the next 12 months? Yes. I can say that with confidence since I know that there's a 100% chance you will forget everything in this column long before the end of the year.

In 2014 some socially acceptable customs will indubitably soon gross us out, and the switch can happen as quickly as it did with Miley Cyrus in 2013. At one point, slavery was fine but asking for interest on a loan was illegal. Masturbation was a sin, homosexuality was a mental illness, the UFC was outlawed in most states, and gluten was served at the start of meals. By the end of this year, something you're doing right now will be considered repugnant, most likely by your spouse, despite the fact that when you first met, your spouse found it attractive.

To find out what will become repugnant and unrepugnant this year, I called Alvin Roth, a Stanford professor who won the 2012 Nobel Prize for Economics. His 2007 paper in the Journal of Economic Perspectives, "Repugnance as a Constraint on Markets," discusses pornography, prostitution, horse meat and dwarf tossing and deeply implies that I could be considered for a Nobel Prize.

Roth feels society might loosen up soon about performance-enhancing drugs. As more people use Viagra to improve sexual performance and Adderall to study for tests, the lines between improving and curing will be so blurred, we won't bother distinguishing. Pills that help you hit home runs will be just another legitimate technology that baseball players use, like cleats, biomechanical-feedback labs and A-Rod's legal team. As Roth put it, "No one thinks that eating breakfast is a performance-enhancing drug." Roth will not be receiving the Nobel Prize for knowing what the word drug means.

Then Roth showed the skills of a true prognosticator by seeming to make predictions without actually saying anything. "There are going to be a lot of reproductive choices. Some will become ordinary, and some will become repugnant," he said. Having emotional conversations with computers with artificial intelligence, like Siri, he thought, would be acceptable, but "we will want a machine voice for some things instead of human voices so we won't be fooled." Also, I'm going to guess that in 2014 people will find electronic cigarettes either cool or super dorky.

Looking for specifics, I asked Roth whether meat eating might become repugnant. He thought that was a solid guess because of both the horrors of factory farming and health concerns over red meat, though everyone going vegan is more of a late-2014 thing. "We already don't eat whale. We think whales might be smart. The next question is cows." I'm thinking very late 2014.

This will be the year when we finally get freaked out by our lack of privacy thanks to advances like Google Glass. "Suppose looking at me was like typing my name into the Google search bar. Whenever I walked anywhere, everyone would recognize me," Roth said, totally unaware that this is exactly what every American is working all day online to achieve. Then he put it more simply: "Think about urinals in stalls. You didn't use to worry about it." I didn't want to tell Roth that he had greatly overestimated people's fascination with the size of economists' penises.

Roth sees repugnance fading for regular polygamy but increasing for the kind where the wives are really young, which I'm pretty sure is regular polygamy. He thinks we'll learn to be O.K. with the idea of cloning brain-dead humans to harvest their organs. And just as we've learned that being gay isn't a choice, we'll stop making fun of obese people for the same reason. Gay obese men, of course, will still get mocked ruthlessly behind their backs by their thin gay friends.

I asked whether plastic surgery was going to be as little judged as makeup or push-up bras, and he thought that made sense. With escort services openly posted online, I asked Roth whether prostitution might be normalized. "Americans are pretty grossed out by prostitution. People like prostitution a lot less than selling organs," he said. Roth thought he could prove this through various polls. I can prove the opposite by the fact that no World War II soldier opened his front door years later to find a Filipino kidney calling him Dad.

It might be hard for you to imagine that by the end of this year we'll have an obese, polygamist, vegan President on steroids who keeps a brain-dead clone of himself around for spare parts, especially since we're not having a presidential election this year. But that's why you don't have a Nobel Prize for Economics. Morality is a quickly shifting thing, and those who hold on to previous iterations become villains. Which is why I predict the Awesome Column will be a lot less judgmental this year. I'm really banking on the fact that no one remembers these prediction columns.

≪ 今の価値感からみれば未来は・・・どんな風に見える ≫



社会に受け入れられている習慣が、2014年内にすぐさま嫌なものに変わるのは間違いないし、その変化は2013年にマイリー・サラス人気に起こった変化と同じくらい急激だろう。ある時期には、奴隷制度は合法だったが貸付金に利子を課すことは違法だった。マスタベーションは罪、同性愛は心の病、UFC(Ultimate Fighting Championship:総合格闘技)はほとんどの州で非合法だったし、グルテンは食事の最初に出されていた。今年末までには、今普通にやっていることが忌み嫌われるものになるだろう。卑近な例を挙げれば、初めて出会った時には素敵と言ってくれた結婚相手に、今では「顔を見るのもイヤ!」と言われる。

今年、何が良くて何が不快になるかを知るために、2012年ノーベル経済学賞受賞者でスタンフォード大学教授のアルビン・ロスに尋ねた。経済予測ジャーナル(Journal of Economic Perspectives)に掲載された彼の論文「市場における抑制としての嫌悪(Repugnance as a Constraint on Markets)」はポルノ、売春、馬肉、小人投げを論じているが、それぐらいなら私だってノーベル賞候補になれること思わせる。



Google Glass(眼鏡型端末)のようなテクノロジーの進歩のおかげでプライバシーがなくなり、ついに恐怖を感じる年になるだろう。「自分を知りたいと思えばグーグル検索バーに自分の名前を叩けばいい、そんな状況はどうだろう。何時だって何処を歩いていようと、誰でも私を知っている」とロスは言う。それと知らずに米国民がみんな、一日中パソコンに向かって懸命にやっていることだ、と。そこでロスはもっとわかり易い例として「屋台のトイレを考えてみればいい。トイレを使っても何の心配もしなかったでしょう」と言う。エコノミストのペニスの大きさにみんなが興味を持つなんて考え過ぎだ、とロスに言いたくもなかったが。



今年の終わりに、肥満で、一夫多妻(一妻多夫)で、菜食主義で、ステロイドを使っていて、おまけに脳死者のクローンを自分の予備臓器として常備している大統領なんて想像できないかもしれない。特に今年は大統領選挙がないから。だからあなたはノーベル経済学賞がもらえないのだ。善悪の価値観は移ろいやすく、これまでの常識に従っていた人が悪者に変わる。だからこそAwesome Column(極上コラム)が今年は独りよがりのコラムにならないこと予測する。私の書いたこの予測コラムが皆様の脳裏から忘れ去られることをただひたすら願っている。

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