Monday, October 18, 2010

Weekly Hurriyet Column: Radical views from the street

Below is the unedited version of my column for this week. You can read the final version at the Daily News website, but since I have been editing my columns myself on the Daily News media webeditor since March, you won't see much of a difference between the two. 

Speaking of Radikal, I have read three issues (I am again late with putting up the column at the blog), and so far so good... Two small comments: 

First, I sense some confusion  by the columnists on the meaning of street columnist: I really don't think it should mean "actually going on the field and reporting from there". I think it rather means squeezing some journalism into the analysis, such as reports of what the experts are thinking. In the econosphere, I think Gillian Tett does that really well. BTW, I tried to do that at today's column by reporting my perceptions from the recent meetings I attended. One customer was not particularly very happy, but it seems she had issues with my former stuff as well:( BTW, I do care about all the feedback, + or -, so I will have a response for her later today or tomorrow

Second, I find their sports section a bit weak. The news are OK, but not too many hot-shot columnists. But there was a great Hayko interview on Sunday and Monday nevertheless. 
Last but not the least, the columnist podcasts/videocasts are great, although it was kind of one of the pillars of a new Econ. web site I am starting up with a few friends, so we are not amused:) And they have one of the better Blackberry applications out there. In sum, while I would  not call their web page radical, it is certainly quite good.

Anyway, on to the column:

Our sister (or rather big brother) daily Referans merged with Radikal yesterday, a paper undergoing significant changes itself.

Their editor-in-chief has been particularly raving about how he intends to change traditional op-eds by molding your average newspaper columnist into a terminator he has named “the street columnist.” I have been to quite a few conferences in the past few weeks myself, as well as talk to people who have been to others, so I am in the perfect position to relay my impressions from the street.

At the IMF-World Bank Annual Meetings in Istanbul last year, uncertainty on the macroeconomic outlook was the name of the game, with endless debates on the shape of recovery. That kind of ambiguity has decreased considerably, although some party-spoilers like the great Roubini continue to muddle the future. But that does not mean that the horizon is crystal-clear; macroeconomic clouds have simply given way to others.

The most-discussed of these new uncertainties is arguably woes of a European kind: I sensed a great deal of pessimism on the Euro Area, whether it be short-term fiscal worries or long-run structural problems like declining competitiveness and fallback in innovation. On the contrary, there is quite a bit of optimism on the U.S. economy. Even those opting for a more wary outlook believe that as long as employment prospects do not improve, American policymakers will continue to support the economy every way that they can.

And that brings me to Fed’s Quantitative Easing II, which is just around the corner. Many economists, including PIMCO’s Mohamed El-Erian, are critical that it will work. Their main reasoning is that investors cannot be bribed into equities; nor can banks be induced to lend by flushing them with liquidity. Agents will take risk if and only if it is attractive for them to do so.

Then, all that money for nothing will end up somewhere else, and judging by the preemptive strikes, that somewhere looks like commodities and emerging markets. As a result, positions are being built by speculators, and battle lines in the form of currency wars are being formed by policymakers. There is even the worry that there might be another Great Trade War in the making.

In the same vein, there is quite a bit of debate on the future of policymaking, which has already undergone many changes. The International Monetary Fund revamped its crisis prevention toolkit this past year. It was also quick to depart with its well-established mantra by advising fiscal easing for the developed world and capital controls for emerging markets. But now policymakers have taken those radical changes a step further by putting central banking on the spotlight.

Given the financial crisis, it is not startling that there is a lot of discussion on whether central banks should be in charge of financial regulation as well. But I was taken by complete surprise with doubts about inflation targeting. What started as an innocent pissing contest by the European Central Bank, as they claimed their two-pillar approach was superior to inflation targeting, has morphed into something much more sinister.

Economists and policymakers alike are well aware that an inflation-targeter faced with free capital flows is more or less helpless against appreciation pressures on its currency. But they are ignoring the benefits of inflation targeting for the likes of Turkey, or not coming up with an alternative, as one Central Bank of Turkey official lamented in a quick chat over coffee at the Global Economic Symposium in Istanbul.

This is your friendly neighborhood economist reporting radical views from the street…

Emre Deliveli is a freelance consultant and columnist for Hurriyet Daily News & Economic Review and Forbes as well as a contributor to Roubini Global Economics. Read his economics blog at


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