History

Inequality has been growing and destabilizing confidence in many countries in recent years.

Evidence of climate change is widely accepted by scientists.

Three major crises are confronting the world. The first is the increasing and uneven burden of humans on the biosphere, and the observation that we have already surpassed the ‘safe operating space’ for humanity with respect to three planetary boundaries: climate change, the nitrogen cycle and biodiversity loss.

How can we distribute growth globally when the developed world needs growth to emerge from debt overhangs and inequality between nations is still quite formidable?

We analyze shareholders’ incentives to change the leverage of a firm that has already borrowed substantially. As a result of debt overhang, shareholders have incentives to resist reductions in leverage that make the remaining debt safer.

Budget cuts can be dangerous. Inspired by the wrenching experience in Greece, increasing attention is now being paid to the fact that austerity may fail to reduce the government deficit if the economy declines in response, as is likely in a liquidity trap (Delong and Summers 2012).

A country that produces goods of high quality at a competitive price is likely to be rewarded for its ingenuity with a trade surplus. Small countries often achieve great development success through export-led growth. At the same time, the entire economic system must be balanced.

These are truly testing times. The world economic order – capitalism – is being called into question following the Lehman crisis. The world’s best form of societal organization – democracy – is being challenged by the economic success of autocratic countries such as China and Singapore.

When the very fabric of society is threatened by prolonged austerity or a financial sector collapse, a deliberate re-structuring of debt may be necessary to restore the hopes of renewed prosperity.

After an era of vigorous expansion a downturn can reveal a large stock of debt relative to the economy’s capacity to service it.

What has been learned now that the Euro zone’s fault lines have been revealed? Where are Europe and the Euro zone today?