A few observations from the bottom of the list:

• Western Europe's most vulnerable economies continue to suffer. Spanish home prices are down more than last year, the UK remains in the red, and Irish prices have declined by a whopping 21 percent. As the ECB puts forth its strategy of removing many of its exceptional crisis support provisions, Europe's recovery will become even more uneven (just ask Greece). This has already led some to re-ignite the debate over the future of the eurozone, though currency markets seem to be shrugging it off. 

• Parts of Eastern Europe's real estate market are in dire straits. Latvian prices are down by nearly 60 percent, while Bulgaria (28%), Russia (19%) and Slovakia (15%) are all experiencing double-digit falls.

• Dubai is looking to be the ultimate boom and bust story. One year ago, real estate prices had increased by over 61 percent. Now, they are down by 48 percent. The government-owned holding company, Dubai World, is struggling to service its $59bn in liabilities, in spite of a recent $5bn bailout by Abu Dhabi.

Even as we continue to suffer from the pain of past bubbles, new ones are forming. World Bank President Robert Zoellick is particularly worried about asset bubbles in emerging Asia, fueled by loose monetary policy and low interest rates. Writing in today's Financial Times, Zoellick had this to say:

The revival of John Maynard Keynes should not lead us to ignore Milton Friedman: where will all that money go? For a hint of the future, look to Asia, where a new risk is emerging: asset bubbles.

Zoellick points out that housing prices in China are rising at their fastest pace in 14 months, equity markets are booming, and commodity prices are up on speculation of Asian growth. He concludes by calling for greater cooperation and more diverse economic policies:

Perhaps the primary lesson from history is for countries to co-operate in making assessments that distinguish their situations, avoiding one-size-fits-all "exit strategies", and cautioning against currency or trade protectionism.

The crisis ain't over yet.

There is widespread perception that small businesses are the primary creators of jobs in most countries. A presentation from the World Bank's recent Conference on Entrepreneurship and Growth entitled, "Who Creates Jobs? Small vs. Large vs. Young" used US census data to add an interesting twist to the debate regarding the role of firm size in employment creation.

The paper finds that business start-ups contribute substantially to both gross and net job creation, but that young firms also have very high rates job destruction due to frequent failures. Conditional on survival, young firms grow more rapidly (in terms of employment) than their more mature counterparts. A related finding is that once the authors account for firm age, it becomes the definitive factor in job creation. Firms employing 5-499 employees are found to have lower net growth rates than the largest firms (10000 or more workers) in the economy. 

These results raise an interesting policy issue. Assuming a similar pattern of job creation for developing countries, how do we reconcile the emphasis placed by development institutions - including the WBG - on small and medium enterprise (SME) development? Is this sub-sector the right focus of our PSD efforts? If so, how can we ensure not only SME creation, but survival to support net job creation over the medium to long term? On the other hand, if the SME approach does not create the net medium to long term jobs so desperately needed in high unemployment developing countries, what should our policy recommendations be?

Doing Business seeks to recognize and celebrate policy reforms that improve the ease of doing business, of which tax policy is a critical component. For governments, the incentive to reform in this area seems relatively straightforward: make it easier to pay taxes, and your tax revenue is likely to increase. But what about areas where the results of reform are less immediate and tangible, such as closing a business?

In some cases, it is the desire to improve one's national ranking in the Doing Business report that triggers reform. This was Rwanda's strategy, as outlined by minister of finance James Musoni in a recent World Bank speech (you can review parts of the speech on our Twitter account). These accomplishments fit well into the country's Vision 2020 of becoming a middle income country by the end of the next decade.

But given the limited number of publications like Doing Business, and the fact that not every government has a long-term growth plan like Rwanda's, what other mechanisms can trigger beneficial reforms?

A new paper from Vox provides a simple solution: Lots and lots of elections:

Not only do elections likely have a positive structural effect on economic policy, but they may also have a disruptive cyclical effect. Elections introduce frictions; they are periodic events, the timing of which may affect politicians’ incentives to reform. The structural effect of elections is also significant and quite large. The degree to which they improve policy depends upon their frequency; the more frequent, the better. The net effect of different frequencies on the probability of policy improvement is quite large. Taking the extremes of the range, shifting from an election once a decade to an election each year would almost double the chance of policy improvement in the average year.

The paper notes that quality is as important as frequency, and that dubious elections can actually be more harmful to economic policy than no elections at all.

What do frequent, free elections and Doing Business have in common, besides inspiring economic reform? The first thing that comes to my mind is accountability. If governments are held responsible for their actions, they are likely to push for policies that improve the lives of their constituents. The Vox paper shows that the more frequently these governments are confronted with elections, they more active they are in reforming.

By expanding into sub-national regions, and adding additional metrics such as paying taxes, Doing Business seems to be making a similar bet: the more frequently they publicize reform improvements, the more likely governments are to take action.

What market and regulatory issues led to the subprime crisis? How should prudential regulation be fixed? The answers depend on the interpretative lenses—or “paradigms”—through which one sees finance. The agency paradigm, which has dominated recent regulatory policy, seems to be influencing much of the emerging reform agenda. But collective welfare failures—particularly externalities—and collective cognition failures—particularly mood swings—were at least as important in driving the crisis. All three paradigms should therefore be integrated into a more balanced policy agenda. But doing so will be difficult because they often have inconsistent policy implications.

Click here to view the full note.

The study measures tax systems from the point of view of a domestic company complying with the different tax laws and regulations in each economy. The case study company is a small to medium-size manufacturer and retailer, deliberately chosen to ensure that its business can be identified with and compared worldwide.

For the second year in a row Maldives, Qatar and Hong Kong have taken the top three spots as the easiest places to pay taxes. Maldives has been the top performer since the first report was published in 2007.

Some of the report's key findings include:

• The top reformer was Timor-Leste, which introduced a new tax law, streamlined the business tax regime, and simplified tax administration.
• Between June 2008 and May 2009, 45 economies made it easier to pay taxes as measured by Doing Business, almost 25% more than in the previous year.
• Eastern Europe and Central Asia had the most reforms for the third year in a row, with 10 economies reforming.
• Around the world on average, the case study company faces a total tax rate (percentage of profit paid out in taxes) of 48.3% and spends 286 hours a year, and makes 31 tax payments, to comply with tax laws.
• The time to comply with tax requirements ranges from 212 hours a year on average in OECD high-income economies to 638 in Latin America.
• The number of payments also varies widely. The company makes the most payments in Eastern Europe and Central Asia, 53 a year on average. It makes the fewest in OECD high-income economies, just 14 on average.
• Survey respondents identified the way tax audits are dealt with and the approach of the tax authorities as the elements of the tax system most in need of improvement.

PricewaterhouseCoopers contributed to the report, giving its perspective on the data via case studies in various countries. The consultancy concludes:

Tax reform remains firmly on the government agenda. Through its Doing Business indicators, the World Bank Group has recorded tax reforms in 104 economies around the world during the five years of the Paying Taxes study. The recession is not likely to lessen the pace of these changes. The downturn has reduced corporate profitability and slowed investment and transaction activity, thus reducing government tax revenues from business. The challenge for government is not only to rebuild revenues, but also to help businesses survive through a difficult time and position themselves best for recovery, while also exploring possibilities for easing complexity and administrative burden.

Benjamin Franklin once famously quipped, "In this world nothing can be said to be certain, except death and taxes." Thanks to the Doing Business team, the latter is becoming a little less painful.
 

Negative interest rates on T-bills: This time is different.

"The fact that oil is trading at $80 a barrel in this climate should tell you that it is trading more as a financial asset than on supply/demand imbalances".

California is doing its part in the fight against deflation, one university at a time.

The recession is having quite an impact on migration trends in the United States. Plus, our People Move blog looks at new remittance data.

Tyler Cowen describes these two posts from Paul Krugman and Brad Delong as "critically important stuff and two of the best recent economics blog posts, in some time."

War is brewing in the financial blogosphere.

Matthew Yglesias thinks that Chinese leverage over the US is overblown.

More emerging market attempts to stop the appreciation of their currencies.

Finally, as the US gets ready for the Thanksgiving holiday, Adam Gopnik analyzes our hunger for cookbooks.

In the United States, the typical Indian entrepreneur has an average business income that is substantially higher than the national average and is higher than any other immigrant group. Net annual income in the United States is 60 percent higher than the overall average. Meanwhile, in Canada and the UK, Indian entrepreneurs make similar incomes as other immigrants, but employ more employees than almost any other ethnic group.

What explains these differences? The authors attribute around 50 percent of this success to higher rates of education. For example, in the United States 68 percent of Indians have college degrees, which is twice the rate for whites. This is also true for Canada, where immigrants are largely admitted on a points based system that rewards higher education.

Other factors beyond education are also important: around 10 percent Indian entrepreneurial success is due to industry differences, such as the fact that Indian business are largely service-based, with very few participating in agricultural and construction sectors, which tend to produce lower returns. The authors also attributed some of these successes to the fact that 90 percent of Indian expatriate entrepreneurs are married.

While these three factors provide a logical explanation for these successes, the authors concede that many questions remained unanswered. For example, what roles do labor and credit markets, and institutions in general play in this matter? Cerberus paribus, would these entrepreneurs succeed in India if, say, its Doing Business score wasn't 131 out of 183? Does this study show that educated, married entrepreneurs, who work in the services sector in pro-business countries are more prone to success? Or, are Indian entrepreneurs in general successful when given the right business-friendly environment?

Mr Kumar and his colleagues may want to team up with the Subnational Doing Business team to find some answers to these questions.

Asian currencies came under pressure on Thursday as a move from Brazil to further curb foreign inflows sparked fears that other countries would follow suit. Brazil moved overnight to close a loophole that had allowed investors to avoid a 2 per cent tax on foreign investment in equities and bonds announced last month.

Speculative flows have now reached the point where many emerging market currencies have hit levels that threaten to undermine their export sectors.

So far most emerging market economies have managed the problem by intervening in currency markets to slow the appreciation of their currencies. However, Brazil and Taiwan have taken more dramatic action, imposing capital controls designed to limit the appreciation of their currencies.

Speculation has risen that other countries will follow their lead.

“Recent measures from Brazil and Taiwan curbing capital inflows send a clear signal: emerging market policymakers are far away from accepting a sustained reallocation of portfolio capital from the west, and its liquidity and currency implications,” said David Bloom at HSBC.

Taiwan's decision to ban foreigners from putting money into time deposits seems to be working. Investors have pulled out roughly 12 percent of this 'hot' money. Taiwan's success, and Brazil's apparent determination, are likely to encourage others to take a more assertive stance.

Low interest rates in the West, coupled with a fixed renminbi and weaker dollar, have left many emerging markets somewhere between a rock and a hard place. They now must try to avoid excessive currency appreciation without appearing hostile to the foreign investment that is fueling much of their growth.

The global economy is unlikely to reach any sort of equilibrium for a very long time.

Occasionally something comes along that captures our imagination and seems to offer a glimpse of the elusive grail. Mohammed Yunus' recent speech on social business at IFC was a widely reported example. Another similar but smaller event was more quietly inspirational. Harold Rosen, IFC’s former in-house serial entrepreneur and inspiration behind many of the IFC’s small and medium enterprise interventions, returned to IFC to discuss the performance of his Grassroots Business Fund (GBF), which was spun off from IFC in 2008.  

GBF- described by Harold as ”a genetic splice of IFC”- invests in a market niche that is critical to engaging the base of the pyramid, but which large financial institutions currently find too costly and risky to deal with themselves. This niche is up-and-coming social enterprises – or Grassroots Business Organisations (GBOs) - that are perhaps 40-80% of the way to reaching full commercial sustainability. These grassroots enterprises function as intermediaries enabling impacts on the poor in a cost effective way.

 
Source: Grassroots Business Fund

In its first year GBF made $2.7 million of investments in nine GBOs and five projects involving would-be investees, reaching a total of around 350,000 beneficiaries. This is a strong start, and as GBF develops it will provide fresh perspectives on some familiar constraints. Will GBF be able to find the quantity and quality of GBO intermediaries required to overcome the formidable barrier of the transactions costs required to reach large numbers of poor people? What is the scale of technical assistance required to make would-be intermediaries investable? Is investment and technical assistance to individual GBOs enough? Or, are other complementary systemic interventions needed to build a “market ecosystem” around social enterprise in the same way that, say, CGAP has helped develop the microfinance industry? Will “smart” or results-based subsidies be needed for GBOs to attain the required economies of scale within base of the pyramid markets? GBF’s results and experience will provide critical directional indicators on the quest for PSD’s holy grail.

Bill Owens argues for closer cooperation in just about everything:

The US-China relationship is a vital interest for the two countries and the world. Throughout history, great powers have tended to become adversaries. Now, for a few years, we have a chance to break that cycle. It will take strong and enduring commitment on both sides. But a new and engaging relationship is imperative for our common good

Martin Wolf puts wishful words into the mouth of Barack Obama:

At a time of such weak global demand, yours is a 'beggar thy neighbor' policy. You complain about the protectionist actions I have implemented. But their impact will be trivial compared with China's 'exchange rate protectionism'. This policy will shift the costs of adjustment on to China's trading partners.

Paul Krugman offers even tougher talk:

What makes China’s currency policy especially problematic is the depressed state of the world economy. Cheap money and fiscal stimulus seem to have averted a second Great Depression. But policy makers haven’t been able to generate enough spending, public or private, to make progress against mass unemployment. And China’s weak-currency policy exacerbates the problem, in effect siphoning much-needed demand away from the rest of the world into the pockets of artificially competitive Chinese exporters.

Barack Obama has even joined the chorus, telling reporters, "I was pleased to note the Chinese commitment made in past statements to move toward a more market-oriented exchange rate over time".

The Economist asks the obvious, namely, what is China thinking? If China's currency policy is putting the world economy on a collision course with itself via beggar thy neighbor trade agendas and aggravated imbalances, why persist in holding down the renminbi?

There are two reasons. First, renminbi depreciation isn't especially severe when looked over a broader time frame. Second, renminbi appreciation will do little to fix the trade balance between China and America, as the US in unlikely to begin producing much of what it imports from China. Instead, it may lead to inflation:

If a stronger exchange rate is in China’s own interest, why does it resist? Beijing rejects the accusation that its exchange-rate policy has given it an unfair advantage. It is true that other emerging-market currencies have risen sharply this year, but this ignores the full picture. Last year China held its currency steady against the dollar throughout the global financial crisis, while others tumbled. Since the start of 2008, the yuan has actually risen against every currency except the yen.

Some Chinese economists warn that the benefits to America from yuan revaluation are much exaggerated. In particular, a stronger yuan would not significantly reduce America’s trade deficit. There is little overlap between American and Chinese production, so American goods cannot replace Chinese imports. Instead, consumers would simply end up paying more for imports either from China or other producers, such as Vietnam. This would be like imposing a tax on American consumers.

If Martin Wolf is correct, and China's 'exchange rate protectionism' will shift the cost of adjustment to China's trading partners, I'm surprised these partners aren't putting more pressure on China to depreciate. In some ways, the US lacks credibility in pushing China towards a stronger renminbi. For one thing, America is experiencing first hand the benefits of a weaker currency, as evidenced by its reduced trade deficit. Why shouldn't China be able to enjoy similar benefits? Furthermore, China's weak renminbi policy is made possible though the purchase of dollars (in the form of US treasuries), which allows America to deficit-spend its way towards a recovery.

Meanwhile, as emerging markets such as India, Brazil, and Russia face an uphill battle in limiting the appreciation of their own currencies, they are likely to grow frustrated with their lost competitiveness. Unlike America, which sees China as its primary creditor, these countries might have more wiggle room in their relationships with Beijing, allowing greater opportunity for criticism. Instead of putting pressure on foreign capital inflows, might they point a finger or two towards the renminbi?