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?

The 20 billion Central African francs ($43 million equivalent), five-year tenor bond will be listed on the regional exchange in Libreville and on the Doula Stock Exchange. It will be tax-exempt in all six countries in the Economic and Monetary Community of the Central African zone. The countries are Cameroon, Central African Republic, Chad, Congo, Equatorial Guinea, and Gabon. All proceeds will be reinvested in the zone.

IFC's timing is quite prescient. As the recovery from the crisis continues to be lopsided, strongly favoring emerging markets, there should be substantial outside investor interest in these types local-currency bonds (see previous post).

Furthermore, increased dollar volatility will enhance the attractiveness of local currency bonds in two ways. First, judging by the market's negative reaction to Ben Bernanke's dollar reassurances, foreign investors should be more willing to take on local currency risk, as they remain convinced that dollar depreciation will continue for some time.

Second, while foreign investors seem sanguine about the dollar's weakness, local investors from fragile emerging markets, such as those in Central Africa, are more likely to recall the dollar's upside potential. Should another crisis occur, triggering a flight to safety along the lines of what we saw in the aftermath of last year's crisis, emerging market currencies will be the first to fall. Local currency bonds offer a layer of insurance against the damage that such a precipitous outflow of capital can cause, making them an attractive option for local businesses and investors alike. 

On Thursday and Friday, a Conference on Entrepreneurship and Growth will be held in at the World Bank's main headquarters. Topics range from "Promoting Business Formalization and Growth" to "Firm Dynamics and Size". Dozens of speakers will be featured, from both inside and outside the Bank.

Next, Infoshop will be hosting a discussion this Thursday with Robert Skidelsky, who has just finished his latest book, Keynes: The return of the master. I am especially fond of Skidelsky, and look forward to hearing his thoughts on how Keynesianism is back with a vengeance as a result of the financial crisis. The conversation begins at 12:30pm EST.

All events are open to the public. If you are not in the Washington area or are unable to attend, fear not! I will be Tweeting highlights from each event as they unfold. (If you missed this morning's conference on achieving scale in entrepreneurship, you can view a summary on Twitter).

First, the bad news:

Access to financial services, and indeed overall financial development, is crucial to economic growth and poverty reduction. Yet in Sub-Saharan Africa, only 1 in 5 households have access to financial services. In 2007, over 70 percent of Kenyan households did not have bank accounts or relied on informal sources of finance. In 2006, there were only 35 bank branches in Benin, a country with a population of 7 million. This lack of formal financial services limits market exchanges, increases risk and limits opportunities to save. Without formal financial services, households rely on informal services that are associated with high transaction costs.

Yet this may be changing, thanks to mobile banking and lower barriers to entry. The report cites Kenya as the most successful example of mobile banking leading to increased access to finance:

In Kenya, the last three years have seen dramatic changes in the financial sector landscape. First, commercial banks recognized that lowering barriers to entry (no requirements of minimum balances in opening bank accounts) can increase retail accounts. Second, banks realized that lowering costs of transacting across other bank accounts attracts more customers to open accounts. As a result of these changes, the number of bank accounts has increased from 2.3 million in 2006 to about 6.7 million in July 2009. Equally, deposits increased from Ksh 540bn (US$ 7.2bn) in 2006 to Kshs 950bn (US$12.6bn) in July 2009.

Technological innovations have now made it possible to extend financial services to millions of poor people at relatively low cost. A case in point is mobile telephone money transfer services that allow mobile phone users to make financial transactions or transfers across the country conveniently and at low cost. Kenya’s mobile payment service, known as M-PESA, provided by the main mobile phone company,

Today, millions of Kenyans use M-PESA to make payments, send remittances and store funds for short periods.

This growth in access to fiance, particularly savings accounts, will not only benefit very poor countries such as Kenya and Pakistan. As I noted last week, only 30 percent of Filipinos have bank accounts. Just at Grameen Bank's business model has proven effective in both Bangladesh and the Bronx, mobile banking has the potential to impact a diverse range of clients.

(h/t Docuticker)

Plus, the case for Fed independence.

Does car sharing take cars off the road? Or just put walkers into cars?

Another PR disaster for Goldman.

Paul Krugman praises the German labor market, while Yves Smith takes it one step further.

Hong Kong's leader, Donald Tsang, thinks that the United States is following in Japan's footsteps.

Ghost Towns in China. Or, the flaws of GDP.

"Excluding OPEC and China, America's balance of trade has improved". A weaker dollar/stronger yuan can help the latter, but may end up exacerbating the former.

Where the jobs aren't.

Will freer trade create stable food prices?

Finally, The World Bank is having a Conference on Entrepreneurship and Growth throughout next week, which is open to the public. Recommended.

A survey of informal firms in Ivory Coast, Madagascar and Mauritius conducted by Enterprise Surveys provides some support to this idea. The survey shows that 81 percent of the firms in Ivory Coast, 72 percent in Madagascar and 49 percent in Mauritius operate within household premises. The figures below show the percentage of firms that report various benefits from registering. Overall, a larger percentage of firms located within household premises expect the various benefits from registration. These preliminary findings suggest that understanding the types of informal firms that operate within and outside household premises could be an interesting area for future research.