Experience Stern | Faculty & Research

"During the last few weeks, the spread of COVID-19 has rattled the global economic prospects and financial markets. Growth and employment forecasts for the global economy have been revised substantially downward to recession levels for the next two quarters; global stock prices have declined, especially for banks and other financial intermediaries; credit spreads have surged, notably for junk-rated paper in developed economies; and central banks have reacted with substantial rate cuts and/or liquidity provision and asset purchase programs." Read More...

"Three things need to change. First and most immediately, there is a pressing need for greater coordination, burden-sharing, and transparency among the states. The federal government has the unique capacity to survey existing needs and distribute crucial supplies among the states in a rational and efficient way." Read More...

The eminent economist Bob Solow once said his profession “requires three qualities: faith, hope and clarity; and the greatest of these is clarity.” For the past four years the British view of its future trading relationship with the European Union has reflected much more of the first two virtues than the latter. Thankfully, we’re now seeing signs of lucidity. A speech last month by the U.K. trade negotiator, David Frost, was admirably clear on the subject. Read More...

Responding to the spread of COVID-19 cases in the U.S., Amazon has joined a growing number of companies directing their executives to suspend domestic travel “until further notice.” As reported in The New York Times, Dave Clark, Amazon’s Senior Vice President in charge of the firm’s worldwide operations, told his employees that no group or team meetings requiring travel should be planned sooner than the end of April, “by which time hopefully we have a better sense of the virus, its spread and impact.” In this internal message, Clark stressed that “we are watching this situation closely with a focus on the safety of our teams.” All of this seems prudent and sensible, all the more so because two Amazon employees in Italy, and a third in Seattle, recently tested positive for the virus, which has claimed more than 3,000 lives worldwide. Read More...

Barring such a “black swan” event, however, history suggests that the COVID-19 outbreak’s long-term effects may rather small, even negligible. This is all the more likely, because China’s economy is far from fragile. Read More...

Investors are deluding themselves about how severe the coronavirus outbreak will be. Despite this week’s big sell-off in equity markets, the worst is yet to come. Read More...

At the World Economic Forum (WEF) in Davos last month, a group of 140 of the world’s largest companies proposed a core set of common metrics to track the environmental and social records of companies. This initiative is sorely needed. It follows several other efforts to shift businesses from the singular focus on maximizing short-term shareholder returns that has defined corporate culture in America since the 1970s.  Read More...

In my 2010 book, Crisis Economics, I defined financial crises not as the “black swan” events that Nassim Nicholas Taleb described in his eponymous bestseller, but as “white swans.” According to Taleb, black swans are events that emerge unpredictably, like a tornado, from a fat-tailed statistical distribution. But I argued that financial crises, at least, are more like hurricanes: they are the predictable result of built-up economic and financial vulnerabilities and policy mistakes. Read More...

Last week in Brussels, members of the European Parliament met to assess the current state of Bangladesh’s massive ready-made garment (RMG) industry, now the second-largest in the world and a major supplier to Europe. It has been almost seven years since the Rana Plaza factory complex collapsed, killing more than 1,100 workers, mostly young women, and injuring 2,500 others. Rana Plaza generated worldwide headlines and searing images that still color many people’s perceptions of Bangladesh and the broader risks to workers in global supply chains.  Read More...

Would you believe that roughly 45% of U.S. public companies are reporting annual losses? And that in a booming economy and record breaking stock market. The percentage of these loss-reporting companies didn’t change much in the past ten years, but was substantially lower in previous years. In the 1970s, less than 20% of companies reported annual losses, climbing to around 35% in the mid-1980s, and to 40% in the late 1990s. Returning to the present 45% loss frequency, how can the economy prosper with almost half of public companies losing money? Read More...

At the World Economic Forum in Davos last week, Richard Edelman released the 20th Edelman Trust Barometer, an annual public opinion poll that tracks attitudes towards government, corporations, civil society, and the media in more than 20 countries. One of the key takeaways from this year’s report is the pressing need for corporate leaders to assume a more central role in addressing key societal issues, such as global warming and rising inequality.  Read More...

Following the United States’ assassination of Iranian Quds Force commander Qassem Suleimani and Iran’s initial retaliation against two Iraqi bases housing US troops, financial markets moved into risk-off mode: oil prices spiked by 10%, US and global equities dropped by a few percentage points, and safe-haven bond yields fell. In short order, though, despite the continuing risks of a US-Iran conflict and the implications that it would have for markets, the view that both sides would eschew further escalation calmed investors and reversed these price movements, with equities even approaching new highs. Read More...

As one advances in age, one tends to mark each new year by reflecting on the broader developments that have run in parallel with one’s own lifetime. For my part, I usually focus on the surprises (both positive and negative): things I would have been considered unlikely or even unimaginable in my younger years. Read More...

Financial markets were cheered recently by the news that the US and China have reached a “phase one” deal to prevent further escalation of their bilateral trade war. But there is actually very little to cheer about. In exchange for China’s tentative commitment to buy more US agricultural (and some other) goods, and modest concessions on intellectual property rights and the yuan, the US agreed to withhold tariffs on another $160bn (£124bn) worth of Chinese exports, and to roll back some of the tariffs introduced on 1 September. Read More...

Last month, Senator Marco Rubio called for what he termed “common-good capitalism.” In a speech at Catholic University that received too little attention, Rubio outlined a framework that embraces the free market but demands more from it than short-term financial gain. He called for a system that ensures dignified work for employees rather than focusing myopically on the celebration of corporate profits.  Read More...