William Pesek writes: In a new report, Goldman Sachs says the yuan is now used in 80 per cent of transactions into and out of the cyber currency, topping the US dollar, yen and euro. Given that the Communist Party’s highest priority is stability, and the rampant use of bitcoin represents nothing if not the opposite, it’s probably only a matter of time until Beijing tries to crack down.

It wouldn’t be the first time. In December 2013 – at a time when the yuan accounted for about 50 per cent of bitcoin transactions – Zhou clamped down hard on the nascent payment system, citing concerns that it was enabling money laundering and undermining capital controls.

The People’s Bank of China barred financial institutions from handling bitcoin transactions, concluding it wasn’t a currency with “real meaning”. A few months later, in March 2014, it went further, ordering banks and payment companies to close the trading accounts of more than 10 bitcoin exchanges.

But bitcoin traders continue to show up the People’s Bank of China. As Goldman Sachs points out, the trading volume on the mainland has risen markedly – even as bitcoins plunge in value (from about US$1,100 in late 2013 to around US$300) and lose cachet elsewhere. “Bitcoin,” writes Goldman Sachs analyst James Schneider, “has momentum in China.”

What gives? Some mainlanders are surely buying bitcoin to engage in relatively innocent forms of financial speculation. But they are probably outnumbered by the people who are using it to move yuan overseas, while circumventing Beijing’s currency controls. That’s partly because the mainland’s broader economic slowdown provides fewer lucrative investment opportunities. But it’s also because of Communist Party general secretary Xi Jinping’s ongoing crackdown on corruption, which has made it harder to launder ill-gotten funds. (Hong Kong money changers used to be the laundering method of choice, but are no longer readily available.)

Bitcoin’s value gyrates too wildly to be a viable transactional unit, but it’s proving to be a nifty way to move money across borders beyond the watchful eye of the government.

Bitcoin’s surging popularity on the mainland – despite the attempts to crack down against it – underscores how fragile the world’s second-biggest economy is at present. Data released on Wednesday showed industrial output since the beginning of the year was at its slowest pace since 2009, rising just 6.8 per cent in January and February. Deflation also seems to be on the horizon.

Wired magazine explored the rise of darkcoin, which is fast becoming the chosen medium of drug merchants and others active on the mainland’s black market. It’s not hard to imagine the development of other such cryptocurrencies with Chinese characteristics.

When the mainland previously faced money laundering problems, it had clearer solutions at its disposal. Last year, for example, Beijing clamped down hard on Macau, whose casinos had become a favoured laundromat for ultra-rich Chinese.

But now that it’s facing a stealthier threat in bitcoin, its options are more limited. Zhou is undoubtedly aware of the problem posed by bitcoin, but he may not yet know what he should do about it.

Maysa Jabout writes: For Arab women, hard-won progress in education has not earned them the economic progress they deserve. Although young women seek and succeed in tertiary education at higher rates than young men, they are far less likely to enter and remain in the job market. Understanding and tackling the barriers that hinder women from working would unlock Arab women’s potential and yield significant social and economic benefits to every Arab State.

Saudi Arabia is largely responsible for the dramatic fall in oil and gas prices in recent months, a U.S. government official said.

Richard Fisher, the head of the Dallas Federal Reserve, said “the Saudis have engineered” the oil crisis. He was speaking at the Economic Club of New York.

“We are a huge supplier of energy. The Saudis took a while to realize what was going on,” Fisher said, referring to the massive growth of the U.S. oil industry in recent years.

Fisher is the most prominent U.S. official to pin the blame largely on Saudi Arabia.

As recently as July, oil traded at over $100 a barrel. By January, it had plunged below $50.

Saudi officials have repeatedly blamed supply and demand for the price meltdown. They say they were caught off guard by the price decline, and acknowledge this is putting a lot of pressure on U.S. shale.

“Although Saudi Arabia and OPEC countries did not engineer the reduction in the price of oil, there’s a positive side effect, whereby at a certain price, we will see how many shale oil production companies run out of business,” Prince Alwaleed bin Talal, a member of the Saudi royal family and prominent global investor, said in January.

The oil games: While the price of oil started falling at the end of the summer, it was exacerbated on Thanksgiving Day when OPEC, led by Saudi Arabia, voted not to scale back on production. That send oil prices diving.

Fisher also noted that the Saudis benefit not just economically, but politically from the oil price decline. Low oil prices especially hurt their biggest regional rival: Iran.

“I’m sure King Abdullah thought to himself, ‘I’ve also done a favor vis-a-vis Iran,'” Fisher said.  Iran’s economy needs oil to trade around $135. Saudi has far larger cash reserves and is thus able to withstand a downturn in prices for much longer.

What’s ahead for oil prices? Given how motivated Saudi Arabia is to keep prices low right now, Fisher doesn’t expect oil will shoot up to $100 a barrel again any time soon.

“From a budget stand point, [the Saudis] have reserves that can handle this,” he said.

While many energy companies are laying off workers and slashing spending, Fisher said that cheap oil’s overall impact on the U.S. economy will be positive. A typical American driver is expected to save $750 this year at the pump, according to government estimates.

Even in his home state of Texas, Fisher said the economy has diversified a lot more beyond oil, so it’s unlikely to be nearly as bad of an effect as the last oil bust of the 1980s.

Martti Ahtisaari, Emma Bonino and Albert Rohan write:  Later this year, Turkey will host the 2015 G-20 Leaders’ Summit, the tenth annual meeting of the G-20 heads of government. The country’s prominence on the world stage comes at an odd time, when it finds itself surrounded by a widening arc of instability.

Indeed, two geopolitical orders are unraveling in Turkey’s immediate neighborhood: the post-Cold War entente with Russia, and the national borders in the Middle East defined by the 1916 Sykes-Picot Agreement and 1919 Treaty of Versailles. Never have the European Union and Turkey needed one another more, and yet rarely have they been so distant.

Turkey is no longer the rising regional star that it was during the first half of President Recep Tayyip Erdoğan’s 12 years in office. Long gone are the days when the country was booming economically and advancing toward true democracy, a source of inspiration to many in the region.

Turkey cannot confront its challenges alone. The EU accounts for almost 40% of Turkish trade, 70% of its foreign direct investment, and more than 50% of its tourism industry. Meanwhile, the country’s economic ties with its southern neighbors have spiraled downward since the Arab Spring in 2011.

This reality is reflected in Turkish public opinion, with support for the EU rising from a low of 34% in 2009 to 53% last year. Simply put, Turkey is waking up to the reality that it has no attractive alternative to the EU and close cooperation with the transatlantic community. The country’s “EU Strategy” announced by European Affairs Minister Volkan Bozkir last fall can be read as an implicit recognition of this fact.

Meanwhile, Europe has never had a greater interest in a stable, democratic, and Western-oriented Turkey.

And yet, rather than being drawn closer together, the EU and Turkey are drifting apart. Freedom of expression, the separation of powers, and the rule of law have been progressively eroded under Erdoğan. The country risks being sucked into the region’s sectarian conflicts – and being tempted by the authoritarian sirens of Vladimir Putin’s Russia.

The EU-Turkey relationship hit a new low at the close of last year, when Turkey increased its pressure on media close to the self-exiled Islamic leader Fethullah Gülen. The clampdown triggered strong criticism by the EU, which Erdoğan, in turn, angrily rejected.

Some in Europe argue that the deterioration of rights and freedoms in Turkey is so serious that the already-moribund EU accession process should be suspended. Indeed, it would be difficult to make the case that Turkey fulfills the Copenhagen political criteria. For example, Turkey slid in Reporters Without Borders’ World Press Freedom Index to 154th place (out of 180 countries).

But it is unlikely that a formal suspension of accession negotiations would do anything other than remove the last incentive for Turkey to pursue democratization and EU harmonization. Instead, the EU should redouble its efforts, strengthening both its criticism of Turkey’s democratic backsliding and the credibility of its accession process.

Until now, Cyprus has posed the biggest obstacle to Turkish accession. EU member states should engage more actively with the Cypriot government to bring about the necessary change.

Lifting its blockade on negotiations would benefit Cyprus as much as Europe. No country would gain more than Cyprus from stable democracy in Turkey.

Beyond the EU accession process, other important measures should be taken to rebuild trust and deliver concrete benefits to both sides, thereby revitalizing an ailing and yet increasingly strategic relationship. Such steps should include upgrading and modernizing the customs union agreement (as the World Bank recently advocated) and vigorously pursuing visa liberalization.

Though these measures are not alternatives to a revamped accession process, they would help to revive it. Above all, by embedding Turkey within the European family, such measures would counter the country’s dangerous drift away from our common European values.

Wolfgang Ischinger, Chairman of the Munich Security Conference; Hans van den Broek, a former Dutch foreign minister and EU commissioner for external relations; Marcelino Oreja Aguirre, a former Spanish foreign minister; Michel Rocard, former French Prime Minister; and Nathalie Tocci, Deputy Director of the Istituto Affari Internazionali in Rome.

Dani Rodrik writes: So-called “frontier market economies” are the latest fad in investment circles. Though these low-income countries – including Bangladesh and Vietnam in Asia, Honduras and Bolivia in Latin America, and Kenya and Ghana in Africa – have small, undeveloped financial markets, they are growing rapidly and are expected to become the emerging economies of the future. In the last four years, inflows of private capital into frontier economies have been nearly 50% higher (relative to GDP) than flows into emerging market economies. Whether that should be cheered or lamented is a question that has become a kind of Rorschach test for economic analysts and policymakers.

We now know that the promise of free capital mobility has not been redeemed. By and large, the surge in capital inflows has boosted consumption rather than investment in recipient countries, exacerbating economic volatility and making painful financial crises more frequent. Rather than exerting discipline, global financial markets have increased the availability of debt, thereby weakening profligate governments’ budget constraints and over-extended banks’ balance sheets.

The best argument for free capital mobility remains the one made nearly two decades ago by Stanley Fischer, then the International Monetary Fund’s number two official and now Vice Chair of the US Federal Reserve. He argued that the solution was not to maintain capital controls, but to undertake the reforms required to mitigate the dangers.

Fischer made this argument at a time when the IMF was actively seeking to enshrine capital-account liberalization in its charter. But then the world witnessed financial crises in Asia, Brazil, Argentina, Russia, Turkey, and eventually Europe and America. To its credit, the Fund has since softened its line on capital controls. In 2010, it issued a note that recognized capital controls as part of the arsenal of policy tools used to combat financial instability.

Yet free capital mobility continues to be the ultimate goal, even if some countries may have to take their time getting there.

There are two problems with this view. First, as advocates of capital mobility tirelessly point out, countries must fulfill a long list of prerequisites before they can benefit from financial globalization. These include the protection of property rights, effective contract enforcement, eradication of corruption, enhanced transparency and financial information, sound corporate governance, monetary and fiscal stability, debt sustainability, market-determined exchange rates, high-quality financial regulation, and prudential supervision. The list is not only long; it is also open ended.

The second problem concerns the possibility that capital inflows may be harmful to growth, even if we leave aside concerns about financial fragility.

But many developing countries are constrained by a lack of investment demand, not a shortage of domestic saving. The social return on investment may be high, but private returns are low, owing to externalities, high taxes, poor institutions, or any of a wide array of other factors.

Capital inflows in economies that suffer from low investment demand fuel consumption, not capital accumulation. They also fuel exchange-rate appreciation, which aggravates the investment shortage.

Such concerns have led emerging economies to experiment with a variety of capital controls. In principle, frontier market economies can learn much from this experience.

That is not because they fail to affect the quantity or composition of flows, but because such effects are quite small.

Capital controls by themselves are no panacea, and they often create worse problems, such as corruption or a delay in needed reforms,  Treating capital controls as the last resort, always and everywhere, has little rationale; indeed, it merely fetishizes financial globalization. The world needs case-by-case, hardheaded pragmatism, recognizing that capital controls sometimes deserve a prominent place.