Economics

Beijing’s keep-’em-guessing approach has flaws

21 Oct 2010

Strong inflation figures help explain this week's surprise rate hike but the central bank remains mute. An air of mystery may stop investors thinking China's monetary policy is a oneway bet. But in fighting inflation, a clear, wellexplained plan looks more effective.

The game has changed but Geithner can keep playing

20 Oct 2010

With much of Obama's original economic team gone, Washington insiders keep buzzing about the Treasury secretary's fate. The position's evolving mandate has changed from saving the banks to fixing the budget and boosting trade. But Geithner may still be the best man for the job.

Stimulated markets twitch at slightest tightening

20 Oct 2010

China s unexpected rate rise has unsettled markets wanting more stimulus, not less. Yet the modest move reflects stirring inflation in fastgrowing Asia. In the slowgrowing West, markets are counting heavily on more stimulus from the Fed. But that s not an absolute certainty.

Britain’s unkind cuts may help growth sprout

20 Oct 2010

The government has delivered the promised bloodbath, slashing spending by 81 billion pounds over five years. State employees and welfare dependents will be hit hard. The big risk is that private growth fails to take up the slack. But at least ministers have been decisive.

China lifts rates – now what about the yuan?

19 Oct 2010

The country's first interest rate increase since 2007 may take the edge off stirring inflation, but won't stop property prices rising or savings from being eroded. Still, hiking rates only a bit gives China room to strengthen its cheap currency. That would be a welcome sequel.

Geithner no warrior in currency battles

19 Oct 2010

The U.S. Treasury Secretary has plausibly asserted that America is a noncombatant in the ongoing currency wars. Geithner is right. Dollar weakness is but a side effect of an ultraloose monetary policy. The U.S. should keep the pressure on China.

China will find culture tricky to manufacture

19 Oct 2010

The Communist Party has named culture as a pillar industry in its fiveyear plan. Unlike former pillars such as properties and autos, that might actually help the economy rebalance provided problems over intellectual property and freedom of speech don't get in the way.

Mandelbrot gave shape to flaws in modern finance

18 Oct 2010

The maverick mathematician behind fractal geometry, who has died at 85, showed markets don t necessarily move in a random walk but rather are prone to sharp jumps. That helped discredit several of Wall Street s risk management practices. Many still haven t taken notice.

EU considers timid steps towards fiscal wisdom

18 Oct 2010

To avoid a repeat of the sovereign debt crisis, the EU wants to force members to pay more attention to debt levels, with fines to pay when they stray off fiscal targets. But Germany will find it hard to convince other countries of the need for tougher, automatic penalties.

Dollar’s Asian fall is good for the world

15 Oct 2010

That Singapore's revaluation helped provoke a further selloff in the dollar might appear to add to the U.S. currency's QEfed humiliation. But rising Asian currencies will help to rebalance the global economy. The pressure on China to join the healthy trend will only increase.

Tame U.S. inflation doesn’t justify money-printing

15 Oct 2010

The core CPI hit its lowest annual rate in 50 years. With commodities soaring and inflation still present in producer and import prices, it looks as if labor conditions are suppressing consumer prices. The economy needs rebalancing, not more quantitative easing by the Fed.

Russia’s move to free rouble is right but risky

15 Oct 2010

The decision to widen the rouble's band is more than a kneejerk reaction to global currency wobbles. It shows the strategy to float the rouble remains on track. But Russia still faces exchange rate dilemmas which won't be solved until the economy shakes off its oil dependence.

Catalonia raises stakes in Spain’s deposit war

15 Oct 2010

Shut out of markets, the cashstrapped regional government is using an army of bank managers to sell 2.5 bln euros in bonds to retail savers. It's a sensible if expensive move. But for Spain's weaker banks, the generously priced issue risks cannibalising muchneeded deposits.

Listed hedge funds die hard

14 Oct 2010

It feels like boomtime again in hedge fund land, with Brevan Howard the latest manager to be raising permanent capital with a listed credit fund. Previous such vehicles have flopped. The new breed may be better designed, but investors can't say they haven't been warned.

What China’s five-year plan should really say

14 Oct 2010

China's wish list for the next five years comes at a critical moment. The People's Republic is trying to make the shift from exportled to consumerled growth. A good start would be to ditch some old targets and install new ones. Here are five goals that might work wonders.

ECB should keep buying government bonds

13 Oct 2010

Bundesbank chief Axel Weber thinks the ECB's government bond purchases haven't helped, and should be stopped. Weber is half right the euro zone sovereign bond market still isn't functioning properly. But that's precisely why the programme should be kept in place.

Cash call fees heading in right direction

13 Oct 2010

UK rights issue fees remained stubbornly high during 2009. But the terms of StanChart s 3.3 bln stg cash call suggest they are finally coming down as they should, given lower market volatility. That should make a new round of bank capital raisings more palatable for investors.

Strong China trade points to more pressure on yuan

13 Oct 2010

China's thirdquarter trade surplus was its highest since 2008, despite falling slightly in September. Meanwhile, its pile of foreign exchange hit $2.6 trillion. As the yuan falls against trade partners' currencies, the numbers set China up for tough questions at November's G20.

Buba chief’s outburst lays bare ECB divisions

13 Oct 2010

Axel Weber says the European Central Bank s sovereign bondbuying programme hasn t worked and should be stopped. He also wants a speedy exit from other emergency measures. This public dissent will confuse markets about the ECB s policy, and increase upward pressure on the euro.

South-South M&A trail leads to seller’s remorse

12 Oct 2010

Emerging market tieups are on the rise. But familiar imbalances lurk: India and China are buying, while everyone else sells. Southern economies may be happy to thumb their noses at the North for now, but selling the family silver is a poor way to climb the development ladder.