Economics

Asia should grab hot IPO money while it lasts

12 Oct 2010

Countries are worried about hot money from abroad pushing up the value of their currencies. Hence, Thailand s move to tax inflows. But this cloud has a silver lining: the chance to lock in capital at good rates, as the mega IPOs of Petronas Chemicals, Coal India and others show.

Fed ought to consider global bubbles

11 Oct 2010

The expectation of more quantitative easing from the U.S. Federal Reserve is driving hot money into emerging market currencies, asset markets and commodities. The Fed ought to keep in mind the risk that its policies create inflation and destabilising bubbles around the globe.

Who’s winning the currency wars?

11 Oct 2010

The U.S. and China criticized each other at the IMF annual meeting, but actually both are winners in the race for cheaper currencies. The real victims are elsewhere. Unfortunately, there's no easy way forward and, as rhetoric heats up, currency wars could mutate into trade wars.

Economics Nobel nails top problem in world economy

11 Oct 2010

Peter Diamond, Dale Mortensen and Christopher Pissarides were rewarded for work on market search costs, such as for the unemployed seeking jobs. That s highly relevant to today s economy and to Diamond s proposed Fed job. The Senate s rejection of him now looks especially silly.

Peace prize adds to yuan pressure on China

8 Oct 2010

The granting of the Nobel Peace Prize to Chinese dissident Liu Xiaobo puts the PRC on the defensive politically when it is also under pressure to let its currency appreciate. The authorities are giving some ground on the yuan. The West is justified in pushing China further.

Scarce U.S. jobs should raise policy questions

8 Oct 2010

The paucity of new jobs in Friday s report has already brought calls for fresh stimulus. Even if politically feasible, that could just reinforce policy failure. The sluggish upturn suggests ultralow interest rates and huge budget deficits simply may not be working as advertised.

Missing the chance for UK pension reform

7 Oct 2010

John Hutton's report on Britain's public sector pensions sums up the problem: employees must work longer, pay more and accept lower rewards. The gravy train for highflyers is also clearly unfair. Yet his interim suggestions are feeble, and miss the point. There is a better way.

Credit boom’s biggest casualty: U.S. lifestyles

7 Oct 2010

For a decade the American middle class made up for stagnant incomes by going ever deeper into hock. With debt still at 123 pct of disposable income, and no housing wealth to tap, a bout of inflation is one of the few alternatives to a decade of austerity.

Euro will stay high as Trichet longs for exit

7 Oct 2010

The ECB president can't bear countries with huge fiscal deficits and doesn't like giving banks all the cash they want. He longs to return to a normal, precrisis world while the US and UK edge to the printing press. The euro may go higher, harming the zone's recovery prospects.

House price plunge may add to UK policy jitters

7 Oct 2010

The 3.6 pct monthly fall in the Halifax house price index looks worse than it is, after rises in recent months. But house prices are likely to slide, and the shocking number may make the government nervous about cuts. Even so, the coalition mustn't be diverted from tough action.

France’s hedgie surrender was pre-ordained

7 Oct 2010

A majority of EU members have agreed that foreign hedge funds authorised to operate in one member country should be granted a passport for the whole of Europe. France opposed the measure, but can't stick to its hard line much longer. Otherwise the status quo would prevail.

Plaza Accord 2.0 could worsen China’s imbalances

7 Oct 2010

A rerun of the 1980s currency agreement probably wouldn't balance China's trade, just as the original didn't balance Japan's. It might create more distortions as Beijing tried to offset the shock. China can put such ideas to bed by speeding up yuan revaluation on its own terms.

Block trade mini-boom could end in tears

7 Oct 2010

All kinds of issuers are exploiting the rally to offload big chunks of stock take Renault's sale of Volvo shares. After a slow patch for equity issuance, and with yearend league tables looming, banks will be fighting for the work. But blocks can be an easy way to lose money.

Mexico makes most of funding sweet spot

6 Oct 2010

Investors rushed in for a rare 100year bond like kids to a busted piñata. The appetite reflects enthusiasm for emerging markets, Mexico s economic turnaround and the 6.1 pct yield. But domestic risks and past crises still hang in the air. Mexico s strike looks wisely timed.

Three reasons U.S. homeowners shouldn’t lose hope

6 Oct 2010

Folks already depressed by the shrunken value of their biggest asset should skip the IMF s missive on the risk of a double dip in property prices. The fund s grim outlook is hard to dispute. But three historic measures now suggest that homeowners can put down the revolver.

China must budge to avert currency war for real

6 Oct 2010

There isn't yet a multicountry currency conflict; China is the world's single big currency manipulator. But trade and exchangerate wars will start if China doesn't cooperate soon. The world should be satisfied if China gives ground gradually.

Tax fraud is Greece’s Achilles’ heel

5 Oct 2010

The government is ahead of IMF/EU targets for cutting its deficit, as its new budget shows. But revenue is seriously lagging, due to the country's massive tax fraud and evasion. Athens wants to sort this out but, as last week's tax amnesty shows, this won't be easy.

Bank of Japan starts to get it

5 Oct 2010

Launching QE and cutting interest rates close to zero won't do much to address the overvalued yen because the U.S. Federal Reserve is likely to engage in an even bigger bout of QE. But the BoJ's action is still a positive step to tackle deflation by the conservative institution.

Latvia is example of how austerity can work

5 Oct 2010

After draconian cuts designed to head off devaluation of the lat, GDP fell 18 pct in 2009. Now Latvia s economy is turning up and the currency s parity with the euro seems assured. The government responsible even got reelected. Keynesian stimulus isn t the only answer to a bust.

Politics is Portugal’s biggest financial problem

4 Oct 2010

Bond investors are punishing Portugal more than its larger neighbor Spain. Both countries face similar challenges, and Spain's may in some ways be more acute. The difference is that Portuguese politicians haven't yet agreed on how to tackle it.