Economics

Flash crash report shows how, er, crashes happen

4 Oct 2010

There's no real blame. Preexisting jitters and one large trade, overlaid with computerized trading and data glitches, led U.S. stock market liquidity to dry up briefly on May 6. Some fixes are possible. But the broader lesson is that markets will always have tipping points.

EU unlikely to fall for China’s Greek ploy

4 Oct 2010

We're such nice guys, we'll even buy Greek debt, says China's PM on his European tour. It looks like an attempt to curry favour with the euro zone as the U.S. piles on pressure to revalue the yuan. But the euro zone isn't likely to and certainly shouldn't swallow the bait.

Feds might bail out U.S. cities and states

4 Oct 2010

Historically that hasn t happened, but the EU s example could make it more likely. Two possible structures for bailouts are budgetavoiding federal guarantees and regulationbending Federal Reserve bond purchases. Either way, politics may make rescues hard to resist.

Ireland’s bailout is a clever financial wheeze

1 Oct 2010

The government's bank rescue has left a gaping deficit for 2010. But the cash cost will be spread over 10 years, while other expenses aren't included in the national debt. If Ireland can persuade investors it has capped its losses, however, the manoeuvres will be worth it.

Jain’s rights issue reluctance could go down badly

1 Oct 2010

Unlike his boss, the head of Deutsche's investment bank is not taking up his full entitlement to buy shares in the German lender's 10.2 bln euro cash call. There are good reasons why Jain may not be stumping up fresh cash. But they won't help his chances of becoming the next CEO.

Spain will survive its latest downgrade

30 Sep 2010

Moody's was the last of the rating agencies to knock Spain's AAA rating. It did so by just one notch. This should encourage the government to stick to its guns on fiscal discipline, as it sends its austerity budget to parliament. But if growth stalls, it will have to do more.

Irish woes further dent cred of euro stress tests

30 Sep 2010

The summer's health check of European banks already looked soft it turned a blind eye to sovereign exposure outside the trading book. The fact that Irish banks need a fresh bailout shows another flaw: the biggest offender, Anglo Irish Bank, wasn't even part of the test.

U.S. trade thaw may leave China out in cold

30 Sep 2010

Passage of a retaliatory China currency bill in the U.S. House helps brand this Congress one of the more protectionist in years. The next one might well embrace trade by passing several stalled pacts. But Beijing shouldn t expect that to translate into a friendlier Washington.

U.S. tax debate should bypass old German theory

30 Sep 2010

The expiry of Bushera tax cuts could hurt the anemic U.S. recovery. Hawks reckon that's an acceptable risk, saying America can't afford to extend them. But that assumes belief in Wagner's Law, which posits everhigher public spending a bit of dogma in need of debunking.

Bank rescue takes Ireland to the brink

30 Sep 2010

Propping up its troubled lenders will lift the country's deficit to an astonishing 32 pct of GDP. Getting the cost out into the open is better than sweeping it under the carpet. But the underlying deficit is still 12 pct. Until that is addressed, Ireland will be vulnerable.

Depression warning has weight but QE should wait

29 Sep 2010

Adam Posen has called for more quantitative easing. The member of the Bank of England monetary policy committee's fears of a slump cannot be easily dismissed. But policy is different from the 1930s and protectionism has been avoided so far. More QE should remain on hold for now.

Dubai returns to bond market right on time

29 Sep 2010

It may seem too soon for the emirate to be selling its first bond since flagship conglomerate Dubai World was forced into a $25 bln restructuring last year. Creditors are still licking their wounds. But the emirate is right to see now as a good moment to test investor confidence.

Prosecuting politicians for negligence is bad idea

29 Sep 2010

Retired leaders should be liable for corruption or war crimes. But Iceland's decision to charge its former premier with negligence during the banking crisis sets a poor precedent for any civilised state. It looks vindictive, and will deter future politicians from seeking office.

China IPO frenzy returns – but not in China

29 Sep 2010

Domestic investors are no longer blindly in love with new stocks. But foreign markets seem to be. Four Chinese companies rose on average 52 percent on their debuts in New York and Hong Kong. Cashrich global investors like growth, but new supply may test their exuberance.

China’s billionaires not ready to give like Gates

28 Sep 2010

Bill Gates and Warren Buffett may struggle to rustle up philanthropic spirits on their tour of China. The country's billionaires are still insecure about their wealth, and trustworthy charities are lacking. Yet as China's wealth gap widens, more generosity might be a good idea.

EU should resist ECB’s fiscal policy power grab

28 Sep 2010

Trichet, the ECB president, wants euro zone governments to answer his questions on fiscal deficits, and suggests a committee of wise men should monitor budgets. This goes too far. Budgetary policy is a matter of government responsibility, not central bank meddling.

Mayor’s ouster won’t solve Moscow’s problem

28 Sep 2010

The abrupt sacking of mayor Yuri Luzhkov could help improve the city's negative investment climate if his successor gets a free hand to tackle the Russian capital's rampant corruption. But the way he was ousted leaves little hope this will happen.

U.S. corporate tax debate needs directional shift

28 Sep 2010

The hotbutton campaign issue of jobs offshoring is driving a vote on taxing overseas income of U.S. multinationals. The bill looks set to fail but corporate taxes do merit attention. A territorial regime and rate cut would shift the debate from the political to the sensible.

Oil prices will guide Venezuela’s political future

27 Sep 2010

The opposition victory in Sept. 26 elections gives Hugo Chavez international credibility, but does not restrict his power much. If oil prices hold up, he will have the cash to keep his form of Bolivarian socialism alive and the power to win 2012 s presidential election to boot.

Ireland’s only road to solvency is more cuts

27 Sep 2010

The emerald isle's GDP fall is encouraging some to say the cuts are too savage. But that's wrong. Ireland can't do much to cut the cost of its bank bail out and turning to the EU would provoke panic. Public sector pay ballooned in the boom and must be cut. And growth will return.