Economics

EU timidly moves towards better banking regulation

3 Sep 2010

European Union bodies have finally reached a compromise on the new financial regulatory framework suggested by the Larosière report eighteen months ago. The new panEuropean bodies will lack a full set of teeth, but they might still be able to help in times of crisis.

Bob Geldof’s African buyout fund shows good timing

3 Sep 2010

The rock star wants to invest $1 billion in Africa. Even Goldman guru Jim O'Neill says the continent may be the next BRIC. Africa's been the next big thing for ages. But there are reasons to think it's different this time, and Geldof's established connections will open doors.

Reviving recovery story puts bonds at risk

2 Sep 2010

The market mood has swung back from double dip to recovery. Solid U.S. manufacturing was the chief catalyst, though fast growth in exportoriented Australia is another sign that Chinese growth is holding up. Bonds that are priced for a deflating world now look vulnerable.

Obama pulled two ways on stimulus 2.0

2 Sep 2010

Departing White House economic adviser Christina Romer says last year's $814 bln package fell short. That may suggest those arguing for more are gaining ground with the administration. But short of a renewed economic slump, electoral politics are working against more spending.

Basel’s Coco plan is step in right direction

2 Sep 2010

The body that sets global banking rules wants all capital instruments to be written down if a lender gets into trouble. The plan will help to reduce moral hazard, though it may increase the cost of credit. There are also some imperfections in Basel's plan.

A Labour leader who could upset the UK coalition

2 Sep 2010

Two Eds, two Milibands, and about half a policy between five candidates. One will lead Britain's opposition Labour party, but only David Miliband, front runner ahead of his younger brother Ed, appears to have grasped the scale of the UK's problems.

Investment banking finds sweet spot in forex

1 Sep 2010

Foreign exchange trading provided the industry with a muchneeded boost this year. As well as smoothing earnings volatility, the business looks a relative winner in a tougher regulatory climate. Even if secondquarter performance isn't repeated soon, forex has a lot going for it.

China’s manufacturing rebound looks hard to sustain

1 Sep 2010

The muchwatched PMI measure showed manufacturing bouncing back. But external forces threaten. China still depends on the U.S. market, and its export recovery might tempt neighbours to snatch back market share. Meanwhile, domestic markets won't easily pick up any slack.

Fuld may have a point mixed in with his Kool-Aid

1 Sep 2010

Blaming Lehman s demise on the lack of a bailout neglects years of hubris. It was Fuld s job to watch his firm s back. But his charge that regulators were damagingly inconsistent is fair. The U.S. crisis commission should get to the bottom of why and how to avoid it next time.

It may be too late for Obama to cut taxes

1 Sep 2010

The administration is possibly warming to the idea of tax breaks to boost the economy. Such a plan would have landed plenty of Republican votes 18 months ago. But with the president s popularity falling and elections looming, congressional support won t be so easy to coalesce.

Blair’s economic policy claims are absurd

1 Sep 2010

Tony Blair, UK prime minister until 2007, asserts in his new memoir not only that he ran economic policy for most of his 13 years in power but that all the best ideas were his. Gordon Brown, his finance minister, made many mistakes, but Blair s version is simply not credible.

State capital sounds alarm on muni defaults

1 Sep 2010

Harrisburg, Pennsylvania, is skipping a general obligation bond payment. The default is small but the significance potentially much larger. The struggles of municipalities tend to lag the economic cycle and a sluggish recovery could very well produce a surge of them.

Japan’s fate hangs on US

31 Aug 2010

Tokyo's latest mini fiscal stimulus and the central bank's supply of yet more cheap loans has impressed nobody. The too strong yen keeps rallying. Currency intervention may be the next move. But even that will achieve little. Japan desperately needs a stronger US recovery.

Decent Canadian recovery outshines sluggish U.S.

31 Aug 2010

The annualized Q2 growth rate of 2.0 pct north of the border didn t much beat the U.S. pace, but final demand growth at 3.2 pct was much stronger. That s an indication that Canada s economy, though weighed down partly by its neighbor s weakness, is recovering more robustly.

FDIC’s cautious optimism at odds with the market

31 Aug 2010

Bank investors digested the Q2 positives the regulator is just pointing out weeks ago. Now revenue shortfalls and chances of a double dip worry them enough to drive many bank stocks below book value. The FDIC s report is a handy historical snapshot, but may already be outdated.

Strong yen is not Japan’s main problem

30 Aug 2010

The BOJ's latest moves failed to weaken the currency. In any case, the tradeweighted yen is weaker than its real 19902010 average and Japanese exports are still rising. Export lobbies may have the government's ear, but intervention could make Japan's domestic predicament worse.

Canada takeover laws make Potash easier to snare

27 Aug 2010

The country's weak protections for minority shareholders and limits on poison pill defences make hostile bids easier than in the U.S. BHP will need to raise its offer to win Potash Corp. But, the miner's bigger challenge may be persuading its investors to support such a move.

Bernanke fights phantom problem, ignores real one

27 Aug 2010

The Fed boss said on Friday he would act against deflation but he ignored the federal deficit. Even Japan has not had significant longterm deflation, while the U.S. deficit is at record levels. Bernanke s faulty diagnosis and treatment are unlikely to produce faster growth.

Bernanke’s message: we can get out of this hole

26 Aug 2010

The Fed chairman is to address the policymakers powwow at Jackson Hole amid heightened fears for the U.S. economy. Bernanke can plausibly argue that economic recovery is just about intact. But he will almost certainly remind us of the Fed s moneyprinting remedies if it isn t.

BHP bid should sail through Canada’s regulators

26 Aug 2010

Foreign buyers must prove a deal will be a net benefit to the country. The Australian miner's pursuit of Potash Corp should easily pass that test. And national security isn't an issue. Canadians might not like losing another top company. But there's no reason to prevent it.