Economics

South Africa has work cut out to reach BRIC goal

26 Aug 2010

President Jacob Zuma wants South Africa to leap from the emerging CIVETS grouping into the club representing the biggest fastgrowing economies. That would bring a deluge of foreign investment. But Zuma has plenty to prove including that he can avoid the BRICs worst failings.

Ireland must cut to avoid becoming Greece

25 Aug 2010

Global doubledip fears and a downgrade of Ireland by S&P are increasing pressure on the euro zone periphery again. Ireland's debt is spiralling. The fiscal deficit must be cut fast. If Ireland doesn't act, it will follow Greece into crisis and test the zone's safety barriers.

China’s currency games could annoy its neighbours

25 Aug 2010

Beijing has been buying its Asian trade partners' debt to diversify its $2.4 trillion reserves. But Japan and Korea are already anxious about their currencies rising too much. Beijing could incur losses or worse, strain relations. Sticking to the dollar looks the lesser evil.

100-year Treasuries could be tough sell

24 Aug 2010

If a U.S. railroad can issue 100year bonds, why not the U.S. Treasury? Longer maturities than the current 30year maximum would reduce refinancing needs and appeal to institutions. But investors might well demand more return for the risks than Treasury would be willing to pay.

Equities at tipping point as risk aversion mounts

24 Aug 2010

Japan's Nikkei index has touched a 15month low a bearish signal for global equities. Falling oil and a rising dollar are other signs of growing risk aversion. Stocks that have risen far on expectations of a smooth recovery could be about to retreat sharply.

Death penalty rethink is China economic milestone

24 Aug 2010

China may scrap capital punishment for most financial crimes. The extreme penalty partly reflected the importance of maintaining trust in Chinese financial institutions. But it also showed economic immaturity, and undermined China's global standing.

Aussie election stalemate leaves miners in dark

23 Aug 2010

The country's economic health means a hung parliament shouldn't frighten markets. The biggest bargaining chip in the battle to court independent lawmakers could be the fate of the proposed supertax on miners' profits. Sadly, the levy may not survive the political horsetrading.

Further stimulus is not what Japan needs

23 Aug 2010

Surpassed by China as the world's No.2 economy, some Japanese politicians want another fiscal boost and a weaker yen. But more spending has limited benefit and adds to the deficit. Perhaps only a crisis will force Japan to discover and address the profound causes of its malaise.

Spain lulled into false sense of security

20 Aug 2010

The government appears to be slightly backpedalling on its austerity measures. Despite successful recent debt auctions, this seems naïve. Investors are still nervous of sovereign risk, and Spain cannot afford too many missteps.

Peru faces choice of near-neighbors’ policies

20 Aug 2010

The Andean country has enjoyed standout economic growth in 2010, but this may not last. In next April s election, it will choose between resourcesled growth like Chile, state expansion like Argentina or full state control like Venezuela. Peruvians votes will really matter.

Weekly U.S. job data could foretell policy lesson

19 Aug 2010

The uptick to 500,000 in initial jobless claims spooked the market. It could be a blip, since newly redundant census workers will claim benefits. But if market pessimists are right, the sense that unprecedented policy moves have failed to generate jobs would be inescapable.

Europe’s economy grows dependent on Germany

13 Aug 2010

German GDP jumped 2.2 percent in the second quarter. The global recovery helped boost exports, but domestic demand and investment surged as well. Other EU economies will benefit. But it's now even less likely that Angela Merkel will change course on cutting the deficit.

Peripheral debt pain shows Europe is still weak

12 Aug 2010

Spreads on Irish and Portuguese bonds have risen sharply in recent days. Low trading volumes may be playing a part, but bad news and fragile markets are raising risks of more sovereign blowups. The ECB may be forced to provide more support if conditions get much worse.

Obama’s home state may beat California to default

12 Aug 2010

Illinois budget mess is worse than the Golden State s; its government is in arrears and borrowing to fund pensions. It does have a low income tax rate and restrained local governments. But its weak economy and erratic debt management could tip it first into crisis mode.

Russian economy scorched by wildfires

11 Aug 2010

The fires ravaging regions of Russia could knock 1 pct off this year's GDP, while food shortages may add 1.5 pct to inflation. The impact will also be felt in future years. With popularity at an alltime low, the crisis could not have come at a worse time for the government.

China’s mild inflation could be good for the world

11 Aug 2010

Consumer prices rose 3.3 percent in July, more than Beijing's fullyear target. Food costs should drop after floods retreat, though higher wages will push up other prices. But with much of the world mired in slow growth, China's mild inflation could bode well for domestic demand.

King’s vision of weakness may mean more QE

11 Aug 2010

The Bank of England governor expects inflation above his target in 2011 and below it in 2012. The U.S. Federal Reserve's decision to top up its quantitative easing suggests the BoE's downbeat outlook may be right. The Old Lady, too, may one day dust off the printing press.

Bankers will have to learn to love the CoCo bonus

11 Aug 2010

European regulators are designing rules to make banks pay part of their bonuses in contingent capital bonds. Employees may hate the idea, but paying compensation in hybrid debt should make them less reckless. It could also help develop the market for new kinds of bank capital.

China can’t both pull and push the yuan

10 Aug 2010

Beijing is trying to stimulate the use of its currency outside China. But capital inflows will make it harder for the authorities to control the exchange rate. Until now, China has managed to limit the yuan's volatility. That may be about to become more difficult.

Japan fears further dollar weakness

9 Aug 2010

A toostrong yen and slow U.S. growth are making life hard for Japanese exporters. Data on trade and on domestic lending are disappointing. The finance minister is trying to talk down the yen, but the U.S. recovery and the Fed remains the key.