Economics

China offers credit ratings for new world order

13 Jul 2010

The sovereign debt crisis has shown the inadequacy of Western rating agencies. The Chinese are doing something. Its new Dagong ratings say China is a better risk than the U.S. and UK. When the world's biggest single buyer of government debt speaks, other investors should listen.

UK government may pay for inflation fiddles

12 Jul 2010

The new coalition is trying to save money by switching its inflation benchmark to an index which has produced lower figures. But the historic difference is the result of Britain's long property boom. When this comes to an end, the policy switch could prove to be very expensive.

Japan’s election stalemate is blessing in disguise

12 Jul 2010

Markets barely blinked as the DPJ lost control of Japan's upper house. But the result looks positive for the country's indebted economy. The DPJ may now have to ally with the fiscally conservative Your Party to push policy through. That makes action on the deficit more likely.

Euro zone may show way to post-Westphalia world

12 Jul 2010

The 1648 treaty established national sovereignty as Europe's guiding principle. The single currency violates this principle, as its critics hasten to point out. But the economist Tommaso PadoaSchioppa makes a good case for the region's more flexible politicaleconomic model.

Euro has scope to keep rising – and fall later

8 Jul 2010

A strong defence from the ECB helped thwart traders who expected an imminent euro collapse. With the U.S. looking weaker, the single currency's recovery could continue. But the euro zone periphery is far from sound. That will take years, during which the euro may decline again.

German World Cup loss offset by economic gains

8 Jul 2010

The country s footballers have their flaws but its exporters are undeniably world class. The financial collapse and the weak euro have shown the benefits of the German economic model, which emphasizes manufacturing, technical education, workforce discipline and quality control.

Greece’s fortitude should inspire other EU leaders

8 Jul 2010

An EU report shows that the Greek government has started delivering on its promises of serious reforms. It is on track to reach its deficitreduction goals. Prime minister Papandreou's determination is paying off. He should be a model for some of his EU colleagues.

Would the ECB pass a stress test?

7 Jul 2010

The central bank has taken on a lot of dodgy assets since the crisis struck. Its balance sheet can sustain severe losses for a few years without triggering inflation. But if disaster strikes, the ECB would have to ask euro zone countries to bail it out. That would not be easy.

U.S. state/local finances in big double-dip risk

7 Jul 2010

Alarmingly, the budget gap for the states in 201011 is higher than in 200910. If the recovery slows or doubledips, state and local government budgets, highly dependent on economic conditions, could suffer more pain than any other player except the longterm unemployed.

Russia rightly attacks a murky corporate practice

6 Jul 2010

The parliament has proposed a ban on voting quasitreasury stock, shares that a subsidiary owns in its parent. That would make it harder for managers and controlling oligarchs to ignore outside shareholders. A pity, then, but no surprise, that the plan has powerful opponents.

China looks healthier when it slows

6 Jul 2010

China's growth is slipping, but from the heady 12 pct to the new normal of 89 pct. Rebalancing away from investment and trade will hurt growth, though the pain is necessary to reduce financial risks. Financial stalemate is a concern, but the marathon runner looks in good shape.

Double dip less likely than years of dull growth

6 Jul 2010

Growth is slowing in much of the world. The good news is that there are few signs of an imminent fall into renewed global recession. The bad news is that the financial system remains both a brake on expansion and at risk of another explosion. The crisis has turned into a morass.

Euro zone rescue fund no quick fix for banks

6 Jul 2010

The EU monetary affairs commissioner says the 440 billion euro bailout fund could be used to recapitalise banks. But the fine print hasn't changed. Banks would first have to go to governments and only, if governments struggled to raise money, would they go to the bailout fund.

EU bank cash calls won’t mean i-bank fee bonanza

5 Jul 2010

Equity underwriters had a bumper pay day last year after U.S. bank stress tests led to a spate of private capital raisings. But many of the euro zone banks that could require capital after their own forthcoming stress tests are not quoted. A similar fee splurge looks unlikely.

Market prices might be almost meaningless

5 Jul 2010

That's one way to interpret the analysis of derivatives expert and philosopher Elie Ayache. If the economic estimate of a fair price relies on an unknowable distribution of future values, that calculation isn't worth much. Better to think about moods and the flow of money.

Tepid U.S. jobs report spares Congress – for now

2 Jul 2010

Friday s data indicate anemic growth at best. That will keep austerity advocates quiet. But with prudence in vogue, there s also little ammo for proponents of a fresh stimulus. Lawmakers will have to wait and see but they may get antsy as November s elections approach.

How to square the circle on EU bank stress tests

2 Jul 2010

Financial markets are worried about European banks' exposure to sovereign debt. But governments carrying out stress tests on lenders don't want to admit that some countries may default. With a bit of skill, regulators should be able to design a test that keeps both sides happy.

Euro zone will muddle through

1 Jul 2010

Although banks and sovereign debt could still provide flashpoints, a credible path for dealing with Europe's zombie banks and zombie economies is emerging. Unfortunately, it won't be a jolly ride and it could provoke a doubledip recession, say Hugo Dixon and Neil Unmack.

Brazilian bankers’ yearlong carnival comes cheap

1 Jul 2010

Take Banco do Brasil s stock offering this week. While $5.4 bln, the 50 basis points in fees are exceptionally low and spread among five banks. This sets a precedent for the next megaoffering, of Petrobras stock. But with some $82 bln to be sold, banks can t afford to miss out.

Presidential mess undermines Merkel’s authority

1 Jul 2010

It took three rounds for Angela Merkel to get her candidate elected to the honorific German presidency. The chancellor's waning leadership, and the deepening rift with her coalition allies, will make it more difficult for her to act swiftly on the euro zone debt crisis.