Economics

Blackstone’s Merlin wizardry has its limits

21 Jun 2010

The buyout firm is looking to sell some of its stake in the UK leisure group to rival CVC in lieu of an IPO. Blackstone can show investors some gains. But the sale leaves a refinancing challenge and a chunk of equity to offload later.

Yuan hasn’t shifted enough yet to mollify Congress

21 Jun 2010

Beijing's currency concession might just defuse Capitol Hill critics. But with U.S. unemployment high and congressional elections just months away, China is a convenient economic scapegoat. An upwarddrifting yuan won't be enough to take the tension out of trade relations.

Security remains key for Colombia’s new president

21 Jun 2010

The country needs major foreign investment in manufacturing and services to achieve Presidentelect Santos goal of reducing appalling poverty. To make that happen, Colombia doesn t just need sound policies and lower corruption it requires physical safety.

Counterpoint: BoE in denial on inflation

21 Jun 2010

UK inflation is always about to fall back below its target, but somehow never quite does. The BoE's faith in spare capacity to restrain prices looks increasingly misplaced, but it dare not raise rates. As a result, its target of 2 percent CPI inflation looks more like a floor.

Yuan-dollar rate doesn’t drive Chinese rebalancing

21 Jun 2010

Currency reform certainly didn't start with a bang on Monday. The People's Bank made no change. But while markets fixate on the dollar exchange rate, doubledigit wage hikes and higher input costs are shrinking the trade surplus. China's competitiveness is deteriorating fast.

UK should worry about deflation, not inflation

21 Jun 2010

The Bank of England could appease critics of its inflation record by jacking up rates and plunging the UK into recession. Sterling, oil prices and VAT have pushed inflation up. But as fiscal policy tightens, the chief risk remains economic weakness and deflation.

China currency reform more word than deed

19 Jun 2010

The People's Bank says it will be more flexible over its dollarpegged currency, but won't revalue strongly. That should placate the US ahead of G20 talks. But it's mostly a return to China's precrisis regime, and unlikely to presage big changes in the yuan's shortterm trading.

Merkel and Sarkozy try to find unity in populism

18 Jun 2010

The French and German leaders say they will push for a global financial transaction tax at next weekend's G20 summit. They know it won't fly. But they're desperate to display a united front after months of profound differences over the management of the euro zone debt crisis.

Russia goes wrong way on infrastructure investment

18 Jun 2010

After years of neglect, the country desperately needs to upgrade roads, railways, ports and utilities. But the government is slashing spending, because social programmes are a higher priority. That choice forces Russians to rely too much on the threadbare Soviet capital stock.

U.S. could finally be getting religion on deficit

17 Jun 2010

Europe s newish cult of austerity may have some converts in Washington. The U.S. Senate is having surprising trouble passing a routine spending bill that grows the budget gap. Bipartisan resistance could hint that deficit hawks are starting to gain the upper hand in Congress.

CPI spares Fed – but not indefinitely

17 Jun 2010

Consumer prices are currently quiescent but may rise in coming months. Based on the Taylor Rule formula that links inflation, employment and interest rates, rates should then rise. But if the U.S. central bank tweaks key Taylor Rule inputs, the signal could be hidden.

EU banks must give full disclosure on stress tests

17 Jun 2010

The euro zone's big beasts are finally planning to publish the results of bank stress tests. Disclosure could ease market tensions, if France, Spain and Germany show they have been as tough as the U.S. was last year. But withholding vital details could just make things worse.

Time to shift UK taxes from labour to consumption

16 Jun 2010

The government takes in 50 percent more from taxes on income than taxes on spending. That split would make sense if jobs were abundant and consumer goods scarce. But job creation is a greater challenge in the UK than poverty. The budget is an opportunity to shift the tax load.

BP oil spill pollutes Obama energy speech

16 Jun 2010

The president used his first Oval Office address to call the nation to a clean energy future. And also to say that BP would pay for the damage its Gulf gusher is causing. Obama sees a direct tie, but the American people may have trouble concentrating until the leak is stopped.

China’s strikes may not be as historic they seem

15 Jun 2010

Recent labour unrest could be just as much the result of an overheating economy as a defining moment in China's modernisation. Surplus labour persists, just in the wrong places. And while spats at foreign firms bring political dividends, Beijing won't let them spread very far.

UK budget coach can’t win economic match alone

15 Jun 2010

The new Office for Budget Responsibility can bring discipline, just like England football manager Fabio Capello. But would the OBR have foreseen the UK's fiscal thrashing? Is George Osborne sorting out the budget midfield? Coaches can help, but it's the team that actually plays.

BP bigger blow to confidence than euro debt crisis

15 Jun 2010

Sure, the Gulf of Mexico fiasco threatens to wipe out just one big company, BP, while one sovereign default could lead to more and break up the single currency. But debt crises can always be resolved somehow. No man, government or corporation has been able to stop the Gulf leak.

UK faces up to grimmer economic reality

14 Jun 2010

The new Office for Budget Responsibility sees less growth in the future while the Bank of England hints at less production capacity left over from the past. Relatively high inflation may be a warning sign. The government must shrink to fit the smaller economy. It won t be easy.

ECB remains at sea in fragile global recovery

10 Jun 2010

Central banks have not managed to speed up money growth. Deflation is still a danger. Slow recovery, high unemployment and fiscal strain will keep policy rates down. The Fed expected as much, but the ECB looks lost. There's a risk central banks will print more money.

Brazil serves up refreshing economic cocktail

9 Jun 2010

The country mixed 9 pct Q1 GDP growth with interest rates 4 percentage points above inflation. Lax fiscal policy may yet cause overheating but for now tight money is keeping prices under control. The sluggish, lowrate Europe and United States may want to consider a taste.