Economics

Yuan may not be one-way bet for traders

7 Apr 2010

The Chinese authorities seem to be set to depeg the currency. Beijing wants to protect exporters and kick speculators, so expect a complex managed float, not a single big revaluation. The yuan's ultimate direction is surely upwards, but the journey may not be a straight line.

Yuan negotiations should be multilateral

1 Apr 2010

Americans complain the loudest about China's fixed currency. But the EU also runs a big trade deficit with China, and rival lowcost producers are squeezed. Widening the debate could depoliticise it but might also weaken the U.S. case. Not everyone hates the status quo.

Yuan’s rise is inevitable and helpful

31 Mar 2010

China is suffering from growing pains, including a currency that is fixed but shouldn't be. The undervalued yuan threatens to create a disastrous trade war with the U.S. But compromise is within reach. China's hot economy makes a little yuan appreciation advisable now.

Ireland risks falling into debt spiral

31 Mar 2010

The government's postbubble pain is not over. Irish banks will be propped up, adding more debts to the deficits that come with a 7 percent GDP drop. Poor recovery prospects point to evermounting debts, unless something is done. Further public sector cuts seem essential.

California treasurer has right idea on CDS

31 Mar 2010

Bill Lockyer is asking the big banks that underwrite the state's bonds to tell him about their role in the market for related credit insurance. It's a fair question. And this kind of disclosure could be a better way to deal with CDS concerns than a hasty and simplistic ban.

CLO expirations could roil markets

30 Mar 2010

Call it a quirk of fate. Many European buyout loans will come due just as many CLOs, the structured vehicles that financed them, start winding down. That leaves a large funding gap. To close it, new investors are required. Borrowers should expect a rough and expensive transition.

Weak U.S. productivity could create Long Recession

30 Mar 2010

Financial crises are too often followed by slow and meager recoveries. It could happen in America, if business productivity slumps. The omens are not good, especially bad trends in the pace of innovation. Washington can help. While cutting deficits, it should promote growth.

Dubai World lenders have some power in debt talks

30 Mar 2010

The emirate needs the consent of lenders before it can take full ownership of property unit Nakheel, a move it sees as vital to protecting the local economy. That gives Dubai World's creditors leverage in negotiating a better restructuring deal. They may have some success.

Greek interest rates should stay high

29 Mar 2010

Athens will almost certainly get its latest 5 bln euro bond away, thanks to a generous coupon and the promise of an EU/IMF safety net. But to keep default away, Greece has to combine wages cuts with fast GDP growth. It's possible, but current yields reflect justified doubt.

U.S. savers doing little to fund economy’s needs

29 Mar 2010

The U.S. savings rate dropped to 3.1 pct in February, well below the level seen in 2009. That s a step in the wrong direction, with problematic knockon implications for both trade and budget deficits. Above all, low savings leave the U.S. ever more dependent on foreign cash.

Investors can curb the rights issue middlemen

24 Mar 2010

UK investors are angry about the fees banks charge for underwriting equity issues. Even the competition watchdog sounds worried. But institutions could take the initiative and offer to underwrite cash calls themselves for a lower rate. They just need an honest broker.

IMF in Greece is euro’s disgrace

24 Mar 2010

To soothe Germany's concerns, euro zone leaders are working on a compromise that would tap IMF money to help Greece solve its financing problems. This wasn't necessary, but illustrates the euro's basic flaw: the lack of a credible crisisresolution mechanism.

Budget for votes riskily delays UK debt pain

24 Mar 2010

The preelection budget could have been even worse. But it still includes populist measures like a tax cut on property purchases. And while deficit forecasts have been shaved, they remain optimistic and alarming. At best the UK delays its pain; at worst it heads for crisis.

Markets aren’t ready to blow LBO bubbles — yet

22 Mar 2010

Buyout buzz has gained momentum thanks to shrinking debtmarket risk premiums. HarleyDavidson, RadioShack and Supervalu all got the treatment recently. Sure, LBOs are back from the dead. But bigger examples will remain scarce for now. Loan markets, especially, just aren t ready.

EU summit Greek standoff could restart contagion

22 Mar 2010

Despite Germany's fierce rhetoric opposing a Greek bailout, there is still a chance of compromise at this week's EU summit. But if euro zone leaders can't clarify their position, the crisis could spread to other weak members such as Portugal and Spain.

China’s double agenda means more trade pain

19 Mar 2010

A cheap yuan helps to protect makers of poorcountry exports, like toys and tyres. But China is also moving rapidly into richcountry goods, like highspeed trains, where currency matters less. So long as it pursues both goals, competitors at both ends will feel the squeeze.

Yuan may be less undervalued than it appears

19 Mar 2010

Some U.S. congressmen want to slap duties on Chinese goods unless Beijing revalues the yuan. Yet China's premier insists the currency isn't cheap, and Goldman Sachs research supports his view. The revaluation lobby is loud, but its case is open to challenge.

Benign U.S. inflation report is pause, not break

18 Mar 2010

February s flat CPI index stemmed from a price dip for energy and the stronger dollar. Global stimulus and a rising U.S. trade deficit should reverse both soon. Wages are still under pressure, but higher costs for commodities, energy and capital will keep inflation ticking up.

U.S. Congress needs new financial regulations, too

18 Mar 2010

A top aide to Senate Banking Committee Chairman Chris Dodd traded financial stocks during the crisis. The trades were apparently allowed, but look dodgy. With so much marketsensitive activity going on in Washington, it's time to toughen up Capitol Hill's investing rules.

Back to the future for UK capital gains tax

17 Mar 2010

In 2007, the admission from a private equity boss that those at the top paid less tax than a cleaning lady caused fury, and forced panic changes to the capital gains tax rules. But the current regime is unsustainable. There is a better way and it's a wellcharted path.