Economics

Manipulator label could ease China-U.S. relations

17 Mar 2010

The U.S. Treasury Department may finally tag China a currency manipulator next month. Beijing may not rejoice, but should be neither shocked nor angered. The likely alternative is protectionist laws from Congress. And the label brings negotiations first, sanctions only later.

Reforms shouldn’t stop at Wall Street

17 Mar 2010

The Fed also needs a rethink: to avoid groupthink, become less political and more distant from the financial industry. The Dodd plan gets it nearly right. Active bankers shouldn t be on regional Fed boards. But it s not ideal for the president to appoint the NY Fed boss.

Jobs, inflation and pound don’t signal UK rebound

17 Mar 2010

Lower jobless claims and Bank of England concern on inflation gave sterling a brief boost. But there are less people in work, and inflation reflects the pound's fall rather than recovery. The pain may get worse when fiscal cuts come, but devaluation is helping the UK rebalance.

Investors should fear Goldilocks’ farewell

17 Mar 2010

The Fed is still talking low for long but is winding down stimulus as the U.S. economy warms and will raise rates this year. In China, the porridge is too hot and monetary cooling looks needed. Markets have got comfortable with überstimulus but the bears may soon be prowling.

Reform’s steely knife points at Goldman and Morgan

16 Mar 2010

Wall Street s closest link to Hotel California lyrics had been the indulgent pink champagne. But a plan to overhaul financial regulation brings a new slant. The two firms could check out as bank holding companies but not leave the Fed s embrace. That s the way it should be.

Europe’s demographic decline won’t cut job pain

16 Mar 2010

More people will hit retirement than working age in the EU this year. The trend will accelerate, so it might sound like a job glut is in the making. But that s not the way modern economies work. Population falls could even make unemployment a worse problem.

Fed ‘extended period’ may not be such a long time

16 Mar 2010

Retaining ultralow rates for a really extended period could depress savings rates, quash small business lending, boost inflation and increase dependence on foreign capital. If unemployment numbers trend better, rates could start rising sooner than the Fed's language suggests.

Nobel laureate scores rare Wall Street win

16 Mar 2010

William Sharpe s IPO of an investment advisory firm defies the record of his elite brethren. Recipients of the prestigious economics prize often struggle to turn theory into profit think LTCM. Sharpe s firm, Financial Engines, is succeeding because it wasn t blinded by dogma.

Appearance of rising wealth is unusually fragile

12 Mar 2010

The Forbes ranking of billionaires and data from the U.S. Fed suggest that individuals' net worth is again on the rise. Trouble is, governments everywhere are propping up markets and asset values. As fiscal authorities change tack, recent increases in wealth could evaporate.

China’s yuan rebuttal puts U.S. in a bind

12 Mar 2010

Premier Wen's muscular denial of a toocheap currency is sure to raise American hackles. If the U.S. Treasury retaliates by officially branding China a currency manipulator next month, it could kick off titfortat trade sanctions with damaging consequences for all.

Doubling U.S. exports will take more than rhetoric

11 Mar 2010

President Obama s goal of doubling exports in five years requires market opening, not just subsidies and new bureaucracies. If he yields to protectionism on trade, agriculture and antidumping matters, global trade will decline most likely taking U.S. exports down with it.

Chinese inflation could run out of control

10 Mar 2010

If the rate could persist at February's 2.7 percent, China and the world might be better off. Rising prices and wages spur consumption and effectively revalue the currency. But it will be hard to keep inflation tame while monetary policy stays loose in an overheating economy.

Weak pound still can’t revive British exports

9 Mar 2010

The UK's trade deficit for January wasn't bad it was dire. The cheaper pound gave British exporters the chance to employ the spare capacity in the economy that the Bank of England insists will help control inflation. If it exists, manufacturers are not using it yet.

Iraqi elections could kick-start oil efforts

9 Mar 2010

Iraq is corrupt, violent, and lacks a solid oil law. But its crude is abundant and cheap to extract. If a stable regime emerges from the weekend's polls, foreign oil groups will consider investing more. The government s job will be to persuade them the risks are manageable.

U.S. needs to lead, not hide, on free trade

9 Mar 2010

Brazil s threat of tariff retaliation over American cotton subsidies is only the latest eruption of protectionism acts around the world. President Obama isn t doing much to quell such sentiment in the United States either. The omission could prove costly.

Board gender quotas not the way to go

8 Mar 2010

Simply increasing the number of women directors risks producing a merely cosmetic change. Gordon Brown's threat to enforce increased diversity at the top is flawed. What boards need is a wider range of thinking, which would surely require a more equal balance of the sexes.

Yuan appreciation is still a distant move

8 Mar 2010

China's central bank governor has acknowledged that Beijing must eventually end its special yuan policy the clearest signal yet that the currency may be allowed to rise. But it would be wrong to expect change soon. Higher authorities still think boosting exports is a priority.

Counterpoint: Resist inflation’s siren seductions

8 Mar 2010

Some pundits, including Reuters Breakingviews' Edward Hadas, argue that a spot of inflation could be just the remedy to bail out those who borrowed too much. But the flipside would be that savers would be robbed. This would be an extremely unhealthy lesson from the crisis.

Spanish banks face looming bad debt spike

5 Mar 2010

The Bank of Spain may force lenders to make larger provisions for real estate bought from developers. But refinanced loans pose a bigger problem. All told, Spanish banks face at least 23 bln euros of extra provisions. That s 41 percent of the amount they have set aside so far.

Inflation doves may have a case

5 Mar 2010

The IMF's chief economist alarmed some central bankers by suggesting that their target inflation rate should be as high as 4 pct. His concern about the zero bound looks excessive, but moderate inflation may be the least painful and most practical way to deleverage the world.