Economics

Argentine fiscal soap opera will continue to run

7 Jan 2010

The central bank chief nobly resisting the government s plans to seize reserves is refusing to step down. He won t succeed in keeping President Fernández from raiding the bank s $48 bln cookie jar. But he ll be vindicated when Argentina enters another crisis as the funds run dry.

State budget holes pose big risk to US recovery

28 Dec 2009

The states must balance their budgets but made the easy cuts last year. In 2010, the fiscal gap is almost twice as large as the last recession s peak, and federal stimulus funds run out next December. State budgets economic drag on the recovery will be correspondingly severe.

How to beat the life out of your savings

24 Dec 2009

We need life assurance as protection against disaster. But life offices are little better than the mattress as a home for savings, and as some Aviva policyholders are discovering, can be worse. Moral: don't buy a savings product from a life company.

Banks should have many shares to offer in 2010

24 Dec 2009

The crisis has been excellent for one part of the investment banking business equity capital markets. Share issues from troubled banks made 2009 a good year, and deleveraging should keep the flow strong. Better still, U.S. and European IPO markets might come back to life.

Democrats will lose US House in 2010

23 Dec 2009

The president's party usually suffers in midterm congressional elections. To that timetested dynamic now add voter angst about high unemployment, big deficits and controversial legislation. The result: Democrats lose their Senate supermajority and hand the House back to the GOP.

Financial innovation is hard to kill

23 Dec 2009

The credit crisis gave innovation a bad name. But, despite the vogue for simplicity, innovation is already back. And 2010 promises to be a good year for the rocket scientists. Innovation can help solve problems, but investors should be wary of aggressive structures.

Dubai learns harsh truth about financial centres

22 Dec 2009

The emirate's effort to build a standalone international stock exchange has failed. Dubai's larger domestic bourse will now buy Nasdaq Dubai in what looks like a prelude to a full operational merger, and a tieup with Abu Dhabi. One strong player is better than three weak rivals.

US stimulus producing weak, distorted recovery

22 Dec 2009

The economy grew by just a 2.2 pct annual rate in the third quarter, all accounted for by inventories, government and cash for clunkers. Past recoveries from such steep downturns ran at 5 pctplus growth. Economic distortions and crowding out may be extracting their toll.

European bankers’ M&A hopes may be premature

22 Dec 2009

Investment bankers are preparing for the end of a twoyear drought in corporate activity in Europe. They hope that rising markets, easier financing and CEO confidence will drive a deal revival. But there are just as many reasons to believe that bosses will stay cautious in 2010.

No winners in badly handled EADS insider probe

18 Dec 2009

A threeyear investigation by France's market watchdog has cleared 17 EADS executives of insider trading in the aerospace group's shares. While the bad publicity may have some deterrent effect, the case mainly underscores the need for serious reform of French insider dealing law.

Basel must keep its reforming resolve

17 Dec 2009

The latest update from the leading banks standardssetter suggests Basel is serious about getting tough on the sector. But key questions won't be answered for another year. Such vagueness could facilitate counterlobbying by the banks. The momentum for change must be maintained.

Bernanke risks being person of the year again

16 Dec 2009

The Fed boss made the front of Time for his influence and possibly heading off a depression. But he is in no hurry to lift interest rates despite the recovering U.S. economy and signs of inflation. Through inaction, Bernanke is risking a second, less positive, turn on the cover.

Abu Dhabi accuses Citi of fraud

16 Dec 2009

Whatever the merits of the allegation, which Citi disputes, the Abu Dhabi Investment Authority is facing a 90 pct loss on its $7.5 bln investment in the bank. Meanwhile, Kuwait which also bailed Citi made profits. ADIA's relative misery is partly bad judgment, partly bad luck.

China well placed to turn green into gold

16 Dec 2009

China has been reluctant to give way on climate change issues. But negotiating tactics shouldn't get in the way of green initiatives. China may have more to gain than most from green trends, as a heavy commodity user and as an exporter into a potential $1 trillion market.

Global prices may soon present cruel dilemma

15 Dec 2009

After falling early in 2009, global consumer prices have resumed rising, pushed up by commodities. If the global economy recovers, labor markets strengthen and commodity prices stay strong, inflation could quickly force monetary policymakers into a difficult choice.

Samuelson’s half-truth remains too influential

14 Dec 2009

The Nobel laureate s death doesn t mark the end of an era. Paul Samuelson s textbook made him the most influential economist of his generation, and his Keynesianneoclassical synthesis helped inspire current policies. But the approach glosses over the risk of Keynesian excess.

Brazil’s economy loses some of its sparkle

10 Dec 2009

The country s thirdquarter GDP growth was lower than expected and performance is lagging 2008. The slowdown may result from the currency s strength after last year s collapse. Still, stock market euphoria looks overdone and Brazil s growth is not soaring to Chinese levels.

Greece stirs to Fitch’s wake-up call

9 Dec 2009

The Greek government is belatedly acknowledging the seriousness of the country s plight. That s welcome after its initially blasé response to this week s sovereign downgrade. But Greece is running out of time to deliver a credible plan for tackling its structural problems.

New Japan stimulus is early, and risky, backtrack

8 Dec 2009

Yukio Hatoyama s DPJ, elected only in August on a stimuluscutting ticket, has approved a big new spending package. The cost of the measures will add to public debt already at 219 pct of GDP potentially crowding out the private sector as well as the DPJ s election promises.

Obama’s modest jobs plan is welcome

8 Dec 2009

The US president's new jobs program is Scroogelike compared with the expensive splurge congressional Democrats and liberal groups wanted. It's a sign that Obama has rightly decided that ignoring the yawning budget deficit would act against economic and employment growth.