Economics

US jobs data tighten squeeze on Bernanke

4 Dec 2009

The nudge down in US unemployment to 10 pct is good news. But the Fed chairman this week cited rising job losses to quell calls for higher interest rates to fight soaring commodity prices. If commodities continue strong, the arguments for cheap money will soon wear thin.

Bernanke needs to compromise with Congress

3 Dec 2009

The Fed chairman s efforts to shore up political and public support have left many far from convinced. If he wants to remain at the helm of the US central bank and to preserve its perceived independence the former academic would do well to show greater realism.

Liberals and Tories point right way on UK taxes

30 Nov 2009

The Liberal Democrats plan to raise the tax threshold substantially would help the poor and the country, but their mansion tax on the rich doesn t seem worth it. Conservative ideas on corporate tax look good. The UK needs to rethink its tax system to encourage work and output.

Markets overreact to Dubai damage

27 Nov 2009

Even a total meltdown in the emirate would probably cost foreign lenders far less than enough to justify the huge global selloff in risky assets. Dubai s problems might presage another credit crunch, but for now it looks more like markets are getting carried away.

Further yen rise would provoke intervention

27 Nov 2009

The yen shouldn t be climbing. A soaring yen will make Japan's newly returned deflation worse. And with government debt rising towards twice GDP, deflation is the last thing Japan needs. If the yen keeps rising, the authorities will step in. Intervention would be the lesser evil.

Dubai’s careful plan claim a bad joke

27 Nov 2009

The emirate may have needed to restructure Dubai World s $59bln debts. But the way it has communicated its intended default is appalling. Dubai now says the move was carefully planned and a sensible business decision. But its reputation will struggle to recover from the blow.

Limits to stimulus start to appear

26 Nov 2009

Huge fiscal deficits and ultralow interest rates have boosted many markets and helped end the global recession. But Dubai s troubles show the official blitz can t erase all the excesses of the credit boom. And the dollar s fall looks like a dangerous side effect of easy money.

Vietnam is like China – with an East European flavor

25 Nov 2009

Like China, Vietnam continued growing through the slump, giving output an extra fiscal stimulus boost. But Vietnam also had inflation, foreign hot money and a payments deficit. It s unsurprising it ran into problems afflicting economies elsewhere, and had to devalue.

Next Mexican crisis could come soon

25 Nov 2009

Fitch s ratings downgrade was a warning. Mexico s oil production is declining rapidly, its exports even faster. Nonoil state revenue is far below global norms. With tax evasion, huge inequality, political stasis, economic stagnation and an antimarket outlook, crisis looms.

Cameron’s forked tongue damages deficit crackdown

24 Nov 2009

The UK s probable next PM had been doing an admirable job softening up the electorate for fiscal retrenchment. But now he has spoilt the effect by promising an emergency growth budget. Even if the plan has little substance, the rhetorical uturn is unfortunate.

UK plc suffers from small corporate bond market

24 Nov 2009

London is supposed to be European centre of financial markets. But when it comes to corporate bonds, France and Italy are twice the size. Firms of all shapes and sizes have been selling shares, but only the strongest can tap the fixedincome market. That should change.

Dubai needs to do more than play musical chairs

23 Nov 2009

Several of the architects of the debtladen emirate s hapless financial expansion have been replaced. The display of accountability is welcome. But the changes appear to mark a return of the old guard. To restore confidence, Dubai really needs to bring in more outside voices.

US inflation risk now outweighs fear of deflation

18 Nov 2009

The headline CPI rose more than expected in October. Prices are within 1% of their 2008 peak. Stripping out food, energy and housing costs, inflation is running close to 3%. As the deflation menace now is remote for the US, monetary policy should be adjusted accordingly.

Central banks shouldn’t ignore asset prices

17 Nov 2009

A few years ago, monetary authorities claimed bubblepricking was not their job. Despite the worst recession in decades, the Fed s Kohn still believes that. He should think again. Rapidly rising asset prices are usually a reliable sign the financial system isn t working right.

Eurozone looks for a tow from stronger world

16 Nov 2009

The eurozone has emerged from recession, but largely thanks to German exports. The region has contracted twice as much as the US and still appears reliant on faraway consumers to fuel its growth. Germany s finance minister is probably right to see tax cuts as a way forward.

China pot calls US kettle black on carry trade

16 Nov 2009

A top regulator called ultralow US rates a global risk. True, but China s own pegged exchange rate generates a flood of dollars, which helps keep US yields down. And a big domestic stimulus is pushing up Chinese asset prices. The US has no monopoly on inwardlooking policies.

Return of growth doesn’t erase recession’s pain

13 Nov 2009

The eurozone has joined the US and Japan in saying farewell to quarterly GDP declines. That's an improvement on the freefall which looked possible in early 2009. But even if this still tentative recovery proves durable, the economic damage will not be reversed quickly.

Don’t give up on global accounting standard

12 Nov 2009

Attempts to streamline the rules for bank accounting are running into problems with both the EU and the US. But this holy grail is well worth pursuing. The current hairballs helped confuse almost everybody and exacerbated the crisis.

Greece shouldn’t wait for market discipline

10 Nov 2009

The EU is set to criticise Greece for failing to rein in its budget deficit, which is now expected hit to 12% of GDP double previous estimates. Investors don t care right now, but they will eventually. Greek politicians need to become more forthright and less complacent.

A still lower dollar could be good for the world

9 Nov 2009

Globalisation should lead to a convergence of US and emerging market labour costs. High US unemployment and stellar productivity growth suggest this may be occurring with painful speed. US wages are too high for the new reality. A less valuable greenback would push them down.