Economics

Productivity surge could signal further jobs gloom

6 Nov 2009

US unemployment has reached 10.2% in spite of a growing economy. Meanwhile, productivity is surging. That s normal in recoveries, but it began early and may continue. If so, jobs may be slow to return and unemployment could reach a record, weakening banks and depressing wages.

Fed’s latest inaction creates more bubble risk

4 Nov 2009

By not even signalling an end to easy money the US central bank runs the risk of further inflating asset and commodity prices and sinking the dollar. Its mandate is to keep inflation and employment stable. Avoiding bubbles ought to be central to this mission.

Happy days not quite here again yet

29 Oct 2009

US growth of 3.5% looks like a bounce into recovery. But with cash for clunkers and government spending driving the numbers, it might as well be called Government Domestic Product. This approach caused a nice, but temporary, bounce in 1933. History may repeat itself.

Asia growth reflects and exacerbates imbalances

28 Oct 2009

China and Korea are showing an incipient export recovery. The revival in trade may partly reflect excess global liquidity, and partly the immaturity of China s consumer economy. Whatever the causes, returning Asian trade surpluses should be a concern.

China’s fight against market bullies has far to go

27 Oct 2009

Individual customers are taking on China s biggest domestic firms, but the antitrust regime has been more visible in shackling foreigners like CocaCola, ABInbev and GM when they bid for Chinese assets. The halfbaked regulatory framework risks preserving a stodgy state sector.

Modern finance, not free markets, created crisis

27 Oct 2009

George Soros new foundation will seek an alternative to market fundamentalism . But the false assumptions in modern financial theory abetted by laxity in monetary policy and government meddling in housing should get most blame for the crash of 2008.

Asia gains as trade recovers faster than finance

26 Oct 2009

New GDP data from South Korea indicate a vigorous recovery, and economic fundamentals support the case. The trade crash a year ago hurt Asian economies more than, say, the US but now seems to have done less longterm damage than Western financial crisis.

Brazil using 2009 boom to roll back free market

20 Oct 2009

At first glance, the country has a good case for its capital inflow tax. It s fighting hot money from sloppy global monetary policy. But the tax violates market axioms and hits foreigners, as does the new oil regime. President Lula may no longer deserve the benefit of the doubt.

Icesave deal won’t bring instant diplomatic thaw

20 Oct 2009

Iceland is close to agreeing a revised plan to reimburse the UK and the Netherlands for the bailout of Icesave depositors. But the deal still leaves Iceland with a debt burden equivalent to half of its GDP. Relations with London and Amsterdam are likely to remain cool.

Hot money is cost of frozen renminbi

19 Oct 2009

Some $60bn of mystery funds crept into China s currency reserves last quarter. The culprit isn t spivvy foreign investors, but a toocheap renminbi. It entices those who can to swap US dollars for their Chinese counterparts, adding to the central bank s $2.3 trillion headache.

Pound’s technical bounce belies weak prospects

19 Oct 2009

Sterling enjoyed a sharp rally last week amid an apparent short squeeze. But the currency s ultimate fate will be determined by the UK s still frail fundamentals. Further weakness seems in store, as the UK seeks a rebalancing which megastimulus may have delayed.

China’s African investment: both change and bubble

19 Oct 2009

In Africa, China increasingly rivals and even outguns the US as a trading and investment partner. Africa undoubtedly benefits from the competition. But China s domestic boom has encouraged scattergun investments. A bubble may have to burst before the relationship becomes healthy.

Spanish economy gets blacker

15 Oct 2009

That doesn t mean gloomier. Quite the contrary. Tax dodging, always big in Spain, seems to be booming in the recession. But it s a dangerous habit that may make the government s task of balancing the budget harder when growth returns.

Latvia might show way forward for burden-sharing

15 Oct 2009

Swedish banks are aghast at Latvia s proposals to limit mortgage repayments to current property values. But the scheme could make devaluation more acceptable to Latvians. And a devaluationcap combination has a rough justice. Everyone was foolish and everyone will suffer.

US healthcare bill twists already tangled system

13 Oct 2009

The bill approved by the Senate Finance Committee does increase healthcare coverage. But it adds complexity in areas like crosssubsidisation and fails to tackle widely recognised problems like lawsuits. It risks making the system even less economically efficient.

Economics Nobel follows anti-market zeitgeist

12 Oct 2009

Elinor Ostrom studies collective and traditional management of resources and Oliver Williamson shows why many transactions take place inside rather than between organisations. Diverse work, but a common theme: interest in decisions made outside of the conventional market.

Japan tries de-stimulus to boost recovery

7 Oct 2009

The prime minister is cutting Y2.5 trillion of wasteful stimulus, fulfilling an election pledge. It also relieves some strain on Japan s budget deficit and borrowing needs. The previous administration's stimulus hadn't worked; the antistimulus experiment is worth watching.

Saad’s unfair restructuring may damage Saudi

6 Oct 2009

The troubled conglomerate is prioritising local creditors as it moves to settle a $20bn dispute. For foreign lenders, it's another tough lesson about the riskiness of the region. The Saudi authorities endorsement of the deal will only further weaken confidence.

Australia should be first of many to hike rates

6 Oct 2009

It s different in Oz. Sensible monetary and fiscal policies in the good times make it easier to afford higher policy interest rates now. But with global financial markets bubbling, other G20 countries should follow the Australian lead even before withdrawing liquidity.

Euro is Ireland’s life-jacket – and straitjacket

5 Oct 2009

Deep recession has changed Irish minds on the Lisbon treaty. This is no time to spurn the supportive EU. The euro has been a bulwark for the tiny economy, but the safeguard comes with a constraint. Without devaluation, it will take years for Ireland to regain competitiveness.