Economics

Dollar politics underpin China’s IMF plea

16 Sep 2009

The Middle Kingdom has a wary relationship with the fund, which frowns on Chinesestyle trade imbalances and lends where China wants to have influence. But a stronger global voice would add prestige. Moreover, as a currency issuer, the IMF could help chip away at the greenback.

Dollar tumble reflects hope, and a little fear

16 Sep 2009

The currency of the crisis home country was perceived as a safe haven in troubled times. Now that traders think times are less troubled, they are selling dollars to fund more adventurous bets. But there is also a lingering concern that the greenback has deep structural flaws.

Greece could still derail Europe’s recovery

16 Sep 2009

The recent rally in the country's government bonds is impressive. But the trend is not based on fundamentals. It reflects a carry trade among domestic banks funded by cheap ECB liquidity. The pressure on Greece may have eased, but the situation remains precarious.

Borlaug’s accomplishments teach timely lessons

15 Sep 2009

The father of the green revolution exemplified many virtues of the modern economy. Imagination, technology and globalisation enabled the agronomist s ideas to feed half the world. And this huge social return on investment was earned without worrying about profits.

US bond market may take a battering in coming months

15 Sep 2009

August US retail sales were strong, and producer prices jumped. Strong commodity and energy prices may boost reported inflation in the coming months, while retail sales could also improve. Both will be flattered by 2008 comparisons. A rough time for government bonds could follow.

Abandon GDP; abandon GDP-substitutes

14 Sep 2009

France asked Joseph Stiglitz to investigate confusion over the value of GDP. The Nobel economist concluded GDP is flawed and alternative techniques for counting economic wellbeing have problems. He should have gone further saying the whole measurement effort is pointless.

Heidelberg gets creative to conclude restructuring

14 Sep 2009

The Mercklecontrolled building group is close to completing a textbook restructuring of its E12bn debt pile. Using some unorthodox techniques, Heidelberg plans to raise capital and transfer ownership from the indebted family to institutions without selling at a deep discount.

Postcard from Dalian

14 Sep 2009

Overlooked by a colossal mockBavarian castle, the second home of the World Economic Forum is sparkly, modern, and an example of how China is still hooked on the wrong kind of growth. Trade sanctions may make things worse. John Foley explains.

Geithner exaggerates US government retreat

11 Sep 2009

When is a lapsed guarantee really an extended guarantee? When the US Treasury secretary says Uncle Sam s commitment to backstop money market funds is about to expire. The formal guarantees end next week. But it will be a while yet before the Feds let a big fund break the buck .

Brazil deserves policy prize for recession-handling

11 Sep 2009

The country s quarterly growth and modest yearly GDP decline make it among the best performing big economies in the downturn. With high real interest rates and a small budget deficit, Brazil followed monetary and fiscal policies at odds with the global consensus. They worked.

Growth or bubble? That is the market question

10 Sep 2009

Equities are up around the world, but why? Perhaps it is a rational response to the resumption of growth as last year s bank panic fades into history. But falling bond yields suggests ample cheap money is still the driving force. That makes the rally and the recovery fragile.

US neglect of free trade endangers world recovery

10 Sep 2009

Obama's new duties on steel pipes suggest he isn't standing up for free trade. That s a pity; global trade is still down 20% and each new barrier hinders its recovery. The world needs freetrade cheerleaders to prevent creeping protectionism and its negative economic effects.

EU justifies rescued banks’ uncertainty discount

7 Sep 2009

The Commission s desire for the debtholders of bailedout banks to take some pain is reasonable. Preventing the likes of RBS from calling debt is also fair game. But as long as the banks are subject to arbitrary state interference, their bonds will keep being marked down.

$37bn says deals are back

7 Sep 2009

That s Monday s total value of deals proposed, mooted and rumoured. Almost a year after the Lehman collapse, the markets and economy are stable enough for bosses and bankers to think about growth. There s even a hint of the old exuberance in Kraft s hostile interest in Cadbury.

Brown’s profligacy could cause depression

7 Sep 2009

The UK prime minister has urged fellow leaders to rack up still higher government deficits. But that could lead to higher inflation, forcing central banks to reverse the rate cuts that have helped stabilise economies. Far from saving the world, Brown would make things worse.

G20’s fine words need to be followed by action

7 Sep 2009

The G20 finance ministers have called for raising banks capital buffers and agreed on a common approach to curb bonuses. But, with a few exceptions, that's pretty much where they were after leaders met in London in April. What is needed now is detailed followthrough.

US job losses may reflect lost advantage

4 Sep 2009

The loss of 6.9m jobs in this recession easily sets a new postwar record. Aside from the impact of the global downturn, this may reflect a secular weakening in America's once mighty capital position. A narrowing of the gap with wages and living standards elsewhere could follow.

Risky convertibles return to IPO market

3 Sep 2009

Las Vegas Sands borrowed $600m in a bond that repays in shares, after the casino operator lists in Hong Kong. This kind of illiquid paper has in the past burned lenders. And issuers can end up undermining their own investment case. Only hardened gamblers need apply.

Stimulated Australia might sail through crisis

2 Sep 2009

Australia is surprised to find it s winning. Big doses of fiscal stimulus and continuing Chinese growth have averted recession. Inflationary pressures are rising and the central bank may raise rates in October. But it has to keep half an eye on bubbly China.

Spain faces tough post-holiday comedown

1 Sep 2009

While France and Germany are showing signs of recovery, Spaniards don t have much to look forward to. GDP is down and some taxes could rise soon, as the government wrestles with a spiralling deficit. Hard decisions, like freezing government pay, are still needed.