Economics

Korea-India trade deal has big long-term potential

6 Aug 2009

The free trade agreement between Korea and India represents only a partial market opening. But it may bring major trade growth between the complementary economies. It shows Korea has options beyond its stalled deal with the US and that India remains open to trade expansion.

Personal view: Baltic economies may bounce quicker than most

5 Aug 2009

Lithuania, Latvia and Estonia have the world s worst recessions, but all three are taking nasty medicine: cutting private and government costs sharply. Martin Hutchinson argues that this avoidance of Keynesian selfindulgence can bring them a quicker recovery.

US economy could languish at bottom of deep hole

31 Jul 2009

The 1% drop in Q2 GDP makes the 3.7% drop in the last six quarters the worst recession since World War II. Government stimulus helped, but personal savings are still depressed and the federal deficit is huge. Correcting those imbalances could make for a very slow recovery.

Savings drive record emerging market bond volume

28 Jul 2009

Firsthalf issuance was the most ever, belying forecasts earlier this year of widespread capital shortages. Chinese and corporate issuers dominated. Companies in countries with big savings pools did the most business showing the advantages of thrift.

US housing rebounds, but won’t lead recovery

27 Jul 2009

New home sales, existing home sales and housing starts all rose in June. But housing starts are still far below previous cyclical lows, and sales levels are boosted by fiscal and monetary subsidies. These seem to have brought a bottom, but won t end housing s bear market.

Asian recovery could be unfettered by bank woes

23 Jul 2009

The ADB expects emerging east Asia to recover quickly in 2010. That sounds reasonable. Trade has bounced and domestic growth remains strong. The region's manufacturingoriented economies with modest budget deficits may now fare better than the centres of financial meltdown.

Turkey’s bluff pays short-term dividends

23 Jul 2009

Many investors were horrified six months ago when Turkey backed away from talks with the IMF. But the country has averted economic disaster without the fund s help. Still, unemployment is high and exports are weak. The economy will stay vulnerable for some time.

BoE faces QE dilemma

23 Jul 2009

One member of the monetary policy committee has been criticised for suggesting the programme of printing new money may be put on hold. That won t help the government sell gilts but that s hardly the BoE s job. As for QE itself, it doesn t seem to be working.

Fed should note signs of nascent inflation

15 Jul 2009

US consumer prices ticked up 0.7% in June, suggesting inflation not deflation is the danger. With negative real interest rates and huge monetary stimulus, the Fed will have to act fast if inflation emerges. Recent data could be blips, but it's safer to see them as warnings.

US payroll data suggest recession is worsening

2 Jul 2009

June s job losses were greater than those of any month of the 200102, 199091 or 198082 recessions. Even discounting possible noise , this shows the recession is not yet bottoming. Stocks, budget estimates and bank stress test assumptions may all have been too optimistic.

Can Iceland be saved?

29 Jun 2009

Personal view: Oil economies have trouble with democracy

15 Jun 2009

In countries like Iran, most of the wealth comes from the governmentcontrolled oil industry. Voters care more about who gets which share of the booty than about the government s economic competence. That favours antimarket populists like Ahmadinejad, Chavez and Putin.

US jobs data suggest Fed should ready the brakes

5 Jun 2009

Job losses in May were sharply lower than in prior months. Meanwhile commodity prices have zoomed up, presaging inflation, and banks look healthier. The rationale for outsized monetary stimulus is wearing thin, and Ben Bernanke needs to prepare to reverse it sooner not later.

Renminbi not the answer for dollar diversifiers

4 Jun 2009

Malaysia may follow Brazil in denominating more Chinese trade in the Chinese currency. The symbolism pleases Beijing and diversifying foreign currency holdings out of dollars makes sense. But the overcontrolled renminbi is a less suitable store of value than the freemarket yen.

Germany may get pain but little gain

3 Jun 2009

Germany used less stimulus and runs lower deficits than other big economies. That made its slump deeper, but raised hopes of a healthier recovery. Regrettably, its chancellor is right to fear that central bank easing may cause inflation, depriving Germany of austerity s rewards.

Would California work better as four states?

21 May 2009

China pays Taiwan geopolitical dividend

4 May 2009

Financial turmoil has brought the two closer. Taiwan, its economy slammed by a 30% fall in exports, will gain from opening up to Chinese capital and tourists. Investors will welcome the reduced political risk. China may yet win with finance what threats of force didn t get.

US GDP is not as dismal as it looks

29 Apr 2009

Q1 consumption turned positive, inventories dropped and weak government spending which won t be a problem going forward depressed growth. Yes, capital investment plummeted, but the slowing decline suggests the economy is nearing a bottom. However it may stay there.

Is Fed stretching numbers to justify looser money?

27 Apr 2009

The US central bank has calculated the optimal interest rate based on inflation and GDP. But its conclusion minus 5% doesn t add up. The socalled Taylor rule suggests a rate around 2%. The Fed is either underrating current inflation or overrating the output gap.

Asian trade figures suggest global decline slowing

22 Apr 2009

Japan s March exports were down 46%, but that still beat February. Overall, Asian trade figures have bounced somewhat, suggesting their previous drop resulted from inventories and finance, not a deeper problem. This is not the end of recession, but maybe the end of its beginning.