Economics

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.

World needs a higher renminbi – but not today

5 Oct 2009

China s too cheap currency helped cause global imbalances. But a sharp revaluation when trade is weak could have unhappy consequences, especially for Asian countries whose imports China processes. China badly needs a new growth model, but a major currency experiment can wait.

US jobs data shows recession not over yet

2 Oct 2009

The big 263,000 drop in nonfarm payrolls was not the only bad news. Shorter working hours and a big downward statistical revision show the US economy is in a recordbreaking hole. Recent signs of strength look like artificially stimulated blips. True recovery is far off.

Long bear market for stocks not yet over

1 Oct 2009

The third quarter was strong, but most equity indices are still where they were a decade ago. Stocks were so expensive then that even after a good decade for growth, they still aren t a bargain although they probably were in March. If it s any comfort, bonds look worse.

LSE can cut a precious cashless deal for Turquoise

1 Oct 2009

The London Stock Exchange is in pole position to buy its upstart rival. A deal would be small in size and may see no cash change hands. But a tieup would offer the LSE the chance to repair strained relations with Turquoise s founder brokers. That would be pretty valuable.

Tui Travel pays up to win convertible contest

29 Sep 2009

A busy day for new issuance in convertible bonds saw tour operator Tui Travel up against steel maker Salzgitter. Despite Tui Travel s weaker balance sheet, keen pricing made its issue more successful. Higherrisk credits are once again welcome in convertibles land at a price.

Yen strength doesn’t help deflating Japan

29 Sep 2009

The yen is strong but the Japanese economy is weak. The new government should try to put doubts in traders' minds. But it has more profound economic challenges after years of expensive and ineffective stimulus plans. Japan s quandary is also a warning for the West.

EBRD cash call is right, but also self-interested

29 Sep 2009

The European Bank for Reconstruction and Development wants to tap its 61country membership for E10bn to drive lending in eastern and central Europe. The plan is both welcome and worrying. And it suggests that the EBRD sees the crisis as a chance to bolster its mandate.

Bankers can sleep easy with G20 bonus fudge

28 Sep 2009

The world leaders offered an endorsement of their guidelines on bonuses, and promised to monitor the situation. But the banks are ready to justify big payouts with arguments the politicians are willing to believe. It looks like an opportunity for reform is being squandered.