Fiscal Policy

Sex-trade spat exposes defect in morality-free GDP

19 Jun 2014

France is refusing to include involuntary prostitution in its measure of national output. The stance runs contrary to new European standards. It also exposes the problem with economists’ conviction that GDP can be ethically neutral. France is right. GDP purists are wrong.

Europe can learn from limits of Japanese reform

19 Jun 2014

Abenomics is not failing, but it is proving more incremental than revolutionary. That is not surprising. It is very hard to change embedded practices in rich and ageing countries. Europeans have different problems from Japan, but these are likely to prove equally persistent. 

UK’s duff credit easing is still a model for ECB

30 May 2014

The Bank of England’s Funding for Lending scheme isn’t boosting bank credit. A rumoured ECB version will likewise fail to spur a massive wave of lending if demand is weak. But a round of credit easing that cuts elevated peripheral bank funding costs would still be worth a try.

Financial elite finally wake up to inequality

28 May 2014

A conference on “inclusive capitalism” brought out the rhetorical best from Christine Lagarde and Mark Carney. The IMF and Bank of England bosses flagged inequality as a problem, rather than side-stepping it. Their backing could make it easier for politicians to take action. 

Fed bigwigs short of signs on path to higher rates

21 May 2014

New York’s Dudley thinks interest rates should rise slowly, Philly’s Plosser reckons they should go up faster, and Bullard of St. Louis has crunched numbers implying rates should already be at “normal” levels. Veering off the beaten track has left the Fed uncertain how to return.

Greenspan’s swipe at big bank bailouts misses mark

15 May 2014

The former U.S. Fed chair says the inevitable rescue of financial behemoths means government debt is understated. That ignores the tidy profit taxpayers made from saving Wall Street’s hide. Regulators deserve a lot more credit for limiting likely losses in future crises.

What Lagarde should’ve told Smith College’s grads

14 May 2014

The fund’s boss wimped out of speaking at the women’s college’s commencement after a petition accused the IMF of supporting “patriarchal systems.” That critique is old hat. Lagarde’s IMF has fostered social spending and female rights. Here’s what she ought to have said.

Review: A crisis-like evaluation of "Stress Test"

12 May 2014

To judge the merits of Tim Geithner’s reflections, six Breakingviews columnists digested different pieces in a short amount of time. Like the regulators who often lacked broader context, the assessments vary. Yet there’s also consensus it’s a useful tome for the financial library.

Fed’s glasnost era dies, age 9: an obituary

8 May 2014

The U.S. central bank’s campaign to provide transparent policy guidance has lost its battle with market misinterpretation. Chair Janet Yellen, who helped nurture the effort, and other officials revealed the sad news this week. Its demise leaves investors worldwide bereft.

The Fed really does care about little banks too

1 May 2014

It’s easy to think no one would miss these thousands of small community institutions if they disappeared. But America’s top bank police chief, Janet Yellen, assured them she cares. Tailored regulation and still tougher rules for the bigger behemoths prove her point.

Fed and gridlock to thank for U.S. deficit decline

22 Apr 2014

Since five years ago, the expected ratio of government debt to GDP in 2019 has fallen from 81.7 pct to 72.5 pct. That’s a handy reduction. The Fed’s low interest rates have made a difference. But politicians can’t take much credit, having mainly just thwarted each other’s plans.

Fed offers too little, too late on too big to fail

26 Mar 2014

The watchdog’s researchers reckon big banks benefit from a cheaper cost of funds than smaller rivals thanks to an implicit government backstop. That’s often true, especially during crises. But the Fed ignores more recent data. The behemoths’ advantage is actually shrinking.

U.S. financial reform is still on to-do list

25 Mar 2014

The Dodd-Frank law brought broad new rules for Wall Street. Lawmakers are now focused on mortgage finance. That’s a valid priority, but if it weren’t for Washington’s logjam they could tackle far more, including money markets, mechanisms for bank failure and virtual currencies.

Further policy reversal is Argentina’s best option

24 Jan 2014

Cristina Fernandez has eased FX curbs. That’s a step toward tackling the peso plunge. But on official statistics, there shouldn’t be a currency problem. Argentina needs more reform, spending cuts and an independent central bank – plus better data. That means a whole new mindset.

Rousseff’s postcard from Davos may not reach home

24 Jan 2014

In her World Economic Forum debut, Brazil’s president preached to the capitalist choir. Promises of fiscal virtue, price stability and privatization should delight investors. An upcoming election, though, probably means it’ll take more emerging market turmoil to be less populist.

Brinksmanship to worsen with U.S. midterm election

27 Dec 2013

Congressional contests will make extremism more appealing to lawmakers than compromise. That means more gridlock, in which President Obama’s healthcare reform gets more attention than economic policy. Worse, the GOP minority’s only real leverage is the threat of default.

Hugo Dixon: Europe’s post-crisis challenge

16 Dec 2013

The hot phase of the euro crisis may be over. But the zone will limp on for years with low growth and high unemployment unless further action is taken on three fronts: bank balance sheets must be cleaned up, monetary policy loosened and more free-market reforms adopted.

U.S. budget mini-bargain beats no bargain at all

11 Dec 2013

A deal reached between the House and Senate replaces $63 bln in planned cuts and slices another $23 bln from deficits – but it fails to deal with long-term issues. It’s as close as this dysfunctional Congress gets to compromise, just in time for a midterm election year.

Osborne lets UK recovery ease austerity’s pain

5 Dec 2013

Stern responsibility remains the British Chancellor’s watchword. With jobs increasing and GDP rising faster than expected, it’s easy to resist calls to abandon his austere course. Small shifts, like tax cuts for young workers and a new attack on tax dodges, are useful ornaments.

Yellen channels her inner Bernanke before Congress

14 Nov 2013

 In her first Senate confirmation hearing as nominee to lead the Federal Reserve, Janet Yellen was calm and composed. On policy questions, she argued the Fed’s actions were prudent without dropping any hints on the future. Markets may feel like Ben Bernanke never left.