Fiscal Policy

Say goodbye to American housing finance reform

7 Nov 2013

Bailed-out mortgage backers Fannie and Freddie had an astounding $39 bln quarter. That sort of performance won’t last forever, and it doesn’t erase the companies’ past misdeeds. But as Congress mulls fixing the housing system, it might have trouble slaughtering two cash cows.

Lael Brainard isn’t the only Fed no-brainer

6 Nov 2013

The departing Treasury official acquitted herself nobly helping the world understand Washington’s profligate and quixotic ways. She’s a confirmable choice on the central bank’s board of governors. Filling other Fed vacancies quickly is President Obama’s other obvious task.

France won’t meet its deficit target. No problem

5 Nov 2013

The European Commission’s latest forecasts show that France will not be able to shrink its budget deficit to the mandated 3 percent of GDP by 2015. But that isn’t bad news. Like the rest of the euro zone, the country will gain by breaking free from the austerity straitjacket.

De-Americanized world economy is a long way off

18 Oct 2013

China this week railed at Uncle Sam’s influence. Political brinkmanship over U.S. borrowing rattled markets, and the global impact of Fed policy is another worry. American hegemony won’t fade quickly, but officials elsewhere can join Washington lawmakers in speeding the process.

Accommodating Fed puts bond vigilantes out of work

18 Oct 2013

Those who took America to the brink of default may well do it again in early 2014. Investors expect the Fed to mitigate economic damage inflicted by the showdown and are buying Treasuries. As long as the central bank keeps obliging, bond markets won’t discipline politicians.

U.S. debt default disaster isn’t up for debate

14 Oct 2013

It would bring global trouble “in a way you couldn’t possibly understand,” says Jamie Dimon. Debt ceiling holdouts in D.C. suggest otherwise. But they’re wrong. Financial markets are a confidence game, and there’s solid recent evidence of what happens when confidence collapses.

Spain’s tax system is an unnecessary mess

11 Oct 2013

The country collects less tax as a share of GDP than the EU average, despite having higher headline rates. Improving the tax system is a key reform which is sitting on the government’s desk. Without a big change, Spain will keep struggling to get its finances under control.

GOP’s best bargaining tactic: raise debt ceiling

8 Oct 2013

Using the imminent default deadline to force the White House to a compromise on the government shutdown isn’t working. Removing it from the table would show that Republicans can be reasonable – and allow the funding debate to rage without roiling global financial markets.

An Abenomics lesson on politics for Uncle Sam

2 Oct 2013

While dysfunction has shut Washington, Japan pushed ahead with a 60 pct consumption tax hike and $51 bln stimulus. What’s startling about the contrast is that Japan was the paralyzed one two years ago. Staring down the barrel of a demographic gun concentrates the political mind.

Japan’s tax blow is well cushioned

1 Oct 2013

Prime Minister Shinzo Abe has unveiled a $51 billion stimulus to help offset next year’s increase in the sales tax. That should soften the impact on spending. But if consumers do catch a deflationary chill, the government can count on the Bank of Japan to crank up money printing.

U.S. shutdown is only preamble to bigger battle

30 Sep 2013

Budget impasses that force Uncle Sam to close shop aren’t that rare and seldom last long. The bigger problem is a likely rematch over the federal debt ceiling. Back in 2011, even a distant threat of technical default rattled markets. Today’s politics make the danger more real.

Billionaire offers YouTube clue to U.S. torpor

24 Sep 2013

Ray Dalio has taken to video to argue that Uncle Sam is stuck in a deleveraging recession, occurring on a 70 to 80 year cycle. Fed policy largesse, meanwhile, keeps prices stable as debt declines. The Bridgewater founder’s hedge fund success makes it an idea worth spreading.

Common sense could yet bring U.S. debt limit deal

24 Sep 2013

Republicans who want to torpedo Obamacare are off track. And blocking an increase in the federal debt limit proved bad politics in 2011. But trading a higher borrowing cap for fixes to recent cuts and long-term retirement benefits could help the economy and the GOP’s image.

Hugo Dixon: EU should refine its welfare policy

9 Sep 2013

Free movement of people in the EU is hugely valuable, but it is under attack from those who accuse immigrants of “welfare tourism”. Though this isn’t widespread, it is a hot issue - especially in the UK, where it could fuel Brexit. The benefit rules should be tightened.

Washington set to shake up autumn markets

3 Sep 2013

Lawmakers will soon return, most likely itching for another fight over the U.S. debt ceiling. Other market-sensitive policy is also brewing, notably the choice of a new leader for the Federal Reserve. Add in tinkering with housing, and investors need to brace for a turbulent fall.

South Africa looks like grim shadow-BRIC

29 Aug 2013

The country is sometimes listed as a near member of the group of developing world giants. Alas, it comes close in the wrong direction: Russia’s one-party rule, Brazil’s corruption, China’s spiraling labor costs and India’s inefficiency. It desperately needs a better growth model.

Italian tax deal shows Berlusconi’s still kicking

29 Aug 2013

The Letta government has struck a deal on Rome’s mansion tax. Berlusconi’s political career may be ending, but his legal wrangles and populist antics threatened the government and rattled markets. Failure to implement serious reform could ruin the country’s weak chances to grow.

Edward Hadas: Imagine a world without debt

7 Aug 2013

Banks need to raise equity to bear possible loan losses. Why not replace loans with securities that take losses naturally? Wait, these exist today, with gainsharing and inflation protection. Shares, or something similar – call it flexi-debt – are the key to crisis-free finance.

Edward Hadas: Detroit, decay and solidarity

31 Jul 2013

Who is my neighbour? That question is as relevant to the bankruptcy of Motown as the decline of the American car industry or incompetent city governments. If the suburbs lived up to their neighbourly responsibilities, Detroit would not be such a mess. It’s not too late.

Auto bailout may offer fix to Motown pension fight

24 Jul 2013

City workers may have to take a hit in bankruptcy court, but there are ways to ease the pain. GM cut retirees severely but let them recoup some losses in the turnaround. Giving Detroit employees a similar option would be a controversial but fair solution to a thorny legal issue.