Government & Agencies

Bank of England minutes point to rate cut

20 Jul 2005

Inflation is up, the pound is down and the housing market is stable. It doesn t sound like the time to cut rates. But after a narrow July vote in favour of stable rates, an August cut looks certain. The MPC seems more worried about growth than inflation.

Who wants 50-year gilts?

15 Jul 2005

Not many investors, judging by the tepid response to the latest auction. Few pension funds want to look quite that far ahead. It looks like a small victory for common sense. These bonds offer both low returns and the potential for significant real losses.

Popping of carbon bubble will hit utilities

15 Jul 2005

A bubble in the price of pollution credits has driven electricity prices to unsustainable highs in Germany and the UK. Few would value oil companies using oil's current $60 price. So it doesn t make sense to use inflated electricity prices to value utilities.

Byers admits he lied over Railtrack

15 Jul 2005

After three days in court defending his role in the bankrupting of Railtrack, the former UK transport minister admits lying to parliament. Despite evidence of government mendacity, shareholders will have a tough time proving misfeasance. But Byers admission makes things easier.

Breton on the ropes over Rhodia

29 Jun 2005

The French finance minister has played down his knowledge of a deal at the center of the Rhodia scandal. But a document has emerged suggesting he was well briefed about it. Breton has some explaining to do.

ECB hints at rate cut

21 Jun 2005

Noone wants to be the scapegoat for eurozone stagnation, so it's no surprise the bank is sounding flexible. But don't expect anything more than talk. With real rates at zero and the euro down 10% from the peak, the ECB is unlikely to cut further.

France races ahead with privatisations

20 Jun 2005

The government was expected to slow down the privatisation process in response to losing the referendum. Instead, it has upped the tempo. The state seems to be betting that it can create jobs with privatisation proceeds and that unions won t kick up a fuss.

UK attacks European Court of Justice

20 Jun 2005

No wonder. The ECJ is now the most federalist institution in the EU, and its rulings have been expensive for the Inland Revenue. The UK s proposed reform is likely to be blocked, but the ECJ could well get the message anyway. Expect less expansive rulings.

Emerging markets become net creditors

16 Jun 2005

One of the more bizarre features of the global economy is that savers in poor countries are funding debtors in rich countries. This stands traditional economics on its head. It is inappropriate, ultimately unsustainable and, in time, will reverse.

Greenspan can’t explain low bond yields

7 Jun 2005

The Fed chief ruled out a coming recession, pension fund buying, demographics and foreign accumulation. That leaves only "new forces". But one of them is not so hard to find. The Fed s zero real rate policy has induced a quite rational exuberance among bond buyers.

Is Blair really as Anglo-Saxon as France fears?

6 Jun 2005

The French think the UK government stands for rough and tough free markets. But look what Blair's friends at think tanks are churning out. One wants to break up Tesco for the sake of retail diversity. And another wants to triple maternity leave. It sounds ever so Continental.

Dutch no rekindles euro doubts

2 Jun 2005

Two strong no votes on the EU constitution have hit the currency. But talk of breaking up the currency is excessive. The euro may end eventually, but the EU will fight hard to protect it.

Donaldson drops out as SEC boss

1 Jun 2005

The veteran Wall Streeter angered big business with red tape on one hand without successfully championing investors rights on the other. But at least he made an attempt to aid shareholders. His predecessor fouled things up, and his successor may simply be too scared to try.

Big no vote would add political risk to euro

27 May 2005

Slower eurozone growth and the fear of a French rejection of the constitution have already pushed down the currency. But a large majority against would change the tone. The euro s unsustainability might move from idle theory to practical possibility.

OECD call for lower euro rates misguided

25 May 2005

The rich countries club wants the ECB to stimulate demand with a rate cut. But in real terms, borrowing is already almost free. Lower rates would spur asset price inflation, not consumer demand.

Clarke orders extradition of NatWest Three

24 May 2005

The UK Home Secretary has approved the extradition of three British investment bankers accused of Enronrelated offences. Under the UK Extradition Act, the US didn't have to present evidence to support its case. The implications for UK business are profound.

Europe shows rejectionist streak

23 May 2005

Germany's biggest state has turned out its government. And it looks like France and the Netherlands will reject the EU constitution. Voters are hostile to regional unity, reform and globalisation, wanting to protect what they have. This climate is unfriendly to investors.

Shared equity schemes are unwelcome

23 May 2005

The UK government s plan to help firsttime buyers onto the housing ladder could be selfdefeating. The scheme risks adding hot air to the house price bubble and saddling taxpayers with negative equity. Better to let the market do its work.

Reclassification undermines rationale for PFI

20 May 2005

The UK private finance initiative was a clever ruse to keep large increases in public spending off the government balance sheet. The Office for National Statistics has belatedly woken up to the trick. This means Brown is even more likely to miss his fiscal targets.

US trade news supports dollar bulls

12 May 2005

The trade deficit declined by $6bn from February to March. The positive surprise adds to the evidence that the US economy is picking up. But the trade trend remains grim. The gap was still 17% higher than in March 2004. And reshaping US industry will be a hard slog.