Money‚ Markets & Macroeconomics

How Europe can get more bang for its bailout buck

22 Sep 2011

The European Financial Stability Facility is too small to help Italy. Expanding it is politically tricky. Using the 300 bln euros of remaining firepower to guarantee sovereign debt would give the fund more clout. Though the idea has flaws, it would buy the euro zone some time.

Monetary moves have lost their magic

22 Sep 2011

Markets spurned the Fed’s latest love offering. The Twist was seen correctly as a small manoeuvre that can do little to speed up growth. It could even be more dangerous than helpful. Central banks should not try too hard - the pains of economic rebalancing cannot be avoided.

Oil price jitters turn up heat on Gulf producers

22 Sep 2011

Governments are sweating as Brent creeps lower with worsening global economics. At $108 a barrel, oil is $18 above the threshold at which producers feel real pain. But shrinking oil revenues leave less room for manoeuvre. And any OPEC supply squeeze will complicate the problem.

Bring back Manmohan Singh

22 Sep 2011

Anna Hazare’s anti-corruption campaign should be a wake-up call to Prime Minister Singh who has lost touch with India’s growing middle classes. One way to reconnect is to revive the vigour for economic reform which characterised Singh’s tenure as finance minister in the 1990s.

IMF issues timely warning on ultra-low rates

21 Sep 2011

Just as Ben Bernanke and his crew contemplate further easing, a new IMF report lays out the multiple threats created by such loose monetary policy. In rich nations, small firms suffer while in emerging markets, capital inflows produce bubble conditions. The FOMC should pay heed.

IMF financial crisis indicator bodes ill for China

21 Sep 2011

The fund has found a measure of credit growth that could predict crunches. It makes the Middle Kingdom look precarious and heralds problems for Turkey and Vietnam. The IMF’s crisis-spotting record is lousy. But overheating nations shouldn’t dismiss what seems a sensible metric.

Can the BRICs save the PIIGS?

21 Sep 2011

Brazil’s limited offer of $10 billion of support is pure posturing. But its idea to channel it through the IMF has merit. But why limit the effort to the BRICS? Other large holders of reserves - such as Japan and Saudi - should also join the club.

ECB must give bank sickness long-term cure

21 Sep 2011

The European Central Bank is flooding Europe with short-dated funds to ease money market tensions. But banks are still struggling to issue long-term debt, increasing the risks of a dangerous credit crunch. The ECB should ease the strain by setting up a longer-term facility.

Lack of liquidity sucks safety from Asian havens

21 Sep 2011

Asia’s failure to develop larger securities markets is coming home to roost. Investors are beating a path for exits despite the region’s relatively strong finances. Their fear: a retreat by European investors could leave them marooned, unable to cash out without rocking prices.

China’s pursuit of stability risks greater stress

20 Sep 2011

Some claim China’s economy is a bubble set to burst while others think slowing growth and inflation warrant looser policy. Ethan Devine of Indus Capital argues that in fact China’s economy is both too hot and too cold, with structural reforms needed to bring it back into balance.

Pseudo-devaluation could help euro periphery

20 Sep 2011

Greece and its ilk would have to quit the euro to devalue their currencies. But the IMF is offering a tip to mimic the effect: rejigging taxes to benefit exports and hurt imports, especially by hiking VAT. Portugal is trialing the idea. It has drawbacks, but options are scarce.

IMF’s education remedy won’t cure rich world ills

20 Sep 2011

The fund’s flagship yearly outlook laments a jobs crisis and rising inequality in wealthy nations. But its prescription of more education spending is unlikely to do the trick. Though desirable in many ways, such outlays aren’t the golden ticket economists often claim.

China’s taste for European loans leaves it exposed

20 Sep 2011

Borrowers tapping cheap dollars to beat tight credit at home have racked up $333 billion in foreign loans, as much as 60 percent from European banks. If Europe’s crisis forces those banks to turn tail, it could jeopardise a small, but important source of cheap liquidity.

Ireland gets good grades but hasn’t passed yet

20 Sep 2011

Dublin is crawling out of the PIIG sty. Irish bonds outshone those of Portugal and downgraded Italy during the summer turmoil. The country is ahead of target on its IMF programme. But it’s still vulnerable to weak global growth prospects and to dysfunctional euro zone governance.

Slashing tax deductions a big help for U.S. budget

19 Sep 2011

Forget the provocative Buffett Rule. Obama’s simpler proposal to cut tax deductions could add up to $9 trln to the government’s revenue over 10 years. There’s even a hint of common ground with the GOP. Best of all, killing off many deductions would do little economic harm.

SEC’s Abacus rule shuts several stable doors

19 Sep 2011

Banning middlemen from betting on the failure of asset-backed bonds they create sounds worthy. And the regulator’s new rule at least looks fairly narrow. But between the Volcker Rule and the exposure Goldman already found it had over Abacus, this issue already looks covered.

Euro bonds are not the answer

19 Sep 2011

The euro countries aren’t going to agree to guarantee each others’ debts in time to solve the current crisis. And, once it’s over, neither euro bonds nor fiscal integration is desirable. Market discipline is a better way run monetary union in the long run.

Mongolia’s bounty hunters must out-tough Genghis

16 Sep 2011

The windswept, agrarian Central Asian country might make global investors very rich if plans to develop its plentiful mineral wealth come off. But the land of Genghis Khan is still pretty wild. John Foley takes a look across the steppes at the opportunities and dangers.

Japan’s new funding plan is hopeful, yet remedial

16 Sep 2011

The new government’s plans to finance rebuilding by hiking taxes and selling stakes in companies like Japan Tobacco are welcome. But details of how the revenue will be raised are worryingly vague. Given the political hurdles ahead, Japan can’t afford to re-learn old lessons.

Ackman’s gamble on Hong Kong unlikely to pay

16 Sep 2011

The activist fund manager is betting Hong Kong will re-peg its currency higher against the dollar. That may make sense given divergent economies, but could hurt the city’s competitiveness and do little to combat inflation. Bets like Ackman’s only encourage authorities to dig in.