Money‚ Markets & Macroeconomics

Some fiscal honesty would honor 9/11 tragedy

9 Sep 2011

Policy after the attacks 10 years ago understandably focused on shoring up security and morale. But those aims also ramped up the deficit and helped spark the housing bubble. With the U.S. economy teetering again, leaders should fess up and call for shared financial sacrifice.

Qatar can afford more $8 billion handouts

9 Sep 2011

Nationals employed in the public sector will get a salary rise of up to 120 pct. The inflation risk is limited - Qataris make up a fraction of the population. Handouts are unsustainable in many parts of the region, but Qatar can afford to maintain its peculiar “social-contract”.

Dr. Obama prescribes another big dose of stimulus

9 Sep 2011

The president’s $447 bln jobs plan should please the Fed’s Bernanke and IMF’s Lagarde. Both have suggested putting stimulus ahead of austerity. Republicans may be less thrilled. But the tax cuts may pass Congress. Expect Wall Street to start boosting 2012 U.S. growth forecasts.

Canada’s economy hampered by troubled neighbor

8 Sep 2011

The Bank of Canada has stopped raising interest rates at 1 percent, largely because of deteriorating U.S. conditions. That’s a pity - Canada would benefit from rates above inflation. But sluggishness and policy wrangling south of the border sap growth and push up the Loonie.

ECB keeps still in fast-changing world

8 Sep 2011

The central bank signalled an end to interest rate increases, and acknowledged a global slump is now a higher risk than inflation. President Jean-Claude Trichet sees the ECB as an “anchor” in financially troubled times. But there’s a fine line between stability and immobility.

China’s hidden debt undermines its sermons

8 Sep 2011

The government’s stated debt is just 15 percent of GDP. But a gaping pension hole and heavy borrowing by state-backed entities could leave Beijing on the hook for debts closer to 130 percent of GDP. That makes China’s preaching over profligate American ways ring a bit hollow.

Stated numbers don’t tell China’s inflation story

8 Sep 2011

Consumer prices rose 6 percent in August, official statistics are likely to say. But like most Chinese data, that’s a guide not a fact. For savers, inflation probably feels higher. Depositors and politicians are worried. Investors cannot afford to be complacent.

Only Drachmaization can save Greece and euro

8 Sep 2011

Regional comparisons suggest Greek living standards rose far beyond productivity, making austerity inadequate to rebalance the economy. Drachmaization would allow the market to set wage levels, induce other weak countries to reform without EU prodding and thus solidify the euro.

Ukraine-Russia gas spat likely to cost Gazprom

8 Sep 2011

Autumn is coming and Russia and Ukraine are again squabbling over gas. Neither has an interest in a rerun of the 2006 and 2008 supply disruptions. The likely outcome is that Russia lowers prices in return for political concessions. State-backed Gazprom would be the real loser.

Legal surrender hurts SEC more than shareholders

7 Sep 2011

The U.S. regulator won’t appeal a ruling that blocked more investor power to challenge corporate boards. That’s understandable given the legal risks and alternative proxy options. But it preserves a precedent that makes it far more arduous for the agency to implement new rules.

Weakening UK growth creates tax cut Catch-22

7 Sep 2011

The UK chancellor is toning down hopes for UK growth. Tax cuts, as suggested by some economists, would help growth and are desirable. But the deficit reduction plan looks behind the curve, making it hard for Osborne to justify cuts. Faster spending cuts would have helped.

U.S. mortgage suits inflict super-damages on banks

6 Sep 2011

The latest U.S. regulatory assault for mis-selling mortgage securities has dragged down bank stocks. But damages previously sought from UBS, and the performance of the underlying loans, suggest the impact of this particular banking nasty is now more than priced in.

Swiss franc defence will work – at a price

6 Sep 2011

If the Swiss National Bank keeps its promise to buy “unlimited quantities” of foreign currency, its effort to peg the franc should succeed. Given the euro’s big risks, the central bank may lose money again. But the gamble is an attempt to prevent recession and deflation.

Nigeria deals the dollar another blow

6 Sep 2011

The oil-rich African state will invest about $3 billion of its foreign reserves into China’s currency. High inflation and closed markets make the yuan a poor choice. Nigeria’s goal may be to secure investment flows: still, it is another sign of the dollar’s weakening influence.

ECB should cut rates now

5 Sep 2011

It would be an embarrassing U-turn but the European Central Bank should swallow its pride and reverse its recent interest rate rises. The euro zone risks falling back into recession even in its core economies, worsening the crisis in its weaker members. Rate cuts are essential.

China may challenge U.S. for shale supremacy

5 Sep 2011

The U.S. so far stands alone in significantly exploiting shale gas, but Chinese major Sinopec is now planning a serious push. Even if geography doesn’t favour Chinese shale, a lack of legal and political roadblocks to drilling mean its ambitions could be more than a pipe dream.

Libya should adopt oil-wealth transparency

5 Sep 2011

The country’s new leaders must decide how to manage Libya’s oil wealth after funding reconstruction. Opaque handouts might be a tempting way to win tribal loyalties. But it would be better to copy oil-rich Norway and create a transparent and accountable sovereign fund.

Obama’s smog backdown won’t help sick U.S. economy

5 Sep 2011

The White House has bowed to critics in Congress and industry, who said new air quality rules would kill jobs. Polluters have previously exaggerated the costs of EPA regulations, and health-related savings matter, too. The rationale for caving in is a smokescreen for politics.

Asian bonds offer new-style refuge in market panic

5 Sep 2011

If markets swoon anew, as negative economic signals suggests they might, Asian bonds and CDS both stand to gain ground. In the past, the two have moved in opposite directions. Their altered relationship offers a handy storm shelter for investors while it persists.

Brazil can’t solve fiscal woes with rates alone

2 Sep 2011

Cutting the benchmark Selic rate to 12 pct isn’t inflationary, since CPI is only 7 pct and global rates are ultra-low. However the government runs big deficits in a huge boom with high commodity prices. That could boost prices down the road - or worsen any downturn.