Journalists
Martin Hutchinson covers emerging markets and economic policy from Washington, drawing on 25 years of experience as an international merchant banker. He ran derivatives platforms for two European banks, before serving as director of a Spanish venture capital company, advisor to the Korean conglomerate Sunkyong and chairman of a US modular building company. In Zagreb he established the Croatian debt capital markets and set up the corporate finance operations of Privredna Banka Zagreb. Since 2000 he has been a financial journalist, and is the author of "Great Conservatives, " a book on British political history. He has a first class Honours degree in Mathematics from Trinity College, Cambridge and a Harvard MBA.
The headline CPI rose more than expected in October. Prices are within 1% of their 2008 peak. Stripping out food, energy and housing costs, inflation is running close to 3%. As the deflation menace now is remote for the US, monetary policy should be adjusted accordingly.
Cheap money strengthens the case for gold, and reduces the cost of holding it. Gold miners won’t slow the rally. A jump in hedge fund or central bank interest would swamp annual production, worth $88bn and falling. The 20% increase since August could be only the beginning.
The IEA has set out targets to reduce emissions and the carbon price hikes needed to get there. The focus on price is helpful, and underlines the virtues of a carbon tax. As well as being a market-friendly way to tackle climate change, taxes would also boost government revenues.
It has been 20 years since the fall of the Berlin Wall, but the yearning for the good old days of communism, in Germany and other former Eastern Bloc countries, is still widespread. Martin Hutchinson sorts the little that is reasonable from the lot that is misplaced.
By not even signalling an end to easy money the US central bank runs the risk of further inflating asset and commodity prices and sinking the dollar. Its mandate is to keep inflation and employment stable. Avoiding bubbles ought to be central to this mission.
US growth of 3.5% looks like a bounce into recovery. But with "cash for clunkers” and government spending driving the numbers, it might as well be called Government Domestic Product. This approach caused a nice, but temporary, bounce in 1933. History may repeat itself.
George Soros’ new foundation will seek an alternative to “market fundamentalism”. But the false assumptions in modern financial theory - abetted by laxity in monetary policy and government meddling in housing - should get most blame for the crash of 2008.
A US congressman wants bank regulators in charge of accounting standards. That suits those bankers who blame mark-to-market accounting for the 2008 meltdown. But accounting merely exposed mistakes banks had made. Investors need independent standards, not regulatory cover-ups.
Obama may take unused or repaid funds to cut US debt. That's the right thing to do eventually, not least because it stops Tarp becoming a slush-fund. But the US economy is still fragile and more banking trouble is possible. Phasing Tarp out by concrete steps makes better sense.
Globalisation should lead to a convergence of US and emerging market labour costs. High US unemployment and stellar productivity growth suggest this may be occurring with painful speed. US wages are too high for the new reality. A less valuable greenback would push them down.
US unemployment has reached 10.2% in spite of a growing economy. Meanwhile, productivity is surging. That’s normal in recoveries, but it began early and may continue. If so, jobs may be slow to return and unemployment could reach a record, weakening banks and depressing wages.
Off-year US election results favouring Republicans bring no national change. But a bipartisan economic consensus since 2007 has favoured state spending and bailouts. The results suggest a distrust of both that may force policy modifications near-term.
The US Treasury’s draft financial services law provides for a new class of systemically important banks which the Fed regulates more tightly and supports financially. That list should be public, not undisclosed as proposed, and the too-big-to-fail playing field needs to be level.
A proposed offer to the $23bn of holdouts from the 2005 forced renegotiation is ungenerous but should get the benchmarked 60% acceptances. With a plausible finance minister and liquid markets, Argentina may then get a new debt deal done. Investors have been here before.