Journalists
Edward Hadas writes about macroeconomics, markets and metals for breakingviews. Before becoming a journalist, he worked for 20 years as an equity analyst in Europe and the US. His book, Human Good, Economic Evils: A Moral Approach to the Dismal Science is published by ISI Books in Wilmington, Delaware. He has also written a course-book about political philosophy for the Maryvale Institute in Birmingham. Edward has degrees from Columbia University, Wadham College, Oxford and the State University of New York at Binghamton. He has a website, edwardhadas.com.
A few years ago, monetary authorities claimed bubble-pricking was not their job. Despite the worst recession in decades, the Fed’s Kohn still believes that. He should think again. Rapidly rising asset prices are usually a reliable sign the financial system isn’t working right.
The eurozone has joined the US and Japan in saying farewell to quarterly GDP declines. That's an improvement on the freefall which looked possible in early 2009. But even if this still tentative recovery proves durable, the economic damage will not be reversed quickly.
The Chinese and US leaders will have a friendly meeting – mutual dependence guarantees as much. But the rising and the mature economic powers have different agendas. China could be the stronger partner in a few years. For now, though, it can’t really tell the US what to do.
Stocks aren’t up because the economy looks great. There’s only a shaky recovery propped up by ultimately unsustainable fiscal and monetary largesse. But the support will persist as long as the authorities fear an economic relapse. That’s good for asset prices – for a while.
GDP is growing again in most of the world, but consumers are squeezed and companies remain cautious. The Breakingviews.com Economic Spot-check rose slightly last week. But it is still stuck between Slower Decline and Stability. The recession hasn’t been thrown off completely.
Brian Griffiths thinks big bonuses are “a way to achieve greater prosperity for all”. The Goldman Sachs vice chairman has a reasonable philosophical case. But the recent historical record is against him. And inequality is a recipe for public anger and fiscal instability.
Crude has hit $80 a barrel, clearing the $75 Saudi target. But the 2009 average is still well below that. Gulf exporters might theoretically fear the consequences of too-expensive oil, but are unlikely to fight back now. Add easy money, and the $100 barrier doesn’t look far.
The eurozone joined the "positive GDP" club last week, but the Breakingviews Economic Spot-check index didn’t rise from its below-Stability reading. There’s no sign of a post-recession burst of rapid growth. For now, cost-cutting and prudence remain the dominant themes.
After the worst recession since the beginning of the Cold War, it’s easy to be gloomy. But the end of that rivalry 20 years ago has made the world much better. The reign of finance was temporary. The benefits – in cooperation and prosperity – will endure.
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.
The opening of the Wall challenged “Rhenish capitalism”. Many thought the nation needed freer markets, not the traditional high-wage, consensus approach. The eastern region hasn’t caught up, but after 20 years and a global financial crisis, the German way doesn’t look too bad.
A small increase was expected, but GDP fell for the sixth consecutive quarter. The UK government and central bank might want to fight back with more fiscal and monetary stimulus, but the already weak pound means there’s not much they can do. The UK’s pain is set to continue.
The indignation at banks paying fat bonuses is slightly off target. The bigger problem is weak competition and regulation. A properly supervised and competitive banking sector would suffer no bonus controversy. Edward Hadas explains why.
Big bonuses are back and industrial production is finally picking up after last year’s post-Lehman collapse. But higher unemployment and the drag from loan losses kept the Breakingviews.com Economic Spot-Check flat at 2.4 last week. That’s an unsteady recovery, not a boom.