World without dollar primacy a blast from the past 26 Sep 2012 Goldman boss Lloyd Blankfein reckons the dollar’s reserve status may be at risk. Having no dominant currency would hark back to the 18th century, when silver pieces of eight competed with many other coins. Specialist currencies might emerge, but trading costs could rise.
Euro bank recap battle line limits solidarity 26 Sep 2012 Germany, Finland and the Netherlands have made clear that there won’t be a free lunch for Spain, Ireland or other countries if they need euro zone cash to recapitalise their banks. All the more reason for Madrid to grasp rapidly other lifelines available to shore up its finances.
Protests highlight euro zone’s democratic deficit 26 Sep 2012 Rubber bullets in Spain, marches in Portugal, strikes in Greece…People are tiring of the painful mix of austerity and reform. Those in the north are resenting bailouts. Euro governments won’t find a way out of the crisis without improving the union’s democratic legitimacy.
Temasek telco trade offers few clues for StanChart 26 Sep 2012 The Singaporean fund sold a $1.1 billion block of shares in landmark holding SingTel. The latest reshuffle raises further expectations that its 18 percent stake in the UK bank will be next. Though both have delivered good returns, offloading StanChart shares will be harder.
UK "funding for lending" is really for pretending 26 Sep 2012 The Bank of England’s scheme to subsidise lending to the economy is meant to increase credit to small businesses and aspiring homeowners. But for all the hype, banks get the cheap funding if they just hold loan books flat. The real benefit may be in stopping rampant deleveraging.
Nixing China’s oil bid may create Canada discount 26 Sep 2012 The market reckons there’s a one-in-four chance politicians will scupper CNOOC’s offer for Nexen. Takeovers by state-owned companies raise tricky questions. But hoisting the Canadian flag over a company of little strategic importance risks further alienating outside investors.
BBA ouster is right first step for Libor reform 25 Sep 2012 The British Bankers’ Association is resigned to losing its role setting and overseeing the critical interest rate benchmark. After this summer’s rate-fixing scandal, that’s no surprise. Still, it’s an encouraging sign that Libor reform will be meaningful rather than piecemeal.
Batista’s dubious shine lures gold-hungry Qatar 25 Sep 2012 The Brazilian billionaire keeps trying to sell chunks of his diminishing empire, this time mesmerizing the Gulf state with his AUX mining unit. Qatar is hungry for commodities but the emirate should drive a hard bargain - or risk learning the hard way that not all bling is gold.
Law schools owe students truth about job market 25 Sep 2012 Goosing graduates’ employment statistics isn’t illegal, several courts have ruled. But it’s shameful nonetheless. With work scarce and tuition soaring, lawyer wannabes deserve honesty from institutions that teach legal ethics. Caveat emptor makes for a lousy school motto.
Who will run Murdoch’s grand newspaper spinoff? 25 Sep 2012 With a key UK regulatory judgment on BSkyB out of the way, News Corp can focus on cleaving its newspaper empire. Critically for investors, that means picking a CEO. Wall Street Journal boss Robert Thomson appears in pole position. His appointment would spark a chain reaction.
Exit from Greek hell isn’t free for foreign banks 25 Sep 2012 Credit Agricole, SocGen and Millennium BCP are trying to offload Greek units to domestic lenders. But to do so, they are being forced to stump up capital to insulate the buyers from future losses. It forces them to be good citizens. But is also helps their loans to get repaid.
Sunshine may only be partial disinfectant for Bumi 25 Sep 2012 An investigation instigated by independent directors could see a governance revamp at the troubled UK-listed miner. But that won’t tackle the fundamental problem, the fact that Bumi’s main asset is a minority holding that now looks more like a bombed-out financial investment.
Shale gas-led U.S. boom is lesson for wary Europe 25 Sep 2012 In five years, the price of natural gas has halved in the U.S. and doubled in the UK. One result is an industrial renaissance in America. Europe could do with the economic and political benefits of plentiful gas, too. EU governments, reluctant to allow fracking, need to rethink.
Franco-German politics first hurdle for BAE/EADS 25 Sep 2012 The two European defence and aerospace companies can’t merge unless Paris and Berlin settle their differences over governance and shareholdings. The tension is typical of EADS’ own complex political and economic history. The BAE deal offers a golden opportunity to clear the air.
Don’t expect the impossible from OMT and QE3 25 Sep 2012 Central banks have shown their firepower, cheering markets. But ECB bond buying can’t solve the euro crisis. And while QE3 may nudge the U.S. economy, it’s risky to reflate through housing. If central banks try too hard to do everything, they’ll end up spurring global inflation.
Indian power sector bailout is a good first step 25 Sep 2012 The state is taking on some of its utilities’ $35 billion debt, with banks restructuring the rest. That will help fix the underinvestment that led to massive summer blackouts. But the cleanup will only work if distributors are allowed to set prices free of political interference.
iPhone 5 will live up to the hype – in time 24 Sep 2012 The 5 mln handset sales, worth some $3 bln, on debut fell well short of Wall Street’s whisper number. The figure still outpaced its predecessor’s and the iPhone 5 couldn’t meet demand. Supply-chain glitches and map-app hysteria won’t derail Apple’s chugging smartphone train.
Americans’ improved finances could help Obama 24 Sep 2012 Mitt Romney likes to ask if people feel better than four years ago. Unemployment remains a problem. But consumers have reduced debt, and a new survey suggests they feel their personal finances are in better shape. They may be happier about Obama’s tenure than Romney thinks.
Foxconn brawl reflects China’s economic challenges 24 Sep 2012 Reports of violence from one of the Apple supplier’s factories conjure up Western prison riots. That’s unfair, but 79,000 migrant workers, excess hours and dependence on a tough employer make a recipe for tension. It’s the dark side of supplying shiny gadgets to the world.
Bumi reputational damage will spread far and wide 24 Sep 2012 The mining-focused acquisition vehicle has tumbled in value amid alleged financial irregularities in its Indonesian assets. A lack of information makes the shares hard to touch right now. And whatever the final financial fallout, the affair rubs off badly on the London market.
GE deal epitomizes U.S. bank regulation folly 24 Sep 2012 To free itself from the Fed’s strong grip, MetLife opted to unload $7 bln of deposits to the U.S. conglomerate. Tired of waiting for the headless FDIC’s OK, the insurer is enlisting the OCC instead. This classic arbitrage illustrates the trouble with the whole oversight regime.
Percentage-mania builds confidence in 50-50 world 24 Sep 2012 Romney’s 14.1 percent tax rate is the latest headline-grabbing hard number. It follows his 47 percent of slackers, Occupy’s unequal 1 percent, and the euro 7 percent yield-cliff, to name a few. The percentage fixation can make the world look clearer, sometimes dangerously so.
Hugo Dixon: Banks should learn to say "Just Go" 24 Sep 2012 A stream of scandals, weak activity, tightening regulation and poor shareholder returns mean that this year is a golden opportunity to make radical cuts in banker compensation. Those who complain should be told to pack their bags.
India in depth: Twin deficits joined at the hip 24 Sep 2012 India’s gaping trade deficit has its root in the government’s fiscal excesses, which must be tamed if a repeat of the 1991 currency crisis is to be avoided. A competitive exchange rate will narrow the trade gap over time, but only if monetary policy remains hawkish.
UK state bank will need to solve Brussels problem 24 Sep 2012 The British government’s plan to provide 1 bln stg for a new small business bank is welcome. But it needs sound credit judgment and rigorous policing to convince hoped-for private sector partners and to assure the EU that it will keep the right side of state aid provisions.
Spain looking to cut corners on bank bailout 24 Sep 2012 Madrid will soon get 100 billion euros to recapitalise the country’s ailing banks, but hints it may end up only using 60 billion. Spain doesn’t seem to grasp that it must be conservative to be credible. Some of its current assumptions look way too optimistic.
China art world success points to market failure 24 Sep 2012 Sotheby’s plans to launch direct sales in China. No wonder - the country now makes up 41 percent of global art sold at auction. Changing tastes and wealth play a role, but the real secret ingredients of China’s flourishing market are capital flight and financial repression.
Federal Reserve running out of taboos to break 21 Sep 2012 One regional head of the U.S. central bank admitted the latest QE broadside would debase the dollar. Another said an above-target inflation rate would be tolerable. Both follow from the Fed’s war on stagnation, but actually saying so could bring domestic and foreign brickbats.
Wall Street’s newest piggy may cry all way home 21 Sep 2012 Politician Tim Pawlenty sent a stern message to financial institutions: “Get your snout out of the trough.” Bank lobbyist Tim Pawlenty will fight to make sure they keep feeding at it. The choice of an outsider suggests a fractured industry whose cause may struggle in Washington.
Mexican oil giant can take lessons from Brazil 21 Sep 2012 President-elect Enrique Peña Nieto is eyeing Latin American lessons for revamping downtrodden state-owned Pemex. Mexican law bars private investment in oil, but related businesses are less constrained. Cutting taxes on Pemex is another option. Reform may have to start small.