Brazil protests hint at Lula model’s deficiencies 25 Jun 2013 The former president, and successor Rousseff, took advantage of a commodities boom, but have overspent and tolerated too much corruption. Export prices have dropped, budgets need cutting and the people aren’t happy. Placating them with more handouts would worsen the problem.
Corzine lawsuit would be sad financial crisis coda 25 Jun 2013 The former MF Global boss is set to be sued over the broker’s 2011 failure, according to a report. He’d be the first Wall Street headliner targeted by a U.S. regulator. Without criminal charges, though, the case is a reminder of how watchdogs and prosecutors wasted the crisis.
Biased business rankings are better than none 25 Jun 2013 A panel of experts wants the World Bank to drop its Ease of Doing Business national rankings. The critics have a strong case - the criteria are biased and the weightings arbitrary - but the desire to show off, at home and abroad, does spur business-friendly reform.
Is Ben Bernanke wrong, or is QE impotent? 25 Jun 2013 Investors are upset, but why? They might just be “feral hogs”, trying to scare the Fed into abandoning plans to tighten money. They might fear tightening now will stop a weak recovery. Or maybe they think central banks don’t have “whatever it takes” to help the economy.
Anglo Irish tapes will make EU largesse harder 25 Jun 2013 Dublin may have been misled by the bankers that caused its biggest financial disaster. That would be a blessing in disguise if it forced a much-needed public inquiry. But It will also strengthen the euro zone’s reluctance to use its funds to cut Ireland’s bank bailout costs.
Qatar handover will test assertive global push 25 Jun 2013 The emir is handing over control of the tiny state’s considerable wealth and rising global interests to his son, Sheikh Tamim. The country’s influential prime minister may go too. Domestic policy might not change much, but international stakeholders must prepare for uncertainty.
Asia’s pain unevenly spread as China slows 25 Jun 2013 The country’s expanding share of regional trade is a concern as growth slows. But not all are equally exposed. Take Australia: China accounts for a third of total exports, but just 5 percent of GDP. China’s past reluctance to open its markets might be a blessing in disguise.
UK must beware losing austerity on the train 25 Jun 2013 The austerity-minded British Chancellor will announce more spending cuts on Wednesday. Some infrastructure projects will sweeten the pill - and may help growth. But it’s risky to spend big on rail without first deciding on an airport hub. Care is needed on capital spending, too.
India should take U.S. pharma complaints seriously 25 Jun 2013 After a series of legal setbacks, U.S. drug giants are again pushing for stronger patent protection in India. The industry’s main concern is protecting emerging market profit. But in the long term, India’s domestic drug makers would also benefit from a more supportive system.
AIG buys itself some dividend payment insurance 24 Jun 2013 Returning capital to shareholders may hinge on divesting aircraft lease unit ILFC. The $4.2 bln deal with a Chinese group is wobbling, so AIG is prepping alternatives. Choppy markets could make an IPO tough but values also have jumped. A Plan B looks doable if time-consuming.
Private equity finds egress easier than entrance 24 Jun 2013 Take Blackstone’s sale of Vanguard Health to rival hospital chain Tenet for $1.7 bln - the latest profitable cash-out. Steve Schwarzman’s firm more than doubled its money. Finding suitable investments – and companies that will accept private equity cash – is harder.
Supreme Court delays demise of racial preferences 24 Jun 2013 The U.S. justices told a lower court to rethink its approval of race-based affirmative action, but it’s time to move on. Class-based alternatives can create greater economic mobility with less resentment or legal scrutiny. The ruling is a chance to give them a bigger role.
Merkel’s manifesto serves EU better than Germany 24 Jun 2013 The German chancellor’s campaign for a third term relies on promises of more redistribution and regulation. Germany can’t afford such left-of-centre lavishness for long. But it keeps anti-euro forces at bay in Germany, giving Merkel a cover to push her “more Europe” agenda.
Copper will eventually be safer than iron ore 24 Jun 2013 Prices of both industrial metals are well off recent highs. Iron ore should bottom first; it could take two years for copper demand to catch up to supply. After that, geology should rule. Attractive new copper deposits are rare. Iron ore is abundant and easy to dig.
Tesla obstructionists should be firmly resisted 24 Jun 2013 New York is the latest state where U.S. car sellers want to stop Elon Musk’s company selling directly to customers. The franchised dealership model is antiquated and expensive, as the woes of Detroit’s Big Three showed. Government shouldn’t stand in the way of Tesla’s innovation.
Saudi weekend shift could herald more change 24 Jun 2013 The decision to move the kingdom’s weekend to Friday and Saturday brings the oil producer into line with its neighbours and should boost productivity. It also raises hopes that the Arab world’s largest capital market is edging closer to opening up further to foreign investors.
Savings make Vodafone’s Kabel deal palatable 24 Jun 2013 The mobile giant has offered 10.7 bln euros, with debt, for Kabel Deutschland - a pricey 12.4 times EBITDA. Critics think Vodafone is ponderous and profligate in M&A. But this looks acceptable provided the huge promised savings with a present value of 3 bln euros can be achieved.
China’s bonfire of liquidities claims first victim 24 Jun 2013 Stocks tumbled after the central bank hinted it won’t help overstretched banks, and that they should make better use of what they’ve got. Lenders and speculators won’t like it, but for the economy it’s helpful. A bit more financial chaos is a fair price for better quality growth.
Central banks are long way from becoming ordinary 24 Jun 2013 The Bank for International Settlements says it’s time for unconventional central bank policies to give way to supply-side reforms. That’s sensible in principle, but conventional tools don’t work in extraordinary times. Normalcy will remain an aspiration for several years yet.
Resistance to Kazakh mining stitch-up looks futile 24 Jun 2013 ENRC minority holders are in a bad place, now the Kazakhmys board has accepted the low-ball bid from oligarchs and government. Unless Kazakhmys shareholders overrule their board, any ENRC holdouts could end up with unlisted, illiquid shares. Better to admit defeat and cut losses.
Hugo Dixon: Italy’s Letta makes best of bad job 24 Jun 2013 After February’s inconclusive election, it looked like Italy’s dysfunctional political system might drag the country further into the abyss. But new PM Letta is quietly getting on with reform. Sadly, he has a mountain to climb and a political crisis could erupt in the new year.
Novatek wins big in Russian energy deal-a-palooza 21 Jun 2013 A $270 bln oil supply deal between Rosneft and China has stolen the spotlight, but upstart gas producer Novatek’s smaller deal to ship natural gas to the mainland may have been the bigger news on Russian energy this week. Gazprom’s export monopoly looks truly over.
Microsoft’s bucket list needs more realism 21 Jun 2013 The software giant dreamed of “Windows everywhere” in its youth. Now, the firm seems to be racking up experiences while it still has strength. It has decided not to take on Amazon. But retail stores and smartphones remain on the cards. A narrower focus could prove more rewarding.
Congress not courts should cure Obamacare’s ills 21 Jun 2013 The U.S. healthcare act doesn’t need major surgery as it rolls toward full implementation, but it could do with some nips and tucks. Judges are hearing dozens of cases like this week’s test of certain tax credits. Such policy issues, however, are better handled by lawmakers.
Home equity help is better route to U.S. ownership 21 Jun 2013 The Federal Housing Administration is in a $16 bln hole thanks to a failed model of encouraging home-buying by allowing tiny down payments. A new proposal to match buyers’ savings to create a bigger slug of equity looks like a less risky way to subsidize the American Dream.
Review: What’s wrong with economics, anyway? 21 Jun 2013 In “The Origin of Economic Ideas” Guy Routh provides a witty and persuasive explanation of the original sin of the discipline: putting ideology first and observation almost nowhere. His book is almost 40 years old and economics has advanced, but the shadow of bad theory endures.
Salotto Buono’s dismantling hopeful sign for Italy 21 Jun 2013 After 67 years as Italian capitalism’s puppet master, Mediobanca will relinquish its role as a holding company and focus on financial services. Though the bank’s power was already much diminished, an official retreat shows that corporate Italy, if not the state, is reforming.
UK’s latest political football: the Lloyds in-price 21 Jun 2013 The UK chancellor has confirmed Lloyds will be re-privatised soon. For it and RBS there are at least four different levels at which the government can be said to have recovered its money shoring up the lenders. The exit prices are a silly distraction - but they matter to politicians.
China credit squeeze challenges “age of ambiguity” 21 Jun 2013 Imprecision has been good policy for China. The belief that deposits are guaranteed, and that banks can’t fail, has underpinned the last decade of rapid growth. A financial crisis, though, calls for facts and plans - otherwise rumours and half-truths can wreak havoc.
Germany removes one barrier to EU banking union 21 Jun 2013 The euro zone has agreed to use part of its 500 bln euro bailout fund to recapitalise banks directly. Member states will still have to contribute to future rescues, and won’t definitely be able to rejig past ones. But any deal in a German election year is a step forward.