Chancellor: A 300-year lesson in bubble inflation 13 Feb 2019 In December 1718, the newly nationalised Banque Royale became France’s first de facto central bank. Under Scotsman John Law, it proceeded to issue paper money in what was arguably the first instance of quantitative easing. Central bankers take note: it ended very badly.
Bank of Italy attack shows growing radical bravado 12 Feb 2019 Government leaders vowed to overhaul the central bank’s board, citing past bank failures. The intervention looks like political swagger as rivalry within the League and 5-Star coalition gets fiercer. Existing rules should shield the regulator, but other institutions are at risk.
Jerome Powell’s boon is Mario Draghi’s bane 11 Feb 2019 Inflation in the U.S. and the euro zone is easing and looks set to subside further. That will help the Federal Reserve boss justify a pause in rate hikes, but is a headache for his European Central Bank peer who has yet to tighten monetary policy and has less room to manoeuvre.
Japan’s foreign invaders could use domestic allies 11 Feb 2019 From sumo rings to convenience stores to boardrooms, immigrants are changing the way the world’s third-largest economy works. Their presence is politically awkward, but demographically essential. Policies that internationalise Japanese citizens would help ease the transition.
India’s rate cut fuels fears of a yes-man governor 7 Feb 2019 A surprise move to trim the cost of borrowing, less than a week after an expansionary budget, will raise concerns that freshly appointed Shaktikanta Das is dancing to New Delhi’s tune. An election, after all, is months away. Lacklustre price increases, though, provide some cover.
Central banks’ gold fever is anything but reckless 5 Feb 2019 Their 2018 purchases of the yellow metal were the second-highest on record and up nearly three-quarters from a year ago. But this isn’t a speculative punt on prices rising. Instead, it’s a logical precaution against rival currencies and U.S. self-harm eroding dollar dominance.
India’s big budget betrays Modi’s election angst 1 Feb 2019 A decision to ease efforts to reduce the fiscal deficit will dent the government’s prudent reputation. Yet support for farmers, a new pension scheme and a higher effective tax exemption, even as revenues fall short, will give the prime minister a better shot at a second term.
Italy recession is oddly helpful for EU fiscal row 31 Jan 2019 The economy contracted for the second quarter in a row at the end of 2018. Rome is increasingly likely to miss a budget deficit goal of 2 pct of GDP but will get away with it. Imposing austerity during a broad-based euro zone slowdown makes no economic or political sense.
China outlook from Davos goes a little off-piste 25 Jan 2019 A sharper slowdown is high on the list of worries at the economic retreat. George Soros warns a Cold War with the country could turn hot. For now, China’s growth is merely cooling and Beijing has ammunition left. Its Alpine promise of "modest prosperity" may be feasible.
Singapore’s $40 bln flash crash clouds IPO push 25 Jan 2019 Jardine Matheson shares abruptly plummeted some 80 pct before rebounding. A fat finger trade is being ruled out, but the cause remains unknown. Either way, it’s a setback for a market already plagued by outages and liquidity concerns. Attracting new listings just got tougher.
Italian banks have a 38 bln euro problem 15 Jan 2019 The European Central Bank has told euro zone lenders to deal with dud loans by a set date. For state-owned Monte dei Paschi, the deadline is 2026. If applied broadly that demand – and a slowing economy – would hinder Italian banks’ ability to deliver decent medium-term returns.
Basel capital deal gives banks only brief respite 15 Jan 2019 The Bank for International Settlements has halved a proposed increase in capital requirements for trading assets. Lenders’ cheer may be short-lived. Banks still have to comply with tougher rules on credit risk and face increased scrutiny of their leverage ratios.
China can give stock buying idea a wide berth 15 Jan 2019 Beijing’s financiers are abuzz with debate about whether the central bank should buy equities as part of official efforts to help a slowing economy. Drawbacks would outweigh limited benefits. Luckily there is a better way to channel money to where it would do growth more good.
Trump’s Fed pressure is a paper tiger, so far 14 Jan 2019 The U.S. president often bashes the central bank’s rate increases on Twitter. It’s unhelpful but transparent – which makes it easier for the Fed to resist. The real danger is if Trump bullies Jerome Powell behind closed doors, or changes his tactics for the two open board seats.
Zimbabwe currency plan is doomed before delivery 14 Jan 2019 Robert Mugabe’s successor wants to ditch the U.S. dollar and introduce a new national money. Its value is bound to dive but any benefits will be fleeting unless Harare can also slash a bloated civil service and break its serial addiction to printing cash. That is unlikely.
Guidance is a two-way street with Fed and markets 10 Jan 2019 Jerome Powell says the U.S. central bank will be patient in weighing new rate moves. Previous hawkish comments unsettled investors, helping tank stocks last month. The two are learning to read each other, but a data-dependent message may get tricky if the economy starts to turn.
Germany may outdo Italy as a bank bail-in wrecker 9 Jan 2019 NordLB needs at least 1.2 billion euros to help provision dud loans after merger talks with rivals failed. Along with smaller Italian peer Carige, the regional German lender is a prime candidate for resolution. Politics means a mix of private equity and public funds is a likelier solution.
Italy’s radicals bow to bank bailout temptation 8 Jan 2019 The government has passed measures to prop up Banca Carige, despite pledges by some of its members not to rescue lenders. Carige is too small to undermine Italy’s financial sector. But even supposedly anti-establishment parties won’t stomach the political cost of a bank failure.
Italy’s Carige has tricky path to recovery 4 Jan 2019 The sickly lender won’t find a buyer unless it carries out a serious spring clean. That means selling at least 1.8 bln euros of dud loans, which looks hard without some government aid. The hit to public finances would be small, but a rescue could still stoke political tensions.
Next ECB boss will matter less than his sidekick 3 Jan 2019 Most of those vying to replace Mario Draghi at the European Central Bank lack his creativity. Others will have more scope to sway debates. Ireland’s freethinking Philip Lane is favourite to be chief economist. He would have outsized influence, especially in the next downturn.