Japan index: Time to take stock 21 May 2015 Our Abenomics Index hit its highest level since 2001 in March, while fresh GDP data showed Japan’s economy growing at the fastest pace in a year. A rising stock market and slight increases in wages and consumer prices overcame higher bond yields to pump up the reading.
China’s lodestar is not reform but avoiding chaos 18 May 2015 The authorities want banks to show mercy to stressed local government-linked borrowers. The plan seems to be to avoid chaotic deleveraging. Though it’s a step back from reform and market forces, until a clear line has been drawn between good and bad, it’s the right thing to do.
China debt swap lays ground for greater reckoning 13 May 2015 Officials are finalising a plan to replace local authority loans with bonds, which lenders can use to borrow from the central bank. It won’t shrink the 16 trln yuan ($2.6 trln) tower of local government debt, but should stop good loans getting in the way of dealing with the bad.
Draghi is winning the main QE battle 12 May 2015 Had European Central Bank bond-buying aimed to depress yields, Mario Draghi would be in a bad way. Yields have risen since the ECB chief pushed the button. But inflation expectations are a more critical target, and they are up, albeit partly because of an oil price rebound.
$179 mln Picasso shows art and QE in fine fettle 12 May 2015 A high-quality sale straddling impressionist and contemporary works paid off for Christie’s to the tune of $706 mln. That makes Sotheby’s look leaden-footed, even before the regular Christie’s sales of both genres. Meanwhile, easy money means more new price records are likely.
China’s new monetary tool: quantitative teasing 11 May 2015 Cutting interest rates, as the central bank just did, can ease pressure on some borrowers, but won’t do much more. Making money more abundant, rather than just cheaper, would be a more decisive move. For now the government is wisely keeping its powder dry.
ECB’s bank board-crashing makes sense – to a point 7 May 2015 The euro zone’s financial stability gnomes will observe board meetings. Handled right, the ECB should glean extra insight – after all, corporate culture starts at the top. But regular sessions with board committees may reveal more about how Frankfurt’s 123 charges really operate.
India’s aborted central bank plan has few mourners 4 May 2015 The government has withdrawn a proposal to curb the Reserve Bank of India’s sway over the bond market. It’s a welcome retreat. Retrospective taxes on foreign investors have already dented confidence. Clipping the wings of a well-functioning regulator would have caused more alarm.
Blah U.S. growth nearly guarantees Fed rate delay 29 Apr 2015 It’s bad enough that the economy barely grew in the first quarter of 2015. But these GDP figures may be particularly persuasive for leaving interest rates alone given the dollar’s strength. Unless other factors can offset that headwind, it’s hard to see the Fed changing course.
Review: Some of what is wrong with economics 17 Apr 2015 Meghnad Desai mocks his fellow economists for not seeing trouble ahead during the early 2000s credit bubble. The retired professor wisely calls for more study of history and a less narrow perspective, but he is still too conventional. He ignores the crucial financial cycle.
Bernanke musters maximum revolving-door dignity 16 Apr 2015 The Fed boss turned blogger will advise $25 bln hedge fund Citadel. Critics may object, and the move won’t help the U.S. central bank’s image of being above the fray. But former public servants deserve to work for pay. At least Bernanke waited over a year and didn’t join a bank.
Ben Bernanke crushes the Taylor rule 16 Apr 2015 The former Fed boss skewered the interest-rate formula and its creator during a feisty DC debate. Economist John Taylor looked overmatched as his words were turned against him and peppered with dead-on shots. Bernanke’s private sector spunk matches his policymaking chutzpah.
Europe’s lending boom shows power and limits of QE 14 Apr 2015 The ECB’s bank survey shows how loose monetary policy is boosting demand for credit in Europe, helping small companies. That is good for growth. Yet the results are uneven, and investment is not driving demand. The central bank’s policies work, but governments need to do more.
German bonds are becoming like gold dust 14 Apr 2015 They’re scarce, and you increasingly have to pay to own them. The benchmark 10-year Bund may soon go negative. But like gold, it might be a good deal. The market supply is shrinking, thanks to strong German government finances and ECB buying. This paper could prove precious.
U.S. throws monetary policy stone from glass house 10 Apr 2015 A new report from the Treasury criticizes excessive economic reliance on central banks in Japan and the euro zone and calls for more fiscal action. That’s rich, considering the Federal Reserve’s balance sheet has ballooned nearly fourfold since 2008 and Congress is paralyzed.
Japan index: BOJ plays a risky waiting game 8 Apr 2015 The Bank of Japan refused to heed growing calls to further ease its ultra-loose monetary policy. Inaction could be risky. Stock prices are the lone bright spot in a gloomy Breakingviews Abenomics Index reading for February. A return of deflation could hurt the BOJ’s credibility.
Unhappy anniversary for Japan’s inflation drive 2 Apr 2015 It’s two years since the Bank of Japan cranked up yen-printing in a bid to lift annual price rises to 2 pct in “about two years”. But with companies and consumers refusing to spend the stimulus – and oil cheaper – inflation is at zero. The BOJ needs to think beyond bond-buying.
Central banks won’t prop up the euro 1 Apr 2015 The single currency’s share of global foreign exchange reserves is at a 12-year low. Reserve managers haven’t bought euros to compensate for the fall in its value. Central banks’ lack of commitment to balanced forex portfolios leaves the euro free to fall further.
Draghi’s QE is doing all it can for securitisation 31 Mar 2015 The ECB chief’s bid to boost asset-backed security markets has produced few new deals, and its purchase programme is small. But the falling cost of issuance is tangible enough, and regulatory hurdles are lifting. Besides, politics preclude Mario Draghi from buying riskier assets.
Japan shows euro zone the limits of bond-buying 31 Mar 2015 The European Central Bank has barely begun buying government debt. The Japanese experience of massive purchases suggests low expectations are warranted. The Bank of Japan has yet to revive inflation. And it seems even to have lost the power to depress the yen and bond yields.