India could have its cake and eat it too 16 Mar 2012 The budget has set a 5.1 pct fiscal deficit. That doesn’t look smart. But the deficit need not be Delhi’s number one concern. The consumption it fuels may actually be helpful. But structural reform is essential to ensure the supply side keeps pace – and that’s in short supply.
Review: Flawed defence of the good of finance 16 Mar 2012 Robert Shiller is better placed than almost anyone to show that finance can be a force for the good. The Yale professor has imaginative ideas about products which share risk and make finance more democratic. But his latest book doesn’t show Shiller at his best.
U.S. market rumblings point to revved up growth 15 Mar 2012 Rising oil prices and interest rates are election-year bait for politicians, but in reality - along with higher stock markets - they suggest a long-awaited strengthening of the economy. But sticker-shock at the pump and more expensive debt could yet knock confidence.
Ethical economy: What’s really wrong with Europe? 14 Mar 2012 It’s not the economy. On that score, despite recent stress, Europe is working at least as well as the United States. But the euro crisis showed a deeply defective political system. Europe needs more discipline, greater solidarity and a higher purpose. It should be able to manage all three.
Improving U.S. jobs trend favors old over young 9 Mar 2012 A solid 227,000 jobs were added in February, with upward revisions for past months. In the last five years, people aged 55 and over have gained 3.6 mln jobs, while younger workers have lost 7.6 mln. The incentives of shrunken savings and funny money are doubly harming the young.
Euro zone first default gives few reasons to cheer 9 Mar 2012 Most Greek creditors have agreed to take a loss on their 206 bln euro holdings. The euro zone’s first restructuring should not be chaotic. But it has done away with the pretence that a sovereign’s signature is always golden. And Greece still struggles with a heavy debt load.
Now prepare for the next crisis 9 Mar 2012 The euro zone has overcome enough of its fundamental weaknesses to defuse the Greek debt bomb. But the financial system is as distorted as ever. A purely financial crisis is possible in the next two years. A financially enhanced political crisis may be even harder to avoid.
High debt is symptom, not cause, of sovereign woe 8 Mar 2012 Economists Carmen Reinhart and Kenneth Rogoff concluded that growth declines when sovereign debt rises above 90 pct of GDP. But new studies cast doubt on that finding. Besides, it’s mostly economic and political dysfunction that leads to excessive debt, not the other way around.
Brazil is falling short of its BRIC status 8 Mar 2012 Its 2011 GDP growth of 2.7 pct suggests it’s no longer a real emerging market. The government is largely to blame. Populist mandates have bloated state spending while restrictions and meddling have increased risk. Maybe investors should downgrade Brazil from BRIC to brick.
Republican hopefuls rely on faith in economics too 7 Mar 2012 Romtorumgrich promise tax cuts while simultaneously shrinking the U.S. deficit. Economists criticize their math, which doesn’t add up. The candidates say that critics aren’t accounting for stronger growth from lower taxes, or “dynamic scoring.” Neither should voters.
Ethical economy: The lesson of Fukushima 7 Mar 2012 A year after the Japanese nuclear disaster, both opponents and proponents of atomic energy are saying, “We were right all along.” Their differing analyses and cost comparisons reflect a deep philosophical divide. These days, the nuclear debate ought to be able to get past that.
Japan quake anniversary shows lessons unlearned 7 Mar 2012 The economy bounced back after 2011’s disaster, but Tokyo squandered a chance to push through painful economic reform. Now growth is slowing. That leaves Japan in the same state it was in before the earthquake – only deeper in debt and one year closer to its moment of reckoning.
Demographic flip endangers U.S. jobs recovery 6 Mar 2012 Some 4 mln people under 55 may soon seek employment, a Breakingviews analysis of labor participation rates shows. Yet the share of older folks working has grown – and they might not retire so fast. As the economy improves, the two trends could wreak havoc on the jobless rate.
U.S. stock bubble is in profit, not value metrics 5 Mar 2012 The S&P 500 trades at 14 times earnings, so valuation multiples aren’t excessive. But U.S. domestic corporate profitability is running 50 pct above the long-term average, while global profits have soared even higher. This is unlikely to last long.
Who cares how many jobs Apple has created? 5 Mar 2012 Shareholders should be scratching their heads after the gadget king commissioned a study showing it produced half a million jobs. This subjective report misses the point. Apple has created $400 bln of value in the past three years - that’s good for the economy and capitalism.
ECB cash palliates crisis but drives up oil price 5 Mar 2012 The euro zone’s crisis has been eased by a trillion euros of financing from the European Central Bank. But this easy money comes with major risks. It has helped drive up the oil price, indirectly funds deficits and, as Germany fears, could bring inflation and a debased currency.
Wen passes ball on China’s needed reforms 5 Mar 2012 The outgoing premier cut China’s growth target in his last parliamentary address, but gave little news on big issues like inequality, the yuan and food safety. A focus on stability makes sense, but the longer important reforms are ignored, the more costly they may be to implement.
Deficit target fetishism could deepen EU recession 2 Mar 2012 Euro zone leaders are wasting an opportunity to be more flexible about deficit targets. Their blind discipline-obsession is self defeating. In the short term, excessive austerity will worsen the recession. In the long term, it will compromise efforts to ensure fiscal prudence.
UK needs a plan B before abolishing 50 pct tax 1 Mar 2012 The government is under fresh pressure to scrap its top tax rate. That would make economic sense. The snag is that it would be politically difficult. The way forward is to introduce a more intelligent levy on the wealthy – say, a revamped property tax.
Kim Jong-un could thaw dictatorship into growth 1 Mar 2012 If North Korea’s basketball-loving young master really wants to build on his limited nuclear deal with the U.S., land reform would be a good place to start. That should boost food supplies and stimulate small business. Privatizations, big finance and crony capitalism can wait.