Some fiscal honesty would honor 9/11 tragedy 9 Sep 2011 Policy after the attacks 10 years ago understandably focused on shoring up security and morale. But those aims also ramped up the deficit and helped spark the housing bubble. With the U.S. economy teetering again, leaders should fess up and call for shared financial sacrifice.
Qatar can afford more $8 billion handouts 9 Sep 2011 Nationals employed in the public sector will get a salary rise of up to 120 pct. The inflation risk is limited - Qataris make up a fraction of the population. Handouts are unsustainable in many parts of the region, but Qatar can afford to maintain its peculiar “social-contract”.
Dr. Obama prescribes another big dose of stimulus 9 Sep 2011 The president’s $447 bln jobs plan should please the Fed’s Bernanke and IMF’s Lagarde. Both have suggested putting stimulus ahead of austerity. Republicans may be less thrilled. But the tax cuts may pass Congress. Expect Wall Street to start boosting 2012 U.S. growth forecasts.
Canada’s economy hampered by troubled neighbor 8 Sep 2011 The Bank of Canada has stopped raising interest rates at 1 percent, largely because of deteriorating U.S. conditions. That’s a pity - Canada would benefit from rates above inflation. But sluggishness and policy wrangling south of the border sap growth and push up the Loonie.
China’s hidden debt undermines its sermons 8 Sep 2011 The government’s stated debt is just 15 percent of GDP. But a gaping pension hole and heavy borrowing by state-backed entities could leave Beijing on the hook for debts closer to 130 percent of GDP. That makes China’s preaching over profligate American ways ring a bit hollow.
Stated numbers don’t tell China’s inflation story 8 Sep 2011 Consumer prices rose 6 percent in August, official statistics are likely to say. But like most Chinese data, that’s a guide not a fact. For savers, inflation probably feels higher. Depositors and politicians are worried. Investors cannot afford to be complacent.
Romney’s only new economic idea is a bad one 7 Sep 2011 The GOP presidential hopeful unveiled a 160-page blueprint to cut taxes and costs. But it’s largely a rehash of his 2008 ideas, and it’s hard to find the fingerprints of his elite economic team. Indeed, they probably frowned on the big new concept: an anti-China trade policy.
German high court spares euro zone a major crisis 7 Sep 2011 The Karlsruhe constitutional court has thrown out complaints against the region’s bailout facility, and its ruling shouldn’t overly hurt the fund’s flexibility. Disaster may have been averted on the German front, but the euro crisis is still looking for a long-term solution.
Weakening UK growth creates tax cut Catch-22 7 Sep 2011 The UK chancellor is toning down hopes for UK growth. Tax cuts, as suggested by some economists, would help growth and are desirable. But the deficit reduction plan looks behind the curve, making it hard for Osborne to justify cuts. Faster spending cuts would have helped.
ECB should cut rates now 5 Sep 2011 It would be an embarrassing U-turn but the European Central Bank should swallow its pride and reverse its recent interest rate rises. The euro zone risks falling back into recession even in its core economies, worsening the crisis in its weaker members. Rate cuts are essential.
Libya should adopt oil-wealth transparency 5 Sep 2011 The country’s new leaders must decide how to manage Libya’s oil wealth after funding reconstruction. Opaque handouts might be a tempting way to win tribal loyalties. But it would be better to copy oil-rich Norway and create a transparent and accountable sovereign fund.
Brazil can’t solve fiscal woes with rates alone 2 Sep 2011 Cutting the benchmark Selic rate to 12 pct isn’t inflationary, since CPI is only 7 pct and global rates are ultra-low. However the government runs big deficits in a huge boom with high commodity prices. That could boost prices down the road - or worsen any downturn.
How to get Spain working again 2 Sep 2011 With elections looming, political parties must come up with sensible solutions to tackle a 21 percent unemployment rate. Cutting social security contributions makes sense, but it’s harder than it looks.
ECB may need tough love for Italy 1 Sep 2011 Italian politicians seem to be flip-flopping over austerity measures. The risk is that the final package lacks credibility, or that structural reforms to promote growth are watered down. The ECB must be ready to turn up the heat by cutting back on its bond purchases.
Obama’s new economist faces political headwinds 30 Aug 2011 With U.S. unemployment hovering above 9 pct, Alan Krueger - a Princeton labor market expert - is suited to be the next White House chief economist. But his job creation ideas may not get much of a hearing. With Obama campaigning, political pros will have the president’s ear.
Bernanke’s inaction, even if temporary, is welcome 30 Aug 2011 Stock investors may have been briefly underwhelmed, but the Fed chairman was right not to promise new easing in his Jackson Hole speech. Aside from its likely ineffectiveness, he faces dissent at the Fed. That’ll make the now extended September meeting a new focus for markets.
Worldwide trade has worrying weaknesses 30 Aug 2011 Global trade faces triple vulnerabilities: slowing demand, affordable funding, and protectionism. The first is already happening. Memories of the last crisis should safeguard against the second and third - but there are worrying signs that the lessons haven’t been learned.
Bernanke should leave any new stimulus to Congress 24 Aug 2011 The anti-deflation rationale for the Fed’s last bout of bond-buying won’t wash this time. Anyway, its effectiveness was questionable. And the U.S. central bank is already in uncomfortably deep. Fiscal action might be equally unhelpful, but at least it’s easier to reverse.
BofA blues is bottling up U.S. credit 24 Aug 2011 The Fed still wants to keep credit as easy as it can. But worries, rational or not, over Bank of America’s stability are getting in the way. If credit investors continue to fear for the nation’s largest bank by assets, that will outweigh any policy options Ben Bernanke might try.
CBO deficit slash reveals DC financial wonderland 24 Aug 2011 Congress may have done a deal to cut costs, but the new, relatively upbeat 10-year prediction for U.S. finances also relies on some rosy long-term assumptions. Budget experts know next year’s numbers matter most. Washington policymakers need more focus on the here and now.