U.S. government can still save its AAA rating 26 Jul 2011 Even with a smaller deal than credit raters want, there may be ways to stave off a downgrade. It would require a committed path to cut, including some sacred cows, and a plan not held hostage by a debt ceiling debate. The question is if lawmakers think staying AAA is worth it.
U.S. debt capers may expose risk-free fallacy 26 Jul 2011 America's fiscal woes have put its AAA rating at risk even if a budget deal is struck. With plausible riskfree assets on the wane, broad swaths of investment theory including options pricing, portfolio management and Basel capital rules could be undermined over time.
Athens rescue is a pig in a poke 25 Jul 2011 A deal was better than a disaster. But this rescue has the astonishing byproduct of increasing Greece s debts. It also lets private creditors off lightly while making taxpayers elsewhere in the euro zone pay through the nose. It doesn t even mark the end of the crisis.
U.S. lawmakers play mad game of chicken with markets 25 Jul 2011 Politicians shouldn't need threat of market mayhem to do their jobs. But that may be the case in Washington as the deadline to boost borrowing authority nears. Weekend talks brought more confusion than clarity. Coming days may test assumptions about the inevitability of a deal.
U.S. and euro showdowns drive investors to gold 25 Jul 2011 The euro is an experiment in trouble and its inventors are floundering. The dollar is being weakened by politicking and fear that the U.S. response to economic weakness and fiscal deficit will be to print more money. The gold price bubble will get bigger.
Train crash highlights Chinese hard landing risks 25 Jul 2011 The highspeed train tragedy shows when things fail to slow down properly in China, they crash. Highspeed rail is a typical symptom of China's investmentled growth models: wasteful, hazardous and unsustainable. A badly handled accident can trigger political tensions.
Greek deal bizarrely increases its debts 25 Jul 2011 The sustainability of Athens' borrowings will improve because the new debt will be longterm and cheap. But the country's borrowings will go up by 31 billion euros and its estimated peak debt/GDP ratio will rise to 179 percent, according to a Breakingviews analysis.
Peru’s Humala offers movie we haven’t seen before 25 Jul 2011 That's the new president's claim, as he defied expectations and appointed centrists to key economic posts. Investors are flocking back. Stocks are up 19 pct. Peru's government is small, so he can expand it somewhat without Braziltype bloat provided commodity prices stay high.
Debt deal takes euro zone closer to endgame 22 Jul 2011 The monetary union's leaders and the ECB have agreed a robust plan to tackle the Greek crisis and head off contagion. Crucial details are still lacking on private sector participation. But with an enhanced bailout fund, the euro zone is moving in the right direction.
Asia’s Euro-contagion risk starts with Korea 21 Jul 2011 South Korea s banks took on $13.8 billion in shortterm loans from abroad in the first quarter of 2011. Most of it probably came from Europe. The Asian nation is robust, but it s right to worry that a new loss of confidence will see foreign lenders start sucking their money back.
Tax hikes far from inevitably a U.S. job killer 21 Jul 2011 Republicans have warned before that tax hikes cause job losses. Reagan and Clinton faced similar claims over their deficit reduction plans. Tax increases aren't ideal but the strong job creation that followed in both cases refutes the simplistic notion that they always cost jobs.
Yuan may no longer be undervalued 20 Jul 2011 Rising prices have helped correct the undervaluation of the Chinese currency. Consumers get less bang for their buck, and there's now less pressure from current account inflows. If inflation doesn't ease, the yuan could even start to look overvalued.
Three questions the Greek debt summit must answer 20 Jul 2011 By agreeing to meet, euro zone leaders have raised hopes of an agreement on a second Greek bailout. To signal their determination to address the euro's problems and to avert a broader market panic, governments must show they have made progress in three key areas.
Year-old Dodd-Frank punches, if below its weight 20 Jul 2011 With a final 848 pages of law and over 3,300 pages of rules (and counting), the U.S. financial reforms passed a year ago are cumbersome. But they can't be written off as a useless doorstop. Despite flaws and financial industry bleating, sound new measures are taking shape.
Is the ECB as hard as it looks? 20 Jul 2011 Working out what the central bank thinks can be like Kremlinology in the old Soviet Union. But there are signs that its line on not taking defaulted Greek debt as collateral isn't quite as hard as one might think. If so, there could be a compromise that unlocks the crisis.
U.S. Congress scrambles to avoid credit rating cut 19 Jul 2011 Even if lawmakers increase the federal borrowing cap, America's AAA credit rating may still be under threat. Raters want to see solid plans for deficit reduction, too. The bipartisan Gang of Six senators has a $3.7 trln proposal. But it may be too much, too late.
Europe dances with danger 19 Jul 2011 The region's leaders have been consistently behind the curve when addressing problems from Italy to Greece. As credibility shrivels, they need to do much more to restore confidence. This week's summit is the last good chance.
Europe’s bank levy idea looks messy and dangerous 19 Jul 2011 The euro zone's quest to avoid a Greek ratings default keeps generating cockeyed ideas. The latest proposal is to fund a bailout by taxing the financial sector. That might help avert contagion. But designing a levy would be heinously complex and would encourage moral hazard.
Swiss franc gain may cause east Europe slowdown 19 Jul 2011 The Swiss franc safehaven trade is set to run on: but for Poles and Hungarians who borrowed in the Alpine currency that means growing debt pain. Stronger Poland seems better placed to tough it out. But central banks may have to bolster the zloty and forint and forgo growth.
South Sudan joins African growth club 19 Jul 2011 The continent's growth rate is forecast at 5 pct in 2011, well above past levels. That has a lot to do with high commodity prices and increased foreign investment. At least while money stays cheap, Africa should get the needed resources. Club membership could be valuable.