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.
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.
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.
Australia is the canary in China’s coalmine 19 Jul 2011 Chinese commodities demand created a mining boom, and turned Australia's credit market into a proxy for its trade partner's economy. That market is now flashing red for Australia's exposure to a Chinese slowdown. Even if China averts a dreaded hard landing, Australia may not.
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.
Dim sum bond boom rests on shaky assumptions 18 Jul 2011 Risk aversion has hit China stocks hard, but Hong Kong's yuandenominated bond market is still thriving. Issuers have enjoyed low yields and managed to eschew credit ratings, as buyers believe the yuan is bound to rise. That leaves plenty of room for disappointment.
Egypt shouldn’t let the pound slide just yet 18 Jul 2011 Supporting the currency has been costly, but the strategy may have averted a large capital flight. It makes sense if Cairo goes back to a flexible exchange rate policy after the elections. The challenge then will be to ensure politics don't dangerously deplete foreign reserves.
Central bankers too set on 2 pct inflation target 15 Jul 2011 Monetary policymakers have experimented wildly trying to stave off crisis. Yet they share a blinkered faith in that inflation goal despite scant evidence that even far higher rates harm growth. As rich nations struggle with debt, the 2 pct credo merits an openminded rethink.
How to minimise Greek moral hazard 15 Jul 2011 Europe is looking at slashing Athens' debts as a way of solving Greece's problems. That might look like rewarding the Greeks for their profligacy, encouraging other indebted nations to ask for the same favour. Here's how to reduce the chance of that happening.
Indignados don’t say much, but must be listened to 15 Jul 2011 Spain's young protest movement may be too vague to shape the debate in the coming general elections. But they are having some impact on specific issues, like electoral reform or mortgage defaults. The risk is that they oppose more important, structural changes.
Bluster hides U.S. debt deal progress 14 Jul 2011 Even as credit raters like Moody's blare alarm, debt talks superficially seem hopeless. But behind the theatrics, a deal to cut spending and boost government borrowing authority is emerging. It's more a bandage than a major fiscal fix, but it should preserve America's AAA rating.
Banking clarity could complicate euro debt deal 14 Jul 2011 Market turmoil has forced European leaders to seek a comprehensive solution for Greek debt woes. But a final agreement could require lengthy government approvals. EU bank stress tests results could rekindle jitters. Euro leaders must act fast.
Italian debt squeeze leaves little breathing room 14 Jul 2011 Rome can comfortably absorb the rise in borrowing costs seen in the latest bond auction so long as its growth and austerity plan stays on track. But a significant slippage on either part of the plan could land it in a debt spiral.
Japan takes unwilling role in Europe’s debt drama 14 Jul 2011 Investors fleeing the euro zone credit crisis are landing in Tokyo's bond market, adding to upward pressure from domestic investors. That's pushing up the yen, and making life hard for exporters. Intervention is risky. Japan's policymakers must be cursing their safehaven status.
Berlusconi really must go 13 Jul 2011 It's no longer about abuse of power and bunga bunga parties. His continuation as Italy's prime minister could drive the country into a financial death spiral. His own supporters are shaken and the public is afraid. But the opposition is behaving responsibly, so there's some hope.
China’s rising wages spell trouble ahead 13 Jul 2011 GDP growth has slowed in China, yet aftertax incomes rose by 14 percent in the first half. Chinese workers deserve a fair share of corporate profits, but fast wage increases add to inflation and growth worries. It might create a dreaded wage inflation spiral.
Australia’s CO2 plan has much to recommend it 13 Jul 2011 The planned carbon levy is saddled with political sops, and will cost money to implement. But the proposed hybrid of tax and capandtrade is an innovative way to put a price on environmental costs. Bigger polluters like China, India and the United States should watch closely.