Putin takes up residence in alternate reality 18 Dec 2014 The Russian president insists that prosperity is around the corner if his countrymen can only endure another two bad years. But as sanctions and weak oil prices push Russia towards recession, no serious reform is in sight. Putin’s optimism should be a cause for serious pessimism.
Swiss give positive lesson in negative rate policy 18 Dec 2014 A safe-haven currency can invite economic trouble. The Swiss central bank is up to the challenge. It started with market intervention and has now introduced a negative overnight rate. The Swiss realise that money is more of a policy tool than a store of value.
Poor growth prospects show Germany’s weaknesses 15 Dec 2014 Europe’s supposed economic powerhouse can only grow by 1 percent a year in the long-run, according to revised Bundesbank forecasts. Misguided policies drag down Germany’s economic potential as dividends of past reforms are petering out. That’s bad news for the euro zone.
Hugo Dixon: Greece still several steps from chaos 15 Dec 2014 Athens has entered a period of political instability, which could lead to an election won by Syriza. This radical left group’s policies could prompt Greece’s exit from the euro if fully implemented. But this is unlikely, as Syriza will struggle to execute its plan.
French reform bill more talk than walk 10 Dec 2014 Economy Minister Emmanuel Macron wants to show Europe that France is finally getting serious about reform. But his limited plan to deregulate some services faces fierce opposition from within the ruling socialist camp. What Macron is demonstrating is how tough his job is.
Hugo Dixon: Can we have a good life without growth? 8 Dec 2014 The West, especially Western Europe, may have entered an era of low economic growth. This could cause misery, especially if no solutions are found to joblessness, debt and poverty. That said, a changed mindset about what matters may help with finding the answers.
BoE independence faces stiff test 5 Dec 2014 Lower borrowing costs helped George Osborne plug a hole in UK tax receipts. Add the chancellor’s home-buying scheme, and the government’s interest in monetary easing is clear. It is critical for Osborne-appointed BoE Governor Mark Carney to be seen to be making his own decisions.
UK’s economic torpor looks structural 4 Dec 2014 The slow shrinkage of the UK fiscal deficit is one sign of a weak recovery. There are others – a sharp increase in the current account deficit and GDP per person below the 2007 level. The country’s problems are too deeply entrenched to be solved by government budget tinkering.
UK chancellor runs out of stimulus 3 Dec 2014 George Osborne’s budget is no pre-election pleaser, despite populist moves on property, bank and corporate tax. Deficit reduction is further behind schedule in part due to prior tax cuts. The fiscal outlook remains poor. Necessity forced low-cost gestures and further austerity.
“London levy” targets distortive foreign inflows 3 Dec 2014 The UK has a new 12 pct tax on property deals over $2.4 mln. That, and hikes in the cost of being “non-domicile,” will make the global mega-rich think twice about alighting in London. Property taxes elsewhere will fall. Policy is for once being set for the nation not the centre.
UK’s latest small firm loan ploy flogs dead horse 3 Dec 2014 The Bank of England is extending its Funding for Lending Scheme helping banks lend to small businesses. By giving the fragile banking sector more leeway, the FLS has its uses. But it will probably still flunk its stated aim: increasing small firms’ use of debt.
ECB could easily manage QE sovereign risk 2 Dec 2014 Critics say sovereign bond-buying could expose the ECB to risky countries and possibly trigger fiscal transfers. The argument is good in theory. Yet based on the ECB’s target, the exposure could be lower than in 2013 – when the central bank held more debt from the periphery.
Putin’s Russia can’t easily escape rouble debacle 1 Dec 2014 The Russian currency is sinking along with the oil price. A central bank interest rate hike would hurt the struggling economy. Reforms reducing the country’s dependence on oil might increase confidence, but Western sanctions are squeezing the government and the financial system.
Japan downgrade out of step with new QE world 1 Dec 2014 By normal debt logic, Moody’s is right to lower the rating of a sovereign struggling to cut its huge deficit. But yields keep falling as the central bank effectively monetises. The lesson: money-printing governments can always dodge default – and they may duck inflation too.
Euro zone lassitude likely to endure 28 Nov 2014 The sharp oil price decline effectively crushes any hope of an inflation revival, even if the ECB eases, yet again. Fiscal caution, sluggish banks and mild reforms will restrain job creation in key economies. The prognosis is very slow progress with a high chance of crisis.
India in depth: Time to follow China on rates 26 Nov 2014 Global disinflation is creating room for the Reserve Bank to follow its counterpart in Beijing and cut borrowing costs. Unlike the People’s Republic, India doesn’t need to worry about triggering overinvestment. Monetary easing now would have few risks, and several benefits.
Hugo Dixon: Spain is a troubled country 10 Nov 2014 Reform has ground to a halt, unemployment is way too high, corruption scandals are popping out of the woodwork, many Catalans want independence, and a new left-wing populist party is leading in the opinion polls. The traditional political class is at a loss over what to do.
Review: The secret cause of economic crises 7 Nov 2014 Trust, not self-interest, is the main support of market economies, says Geoffrey Hosking. He persuasively argues that widespread trust is crucial for growth. He explains how business cycles are propelled by mutual confidence, too little at the bottom and far too much at the top.
Aggressive tax planning is retreating, not beaten 7 Nov 2014 The details of Luxembourg’s “comfort letters” will add to the pressure on companies which push profits into low-tax jurisdictions. Personal tax havens are also looking much less safe. But national arbitrage will continue as long as countries have different tax rates and rules.
End of U.S. QE is actually good for world economy 4 Nov 2014 Investors worry about the end of America’s quantitative easing but global consumers, especially the poor, can welcome it. The halt has helped make oil and food cheaper, lowering inflation. That will also keep interest rates down. In all, it may be more stimulating.