GOP’s best bargaining tactic: raise debt ceiling 8 Oct 2013 Using the imminent default deadline to force the White House to a compromise on the government shutdown isn’t working. Removing it from the table would show that Republicans can be reasonable – and allow the funding debate to rage without roiling global financial markets.
An Abenomics lesson on politics for Uncle Sam 2 Oct 2013 While dysfunction has shut Washington, Japan pushed ahead with a 60 pct consumption tax hike and $51 bln stimulus. What’s startling about the contrast is that Japan was the paralyzed one two years ago. Staring down the barrel of a demographic gun concentrates the political mind.
Japan’s tax blow is well cushioned 1 Oct 2013 Prime Minister Shinzo Abe has unveiled a $51 billion stimulus to help offset next year’s increase in the sales tax. That should soften the impact on spending. But if consumers do catch a deflationary chill, the government can count on the Bank of Japan to crank up money printing.
U.S. shutdown is only preamble to bigger battle 30 Sep 2013 Budget impasses that force Uncle Sam to close shop aren’t that rare and seldom last long. The bigger problem is a likely rematch over the federal debt ceiling. Back in 2011, even a distant threat of technical default rattled markets. Today’s politics make the danger more real.
Billionaire offers YouTube clue to U.S. torpor 24 Sep 2013 Ray Dalio has taken to video to argue that Uncle Sam is stuck in a deleveraging recession, occurring on a 70 to 80 year cycle. Fed policy largesse, meanwhile, keeps prices stable as debt declines. The Bridgewater founder’s hedge fund success makes it an idea worth spreading.
Common sense could yet bring U.S. debt limit deal 24 Sep 2013 Republicans who want to torpedo Obamacare are off track. And blocking an increase in the federal debt limit proved bad politics in 2011. But trading a higher borrowing cap for fixes to recent cuts and long-term retirement benefits could help the economy and the GOP’s image.
Hugo Dixon: EU should refine its welfare policy 9 Sep 2013 Free movement of people in the EU is hugely valuable, but it is under attack from those who accuse immigrants of “welfare tourism”. Though this isn’t widespread, it is a hot issue - especially in the UK, where it could fuel Brexit. The benefit rules should be tightened.
Washington set to shake up autumn markets 3 Sep 2013 Lawmakers will soon return, most likely itching for another fight over the U.S. debt ceiling. Other market-sensitive policy is also brewing, notably the choice of a new leader for the Federal Reserve. Add in tinkering with housing, and investors need to brace for a turbulent fall.
South Africa looks like grim shadow-BRIC 29 Aug 2013 The country is sometimes listed as a near member of the group of developing world giants. Alas, it comes close in the wrong direction: Russia’s one-party rule, Brazil’s corruption, China’s spiraling labor costs and India’s inefficiency. It desperately needs a better growth model.
Italian tax deal shows Berlusconi’s still kicking 29 Aug 2013 The Letta government has struck a deal on Rome’s mansion tax. Berlusconi’s political career may be ending, but his legal wrangles and populist antics threatened the government and rattled markets. Failure to implement serious reform could ruin the country’s weak chances to grow.
Edward Hadas: Imagine a world without debt 7 Aug 2013 Banks need to raise equity to bear possible loan losses. Why not replace loans with securities that take losses naturally? Wait, these exist today, with gainsharing and inflation protection. Shares, or something similar – call it flexi-debt – are the key to crisis-free finance.
Edward Hadas: Detroit, decay and solidarity 31 Jul 2013 Who is my neighbour? That question is as relevant to the bankruptcy of Motown as the decline of the American car industry or incompetent city governments. If the suburbs lived up to their neighbourly responsibilities, Detroit would not be such a mess. It’s not too late.
Auto bailout may offer fix to Motown pension fight 24 Jul 2013 City workers may have to take a hit in bankruptcy court, but there are ways to ease the pain. GM cut retirees severely but let them recoup some losses in the turnaround. Giving Detroit employees a similar option would be a controversial but fair solution to a thorny legal issue.
Detroit bankruptcy is doing bondholders a favor 22 Jul 2013 The failed city wants to include bonds in its restructuring that the $3.7 trln muni market considers sacrosanct. It’s another example of investors ignoring the limited options governments have to honor debts. The sooner bondholders focus purely on credit risk, the better.
Time for victorious Abe to roll up shirtsleeves 22 Jul 2013 Turning on the money-printing tap was easy. But having won control of the upper house of Japan’s parliament, Prime Minister Shinzo Abe must now attend to the broken plumbing. Passing laws that make the economy more vibrant and public finances stronger are the priority.
Bankruptcy isn’t radical enough to save Detroit 19 Jul 2013 Scrubbing Motown’s $18.5 bln of debt can only be a first step. The sprawling city suffers from blight, woeful infrastructure, a population exodus and falling revenue. The private sector has a role to play, but fixing so many broken windows needs longer-term government help.
Jefferson County is back – bondholders beware 18 Jul 2013 The bankrupt Alabama county became synonymous with fraudulent financing when it defaulted on its debt five years ago. Now it needs the municipal bond market to give it a second chance. To pay off creditors, it needs $1.9 bln. The initial terms, however, don’t look promising.
Does Ben Bernanke fancy himself a Jedi knight? 17 Jul 2013 The Fed chairman implied his most important duty is to ensure markets understand where monetary policy is heading. The past month has shown how hard that can be when investors hear what they want to hear. Unless Yoda he is, tapering and rate hikes will cause painful lurches.
Brazil’s economy reacting the old-fashioned way 15 Jul 2013 Aggressive monetary policy with the cost of money falling sharply has been followed by an inflation surge causing the central bank to raise rates three times. That’s a cycle all too familiar in the 1970s developed world of public sector overspending and private underinvestment.
Congress could force Yellen over Summers at Fed 11 Jul 2013 Setting aside their strengths or weaknesses, President Obama needs to figure out who can actually pass muster with cantankerous legislators. Even after Bernanke saved the financial system, lawmakers only weakly endorsed him. Politics, more than skills, may decide the next Fed boss.