Tunisian economic recovery is reason for optimism 24 Oct 2011 Barring a violent backlash against the likely Islamist party victory, Tunisia can hope for a strong rebound following the country’s first ever democratic elections. Libya’s liberation might also help. For now, that outweighs the looming risks posed by the European slowdown.
Volcker Rule draft still leaves many gray areas 7 Oct 2011 U.S. regulators have made a good stab at trying to minimize the prop-trading ban’s impact on market-making. But their 200-page draft still raises many questions. It confirms that the former Fed chairman’s know-it-when-you-see-it mantra was too simplistic for this complex task.
Latest U.S. tax on rich would be counterproductive 7 Oct 2011 A 5.6 percent millionaire’s surtax is being pushed by Senate Democrats. Unlike Obama’s original scheme to limit deductions, which would help fix part of the tax code, this one doesn’t. The high marginal rates would encourage avoidance and risks dinging the already ailing economy.
U.S. jobs data confirm economy is muddling along 7 Oct 2011 The six-figure increase in employment in September beat expectations but wasn’t enough to cut long-term unemployment, which increased. Still, alongside positive manufacturing data, it suggests the outlook is for slow, patchy growth rather than a relapse into recession.
SEC may deter more cheats by lowering sights 5 Oct 2011 The U.S. regulator faces criticism over its record nailing financial rogues. Ponzi-schemers aren’t the only ones who should pay for wrongdoing. Suing for negligence rather than harder-to-prove fraud could make a difference. Penalties would be smaller but punishment more certain.
Keynesian consensus may win by default in 2012 5 Oct 2011 With Chris Christie out, Mitt Romney looks more likely to win the GOP nomination. He professes a wish to change policy, but his history shows him swayed by the big-government consensus. The Tea Party’s Austrian, hard-money views seem destined to fade from view in the election.
Overbearing Brasilia at fault in ethanol shortage 4 Oct 2011 Lack of investment and squeezed margins mean Brazil’s biofuel production is not keeping up with demand. Government efforts to change that are now affecting oil giant Petrobras. It’s the kind of tangle of unintended consequences that follows excessive government meddling.
U.S. government has chance to borrow very long 30 Sep 2011 Thanks to the Fed’s maneuvers, Uncle Sam could sell bonds maturing decades from now at uncommonly low yields. Moreover, pension funds need the paper. The Treasury has kicked around the idea of 50 or 100-year bonds before. Maybe it’s time to actually issue some.
Global SWAT team needed to close tax loopholes 26 Sep 2011 Tax-based financing deals like those between U.S. and UK banks being targeted by U.S. authorities use legal mismatches to reduce tax bills. They are lucrative, but have no economic value. Such questionable arrangements might be best tackled in a focused multilateral forum.
Putin’s presidential bid step backward for Russia 24 Sep 2011 The prime minister’s decision to run for president again, in place of his more reformist protégé Dmitry Medvedev, dashes hopes for reinvigorating the country’s economy, society and politics. Russia can look forward to a long period of creeping stagnation and seething discontent.
Bank paperwork snafus trap Uncle Sam in mortgages 23 Sep 2011 Fannie Mae and Freddie Mac’s past failures make them easy targets. But the pile of lawsuits against private sector banks, notably over mortgage servicing, suggests they’re not yet ready to replace the government - at least until legal action, time and effort scrape away the rot.
Bernanke’s twist may not be much to shout about 21 Sep 2011 The Fed’s revival of a 50-year-old idea to reduce long-term interest rates is four times heftier than the original. It adds to Fed balance sheet risk and to price pressures; more helpfully, it could boost small business lending. Overall, though, it’s unlikely to achieve much.
IMF issues timely warning on ultra-low rates 21 Sep 2011 Just as Ben Bernanke and his crew contemplate further easing, a new IMF report lays out the multiple threats created by such loose monetary policy. In rich nations, small firms suffer while in emerging markets, capital inflows produce bubble conditions. The FOMC should pay heed.
Slashing tax deductions a big help for U.S. budget 19 Sep 2011 Forget the provocative Buffett Rule. Obama’s simpler proposal to cut tax deductions could add up to $9 trln to the government’s revenue over 10 years. There’s even a hint of common ground with the GOP. Best of all, killing off many deductions would do little economic harm.
SEC’s Abacus rule shuts several stable doors 19 Sep 2011 Banning middlemen from betting on the failure of asset-backed bonds they create sounds worthy. And the regulator’s new rule at least looks fairly narrow. But between the Volcker Rule and the exposure Goldman already found it had over Abacus, this issue already looks covered.
Settlements feed U.S. prosecutor overreach 16 Sep 2011 From Google to tire-maker Bridgestone, firms pay big money to avoid fights with the government in U.S. courts. Trouble is, these deals encourage prosecutors to go after what they can punish, not what the law prohibits. It’s another unpredictable cost of doing business.
Solyndra debacle reveals poor means to policy end 14 Sep 2011 The U.S. solar firm’s bankruptcy shows how poor risk assessment and crony capitalism undercut government loan guarantee programs. Germany’s mandated 20-year fixed-rate contracts for clean energy work better. They shrink the state’s role picking winners and maximize market forces.
Grim Guatemala is demographic, security nightmare 13 Sep 2011 The two leading candidates in the Central American country’s election offer reasonable economic policies and small government. But with population growth nearly double Mexico’s, combined with poor literacy and a security problem, making the economy work properly will be tough.
Legal surrender hurts SEC more than shareholders 7 Sep 2011 The U.S. regulator won’t appeal a ruling that blocked more investor power to challenge corporate boards. That’s understandable given the legal risks and alternative proxy options. But it preserves a precedent that makes it far more arduous for the agency to implement new rules.
Running for president like a hedge fund manager 2 Sep 2011 White House hopeful Jon Huntsman aims to employ a fund-of-funds approach to policy: Combine the best off-the-shelf economic plans on taxes, debt and energy into one broad proposal. Even if Republican voters don’t invest in the underdog’s offering, his opponents might want to.