Balanced budget laws are flawed but not useless 16 Aug 2011 Sarkozy and Merkel like them, and they feature in America, too. But politicians often fudge the numbers, or just change the rules. Nonetheless, in reasonably honest systems such laws slow the build-up of deficits. Perhaps as importantly, they also stigmatize bad behavior.
Rick Perry needs to backtrack on Fed charge 16 Aug 2011 The Texas governor and GOP White House candidate, like the U.S. central bank’s Dallas branch, doesn’t much like its money-printing policies of late. But words like “treasonous” cross a line and further dent Fed independence. Perry could struggle if he doesn’t tone it down.
Battered U.S. junk deserves high-yield name again 16 Aug 2011 With markets volatile, typical junk bonds are yielding north of 8 pct. That’s tasty for those starving on the Fed’s zero-rate diet. And default rates look low, refinancing needs limited and the deal flow manageable. Despite investor wariness, today’s junk looks almost nutritious.
Over-reaction to BP Gulf spill costing U.S. jobs 16 Aug 2011 Oil regulators may have swung from gung-ho to too cautious. Painfully slow drilling approvals mean America could be missing out on 230,000 jobs - and tax revenue, too. Safety matters. But with unemployment and the deficit top national concerns, red tape should be kept in check.
German slowdown adds to pressure on euro zone 16 Aug 2011 Weak Q2 GDP confirms fears that the EU’s largest economy has entered a soft patch. That makes it harder for Europe to grow its way out of crisis. The euro zone can’t afford to relax near-term fiscal austerity just yet. But further rate hikes by the ECB must now be on hold.
Italy’s imperfect budget faces bumpy ride 15 Aug 2011 There’s mounting public anger at Rome’s accelerated austerity programme, in particular its tax on high earners. Debt market jitters are likely as the measures are debated in coming weeks. Still, it’s hard to see the package being rejected - though it may well be modified.
Texas governor creates two-man GOP 2012 race 15 Aug 2011 Rick Perry’s record, Tea Party bona fides and deep pockets make him the prime rival to Republican front runner Mitt Romney, a former private equity boss. Yet flaws in both candidates mean either one would need help from the economy to push Barack Obama out of the White House.
Russia needs to kick-start pension reform 15 Aug 2011 A rapidly rising state pension bill will become a crippling burden without serious reforms. The latter is the key not only to addressing deteriorating public finances, but also to developing flimsy capital markets. A pity Russia’s leaders are so shy about the sensitive issue.
France needs resolve to avoid losing triple-A 11 Aug 2011 Debt and the deficit are high, regardless of the cost of euro zone bailouts. France has a tough plan. But extra measures, like reforming local government and removing VAT exemptions, are needed. Regrettably, as in the U.S., there are political obstacles and an election looms.
Financial lifeboats starting to get crowded 11 Aug 2011 Safety from sinking stocks has been sought in Treasuries, and even bonds backed by U.S. homes. But other places of refuge like the Swiss franc and gold showed on Thursday how quickly they can be rocked when too many investors pile in. Havens aren’t immune to mania either.
U.S. debt-cut panel already poisoned by politics 11 Aug 2011 It hardly matters who sits on the new “super committee” seeking $1.5 trln of savings over 10 years. Wall St. will struggle to convince lawmakers of how important it is to reach a compromise when both parties are eyeing 2012 elections. Credit raters, however, may not wait so long.
Sweet Swiss-German tax deal will be hard to repeat 11 Aug 2011 Bern has agreed to collect tax and penalties from accounts held by tax-dodging Germans. But Swiss bank secrecy remains intact, and lenders will avoid prosecution for past crimes. The revenue hit is also manageable. An investigation by U.S. authorities is unlikely to end so well.
Fed policy creates crunch moment for Chinese yuan 11 Aug 2011 A weaker U.S. dollar raises the cost to China of suppressing its currency - and will further swell its reserves. Pricier commodities could prompt inflation to return. China has resisted a much stronger yuan, but the Fed’s low interest rate pledge may give it little choice.
Defeat for U.S. public unions sets stage for more 10 Aug 2011 Organized labor picked a fight it couldn’t finish in Wisconsin. It won two battles, but lost a recall vote war for the state Senate. Anti-union Republicans remain in control. The outcome may inspire other cash-strapped states to squeeze the power and wages of their workers.
Fed’s "QE lite" another dent in dollar’s crown 10 Aug 2011 Ultra-low interest rates alone won’t knock the dollar off its perch as the world’s reserve currency. The greenback remains the lingua franca of global commerce and foreign central banks’ holding of choice. But the bleeding from a thousand cuts will eventually end its dominance.
Fed’s firm compass setting puts it all at sea 9 Aug 2011 The FOMC’s decision to keep rates ultra-low till mid-2013 suggests excessive faith in its forecasting power. Inflation, jobs and growth have already surprised the Fed this year. Locking in a course for two years as a sop to markets only makes it harder to navigate choppy waters.
Asia emerges as refuge from global fears 5 Aug 2011 The region’s government bonds have soared amid this week’s panic. Not that investors are buying the theory it has decoupled from the West - Asian stocks are weakening. But with balance sheets that look pristine next to the U.S. and EU, Asian sovereigns are seen as a safe haven.
Reform bill could make "incoherent" SEC irrelevant 4 Aug 2011 From Madoff to mortgages, the U.S. regulator has had its misses. But a Republican bid to reshape it seems designed to hinder, not help. There’s room for improvement, but with its duties growing the self-funding watchdog needs more staff, more money and a buffer against Congress.
Can non-violent struggle bring down Syria’s Assad? 1 Aug 2011 Maybe not if it was purely spontaneous. But, in Syria, the campaign shows it can think strategically and organise effectively. In a style that departs from the typical Breakingviews approach, Hugo Dixon tells the tale through the eyes of a leading activist, Ausama Monajed.