U.S. housing reform at risk of stopping way short 4 Feb 2011 America's mortgage market almost sank the world economy, yet no one has done anything to fix it. The government's ideas, due out this month, will frame the debate. But the danger is they will be premised on dogma that should in fact be seriously questioned.
Productivity growth keeps U.S. recovery jobless 4 Feb 2011 Weak job creation in January was adversely affected by winter weather, and the decline in the unemployment rate to 9 pct was encouraging. But despite stronger economic data of late, job growth remains slower than in previous cycles. One culprit may be cheap capital.
U.S. individuals may get tax makeover, too 4 Feb 2011 Overhauling corporate taxes will be politically tough. But it's looking as though it might be impossible without extending reforms to individual taxes. That at least is the mood in Congress for now. But without compromises from Obama and Republicans, neither may end up happening.
If the UK needs a boost, taxes should be cut 3 Feb 2011 How bad must it get for the UK to change tack on the economy? Only if there are three quarters of negative GDP and if unemployment pushes 9.5 percent. But if if new stimulus does become unavoidable, it would be better to cut taxes than abandon cuts to public spending.
New York Mayor Bloomberg to Uncle Sam: Try this 3 Feb 2011 The ever ambitious mayor isn't letting a good budget crisis go to waste. Bloomberg wants to get rid of excessive public pension perks. Unions will resist, making the battle worth watching. If successful, hizzoner may defuse the nuclear option some in Washington are mulling.
France hopes debt brake will help it skirt crisis 3 Feb 2011 The French government wants to change the constitution to restrict budget deficits. Emulating Germany should help persuade other EU countries to follow suit. But the main aim is to convince markets that France, now one the most profligate euro zone members, is on the right track.
U.S. Congress may tie its own hands on spending 2 Feb 2011 If only U.S. Treasuries had covenants like corporate debt does. Instead of linking to EBITDA, metrics like borrowing or spending as a share of GDP could be used. That might be a stretch but lawmakers are still trying to implement new fiscal rules. It's a concept long overdue.
Federal Reserve inaction gets it right this time 2 Feb 2011 The central bank opted not to press ahead with controversial mortgagerelated rule changes and instead punted the matter to a newly created consumer agency. Given the beating the Fed took for neglecting the issue during the boom years, it's a small victory for financial reform.
Techies need plan to deal with despots 2 Feb 2011 Vodafone suspended its Egyptian service after demands from the authorities. Google, on the other hand, chose to pull back in China. There are no easy answers on how to deal with autocratic regimes. But being transparent about the reasons for complying or exiting helps everybody.
Egypt stocks will struggle regardless of outcome 1 Feb 2011 Whatever the political result, it is hard to see Egyptian shares bouncing back to levels seen before the protests. Simply to undo the damage, the country will have to prove it is a better place to invest than it was before. Turkey might be the most encouraging model.
Middle East contagion raises geopolitical risks 1 Feb 2011 There is an upside scenario if the Arab world can transition to democracy. But with unrest closing in on Saudi Arabia and Israel maybe losing its few friends in the region, there is also danger. So long as it's uncertain how things will end up, global markets will be volatile.
Asia should prepare for life after cheap money 1 Feb 2011 Exportdriven economies have long benefited from and helped to create hot money inflows. But as the world rebalances, rates should rise, and finance is likely to get more expensive. Asia urgently needs capital markets that can finance development in an era of costlier funds.
Treasury’s TARP basket cases on the mend 1 Feb 2011 Keeping Chrysler alive in 2009 was a controversial call. Meanwhile GMAC, rechristened Ally, sucked up $17 bln of taxpayers' cash. Now, the two stragglers are following AIG and GM on the road toward recovery. Ally might even be worth enough to offset U.S. losses on Chrysler.
Spanish airports privatisation won’t be easy 31 Jan 2011 The Spanish government plans to raise 14 billion euros by selling off part of its lottery and airports. The lottery sale looks easy. But the privatisation of the world's largest airport group requires serious restructuring, and much higher tariffs.
CDS market shows U.S. risk-free status slipping 31 Jan 2011 Betting on Treasury yields rising is one thing; trading the chance of default is another. U.S. credit default swap volumes have spiked in recent weeks. The CDS game is still hardly mainstream. But unsustainable borrowing is tarnishing the debt market's once pristine benchmark.
GOP not scared to toy with U.S. debt limit 31 Jan 2011 Both parties now seem to agree that not raising America's debt ceiling would be a disaster. But brinkmanship looks likely as Republicans hold out for cuts far deeper than Democrats will easily accept. Pushed far enough, the tactic could still rattle Treasury markets.
Economy will test future Egyptian government 28 Jan 2011 A change of the political guard won't trigger a major financial crisis if the country can quickly establish a new government. But the exodus of foreign funds should remind Egypt's leaders new or old that only economic reforms will help them retain investors' confidence.
Time to avoid Uncle Sam’s debt, buy U.S. states’? 27 Jan 2011 State budget shortfalls have rattled municipal bond markets. Yet even with unfunded pensions added in, the federal government's burden dwarfs those of the states. There are big structural differences, but maybe investors should worry less about munis and more about Treasuries.
Obama’s tax reforms could get waylaid by business 26 Jan 2011 The president delivered on an idea he's been telegraphing for weeks: corporate tax reform. And there are hints he wants major changes. But some companies will lobby hard against losing tax breaks to pay for a rate cut. Even turning a smart proposal into law is no sure thing.
Fed is nearing a withdrawal symptoms problem 26 Jan 2011 The FOMC kept rates low and stuck to its plan to buy $75 bln of Tbonds each month until June. But an alarming new $1.5 trln forecast for the 2011 U.S. deficit lifts the chances that the end of Fed purchases could rattle the market. The monetary policy challenges are multiplying.