Lonely Fed dissenter may gain following in 2011 14 Dec 2010 Thomas Hoenig's campaign for tighter money during his year on the FOMC has been solitary. However, the Fed's latest $600 bln bondbuying program seems to have scored an own goal with bond investors. Hawkish Hoenig successors may find events in coming months help their cause.
Does the European Central Bank need a bailout? 13 Dec 2010 News that it's considering a capital hike suggests that its own resources are stretched by bailing out governments and banks. That goes not just for the ECB itself but for other central banks, such as Ireland's, that are part of the European financial system.
Areva listing better late than never 13 Dec 2010 Paris had to agree on listing the nuclear plant maker next year to lure Kuwait into funding part of its 900 million euro capital hike. After five years of repeated blunders and turnarounds on its nuclear strategy, this may show that the government is finally learning. Hopefully.
Obamacare’s constitutionality not the only hurdle 13 Dec 2010 A Virginia court ruling means the Supreme Court will decide if a key piece of Obama's healthcare law is constitutional. If the majority rules Americans can't be forced to buy insurance, the plan may implode. Even if it doesn't, U.S. health spending is on an unsustainable course.
Russia should use WTO entry as reform booster 13 Dec 2010 The country is poised at last to join the World Trade Organisation. Entry has long been seen as a litmus test for Russia's reform progress, and would be warmly welcomed by foreign investors. But excitement may be premature. Internal reforms are needed to reap the full benefits.
UK cuts agenda weathers storm of protest 10 Dec 2010 Student unrest in London, including an opportunistic assault on a royal car, looks worse than it is. The UK government has jumped an important hurdle by winning the controversial vote on university fees. Fiscal reforms remain intact and so too does creditor confidence.
2012 unemployment rate is key test for tax plan 10 Dec 2010 Last year's stimulus didn't dent unemployment much, as job creation was much more sluggish than in previous recoveries. A new tax package will also be judged by its effect on unemployment, but structural and secular labor market factors may combine to produce a failing grade.
Carping U.S. Congress risks roiling markets 8 Dec 2010 Legislators are in an uproar over the tax deal struck by Obama and Republican leaders. Democrats think it a giveaway to the rich, while Tea Party types want spending cuts. If both sides let the better be the enemy of the good, it could hit stocks in a way the TARP stalemate did.
Demise of Build America Bonds shouldn’t be mourned 8 Dec 2010 The postcrisis program under which the U.S. government subsidizes state and local borrowing has been expensive for the feds and unreliable for the states. It risks inefficiencies, too, by encouraging marginal infrastructure projects. If BABs are now scrapped, good riddance.
Higher interest rates would cure deficit dithering 8 Dec 2010 U.S. deficit hawks may squawk, but the administration s tentative $900 billion deal to juice the economy exposes the bluntness of their talons. Low interest rates are partly to blame: A spike in Treasury yields would focus policy maker s minds on longerterm trouble brewing.
U.S. tax deal puts austerity on back burner 7 Dec 2010 President Obama and Republican leaders have agreed to some $1 trillion of economic stimulus over the next two years, mostly in the form of tax cuts (or nonincreases). If the package makes it through Congress, the message will be that, for now, Washington is going for growth.
UK pension funds lose the plot with risk aversion 7 Dec 2010 Once the bedrock of equity markets, UK definedbenefit pension schemes are racing to derisk. Equities are now treated as a lastresort gamble by desperate schemes. But a more intelligent pensions policy could yet restore pension funds' rightful position as longterm risk takers.
Carry tax armistice sacrifices fairness for peace 7 Dec 2010 By all rights, performance fees earned by Steve Schwarzman and friends should be taxed as income instead of capital gains. But Democrats dropped a longrunning effort to do just that to achieve a broader tax deal. Even if it doesn't affect the deficit much, it sets a bad example.
Citi brings cheer to Uncle Sam, Morgan Stanley 7 Dec 2010 A 26 pct profit on a widely telegraphed sale of 7.7 bln of the megabank's shares is no mean feat. It should foster hope that America will dispose of its AIG and remaining GM stakes well, too. And the investment bank's successful role has won it some allimportant bragging rights.
Common bond is no quick fix for euro crisis 6 Dec 2010 Some EU members are pushing for a euro zone bond to fight contagion in government debt markets. Such a framework probably would have helped if introduced 15 years ago; but it comes too late to end the current crisis. Moreover, it could encourage moral hazard.
How to make sure Uncle Sam doesn’t bail out states 6 Dec 2010 House Republicans want to stop state and local governments issuing taxexempt bonds unless they are more forthright about future obligations. The effort may pave the way for a more radical one: changing the law so that states are allowed to go bankrupt and stiff their creditors.
Portugal bailout should focus on labour, deficit 3 Dec 2010 ECB bondbuying has given Lisbon a breather, but a 5070 bln euro bailout is still likely early next year. Key conditions should be more radical labour market reform to boost competitiveness and a further deficit squeeze to reduce the risk of default.
Deficit panel soft-pedaled Medicare burden, anyway 3 Dec 2010 Obama's commission defined tough fiscal choices for Washington, though its members weren't unanimous enough to force the ideas on Congress. But even if they had, the panel pulled punches on healthcare cuts. Reducing that burden may be central to the next presidential election.
Treasuries, bunds and gilts have further to fall 1 Dec 2010 Investors' love affair with government bonds is running out of steam. High prices, together with doubts about national debts and fears for inflation suggest even top sovereigns are heading for a fall.
Fed’s data dump holds important lessons for Europe 1 Dec 2010 The central bank detailed who borrowed what from its myriad lending facilities during the crisis. Banks, foreigners and industrial conglomerates lined up during desperate times to borrow some $3.3 trn. Europe may need to step up its firepower if it wants to stem its own crisis.