Foreign exodus to test Italy’s bond market buffers 31 Aug 2018 Fear of bold public spending is spooking foreign investors, making it harder for the government to fund itself. Italy can lean on banks and local savings to plug the gap. But gorging on debt hurts lenders and growth. And “Quitaly” concerns may lead Italians to move cash abroad.
Puerto Rico revival needs death-and-tax certainty 29 Aug 2018 The official death toll from last year’s hurricane has just jumped almost 50-fold. The delay is emblematic of San Juan’s longer-term problems tracking and recording everything from paying workers to collecting taxes. Without improvement, it’ll be tough for the island to prosper.
Italy’s Trump card shows bond market fragility 24 Aug 2018 The U.S. President offered to buy Italian debt, according to one newspaper. Donald Trump may want to help a eurosceptic government but has limited scope to mitigate the damage that Rome’s policies are inflicting on domestic asset prices. Help is better sought closer to home.
Italy’s bond fix idea resembles covert bailout 21 Aug 2018 The economic spokesman of the ruling League Party says the euro will collapse unless the European Central Bank limits the gap between euro zone countries’ bond yields to 150 basis points. That bar is too low and would give big spenders free rein to dodge hard budget decisions.
Cox: When commemorating crises, think 20 not 10 15 Aug 2018 As the decennial anniversary of Lehman’s systemic collapse approaches, it’s worth recalling the one that preceded it. Russia’s 1998 default led to LTCM’s demise. Shockingly, that fiasco’s lessons went mostly unheeded until 2008. The key takeaway: there are always blind spots.
Putin has strong defences against U.S. debt siege 15 Aug 2018 The rouble has slumped on fears that Russia’s sovereign bonds will be next in the crosshairs of U.S. sanctions. That would cause a stink, but the bill may not pass into legislation. If it does, oil prices and Moscow’s low debt mean President Vladimir Putin can weather a crisis.
Hadas: The Great Moderation is due for revival 2 Aug 2018 The 2008 financial crisis showed that economic cycles are still inevitable. Or did it? Duller expectations, tamer finance and stronger regulation could make periodic declines unnecessary. Sadly, it looks like at least one more downturn will be needed to get the message across.
Trumponomics flirts with more debt and inequality 31 Jul 2018 Treasury Secretary Steven Mnuchin wants to cut capital-gains tax bills by accounting for inflation. It’s sensible to assess the true value of costs and profit. But it’d mostly benefit the wealthy and add to what may be a $1.1 trln deficit in 2019. It also smacks of self-interest.
Predicting U.S. GDP more exciting, more pointless 27 Jul 2018 The U.S. economy grew at a healthy 4.1 percent pace in the second quarter. A surge in exports ahead of retaliatory tariffs helped. Consumer spending, aided by tax cuts, was also a factor. The trade war and fiscal stimulus could result in zig-zagging GDP figures for some time.
Silk Road speed bumps show limit of yuan diplomacy 13 Jul 2018 There is trouble along Beijing's trillion-dollar trade route. From the Maldives to Malaysia, politicians are calling to review deals, fretting over debt and dependence. Domestic politics are driving the backlash, making it tough to turn economic might into lasting influence.
Malaysia taps brakes along China’s Belt and Road 5 Jul 2018 Prime Minister Mahathir Mohamad has suspended work on a $20 bln rail link between his country’s east and west coasts. It’s a rare setback for Beijing's massive infrastructure initiative. The project's importance, though, means Kuala Lumpur can afford to fight for a better deal.
China’s renewable giants can live without handouts 29 Jun 2018 Authorities are pulling state subsidies for solar and wind companies. The shake-out recalls earlier crises, which claimed stars like Suntech. Now, however, cheaper technology and better supporting infrastructure give clean energy champions a chance to thrive on their own.
Debt relief puts floor under Greek bank pains 28 Jun 2018 A government deal with creditors should lower funding costs for Greece’s big four lenders. With bad loans accounting for 48 percent of lending, normality remains a way off. But ending shareholder angst over debt sustainability could be the first step in banks’ rehabilitation.
Greece swaps bailout hell for eternal purgatory 22 Jun 2018 Eight years after seeking financial help Athens can at last support itself, helped by extra euro zone funds and debt relief. But borrowings of over 300 bln euros mean it must maintain a tight budget, and submit to regular scrutiny. Doubts over its debt sustainability will linger.
China starts trading debt for growth 14 Jun 2018 Shadow bank lending slowed sharply in May, and investment growth slipped to just 6.1 pct. For now, Beijing’s target of increasing GDP by 6.5 pct annually is safe. But officials will be thinking about creative ways to keep credit flowing, even as they discourage riskier behaviour.
Argentina’s $50 bln IMF deal has a year to work 8 Jun 2018 President Macri, like Cardinal Mazarin’s preferred generals, has been lucky as well as bold so far in his efforts to fix Latin America’s No. 3 economy. With elections not due until late 2019 and the deal shielding social spending, he has time to beat opponents’ IMF-phobia - just.
Japanese CEOs get new excuse to stop stock-picking 8 Jun 2018 An updated governance code tells boards to run cost-benefit analyses on holding stakes in other listed companies. It’s too much to hope this alone will catalyse disposals and buybacks. But it could help shareholders, such as those at broadcaster TBS, make a case for streamlining.
China’s bond market faces buyer crisis 5 Jun 2018 A crackdown on off-balance sheet wheezes is likely to sap banks' appetite for bonds. They are by far the biggest buyers, so their retreat will hurt prices. Yield-hungry entrants might appreciate higher returns, but the coming liquidity drain could destabilise a rickety market.
Hadas: Market complacency curses debtor countries 31 May 2018 President Erdogan is wrong to claim a sinister “interest rate lobby” has aggravated Turkey’s structural weaknesses. Foolish foreigners have, however, financed unsustainable consumption binges in this and other economies. Remedies range from regulatory nudges to capital controls.
How the EU can help save Italy from itself 31 May 2018 A new radical government will cast doubt over euro membership and inflame migration tensions. Other EU countries could help ease voter discontent by tweaking the bloc’s fiscal rules, and taking more migrants. That won’t be easy, but it beats Italy leaving the single currency.