Trillion-dollar U.S. deficits are funding headwind 10 Apr 2018 Recent tax cuts will push the annual federal budget shortfall into 13 figures and debt to nearly 100 pct of GDP by 2028, Congress’s number-crunchers reckon. The forecast, on the eve of a big auction of Treasury securities, gives investors one more reason to demand higher yields.
Pete Peterson built a career, and legacy, on debt 20 Mar 2018 The former Lehman CEO and Nixon cabinet member revolutionized modern finance by teaming with Stephen Schwarzman to found private-equity giant Blackstone. He later used his wealth to champion the cause of deficit reduction. Washington has yet to repay that obligation.
Review: The flimsy finances behind China’s miracle 9 Mar 2018 The People’s Republic has long defied the economic doom-mongers. In “China’s Great Wall of Debt”, Dinny McMahon exposes the fragility and contradictions of the country’s growth model. It’s a detailed and original reality check on the latest bout of China hype.
China’s economic targets invite promise fatigue 5 Mar 2018 More money and more credit, less tax and red tape, plus the same old 6.5 pct growth target: Beijing’s key economic conference opened with cautious tweaks to last year's playbook. Chinese promises in Davos that reform will "exceed foreign expectations" look thin already.
Trump’s incoherent strategy dooms tariff crusade 2 Mar 2018 The U.S. president defended his steel and aluminum duties, arguing trade wars are “easy to win.” But his tax cuts increase the budget deficit and the country’s reliance on foreign capital, almost guaranteeing a worsening trade balance. The conflicting tactics are self-defeating.
Debt straitjacket will confine Italy’s next leader 2 Mar 2018 Candidates in Sunday’s election promise to spend more. But the winner won’t have much wiggle room. If Italy’s primary budget surplus dips below 1 pct of GDP, cutting overall debt will be hard, a Breakingviews calculator shows. Rising interest rates are a further constraint.
India lacks ingredients for next leg of growth 28 Feb 2018 The economy expanded 7.2 pct in the fourth quarter as it continued to recover from Premier Modi’s shock therapy. Even stronger growth would require healthy banks. A massive fraud makes this harder to believe in, and a fresh embrace of protectionism will be another drag.
RBS is a step away from ending its lost decade 23 Feb 2018 The state-owned UK lender made its first after-tax profit in 10 years. A 4 pct rise in revenue and falling costs moves boss Ross McEwan closer to his return on tangible equity target. Settling U.S. charges over mortgage securities is the last hurdle to restarting dividends.
Venezuela’s crypto-currency reeks of snake oil 21 Feb 2018 President Maduro says early sales of its oil-backed petro raised $735 mln. Investing in the virtual coinage is tantamount to a bet on the increasingly autocratic administration’s probity, transparency and basic grasp of economic reality. Good luck with that.
Manila sleepwalks towards inflationary trouble 21 Feb 2018 Price rises are accelerating in the Philippines, as strong demand, a weak peso and new taxes boost living costs. The central bank risks falling behind the curve. Inaction could raise bond yields, slam stock values and further dent Asia’s worst-performing currency.
German politics has become Europe’s weak link 15 Feb 2018 The country’s Social Democrats will ballot members on their coalition deal with Chancellor Angela Merkel. Party infighting means approval is not assured. A rejection could lead to a new vote or a minority government. Either would make it harder to push through European reforms.
Trump budget is mostly fan fiction for Republicans 12 Feb 2018 The administration called for cuts in non-military programs in its $4.4 trln budget for 2019. Last week’s two-year spending deal effectively dooms the plan, though it may offer a blueprint for GOP budget hawks. A new infrastructure push offers one hope of bipartisan dealmaking.
Congress holds its nose over U.S. fiscal restraint 8 Feb 2018 The legislature passed a deal early on Friday to raise spending by several hundred billion dollars, just two months after a $1.5 trln tax cut. The strain on government coffers during a roaring economy will leave politicians with far less ammo when the next downturn arrives.
Predictions are hard, especially about the future 7 Feb 2018 Even so, Reuters Breakingviews attempts it each year. The latest effort, “Froth and Frustration,” inspired a series of events and discussions. We also polled audiences from North America to Asia and beyond on key issues. Here’s the outlook for 2018 in text, video and graphics.
Cox: Sliding stocks don’t surprise our readers 5 Feb 2018 From Mumbai to Milan, we polled participants at our Predictions 2018 summits. Even before last week's rout, most thought investors are too exuberant, bitcoin is a bubble and Donald Trump is doing poorly. More surprising were regional takes on NAFTA, Italian elections and Brexit.
Bad things may come in threes for stock investors 2 Feb 2018 U.S. wage growth and 10-year Treasury yields are both nearing 3 percent. The former may hasten rate rises and erode companies’ profits. The latter will boost borrowing costs and make it less attractive to hold stocks. That could spook an equity market priced for near perfection.
Carillion mess puts Corbyn a step closer to power 18 Jan 2018 Even before the contractor imploded, the public contracts it operated were known to be expensive. After Carillion it’s hard to argue private sector efficiency justifies the cost. UK Opposition leader Jeremy Corbyn’s preference for a bigger public sector is increasingly in vogue.
Viewsroom: China’s dubious shot across U.S. bow 11 Jan 2018 Talk of buying fewer of Uncle Sam’s bonds may be Beijing’s way of showing some teeth as the Trump administration mulls import tariffs. But as with other retaliatory trade tactics, it would hurt China too. Plus, why Nelson Peltz doesn’t want to be called an activist investor.
German economic success lays trap for Merkel 11 Jan 2018 The strongest growth in six years and the rude health of public finances may tempt a weakened Chancellor Angela Merkel into budget giveaways. But low interest payments flatter the fiscal picture and won’t endure. Better to invest in infrastructure and education than to cut taxes.
Hadas: Fiscal debts are not our children’s burden 10 Jan 2018 When this generation dirties the water, the next has to pick up the tab. Debt is different. When governments borrow from taxpayers, the children will both pay the bill and enjoy the proceeds. The real deficit dangers lurk in foreign debt and distributional distortions.