UK GDP offers partial vindication for BoE caution 26 Feb 2014 The latest growth report shows consumer spending up a little and business investment up a lot. As more confident businesses invest, they should boost productivity, wages and then spending. It’s a slow process. In the meantime, “lower for longer” interest rates look justified.
Edward Hadas: How hunger and obesity go together 26 Feb 2014 It’s a scandal that poor people in rich countries have to choose between eating and winter heating. The problem is not the traditional economic curse of inadequate production nor the modern scourge of malign neglect by politicians. This hunger is a symptom of societal malfunction.
Japan bond investors’ overseas trip may flop again 26 Feb 2014 The Federal Reserve’s taper talk discouraged Japanese investors from venturing abroad last year. Now wobbly emerging markets are threatening this year’s outing. That’s bad news for bondholders searching for better returns - and for the Bank of Japan’s anti-deflation campaign.
China internet Godzilla moment is in the making 26 Feb 2014 Like the nuclear waste that spawned the fictional monster, China’s peculiar conditions – from scale to censorship – have allowed tech behemoths to grow. Can they run rampage outside their home market? Tencent has a good chance; e-commerce group Alibaba may find it harder going.
More careful aim needed for U.S. insurance bazooka 25 Feb 2014 Congress is considering both flood and terrorism backstops this week. There may be a role for the feds, but not if it usurps private markets. And if lawmakers want to check Uncle Sam’s actuarial ambitions, they could start with the most sweeping: mortgage guarantees.
Outside investors in Mexico will want results soon 25 Feb 2014 Foreign direct investment nearly doubled in 2013, reaching 2.7 pct of GDP, yet the economy grew only 1.1 pct. There’s room for more offshore money, but its providers will expect growth to pick up. Keeping FDI flowing will require the government to follow through on reforms.
Who bails out bitcoin depositors? 25 Feb 2014 The pseudo-currency’s main exchange has disappeared from cyberspace, leaving customers at least temporarily bereft. Bitcoin’s supposed attraction is being government-free. When things go awry, users learn why conventional finance has expensive regulation and political backstops.
At least Venezuela’s unrest is simply economics 25 Feb 2014 Ukraine’s split is ethnic, Thailand’s regional and Syria’s religious. Venezuela is ethnically and religiously united and even has oil wealth. But income inequality and chaos bedevil the Latin nation. In theory, these problems can be alleviated even without political upheaval.
Italy’s Renzi has big dreams and small mandate 25 Feb 2014 The new prime minister announced ambitious reforms on a tight deadline. But his position in parliament is weaker than his sleepy predecessor’s. The promise of shock therapy may give Italy kudos in Europe. But markets need more details - and delivery - before giving him credit.
Scottish secession boxed in by dodgy debt dynamics 25 Feb 2014 An independent Scotland would find it difficult to adopt either the pound or the euro, after snubs from London and Brussels. A brand new currency would be logical, but risky. Whatever the option, assuming their share of UK debt will leave the Scots with little wiggle room.
Emerging market fitness plan: Diet, workout, pill 25 Feb 2014 Developing economies are health cheats. They deny addiction to hot money until capital starts fleeing and currencies begin to tumble. But what can policymakers do differently when capital is on its way in – rather than out? Here’s a step-by-step checklist for staying in shape.
Sturdier Fed only so effective as meltdown averter 25 Feb 2014 The central bank’s 2008 records reveal a board honestly debating the worsening crisis, but ultimately acting too late. The Fed now has more powers, like stress-testing banks. These should give more insight earlier on. They will only go so far to overcome doubt and indecision.
Uncle Sam’s bullying slaps costly tax on justice 24 Feb 2014 BDO Seidman’s ex-CEO beat evasion charges but is broke because the accountant stopped footing his legal bills. In trying to recoup costs, he now alleges that the firm cut him off on a pretext under pressure from prosecutors. Enforcement can be tough without ruining targets.
Facebook stock is not so different from bitcoin 24 Feb 2014 Both are currencies that can be used for certain purposes, but not everything. They depend on networks of people but are not backed by a government. And their worth reflects demand, which is based on murky fundamentals. The trick is to monetize them while they still have value.
Ukraine, the bailout Europe cannot shirk 24 Feb 2014 After triggering the end of the Yanukovich regime, the EU has a responsibility to help with Ukraine’s dire economy. It won’t provide all the needed $20 bln, but it can give the IMF political cover, while calming Russian anger. The ultimate goal has to be for Kiev to join the EU.
Markets at risk from new split in global economy 24 Feb 2014 “Decoupling” has turned upside down. Soft Chinese manufacturing, a weaker yuan, rising Indian interest rates and political unrest look ominous for emerging economies. Meanwhile U.S. data reassures and even the euro zone is a bit better. The mix looks bad for asset prices.
Hugo Dixon: ECB faces severest stress test 24 Feb 2014 A lot is riding on the cleanup of euro zone lenders, which is being overseen by the bloc’s central bank. Progress so far is encouraging. But clarity is needed on a few more things to ensure that banks get a proper scrubbing and can therefore support an economic recovery.
G20’s growth pledge is missing a demand booster 24 Feb 2014 The world’s largest nations have vowed to raise collective GDP by an extra 2 percent in five years. Tinkering with regulation and labour markets may raise productivity. But with wages stagnant and governments reining in spending, there may not be anybody to buy the higher output.
China’s yuan slide not nice but necessary 24 Feb 2014 The currency has reversed course, rapping the knuckles of investors who had been betting on continued gains. The unwinding of speculative trades could remove a useful source of inflows, and add pressure to the parched system. Still, adding more market forces is mostly helpful.
Modern financial arts get special exhibition 21 Feb 2014 Washington’s Corcoran Gallery, with its de Koonings and Twomblys, is being carved up like a common conglomerate. Los Angeles hosted a hostile museum takeover bid and artwork features in Detroit’s restructuring. A blank spreadsheet can sometimes inspire as much as a canvas.