Dollar to give other currencies beating many want 30 Dec 2013 Currency market volatility will be pronounced in 2014. As the U.S. Fed cuts its asset purchases, the dollar looks set to climb from its current debased depths. The yen and the euro are keen to be beaten, emerging markets aren’t. The pound’s rise will rival the dollar’s.
Brinksmanship to worsen with U.S. midterm election 27 Dec 2013 Congressional contests will make extremism more appealing to lawmakers than compromise. That means more gridlock, in which President Obama’s healthcare reform gets more attention than economic policy. Worse, the GOP minority’s only real leverage is the threat of default.
Europe will court shutdown with new parliament 27 Dec 2013 Eurosceptics and fringe parties will make big gains in next year’s European Parliament elections. A U.S.-style deadlock is unlikely, but mainstream parties will have to compromise more, and passing laws will be harder. It will look more like the old-style Italian model.
Two cheers for Israel’s tri-state water deal 27 Dec 2013 Tel Aviv will share more with Jordan and Palestine. Such regional agreements are crucial where water is scarce. Properly irrigated farmland could boost Palestine’s economy by a fifth. Israel, though, is only giving up a token amount and remains in control. At least it’s a start.
China’s banks are coming – this time for real 27 Dec 2013 Overseas assets are growing as lenders chase the country’s corporate diaspora. Takeovers are a likely next step. Japan’s “follow-the-client” banking strategy in the 1980s ended badly, but red tape and lack of foreign funding should make China’s rise slower and more sustainable.
U.S. employers will bring more jobs back home 26 Dec 2013 The nation’s energy costs and wage growth are lower than in many other countries. Productivity’s higher, too. Not only does it make outsourcing to the likes of China less appealing. It may also herald a renaissance for American manufacturing.
American universities need lesson in capitalism 26 Dec 2013 Spiraling degree costs are an economic drag, with $1.2 trln of student debt and parents’ savings hit. Yet graduate income is falling. President Obama is pushing for better value for money. A few colleges are already showing how education can pay off for students and country.
Wall Street’s pitchfork mob needs new villain 24 Dec 2013 Bernie Madoff is doing time and Goldman Sachs has executed a successful charm offensive. The case against Jamie Dimon has struggled to take hold. Steve Cohen, the hedge fund Wizard of Oz, is nursing legal wounds. The culture of greed in finance won’t disappoint for long, though.
U.S. housing recovery could run out of steam 24 Dec 2013 Banks are likely to tighten lending standards once new rules come into place in 2014. Rising interest rates may drive down home loan volume, too. Cash purchases by investors could set a floor for house prices, but they may not be enough to prevent a major slowdown.
Buzzword visionaries will rightsize the lexicon 24 Dec 2013 Is a laser-like focus on jargon mission critical? Can only visionary C-suiters move the needle at the investor day or on the Davos panel? Some expressions are relentlessly taking share. Others, net-net, are past an inflection point. Breakingviews takes a deep dive.
China’s hard-pressed central bankers get a B+ 24 Dec 2013 A funding squeeze in the interbank market has been treated with an injection of cash. The real economy is unlikely to notice any difference. The central bank is still passing its basic test of keeping China’s monetary system stable, but no longer with flying colours.
Europe holds a key to Turkey’s crisis 24 Dec 2013 Prime Minister Erdogan has upped the conspiracy rhetoric to criticise a corruption probe engulfing government officials. Investors are edgy. The intra-government issues are domestic, but without a clear prospect of joining the EU, Turkey has less incentive to liberalise.
Western debt magic is poison for Africa 24 Dec 2013 A poor continent with limited savings is hugely vulnerable to a credit crunch. Africa desperately needs capital, but only the sort that can’t easily leave. Speculative investors and yield-hunters will eventually do more harm than good. There’s a caution here for Bob Diamond.
Brazil infrastructure drive risks running aground 23 Dec 2013 President Dilma Rousseff’s $100 bln plan to spruce up rickety roads and ports only partly makes up for years of neglect. And a looming credit downgrade makes this the priciest time to splurge. Without a shift in Brazil’s savings rate, any investment boom will be short lived.
Governance will matter south of the U.S. border 23 Dec 2013 A 10-year boom in natural resources and easy money allowed bad Latin governments to do as well as good ones. Now with commodities flat and rates rising, regimes that respect investor and property rights, while spending money and allocating capital wisely, should shine.
Tokyo looks most credible new Asia casino capital 23 Dec 2013 Asian countries from Malaysia to Sri Lanka are lining up to steal gaming business from heavyweight Macau. Regional resorts could catch a spillover of high rollers, though taxes and geography matter. Japan may have the best chance of turning gambling into big business.
Carney will struggle to sustain BoE governorship 23 Dec 2013 The UK’s central bank chief is a vulnerable hostage to fortune. The Canadian thinks the British economy will enjoy economic recovery with low inflation and no housing market mess. If he’s right, he’ll be fine. If he’s wrong, Carney will find himself friendless.
Hollande could use electoral defeat to change tack 23 Dec 2013 No French president has been more unpopular than François Hollande, and the economy is stalling. Major defeats loom for his Socialist party at the municipal and European elections. That needn’t be such a bad thing if terrible results prompt him to change both style and substance.
China’s bureaucrats play online war games 23 Dec 2013 Who controls the internet? The authorities can’t decide. The Ministry of Culture is an unlikely favourite, after it clamped down on unsavoury online games. It’s a tussle between the online entrepreneurship China says it wants, and the old-school bureaucracy it actually has.
Detroit pension shakeout bares generational rifts 20 Dec 2013 The bankrupt U.S. city’s crisis manager wants pensioners to take a hit along with younger city-dwellers, who face higher taxes and degraded services. As Motown’s fate plays out in 2014, the legal and philosophical divisions may surface in other cash-strapped metropolises, too.