India in depth: Time to treat savers fairly 16 Jul 2013 One of the lowest real costs of capital in Asia didn’t prevent an investment slump, but it did put off savers. The economy wouldn’t rely so much on hot money if local households weren’t short-changed. The outmoded state-built apparatus of financial repression needs to be junked.
Brazil’s economy reacting the old-fashioned way 15 Jul 2013 Aggressive monetary policy with the cost of money falling sharply has been followed by an inflation surge causing the central bank to raise rates three times. That’s a cycle all too familiar in the 1970s developed world of public sector overspending and private underinvestment.
Republicans add bricks and mortar to mortgage fix 15 Jul 2013 A new House bill offers some good ways to construct a durable financing market for home loans. It still has warts, but would reduce reliance on taxpayers and entice private capital back in. Together with the Senate’s more politically palatable version, it could be a winning mix.
Investors miss emerging-market reality 15 Jul 2013 In the markets, the talk is all of China slowdown and problems in developing markets. Yet emerging economies are still set to provide 76 pct of total additional global GDP in 2014. The financial focus ignores the big picture: the balance of global economic power has shifted.
Hugo Dixon: City should fight Brexit 15 Jul 2013 Quitting the EU would harm the UK’s financial services industry. The damage would range from moderate to severe, depending on the form of Brexit chosen. The City needs to make its voice heard loud and clear that it is opposed.
Asian capital flight risk goes beyond hot money 15 Jul 2013 Reversal of foreign investment flows isn’t the only threat for policymakers. Domestic households too could whip out their cash as rising US interest rates make it more attractive to take money abroad. For some countries the savings arbitrage could prove damaging.
The lowdown on China’s slowdown 12 Jul 2013 This year’s expected GDP growth has shrunk. Weak exports hurt, but 7 percent may be the new normal in a richer, ageing country with a legacy of poor credit allocation. It’s too simple to say the government can make slower growth work - but too early to brace for a hard landing.
Congress could force Yellen over Summers at Fed 11 Jul 2013 Setting aside their strengths or weaknesses, President Obama needs to figure out who can actually pass muster with cantankerous legislators. Even after Bernanke saved the financial system, lawmakers only weakly endorsed him. Politics, more than skills, may decide the next Fed boss.
Dash from emerging to developed markets hits new risks 11 Jul 2013 Capital is being sucked from emerging markets, depressing both asset prices and growth. Developed-market equities are the new favourite. But Europe is in recession, U.S. growth is moderate and Japan’s stimulus may wear off. Investors are swapping one set of risks for another.
S. African miners have few options in wage talks 11 Jul 2013 In a healthy industry, prices of goods should support the cost of decent wages. In South Africa’s mines, a toxic mix of deprivation, politics and geology creates underinvestment and angry workers. With the prices of key metals falling, it’s hard to see the dynamic changing.
Fed transition could look positively Reaganesque 10 Jul 2013 The timing of Fed chief Bernanke’s fate may be just as important to markets as the name of his replacement. Alan Greenspan gave investors a heads-up before the White House tapped Bernanke. Markets would be better served by a seamless 1987-style handoff.
Edward Hadas: Get used to zombie economics 10 Jul 2013 Moviegoers know that zombies are neither really alive nor fully dead. The idea is also useful in demographics and economics. Although economic zombification receives little attention, its effects could be as important as monetary policy, fiscal deficits and structural reforms.
Eike Batista gives human face to boastful Brazil 10 Jul 2013 The implosion of the tycoon’s empire sadly validates the sour joke that Brazil is the nation of the future - and always will be. Batista’s vow to become the world’s richest man looks as dubious as ex-President Lula’s promise of 30 years’ growth. Brazil deserves a hot-air discount.
Higher volatility is the new normal in credit 10 Jul 2013 The end of Fed bond buying will remove a crutch that supported credit markets even as investment banks cut their trading inventory. Worse, it would come as credit ETFs are suffering outflows. Less liquid markets bring bigger price swings. For the smart money, it’s an opportunity.
Rate reform will test China’s modernising mettle 10 Jul 2013 Lifting controls on the price of money would help curb wasteful lending. Yet few countries have managed it without financial trouble. True interest rate reform also requires the state to loosen its grip on banks, companies and citizens. For China, that may prove a bigger test.
Gulf aid helps Egypt avoid financial collapse 10 Jul 2013 The regime change has bought Cairo new financial backers. A Saudi-UAE pledge of $8 bln gives the country’s interim rulers a chance to implement their controversial transitional roadmap. The hope is that they make better use of bilateral support than their predecessors.
India grain subsidy may only outsource hunger 10 Jul 2013 A plan to guarantee cheap grains to 800 million citizens will threaten more than the shaky state budget. With the government as a forced buyer, prices in the thinly traded world rice market may spike whenever drought threatens India’s crop, pushing the pain on to poor countries.
Auditor rotation gets caught in a spin zone 9 Jul 2013 U.S. legislators, who can serve as long as voters will have them, advanced a heavily lobbied proposal to block the accounting watchdog from imposing term limits on financial book-checkers. Such meddling in regulatory affairs is bad form. And the audit industry needs a shake-up.
Ethiopia’s Nile plan emblem of global water woes 9 Jul 2013 A dam to export hydroelectric power looks at odds with IMF hopes for more competition. Egypt’s bellicose threats are wrongheaded, too. Obscured by the rhetoric are longer-term concerns about how nations can sensibly grow their economies when water’s a scarce or shared resource.
Japan index: markets put speed bump in Abe’s path 9 Jul 2013 For the first time in six months, Japanese Prime Minister Shinzo Abe’s economic experiment stumbled in May amidst skittish stock and bond markets. But the drop in the Breakingviews Abenomics Index to 93.8, from 94.4 in April, may be temporary as deflation continues to ease.