U.S. job creation looks better than it really is 5 Jul 2013 The average of 202,000 new positions a month in 2013 is the best first half since 2005. But the jobless rate is stuck as more Americans gradually look for work. While the Fed has to start reversing its easy policy sometime, employment is far from strong enough to force its hand.
How regulators can restore trust in bank capital 5 Jul 2013 The Basel committee of bank supervisors has exposed big variations in how lenders risk-weight their assets. But forcing banks to use a standard model could require truckloads of new capital. There’s a middle way – parallel disclosure using both firms’ and Basel’s methodologies.
China’s shipbuilding supertanker will turn slowly 5 Jul 2013 Rongsheng, the biggest private shipbuilder, is on financial life support. An industry that once symbolised growing economic strength is now a drag. But don’t bet on a shakeout. In China, strategic sectors can stay afloat long after their apparent financial logic has run dry.
Indonesian anti-graft zeal sours business climate 5 Jul 2013 A Jakarta court will soon decide if offering Internet on a 3G network without paying mobile license fees is a corrupt practice. A guilty verdict will put small providers at risk and dent investor confidence just when the economy looks vulnerable to the risk of capital flight.
Draghi and Carney will find limits of word power 4 Jul 2013 Both the euro zone and British central banks took to verbal guidance this month, trying to counter the effect of loose talk from the Fed. Such guidance can be effective but not for long. Investors will figure out if the promises are likely to prove empty. Then they’ll want deeds.
Land-bank levy would compound UK housing-tax mess 4 Jul 2013 The IMF wants to stimulate the supply of housing in Britain by taxing housebuilders’ stocks of land. It’s a better idea than the government’s lunatic “Help to Buy” scheme. But it could backfire, and is way short of the root-and-branch rethink that UK land-tax policy sorely needs.
Pension discount-rate relief is easy to overstate 4 Jul 2013 Rising bond yields improve the reported position of defined-benefit pension schemes. Corporate sponsors are happy, but the accounting mechanics are debatable and the financial reality is more complex. For the long term, the funding picture is still fraught with uncertainty.
Global recovery: this time it’s different 4 Jul 2013 European sentiment, U.S. car sales, Abenomics - developed economies are on the mend. Enough of the boom-time real economic distortions have been corrected for the good news to keep coming. But the financial miasma remains thick, and will keep the recovery slow and fragile.
Military throws Egypt into dangerous phase 4 Jul 2013 The ousting of President Mursi after one year in power cements divisions and confirms the army as kingmaker. A swift return to civilian rule is critical. But the path is fraught with economic and social risk. The outcome may be less democratic – in Egypt and elsewhere.
HS2 train decision must wait for Heathrow 2015 4 Jul 2013 The HS2 high-speed rail project is under fire as cost estimates mount. But that is not the only problem with this massive project. A financial commitment now would pre-empt the 2015 report on airport strategy. Better to wait and not box the country into keeping the Heathrow hub.
Portugal mess shows need for bailout rethink 3 Jul 2013 The crisis in Lisbon is a sign that the country’s acceptance of austerity has reached its limit. A serious debt restructuring, which would lighten the country’s burden, would be the only reasonable choice. Unfortunately the country’s sovereign creditors aren’t ready for it.
Edward Hadas: China’s wisdom on GDP growth 3 Jul 2013 China’s president tells his cadres to stop using this measure as the sole standard of economic success. His advice is even more applicable to developed economies. When inequality and unemployment are the biggest problems, the reliance on GDP is nothing short of scandalous.
Safe havens face three-pronged assault 3 Jul 2013 Markets have corrected but safe havens are still vulnerable. U.S. dollar strength is bad for gold, bonds, and the Aussie dollar. A euro zone out of acute crisis is bad for the Swiss franc. And even a tepid economic recovery will attract funds out of safe havens into stocks.
Draghi can afford to just keep talking 3 Jul 2013 The mooted end of the Fed’s bond buying could still push euro zone rates higher, hurting weak economies. For the moment yields aren’t scary, and they help keep governments focused on reform. The ECB needn’t take drastic measures, as long as just talking about them works.
U.S. Basel embrace puts foreign watchdogs on spot 2 Jul 2013 The Fed is giving a thumbs-up to the Swiss-sanctioned global bank capital rules. The FDIC and OCC should follow suit soon. That quiets overseas critics skeptical that America would play ball. It should also coax Europe and Asia to show a similar team mentality on other issues.
Obama’s African power plan echoes 1930s U.S. moves 2 Jul 2013 The president is providing $7 bln to boost access to electricity in a continent where only 31 pct of people can plug in and charge up at present. President Roosevelt’s electrification projects eliminated much rural poverty in America. Obama’s initiative is similarly well aimed.
Cyprus bond swap is good publicity, bad economics 2 Jul 2013 The creditor banks of Cyprus “voluntarily” exchanged 1 bln euros worth of sovereign debt at cheap rates. That lowers the bailout bill for the euro zone, but the burden falls unevenly on the country’s banks. Exchanging all creditors’ debt would have been fairer - but messier.
India’s aspiring banking moguls fail to impress 2 Jul 2013 A few strong contenders aside, the 26 applicants for a handful of new banking licenses are local finance companies. Giving these shadow lenders access to retail deposits while saddling them with harsh licensing rules could backfire. India needs more banks, but not more weak ones.
China index: Weaker growth on weaker foundations 2 Jul 2013 China’s economy remains gloomier than this time last year as lower export growth and rail freight volumes make a grim follow-up to poor PMI readings. Sales of property, luxury liquor and posh cars prevent a steeper fall, but these are not the bright spots China needs or wants.
Student loan rate hike is a D.C. dysfunction bonus 1 Jul 2013 Congressional inaction means Uncle Sam-backed college borrowing costs double to 6.8 pct. That should curb the rapid rise of such debt, now at nearly $1 trln. It might even slow education inflation. It’s a rare case of useful policy that doesn’t require waiting for the Fed.