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.
Mursi faces choice between compromise and chaos 1 Jul 2013 One year into his term, Egyptian President Mohamed Mursi is facing turmoil in the streets. The Muslim Brotherhood’s failures are many - chief of which is its inability to work with other political forces. It may not be too late. The alternative is real chaos.
Policymakers who see no bubble might still get wet 1 Jul 2013 Central bankers don’t think QE has pushed asset prices well past fair values. One argument is that asset prices are lower now than in 2007. True, but that was a great big bubble. Even if today’s excesses are more modest, QE is probably doing more harm than good.
Croatia makes awkward EU entry 1 Jul 2013 Zagreb joins Brussels at an unfortunate time. Its economy is struggling and its democracy needs improving. The hope is that Croatia takes accession as an incentive to reform, bringing political stability to the troubled Western Balkan region. The risk is that it doesn’t.
Hugo Dixon: Financial reform must carry on 1 Jul 2013 After six years of crisis, progress has been made in fixing the financial system: for example, a landmark EU deal last week to make creditors not taxpayers foot the bill for bust banks. But there’s a huge job still to do. Policymakers must not flag.
New EU bail-in a great tool for previous crisis 28 Jun 2013 New rules forcing losses on investors would have saved taxpayers money in the bailouts of wholesale-funded banks like RBS, Bankia and maybe even Anglo Irish. But the new system assumes lenders have ample stocks of bail-inable debt. Public money may still be needed if they don’t.
UK’s big build dreams still dogged by past binge 28 Jun 2013 There is real austerity in some parts of the UK budget, but not enough to keep total spending from rising. A cap on welfare spending won’t reverse the huge previous rise. The government’s talk of 100 billion pounds in infrastructure projects sounds bigger than the pinched reality.
Finance 101 would get U.S. pensions back on track 27 Jun 2013 Illinois, Connecticut and New Jersey are among the states that neglected the most powerful force in retirement saving: compound returns. Their pension burdens are much heavier because they short-changed the funds, a Moody’s study finds. It’s time to revisit the basics.
Investor imperative – get on top of bond duration 27 Jun 2013 Until now, only geeks worried about this measure of a bond’s sensitivity to changing rates. But if yields keep rising, duration will become a crucial indicator. For a start, it shows how the UK government is well prepared for the shift - and how the U.S. Treasury is vulnerable.