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.
Market bloodletting may be more 2003 than 1994 26 Jun 2013 Bankers are smart to ask if the recent jump in rates could cause a replay of bond pain two decades ago. A better comparison may be 2003. Markets threw a hissy fit when the Fed signaled easy money would end. It didn’t last long. More importantly, nothing big blew up.
Australia’s political bang is an economic whimper 26 Jun 2013 PM Julia Gillard has been ditched as head of the ruling Labor Party in favour of her predecessor, Kevin Rudd. The brutal switch might make Australia’s impending election a closer contest. But the country’s economic future still depends more on events in China than Canberra.
Italy still can’t shake off old derivative sins 26 Jun 2013 Rome’s use of financial engineering in the 1990s is known, but news of a possible 8 bln euro loss on pre-euro swaps is still embarrassing. The debt crisis hasn’t fully clarified Italy’s opaque public finances. Lingering obscurity won’t help if Italy has to ask the ECB for help.
Fed’s sand will make Asia’s investment wheel creak 26 Jun 2013 The fivefold jump in Asian fixed-asset investment in the last decade was largely a result of negative real interest rates. With the Fed deciding to curb stimulus, that cheap-money era is now over. An investment strike in the world’s fastest-growing region may be hard to prevent.
France’s poisonous politics bound to hit economy 26 Jun 2013 Corruption scandals are tarring all the mainstream political parties and populist organisations are on the rise. With no signs of economic growth, François Hollande’s useful but tentative reforms look ever more doubtful. France’s already-big credibility deficit is growing.
China bank rout favours big lenders over small 26 Jun 2013 The country’s four megabanks have a structural advantage in garnering deposits. Smaller rivals have less to lend, so are prone to liquidity squeezes and forced to seek riskier income streams. Though the central bank has pledged to help cash-starved banks, the imbalance persists.
Marc Rich leaves empire at the peak of its powers 26 Jun 2013 The commodities king and former fugitive, who spawned Glencore Xstrata, has died in Switzerland aged 78. Rich’s willingness to trade with almost anyone made him billions, but often posed moral questions. And though he created an industry, its best years may be in the past.
Obama’s anti-carbon plan is more cost than benefit 25 Jun 2013 The president’s new pollution caps will probably just lead to increased coal exports, already at a record high, and lower industry profitability – but not to the intended goal of climate improvement. His $8 bln fund to clean up the fossil fuel is a better way forward.