Ailing South Korea needs monetary remedy 3 May 2013 A weak Japanese yen is hurting Korean firms’ earnings, while anaemic global demand crimps export volumes. Debt-laden households hold out little hope for the economy. The central bank’s reluctance to cut interest rates and head off deflation risk may turn out to be a blunder.
President’s pragmatism paying dividends for Peru 2 May 2013 Ollanta Humala’s social programs and support for indigenous peoples please his supporters, but he has also welcomed foreign investment and may be rolling back an expensive mining consultation law. The strategy has critics, but could keep Peru on an enviable growth trajectory.
ECB sticks to caution with minimum rate cut 2 May 2013 The euro zone’s central bank did as little as expected, a 25 basis point drop in its main rate, to 0.5 percent. A lack of unanimity suggests it won’t cut more soon, or start any bold initiatives. The ECB looks too divided to wage a tougher fight against a sinking economy.
Unsure voters could dim lure of Malaysian assets 2 May 2013 A less than decisive win for either of the two coalitions contesting the May 5 poll could worsen racial discord and damage the economy. A government unsure of survival may also be tempted to dump fiscal prudence to buy popularity. Malaysian stocks and bonds could suffer.
Fed running risk of re-inflating bubbles 1 May 2013 The U.S. central bank is sticking with loose monetary policy and hefty asset purchases. But with stocks at record levels and home prices up 9.4 pct in a year, asset values are heading higher even if growth isn’t. The Fed needs to counter bubbles as well as economic sluggishness.
U.S. debt bosses don’t need no stinkin’ Libor 1 May 2013 The Treasury wants to sell floating-rate debt, but the most common benchmark is discredited. Uncle Sam will use a new one based on government bill auctions. Treasuries are already the world’s touchstone for fixed-rate bonds. The new yardstick could credibly chip away at Libor.
Former junk bond king has more leverage than ever 1 May 2013 Three decades after Michael Milken mastered raising money he now trades mostly in intellectual capital. This year, the likes of Carlos Slim and Tony Blair joined old friends at his annual Beverly Hills jamboree. These growing networks are a better sort of crony capitalism.
Edward Hadas: In favour of much less trading 1 May 2013 When the Chicago options exchange closed for three hours, traders were unnerved. No one else was, and a rationing of liquidity may bring economic benefits. Perhaps it is time to extend traders’ millisecond-long holidays and revert to once-daily price fixings for all markets.
Why China’s “Minsky moment” may be a long way off 1 May 2013 The country’s rising debt and slowing economy point to the kind of financial meltdown theorized by economist Hyman Minsky. But China’s closed, state-controlled system can delay such market panics. The bigger challenge is managing social tensions arising from slower growth.
Euro zone stuck in economic suspended animation 30 Apr 2013 Inflation is surprisingly low, unemployment is depressingly high and GDP remains frustratingly flat. There are ways to make the economy more dynamic, but they are either too revolutionary to be politically acceptable or too slow to matter for years. Expect more of the same.
Germany’s Spanish initiative sends right message 30 Apr 2013 Germany says it has a plan to help fund Spain’s small and mid-sized businesses. This won’t lead to massive north-south fiscal transfers. But a signal from Berlin that Madrid has done its reform homework would be a powerful message to investors - and stragglers like Italy.
Letta fails to impress on first outing 30 Apr 2013 Growth is good, austerity is bad and let’s cut taxes. The new Italian prime minister offered little more than platitudes in his initial speech to parliament. That’s not enough. The necessary reforms are well known. Letta hasn’t yet shown that he will provide them.
Political heat endangers no-brainer ECB rate cut 29 Apr 2013 The European Central Bank last cut its main rate in July 2012. Since then the economy has worsened, inflation has declined, and the Bank of Japan’s actions are propping up the euro. The need for a cut is obvious, even if it’s not a miracle cure. But politics stand in the way.
Hugo Dixon: Austerity debate misses half the point 29 Apr 2013 It is true that governments, especially in the euro zone, shouldn’t chase an austerity spiral ever downwards. But they can’t just sit on their hands. They must drive even harder for structural reforms.
Euro zone spread monster is only half-dead 29 Apr 2013 The euro zone crisis has tuned to a slow burn. Government bond spreads now discipline, rather than terrorize governments. However they hurt local economies and, by several measures, are still higher than they should be. It shows the success, and limits, of ECB policy.
Get ready for three-digit gold 26 Apr 2013 Bullion’s recent bounce doesn’t mean investor demand has returned. And gold remains expensive for jewellery buyers, whose interest has been weak since 2009. Central bank purchases will offer some support. But in a one-sided market, gold could fall below $1,000.
Japan lifts Nomura from its lost half decade 26 Apr 2013 A booming home market and cost-cutting helped the investment bank to its best year since 2007. Yet return on equity of 4.9 percent is still well below where it should be. The shares, which have doubled in less than four months, are asking a lot of Nomura - and of Abenomics.
Review: China, luxury and unfashionable economics 26 Apr 2013 Useless things bring social honour. So argued Thorstein Veblen in his “Theory of the Leisure Class”. His century-old ideas, now out of place in the West, explain China’s craving for luxury goods. There’s a warning too: “conspicuous consumption” breeds conspicuous inequality.
Britain’s economy needs a real boost, not a blip 26 Apr 2013 The UK has dodged a triple-dip recession, but the real economy is still four years into a Great Stagnation. Austerity or stimulus may help, but sustainable GDP growth requires structural changes. Focus on immigration, investment and infrastructure would be a good place to start.
Corporate America lamely blames U.S. budget cuts 25 Apr 2013 This earnings season, forced deficit reduction is filling a role previously held by the weather, China and other spurious scapegoats. Delta and IBM are among the culprits, but Washington-inflicted damage is trivial. Even so, lawmakers could all but end any financial disruption.