Ireland shows powers of virtual ECB 14 Mar 2013 Dublin has sold the first 10-year bonds since its bailout. The move helps it qualify for controversial ECB bond buying - and shows it doesn’t need it. Mario Draghi’s virtual intervention is working wonders. The euro crisis goes on.
US sugar rush takes economic cronyism to new nadir 13 Mar 2013 Washington may buy 400,000 tons of sugar to raise prices so producers don’t default on cheap government debt, selling the hoard to ethanol producers at a loss. It would make for a distasteful blend of crony capitalism, socialism and nationalism. And consumers would be the losers.
EU can save its jobless youth 13 Mar 2013 A 14 pct drop in 15 to 24-year-olds with jobs doesn’t equate to the “lost generation” some describe. History suggests most of the young unemployed will join the workforce eventually. But full job recovery depends on many detailed reforms, and European politicians need to try harder.
Mexican reforms threaten to rouse slumbering giant 13 Mar 2013 Attempts to weaken Carlos Slim’s telecom holdings follow new oil and education plans. Such moves would rattle the stasis that has restrained growth in the $1.2 trln economy for decades. If political inertia can truly be overcome, market disciplines could propel Mexico.
Ethical economy: Obesity and the unhealthy economy 13 Mar 2013 Why have average weights been increasing for a century? Because more food is available and because food producers are determined to sell as much of it as possible. Why has obesity become a public health problem? Because people lack the willpower to stop when it’s good for them.
Russia’s central bank can avoid "putinisation" 13 Mar 2013 Vladimir Putin has chosen close adviser Elvira Nabiullina to run the monetary authority. The appointment could give the president too much sway at one of Russia’s few remaining independent and competent institutions. But the ex-economy minister deserves the benefit of the doubt.
China’s solar bonds leave dim hope of payback 13 Mar 2013 On financial grounds, the looming default of panel-maker Suntech should leave foreign creditors with nothing. Solar overcapacity is rampant and the bonds’ terms are weak. What value remains is a risky bet that authorities will deem offshore investors too useful to snub outright.
U.S. stocks may soar higher – only to crash-land 12 Mar 2013 The S&P 500 is close to a new record. Simple interest-rate based valuations such as the Fed model suggest the benchmark could more than double again. But when debt costs, earnings and valuations revert to long-term levels, equities could trade a third below the current heights.
ECB faces high-stakes dilemma on SME loan drought 12 Mar 2013 The European Central Bank can’t ignore the dearth of credit for small Spanish and Italian companies: it’s in its own data. Taking credit risk via buying banks’ SME loans would be way out of Mario Draghi’s comfort zone. But if things worsen the ECB may have to take the plunge.
Egypt needs urgent help to stop it sinking 12 Mar 2013 The Muslim Brotherhood has failed to protect the fragile economy, let alone boost it. The country is gripped by shortages, aid options are narrowing and no date is set for parliamentary elections. The longer Cairo delays an IMF deal, the greater the social and financial risks.
Intrade sheds light on gray markets going dark 11 Mar 2013 The site, which took bets on everything from elections to oil, closed abruptly and mysteriously. Intrade’s predictive record was good, but didn’t foresee the rising controversy over under-regulated speculation. It’s a cautionary tale for the likes of SecondMarket and StarStreet.
ECB must act as Draghi’s confidence trick wanes 11 Mar 2013 Europe got a boost when ECB President Mario Draghi committed to preserve the euro last year. That is now waning. The euro zone faces contraction this year, and weak inflation risks becoming deflation. The ECB’s failure to cut its 0.75 pct benchmark rate is hard to fathom.
Aging drives U.S. debt more than medical costs 11 Mar 2013 Much Washington talk focuses on runaway healthcare spending. But that has been slowing. Over the long term, say 25 years, the number of people needing treatment is the federal government’s biggest problem. Not far behind is the cost of interest as borrowing balloons.
China starts 2013 the way it can’t hope to go on 11 Mar 2013 Economic growth so far this year has come mainly from exports and real estate. The latter is powered by a surge in financing, which grew at an annualized 37 pct. With consumption weak, the current expansion can continue only by pumping ever more credit, and risk, into the system.
Hugo Dixon: Markets too sanguine about Italy 11 Mar 2013 The country’s politics and the economics are both messed up - and there are no easy solutions. While Rome does have the ECB as a backstop, it may have to get to the brink before using it.
U.S. economy warming up – for those participating 8 Mar 2013 Job gains in February were solid and the unemployment rate fell to 7.7 pct, suggesting a degree of austerity isn’t derailing growth. But labor force participation sank to match last August’s three-decade low. A long trough has left many Americans disconnected from the upturn.
Review: The massacre of Britain at Bretton Woods 8 Mar 2013 Benn Steil’s new book explains how the American Harry Dexter White emerged triumphant - and the UK’s John Maynard Keynes defeated - from the conference which created a new financial system after World War Two. The Bretton Woods Agreement sealed Britain’s post-war decline.
Draghi’s dance on negative rates isn’t over 8 Mar 2013 The ECB chief played down hopes of cutting rates below zero, stressing “serious” risks. It could punish cash-rich banks and may not lead to more lending in the context of the Italian crisis. But if the euro shoots up, talk of negative rates may return.
UK would gain from homeowner tax switch 8 Mar 2013 Homeowners are a tempting target for cash-strapped UK tax collectors. One option is to levy “mansion taxes”; another is to milk existing stamp duties. It would be better to forget the first, scrap the second and close the capital gains tax loophole on residential property.
China’s currency inflows could be illusory 8 Mar 2013 The country’s banks bought a record amount of foreign currency in January. It suggests investors and exporters are regaining faith in the yuan’s rise. But companies may just be clearing a backlog of cheaply borrowed dollars. Those flows could reverse if China’s currency weakens.