It’s the American Economy Stupid!

The obituary of the American century has been written, but there are very good reasons to believe that the USA will continue to play a dominant role in the 21st century. This is the first of 2 pieces that examines the resilience of American economic power. There are fundamental economic, financial, political, military and social […]

The European Crisis – ‘Financial Poker’ Games!

Reviewing the borrowing costs of European nations, a visiting intelligent alien may conclude that the European economic crisis is over and rehabilitation complete. 10-year government bond rates for Spain, Portugal, Ireland and Greece are 2.20%, 3.12%, 1.67% and 6.15% respectively. Equivalent rates for Germany, France and Italy are 0.97%, 1.31% and 2.39%. Comparable rates for […]

India’s New Government Messiah

Winning To the unrestrained delight of investors and financial markets, Narendra Modi has prevailed in the audition for India’s newest Messiah. The incumbent has been received rapturously, with commentators running out of superlatives and comparisons – Thatcher, Reagan and several Indian gods. Indian stocks, up over one-third since September 2013, and the rupee, up about […]

Credit Bubbles Redux

Central banks insist that there is no credit bubble. But like politicians, where a central banker denies something vigorously and repeatedly, it is usually true. To resurrect the global economy from the Great Recession, central banks implemented a policy of ultra-low interest rates and quantitative easing (“QE”) to restore growth. The policy relies, in part, […]

China’s Debt Endgames

Quick And Slow Deaths… Understandably, the major focus now is on the denouement of the crisis. Pessimists are concerned about a catastrophic crash. Optimists are more sanguine, expecting a soft landing with gradual reforms correcting the systemic issues. The crash scenario is predicated on continuing increases in debt levels and over-investment. Policy adjustments are fatally […]

China’s Shadow Banking System

Chinese debt concerns are complicated by two structural issues – the rise in borrowing by local governments and the increase in the role of the shadow banking system. Both sectors are testament to Chinese entrepreneurial spirit, but also point to deep problems in China’s financial system. Local But National… Outside of security matters or foreign […]

China’s Debt Vulnerability

Western understanding of China has never greatly progressed beyond Charles de Gaulle’s statement that: “China is a big country, inhabited by many Chinese”. Despite constant analysis of developments in China in excruciating detail, economists seem to have only recently its identified debt problems. In fact, the country has had a 35-year addiction to cheap credit. […]

G-20 Meeting – Let There Be Growth!

The G-20 Finance Ministers’ Meeting in Sydney in February 2014 provided a convivial winter break for the global economic elite. Travellers from the Northern Hemisphere could enjoy the Southern summer. Everybody could escape domestic political traumas, spending a few days amongst peers in luxury paid for by taxpayers. They could bask in the slavish adulation […]

Bank Profits—With A Little Help From The Fed!

Global stock prices have rallied significantly since 2009. Financial stocks have increased albeit off a low base, with US banks up by over 200%. But improvements in the fortune of banks may be misleading. To paraphrase George Bernard Shaw, financial markets have substituted the “obsolete fictitious for the contemporary real”. Central bank policies, especially low […]

Bank Profits – With A Little Help From The Fed!

Global stock prices have rallied significantly since 2009. Financial stocks have increased albeit off a low base, with US banks up by over 200%. But improvements in the fortune of banks may be misleading. To paraphrase George Bernard Shaw, financial markets have substituted the “obsolete fictitious for the contemporary real”. Central bank policies, especially low […]