Depressing labour market news out of the US last Saturday AEST framed another concerning week of economic data and decisions. The US economy added only 38,000 jobs in May, well below the average of 200,000 per month since the beginning of 2013.
For centuries, happiness was exclusively a concern of the humanities, a matter for philosophers, novelists and artists. In the past five decades, however, it has moved into the domain of science and given us a substantial body of research.
The concept of moral economy was first used by 18th-century thinkers trying to make sense of the rising capitalist values. In feudal society, a “fair price” was preferred over a free price especially for the necessities of the day.
The reciprocal rights and responsibilities of feudalism let the lord set the fair price. The British historian E. P. Thompson showed how farmers clung to this belief. Large farmers who sold their product at a higher price elsewhere while there was some still in need in the village where ostracized.
A principal challenge to Asian security today is that the various approaches to the security order seem to be working at cross-purposes. Take the United States and China. Washington insists that its rebalancing strategy enhances regional stability. Sure enough, it is possible to see the military dimension of rebalancing as crucial to maintaining the military balance of power in the region.
However, the economic aspect of rebalancing — the Trans-Pacific Partnership (TTP) — excludes China and challenges United States–China economic interdependence.
The Organization for Economic Cooperation and Development (OECD) recently released its Regulatory Policy Outlook 2015. Part of its findings related to the effect of effective regulation on economic growth. According to the OECD’s study, even small efforts to correct regulatory shortcomings can have positive impact on a nation’s economic growth and health. As a result, the OECD has advised its member governments to focus on improving their lawmaking.
The Organization for Economic Cooperation and Development (OECD) warned countries trying to spend their way out of crisis that they risk becoming stuck in perpetual economic malaise. The OECD said central banks were running out of room to boost economies, and fears this could become particularly problematic in the event of a sharp financial slowdown.
Angel Gurria, the Secretary General of the OECD said, “Countries that say: I’ll spend my way out of this third slump. I say: no you won’t, because you’ve already done that, and you ran out of space.”
Normally we look at macroeconomic news to provide the incremental additional information that shapes the expected returns on investments. However, in the week ahead, the macroeconomic data is of less importance than the reaction function of policymakers. What we mean by this how policymakers will respond to the recent data may be a bigger driver of financial assets than the new data.
A good rule of thumb in debates on who bears the economic cost of a policy change is to look at the positions taken by vested interests in the matter. If anyone is going to know if he or she bears the cost, those pay. In the case of infrastructure charges on new property developments, the vocal objections from the property industry are a sure sign that they bear the economic costs.
Local governments levy infrastructure charges on developers of new land estates, based on an increased load on essential infrastructure services for which the council is responsible.
The market appears to be taking in stride the latest setback in negotiations over Greece. The euro has recouped all the ground lost in thin markets late yesterday when the Euro group discussions broke down. Each side has their inviolable principles, and yet some compromise has to be found. It might not be possible to do so on the finance minister level, but may require another heads of state gathering to break the logjam.
The month and week are winding down, and what a month and week it has been. The three key events were all about Europe. First on the list was the SNB’s unexpected decision to lift the cap on the franc. The ECB’s decision to proceed with a sovereign bond buying program was less a surprise but just as momentous if not more so. Syriza’s victory in Greece is already changing the political landscape.
