Category: Economics

Building a Bigger Budget Deficit


Christmas came early for Congress this year as politicians from both sides of the aisle came together to pass – by wide margins – a US$1.8 trillion package of tax cuts and new spending.

At year-end, Washington seemed awash in a spirit of holiday cooperation with the president praising new Speaker Paul Ryan. However, does the bipartisan approval of the budget deal really mean that Democrats and Republicans have learned to play together nicely in the Congressional sandbox?

Definitely not.

A Plea for Macroeconomic Cooperation


It looks already as if 2016 will be a pivotal year for the world economy. RBS has advised investors to “sell everything except for high-quality bonds” as turmoil has returned to stock markets. The Dow Jones and S&P indices have fallen by more than 6% since the start of the year, which is the worst ever, yearly start. There is a similar story in other major markets, with the FTSE leading companies losing some £72bn of value in the same period.

OECD Report: China, Brazil Stabilizing Economically


For months, economists have worried about the state of the Chinese economy. As the world’s second largest economy, a slowdown of the Chinese economy could drag down the economy of the entire world. Fortunately, China’s economic slowdown may end later this year according to a report released Monday by the Organization for Economic Cooperation and Development (OECD).

China’s Funky Trade Balance Math


Many of the capital markets are enjoying reversals today.  Equity markets are mostly higher. The MSCI Emerging Market equity index is up more than 1%. Several key commodities, like oil and copper, are firmer.  Bond markets, outside the US, are firmer, with the Japan’s 10-year yield slipping to new record lows slightly below 20 bp.

World Crises a Really Big S.H.O.E.


The weak growth, large output gap, low return on capital, and a host of other economic malaise are widely recognized.  There seem to be two main schools.  One is associated with Reinhart and Rogoff.    They argue that “this time is not different” and that much of disappointment with economic performances is what one should expect given the end of a historic credit cycle and debt crisis.

German Migration Policy under Scrutiny in Wake of New Year’s Eve Attacks


Over 500 victims have reported allegations of sexual assault, groping, and theft taking place in Cologne, Germany, on New Year’s Eve, forcing German Chancellor Angela Merkel to take a tougher stance on migration. Germany has welcomed more migrants and refugees than any other nation in Western Europe, accepting over one million refugees in 2015, but the government is turning away more migrants wishing to get in from the southern border.

Canadian Company Sues United States over Alleged NAFTA Violation


TransCanada, the Canadian company synonymous with the Keystone XL pipeline, announced its intention to sue the United States under the North American Free Trade Agreement (NAFTA). The case will be filed in both an international tribunal and a U.S. Federal Court in Dallas. 

Your City is Hosting the Olympics – Congratulations! Right?


The prospect of hosting any mega-event – especially the Olympic Games – is cause for serious consideration. At local, national, and international levels, the discussion takes shape around two key questions: is it worth it? And if so, for whom?

Sentiment Remains Fragile


Chinese shares continued last week’s plunge, with the Shanghai Composite off 5.3% and the Shenzhen Composite falling 6.6%.  Both indices closed on their lows.  With the apparent help of officials, the onshore yuan strengthened, though the real squeeze was in the offshore yuan, which strengthened by nearly 1%, the most in four months. 

Last Week’s Market Mess Carryover


A tumultuous start of the year saw the US dollar turn in a mixed performance.  Emerging market currencies and the dollar-bloc softened.  Sterling was in this camp, losing about 1.2% against the dollar.  On the other hand, the euro, Swiss franc, and the yen were firmer.

Market positioning, the unwinding of short funding currencies and long risk assets, seemed to account for the disparate price action.  The pace of the slide in Chinese stocks and yuan, and the continued fall in oil prices rather than monetary policy considerations per se were the key drivers.