Central banks worldwide today are utilising unconventional monetary policies, such as quantitative easing, to jump-start growth in their anemic economies. But if such policies remain in place for too long, their side effects could be severe – and the longer-term costs very high.
Broad U.S. “sequester” spending cuts that take effect beginning Friday will hurt growth in the world’s largest economy and destabilise a fragile global economic recovery, the International Monetary Fund said on Thursday, warning that the U.S.’s biggest trading partners would be hardest hit.
The IMF added that it will likely trim its growth forecast for the United States and the global economy if the $85 billion in automatic spending cuts, also known as sequestration, take effect on Friday.
Prominent business leaders in Italy have expressed alarm and fury at the nation’s political gridlock; and have urged politicians to put aside their differences in order to form a grand coalition government that can deal with the nation’s immediate pressing issues.
“The real economy cannot wait for political machinations,” said Giorgio Squinzi, the usually mild-mannered head of Italian business lobby Confindustria, warning that the upcoming six months could essentially determine Italy’s fate.
Although the latest FDI figures by China’s Ministry of Commerce may appear disappointing, the truth is there has been an intensifying relocation of investments from China’s 1st and 2nd tier cities to other parts of China and across Southeast Asia. Asia’s new FDI “deal” is a regional win-win story – whereby emerging Asia can benefit from the low-cost advantages that China once enjoyed, while China shifts from manufacturing to high-value services.
Authorities should drain more cash from the financial system and enhance oversight of banks’ off-balance sheet business, said the Chinese State Information Centre, as the risks of overheating outweigh potential economic slowdowns.
Citing a strong rebound in the fourth quarter and an improvement in the country’s economic outlook, the Centre, the research arm of the National Development and Reform Commission, said in a report on Wednesday that China should adopt a tighter monetary policy to mitigate inflationary risks.
U.S. banks posted their 12th straight quarterly profit in the last three months of 2012, a 37 percent increase from a year ago, reaching their highest level in six years as banks continued to expand lending.
U.S banks earned $34.7 billion in the last three months of 2012, up from $25.4 billion a year ago and the highest for a fourth quarter since 2006, the Federal Deposit Insurance Corporation revealed on Tuesday.
Last Friday, the U.K. lost its much-treasured AAA rating, after Moody’s downgraded its sovereign debt on the back of poor economic growth forecasts. But while the timing of the downgrade was surprising, the move itself was long anticipated – and is unlikely to see the government, nor investors, change their opinions for the future.
Globalization seems to be looked on as an unmitigated “good” by economists. Unfortunately, economists seem to be guided by their badly flawed models; they miss real-world problems. In particular, they miss the point that the world is finite. We don’t have infinite resources, or unlimited ability to handle excess pollution. So we are setting up a “solution” that is at best temporary.
Italy votes for the second day on Monday in one of the most closely watched and unpredictable elections in years. Any shock result or political stalemate could reawaken the threat of market instability, jeopardising investor confidence and hurting the eurozone’s economic recovery.
Monday, February 25
Indian billionaires Kumar Mangalam Birla and Anil Ambani are among several corporate players keen to set up their own banks in the world’s second most populous nation, reported Bloomberg News on Monday, after the government announced changes to its banking license guidelines last week – in order to boost banking accessibility and credit growth in the nation’s rural areas.
