Short-term interest rates in the US have turned negative. This might mean imminent disaster or it might be traders chasing safe investments as they look to secure end-of-year profits – choose between numerous explanations.
There are also competing explanations for the rise in US mortgage delinquency rates. Most of the rise is in people who are extremely late on their payments, rather than just a little: Continue reading "Economic news digest"
Those different labour markets
In its Economic Outlook, the Organisation for Economic Cooperation and Development has drawn some wonderful charts showing that “in most countries, the changes observed during the current recession are quite different from those observed in past major recessions”. (webcast here.)
They take a while to understand but show generally that output has fallen further in this recession but employment has not. The US is a huge exception to this rule. While Krishna, Ralph and I have written about these trends, these charts show the comparisons with past recession better than any others I have seen.
The OECD’s conclusion is the recoveries will look very different too:
“In those countries in which there have been unusually large employment losses, but only a normal downturn in hours worked, relatively fast employment growth in the recovery might be expected. However, in countries in which there has been an unusually large downward adjustment in hours, but relatively little employment adjustment, employment growth will likely be more subdued as activity recovers.”
Enjoy the charts below.
Normality in balance sheets
In a speech this morning, Paul Fisher, the Bank of England official in charge of quantitative easing (Mr QE), makes a bold claim that the Bank’s balance sheet “will return to something like its former composition, and perhaps even its former size”. When? His answer was “at some point”. As a statement, that is about as unhelpful as you can get. England will win the world cup “at some point”, but no one would consider that a useful statement.
If you take a look at the balance sheet (I’ve only showed the Bank’s assets here), normality is a long, long way off. The Bank still has to unwind quantitative easing and restart normal open market operations. The two are linked and unlikely to happen any time soon. If the Bank were to tighten policy, raising interest rates is likely to happen before the balance sheet starts looking normal again. And this picture of the balance sheet does not include the Bank’s £185bn Special Liquidity Scheme because that is in an off balance sheet vehicle.
Capital control, anyone? Emerging markets are taking action to curb currency appreciation. Brazil – whose economy is recovering well – introduced a 2% tax on foreign capital inflows last month, and has just announced a further measure, effective today: there will be a tax on American depositary receipts, which allow foreigners to invest easily in Brazilian stocks. Meanwhile Indonesia has announced possible capital controls, sending its currency sharply lower.
The flight to gold continues, Continue reading "Economic news digest"
New BoJ policy board member proposed
The first appointment of a Bank of Japan policy board member by new Democratic party-led government looks set to leave the central bank boat unrocked.
Ryuzo Miyao, a 45-year-old professor at Kobe University, is seen as being broadly in tune with such tenets of current BoJ policy as a “handle-with-care” approach to unconventional policy (with a heavy emphasis on the need to have a plausible exit strategy) and a scepticism about the value of inflation targeting.
Prof Miyao, who has researched the effect of quantitative easing as practised by the BoJ earlier this decade Continue reading "New BoJ policy board member proposed"
A report published by MIT suggests the world faces a uranium shortage from 2013. So, a few excel spreadsheets later, we have a rough-and-ready Vulnerability Index for you. Most vulnerable, by our reckoning, are France, Japan and South Korea. Most secure are Australia, Kazakhstan and Uzbekistan. More here.
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Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies.
Krishna Guha, US economics editor and deputy Washington bureau chief, is the FT's chief Fed-watcher. He leads coverage of the US economy, the IMF and the World Bank, writing on the global economy for 15 years. Educated at Cambridge and Harvard, Krishna was a Fulbright and CV Starr scholar. He has worked as an FT economics editorial writer and Lex columnist.
Ralph Atkins, Frankfurt bureau chief, has been writing about European economics and politics for the Financial Times for more than 20 years following an economics degree from Cambridge. He has been watching the European Central Bank and eurozone economies since 2004. He has previously worked in London, Bonn, Berlin, Jerusalem and Brussels.
Mure Dickie, the FT's Tokyo bureau chief, has spent most of the past two decades in East Asia. A speaker of Chinese and Japanese, he joined the FT as Taipei correspondent in 1998 and was Beijing correspondent from 2003 to 2008. Before that he was a journalist and editor for Reuters news agency in Beijing and Tokyo.
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Leading economists discuss topics raised by Martin Wolf, the FT's chief economics commentator, and others.