Takuji Aida, senior economist at UBS in Tokyo, has a note out today with a cryptic metaphor for Japan’s economy that made me think of Eric Cantona.
Provoking long-term growth expectations is like filling a container with water. The water is the first factor, i.e. monetary loosening. The container is the second factor, i.e. growth strategies. These are in place. Japan currently lacks the third factor, i.e. a device for pumping water into the container.
Unlike the footballer, however, Mr Aida provides some explanation: Read more
It’s a bit like a prenup: the European Central Bank is encouraging the Irish government to grant its central bank a veto over its intended life partner, the financial regulator.
Legislation is currently being drawn up that will effectively re-merge the central bank and the regulator. But the ECB says the central bank governor should be granted an “explicit” right to veto the regulator’s funding and budget decisions, if they infringe his independence.
Draft legislation may be reviewed this month. Finance Minister Brian Lenihan has yet to work out how the board would be arranged, and precisely how incumbent governor, Dr Patrick Honohan, and regulator, Matthew Elderfield, would work together. Read more
Largely in response to a Nouriel Roubini analysis published in the FT that argued that there was a bubble in emerging market stocks, the Richmond Fed put out a report highlighting fundamental factors that may have resulted in a sustainable rally.
The report isn’t arguing that a bubble doesn’t exist, mind you, just that it may not exist. And, they say, it may be that there’s no way to tell if it exists or not.
“The purpose of this Economic Brief is not to provide quantitative evidence disproving the existence of an asset bubble in certain markets, but rather to posit some factors that could contribute to a fundamentals-based explanation for the recent rally in certain risky asset markets.”
The bubble argument is essentially this: Read more