The global economy—let’s make hay while the sun shines

First published:, 21/03/2017

The good news won’t last forever

This week, the Economist’s cover line was “On the up,” referring to coverage of a synchronised upturn in global growth. The main story here—which has been echoed by commentators around the world—is quite important. For the first time since the synchronised economic bounce-back after the 2008-09 recession, the global economy is firing on most, if not all cylinders.

So does this mean that everything’s fine? Not quite. But let’s start with the good news, which is indeed something to cheer about.

The global purchasing manager’s index, which aggregates survey data in manufacturing and services for the most important economies in the world, started turning up gently in the middle of last year, and by February 2017 it was at its highest level for over two years. The manufacturing survey was at its highest since 2011. This marks a material change from the two and a half years to mid-2016 in which these indicators declined consistently, indicating the world economy was in a sour state…..Read more:

Posted in Global Economy + Finance, Uncategorized Tagged with:

U.K. Investors Have Too Much Faith in Their Government

First published: Bloomberg View, 20/03/17

The U.K. government will soon invoke Article 50 of the Lisbon Treaty to begin divorce proceedings from the European Union. The Scottish government is seeking to hold a second independence referendum before Brexit talks wind up. An otherwise uneventful Bank of England meeting had one interest-rate dissenter with others potentially sympathetic as inflation stirs…..Read more:


Posted in Europe + UK, Uncategorized Tagged with: ,

China has regained economic stability, but clues are in the weeds of finance

21st March 2017

There’s a cute expression that last did the rounds after Lehman went belly-up. As the destruction of balance sheets tore through the the financial system, the black cry rang out that  ‘there’s nothing right on the left side of the balance sheet, and nothing left on the right’. Eventually we recovered. But fast forward to 2017 and what about China, which according to the New York Fed, has accounted for a half of all new credit created globally since 2005?

China’s credit situation has been on most people’s radar screen for a little while now, but there’s been no closure, no validation of imminent demise from when Ordos (ghost town) was first noticed to last year’s financial stress. Indeed, for a year now, there’s been every indication that China’s leaders wanted and have achieved stability (at all costs) in 2017. But this isn’t the time to lose the scent, for the clues as to what happens next are still in the finance sector, and in places that many analysts don’t look. For these reasons, this blog is more essay.

To start, a quote:

Shadow banking is not subject to full regulation, or any regulation at all. We have to focus. If not, the real economy will suffer”.

You might think this is a quote from some seasoned China-watcher, waiting with the patience of Job for the denouement of the credit cycle. But you’d be wrong: they were uttered earlier this month at the annual China Development Forum by Yi Huiman, the chairman of ICBC (Industrial and Commercial  Bank of China and quoted here, the world’s largest bank, ranked by assets. He was referring to the eruption of unregulated – more likely poorly regulated – investment vehicles, such as wealth management products (WMP’s), and he did so barely a month after the People’s Bank of China (PBC) and the three other Regulatory Commissions (Banking, Insurance and Securities) had issued new draft guidelines designed to dampen down the growth in WMPs and curb the activities of banks in this sphere. And that came just 6 months after another set of regulatory guidelines to try and restrain shadow banking activity. Read more ›

Posted in Viewpoints Tagged with: , , ,

Can Merkel and Trump work together?

First published: CapX, 16/03/2017

Stormy weather has shifted Angela Merkel’s trip to see the US President to tomorrow; it provides the perfect metaphor for German-US relations. There are several contentious foreign policy issues, some of which have gone off the boil for now, but there is no question that when it comes to trade and commerce in particular, and the EU in general, Germany and the US are unusually worlds apart.

After Trump’s election, Merkel didn’t mince her words when she said pointedly that “Germany and America are connected by values of democracy, freedom and respect for the law and the dignity of man, independent of origin, skin colour, religion, gender, secular orientation or political views”. People think, mistakenly, that China’s President Xi Jinping sought in Davos to fill the global leadership vacuum in the wake of Trump, but Chancellor Merkel has far stronger claims….Read more:

Posted in Europe + UK, United States Tagged with: , , ,

What Fed’s new tightening cycle holds for Asia

First published: Nikkei Asian Review, 16/03/2016

Higher interest rates could disrupt region’s economic growth

The U.S. Federal Reserve raised interest rates for only the third time this decade at its Wednesday meeting. The policy rate now stands at 0.75-1%. The hike itself was heavily discounted, but markets were tuned in to the Federal Open Market Committee’s hints as to what might happen next. The Fed now expects interest rates to increase twice more this year, with the median projection rising to 1.4% at the end of this year, and then to just over 2% at the end of 2018.

If the Fed is right, then we now have a proper tightening cycle for the first time since 2004, rather than the one-off mini-shocks triggered by the “taper tantrum” of 2013, when the Fed announced an end to its policy of quantitative easing, and raised rates twice, at the end of 2015 and 2016….Read more:

Posted in Emerging Markets, United States Tagged with: , , ,

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