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from Breakingviews:

China stealth stimulus may slip down back of sofa

By John Foley 

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

As China’s economy slows, its authorities must think ever faster. A 500 billion yuan ($81 billion) injection of central bank funds into the country’s biggest five lenders - reported by online media group Sina on Sept. 17 - is unusual and symbolic. But in figurative terms it may just slip down the back of the sofa.

If life were like textbooks, the People’s Bank of China’s money could go a long way. Banks would use it to create new loans and deposits, which would then flow around the system. Since lenders mostly have to keep around 20 percent of their deposits on tap at the central bank, the real firepower might be around 2.5 trillion yuan, assuming banks could find enough people who want to borrow. Such a stimulus would be the equivalent of 28 percent of last year’s total new lending.

China’s dysfunctional setup is very different, however. Funding can go in, but doesn’t always go around. Banks tend to hoard cash, which isn’t so surprising when the growth in deposits increased at its slowest rate since at least 1997 in August. Liquidity becomes precious when many borrowers aren’t paying back loans on time. It is even scarcer ahead of a week-long October holiday when demand for currency is high. If the new funds don’t multiply, they will equate to less than one month’s average new lending.

from Breakingviews:

No-debt mania continues to dictate German policies

By Olaf Storbeck

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Angela Merkel’s rhetoric on higher public investment is changing for the better. But the German chancellor remains unruffled by growing calls from her euro partners and the European Central Bank to change tack on fiscal policy. Germany’s excessive focus on balanced budgets remains unchanged and is likely to prevent any swift and significant increase in public infrastructure spending.

from Breakingviews:

Euro has further to fall

By Swaha Pattanaik

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Euro zone inflation is too low, and economic activity sluggish. But at least one thing is going the European Central Bank’s way. Its hankering for a weaker currency will be fully gratified.

from Edward Hadas:

Central bankers’ reward for failure

Economic systems that work well do not have many heroes. The elevated status of the world’s central bankers – seen in the close attention paid to their annual get-together last weekend in Jackson Hole, Wyoming – is a sign that the financial system works badly.

Most of the modern economy flourishes without much help from professional economists. That would have pleased John Maynard Keynes. The British economist thought his peers should be like dentists – “humble, competent people” who could deal effectively with specialised problems. Such technicians do in fact take care of the production and distribution of goods and services, the allocation of incomes, the protection of the environment and even the development of new products.

from Breakingviews:

ECB deserves to lose market’s inflation confidence

By Swaha Pattanaik

The author is a Reuters Breakingviews columnist. The opinions expressed are her own. 

The case of the euro zone’s vanishing inflation rate has so far stumped European Central Bank President Mario Draghi. Quite rightly, investors’ faith in his ability to do anything about the problem is also evaporating.

from Breakingviews:

Latest blunder hits StanChart where it most hurts

By George Hay

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. 

Standard Chartered’s latest blunder hits the UK bank where it hurts most. New York State’s Department of Financial Services has slapped a $300 million fine on the emerging markets-focused lender for compliance lapses. It reinforces the disturbing impression that StanChart’s top brass aren’t on top of things.

from Edward Hadas:

Time to retire unemployment

Edward Hadas

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Give Janet Yellen credit. The chair of the U.S. Federal Reserve is keen to use monetary policy to help get more people into good jobs. Her priority – work is more important than finance – is reflected in the subject of this week’s get-together for the world’s central bankers: “Re-Evaluating Labor Market Dynamics.” One item should be on the agenda of the distinguished guests at Jackson Hole, Wyoming: how to replace the concept of unemployment.

from Breakingviews:

Dollar set to take pound’s strong currency title

By Swaha Pattanaik

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Sterling emerged as the currency market strongman over the past year because investors grew increasingly confident the UK would be the first big economy to raise interest rates. The dollar now looks set to wrest the title from the pound.

from MacroScope:

ECB’s fingers crossed for private loans growth

Mostly bereft of policy options except for outright quantitative easing, European Central Bank President Mario Draghi hopes that hundreds of billions of euros more in cheap loans to banks will boost inflation.

The jury will be out for a long time before we get any decision on whether they have worked.

from Global Investing:

The people buying emerging markets

We've written (most recently here) about all the buying interest that emerging markets have been getting from once-conservative investors such as pension funds and central banks. Last year's taper tantrum, caused by Fed hints about ending bond buying, did not apparently deter these investors . In fact, as mom-and-pop holders of mutual funds rushed for the exits,  there is some evidence pension and sovereign  wealth  funds actually upped emerging allocations, say fund managers. And requests-for-proposals (RFPs) from these deep-pocketed investors are still flooding in,  says Peter Marber, head of emerging market investments at Loomis Sayles.

The reasoning is yield, of course, but also recognition that there is a whole new investable universe out there, Marber says:

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