Reuters blog archive
Breaking news is S&P’s downgrade of France’s credit rating to AA from AA+ putting it two notches below Germany. Finance Minister Pierre Moscovici has rushed out to declare French debt is among the safest and most liquid in the euro zone, which is true.
What is also pretty unarguable is S&P’s assessment that France’s economic reform programme is falling short and the high unemployment is weakening support for further measures. There's also Francois Hollande's dismal poll ratings to throw into the mix.
As a result, medium-term growth prospects are lacklustre. Euro zone GDP figures for the third quarter are out next week and France is expected to lag with growth of just 0.1 percent.
French bond futures have fallen though not dramatically. They shrugged off the loss of France’s ‘AAA’ status nearly two years ago; yields are significantly lower now than they were then.
from Lawrence Summers:
This month Washington is consumed by the impasse over reopening the government and raising the debt limit. It seems likely that this episode, like the 1995-96 government shutdowns and the 2011 debt limit scare, will be remembered mainly by the people directly involved. But there is a chance future historians will see today’s crisis as the turning point where American democracy was shown to be dysfunctional -- an example to be avoided rather than emulated.
The tragedy is compounded by the fact that most of the substance being debated in the current crisis is only tangentially relevant to the major challenges and opportunities facing the United States. This is the case with respect to the endless discussions about the precise timing of continuing resolutions and debt limit extensions, or the proposals to change Congressional staff healthcare packages or cut a medical device tax that represents only about .015 percent of GDP.
from India Insight:
(Any opinions expressed here are those of the author and not of Thomson Reuters)
Indians use gold for all sorts of things. As the world's biggest gold consumer, its citizens use coins, bars and jewellery as gifts, dowries and investments that are literally more solid than a share in a company. The ill effect that this has on India's current account deficit has led the government to try to curb demand. Here are a few examples of demand that nobody can seem to curb.
This week, gold importer RiddiSiddhi Bullion's subsidiary Dia Jewels unveiled India’s first gold-plated motorbike. About 35 to 40 kilograms of silver went into making the miniature two-wheeler model, which is gold plated and studded with diamonds, and took six months to make, said Mukesh Kothari, director of Riddisiddhi Bullions.
from India Insight:
Google Trends shows that the term “current account deficit” is among top searches from India in 2013. Add “gold” as a comparative keyword and the searches for the commodity Indians love are far higher.
Indians buy gold for everything – investment, gifts, wedding ceremonies and auspicious days. But of late, this has become a pain for policymakers.
We heard it more than once at today’s hearing of the Joint Economic Committee featuring Fed Chairman Ben Bernanke: the central bank’s low interest rate policies are allowing Congress to delay tough decisions on long-term spending.
As U.S. senator Dan Coats asked pointedly: “Is the Fed being an enabler for an addiction Congress can’t overcome?”
from Global Investing:
India's finance minister P Chidambaram can be forgiven for feeling cheerful. After all, prices for oil and gold, the two biggest constituents of his country's import bill, have tumbled sharply this week. If sustained, these developments might significantly ease India's current account deficit headache -- possibly to the tune of $20 billion a year.
Chidambaram said yesterday he expects the deficit to halve in a year or two from last year's 5 percent level. Markets are celebrating too -- the Indian rupee, stocks and bonds have all rallied this week.
from Global Investing:
Someone's loss is someone's gain and as Russian and South African markets reel from the recent oil and gold price rout, investors are getting ready to move more cash into commodity importer India.
Stubbornly high inflation and a big current account deficit are India's twin headaches. Lower oil and gold prices will help with both. India’s headline inflation index is likely to head lower, potentially opening room for more interest rate cuts. That in turn could reduce gold demand from Indians who have stepped up purchases of the yellow metal in recent years as a hedge against inflation.
from The Great Debate:
Washington has been fascinated by Republican self-laceration since the 2012 election. Karl Rove triggered a circular firing squad by vowing to take out unwashed challengers in GOP primaries. Louisiana Governor Bobby Jindal begged Republicans to stop being the “stupid party.” Strategists say the party can’t survive as stale, pale and male. Tea Party legislators knee-cap GOP congressional “leaders” and well-funded political PACs strafe any who dare deviate from the party’s unpopular gospel. Republicans are even talking about changing “Grand Old Party” to something more fashionable.
Representative Paul Ryan’s newest budget will put every Republican on record voting to turn Medicare into a voucher, gut Medicaid, repeal Obamacare, savage investment in education and leave some 50 million Americans without health insurance. Not surprisingly, polls suggest Congress is less popular than colonoscopies, and Republicans poll at lowest levels on record.
from Judgement Call:
Few economists preach spending cuts as a cure for high unemployment. Yet that’s exactly what Congress decided when it imposed, starting March 1, across-the-board spending cuts (the “sequester”). Despite Friday’s mildly upbeat jobs numbers, the economy remains limp, with 15 million or so unemployed individuals who want to work. Federal spending cuts won’t make their plight any better.
Congress has known for quite some time that the federal budget will turn sour in 10 to 15 years, with expected outlays far outstripping expected revenue. For complicated, if not odd, reasons, Congress now feels compelled to do what it ordinarily shuns: cut federal programs and raise taxes. That might seem politically brave and responsible. But brushed up against facts, the case for Congress taking swift action wobbles, hitting wrong targets at the wrong time.
from The Great Debate:
There are glimmers of light in our battle to put America’s finances in order. New hope for a long-term budget deal has come in the form of two ideas, both from outside Congress, that many of our elected officials have embraced:“No Budget, No Pay” and “No Deal, No Break.”
The critical matter now is whether these two initiatives will lead to serious negotiations, or just be rhetorical weapons in Washington’s political warfare.