Category: Economics

What is the European Central Bank (ECB)?

  • Central bank for the euro.
  • Administers monetary policy of the Eurozone.
  • Primary objective is to maintain price stability within the Eurozone (i.e. prevent inflation and deflation).
3714

Explain the looming potential US debt default?

Explain the looming potential US debt default?

  • Government doesn't have enough dosh to pay for stuff, so will need to borrow more on 3 Nov, beyond a pre-agreed debt ceiling.
  • So either the US defaults (i.e. stops paying for things like interest obligations on previous borrowings), or it raises the debt ceiling.
  • Only way to avoid default is if Congress agrees to raise or suspend the debt ceiling.
3689

Describe what Republicans & Democrats are thinking re a potential 03 Nov default?

  • Republicans don't want to raise debt ceiling, i.e. they want smaller and not bigger government.
  • So they are proposing prioritising payment of some (but not all) obligations (i.e. debt service, military and some welfare), or a raising of the debt ceiling in exchange for a reduction in social spending (Medicare, food stamps, social security).
  • The Democrats simply want the debt ceiling raised.
3686

Central Europe’s limping Tigers back on their feet?

Central Europe’s limping Tigers back on their feet?

  • Yep - looks like it.
  • Post Communist countries roared in the 2000's, but, apart from Poland, all were hit hard by 2008 crisis.
  • Finally signs of decent rebound, with Hungary & Romania taking the lead.
3655

What actually is fiscal policy?

What actually is fiscal policy?

  • The ability of a government to tax and spend in order to influence the economy.
  • An expansionary fiscal policy means either lower tax, higher spending, or a cocktail of the two.
  • A contractionary fiscal policy (" tightening") means, yep, you got it, either higher tax, lower spending, or a cocktail of the two.
3632

Brazil blues continue?

  • Deepest recession since 1930s persists.
  • Due to end of commodities boom, fiscal mismanagement and political infighting hindering reform.
  • Political crisis over corruption at state-owned petrol company continues unabated.
3609

Macrosnap China growth?

  • Jul-Sep still robust - at annualised 6.9%
  • But more recent data suggests slower growth and more deflation to come.
  • Rebalancing (i.e. transition from investment-driven manufacturing power-house to consumption-driven service economy) happening slower than expected.
3607

When will Fed rate rise occur?

  • Two thirds of economists polled by FT expect it to happen in December.
  • Markets expect it to happen in 1Q16.
  • Unusually hard call to make as US growth data sending mixed messages amid noise created by strong $ and financial market volatility.
3590

Why are China’s FX reserves falling?

  • Down to $3.5tn from $4tn in June 2014.
  • Fall due to China supporting renminbi (i.e. buying renminbi and selling US$ when downward pressure on renminbi).
  • Downward pressure on renminbi due to capital outflows as China economy slows and foreign investors leave.
3588

Is the Chinese renminbi undervalued?

  • IMF now says no (after years of saying yes) because renminbi has gained 25% against the US$ over the last decade.
  • US considers it "significantly undervalued" (saying China keeps it this way for trade advantage).
  • China is the world's largest trading nation, and many attribute this to an artificially undervalued currency.
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