Here are some of the interesting things that I found around the net. Hopefully, you will find these useful and interesting too.
- How a Rising Dollar Is Creating Trouble for Emerging Economies – The soaring value of the American dollar is rippling across the globe. As it rises, it is threatening emerging economies where companies have taken on trillions’ worth of dollar-based debt in recent years.
- Exchange Rates and Balance Sheet Effects – Actually, this time is not different: the Asian and Argentine crises were also about private-sector debt, with Asian public debt, in particular, quite low before the crisis hit. And a number of economists, myself included, independently developed models of leverage, currency mismatch, and balance sheet effects to make sense of the Asian crisis.
- Tax Cuts Still Don’t Pay for Themselves – The Tax Foundation released a report last week arguing the Rubio-Lee plan would generate so much business investment that, within a decade, federal tax receipts would be higher than if taxes hadn’t been cut at all. According to William McBride, the chief economist at the right-of-center think tank, the senators’ plan would add 15 percent to gross domestic product and 13 percent to wages.
- A Rebuttal of the one that we read on Monday: Riksbank Deputy Governor Jansson again tries to defend the indefensible – But in real time, the Riksbank’s inflation forecast was below the inflation target and unemployment and the unemployment forecast were far above the Riksbank’s estimate of a long-run sustainable rate. In such a situation, easing, not tightening, is the right policy, since it shifts the inflation forecast up and closer to the target and the unemployment forecast down and closer the long-run sustainable rate.
- Israel Shekel Drops as Netanyahu Wins Most Seats in Election – The new government will need to address economic reforms that could affect the currency, including a regulator’s decision last year to reconsider foreign stakes in Israel’s two largest natural gas reserves, according to BlueStar Global Investors LLC.
- Potash Price System Faces ‘Collapse’ as China Negotiations Stall – Potash companies typically reach a deal with Chinese buyers in February, setting a benchmark price that guarantees stable profits for the nutrient used by farmers around the world to grow healthy crops. Now, with no pact in hand by mid-March, producers face the prospect of having to compete on pricing in an oversupplied market, said Daryna Kovalska, an analyst for Macquarie Group Ltd. in London.
- Gold Demand in Asia Seen Doubling as ANZ Sees Record Prices – While the bank has a short-term target of $1,100, prices will increase through 2030 on growing wealth in Asia, rising investment by money managers and expanding holdings at emerging-market central banks, the bank said. If China’s shift to a more open economy is bumpy and global financial instability continues, the price may surge to $3,230, it said.
- GUNDLACH: The global economy isn’t ready for a Fed rate hike – “I’m afraid that the Fed is intent on being a blockhead and raising interest rates against this backdrop,” he said, “and further strengthening the dollar, weakening the economy, weakening corporate earnings, and basically having to reverse policy.”
- Separate Trend from Cycle – Demographic developments are putting downward pressure on interest rates globally. But it is important to remember that the trend seen in the chart below is structural and very slow moving. Around this long term trend we have the business cycle, which is driven by positive and negative changes in confidence. In other words, we have a structural trend and around that trend we have periods where consumers and companies are optimistic about the future and periods where consumers and companies are pessimistic about the future.
- Osborne pins hopes on £6bn budget windfall to regain momentum in polls – Osborne is expected to announce some form of tax cuts designed to woo voters ahead of May’s election. The Independent reported on Wednesday that this will include abolishing tax on some of the income from savings for millions of lower-paid voters. Currently the coalition has plans to cut the 10p tax on income from savings for the lowest earners but that could be increased to include higher earners who pay a 20% rate. It’s understood there would be a cap on the amount that would be tax-free, for example the first £1,000.
