China's woes and a still flawed global economy

  • 26 August 2015
  • From the section Business
Shanghai investor looks at prices

With share prices in Shanghai and Hong Kong up and down all day, it would be premature to say that yesterday's decision by the People's Bank of China to cut interest rates and make it easier for banks to lend has brought calm to stock markets.

That is especially so after last night's gyration on Wall Street, when shares lurched downwards towards the close, after being up for most of the session.

Anxiety rules among investors.

And as I said last night on the News at Ten, in some ways I thought yesterday's events on markets were if anything more disturbing than Monday's global rout.

Because if share price gains could not hold after the significant monetary easing by China's central bank, then mistrust about the true state of the world's second largest economy (actually the number-one economy on the purchasing-power-parity measure of GDP) has become very pronounced indeed.

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Why is FTSE 100 shrugging off Shanghai Noon?

  • 25 August 2015
  • From the section Business
Bewildered Chinese investor
Image caption Chinese investors have been Shanghaied, but does Europe care?

So why on earth has the plunge in Chinese stock markets - Shanghai fell another 7.6% today, taking the losses on shares over four days to well over 20% - left European markets unperturbed this morning after yesterday's fall?

Well, it may well be that the absence of massive (or any) Chinese state intervention to prop up the market, of the sort we saw just a few weeks ago, has delivered some kind of coldish comfort to Western investors - for two reasons.

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Will China's slowdown make us poorer?

  • 24 August 2015
  • From the section Business
Chinese skycrapers

There has never been an economic story like China's - consistent rises in national income for 30 years at an annual rate of 10%, hundreds of millions of Chinese people lifted out of poverty, and expansion that took it from almost nowhere to become the world's second biggest economy, contributing 15% of global GDP and 25% of global GDP growth.

So it is no exaggeration to say that the story of the world economy since 1978 has been China's story - determining everything from our low and falling interest rates (because its manufacturing prowess tamed inflation almost everywhere) through to an unprecedented boom in the price of energy and raw materials.

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Inflation tiny not nil

  • 18 August 2015
  • From the section Business
Mark Carney
Image caption Bank of England governor Mark Carney has hinted that rates could begin to rise early next year

You may find this shocking, but it is probable that the governor of the Bank of England hasn't cried wolf about interest rates being likely to rise fairly early in the new year.

Because the latest CPI inflation figures show that in spite of continued falls in energy and food prices, there is the minutest amount of inflation in the system, where many thought there was none: CPI inflation rose 0.1% in July.

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Why a rise in US interest rates is still risky

  • 17 August 2015
  • From the section Business
US Dollars

There was never going to be a risk-free, stress-free moment for the Fed, the US central bank, to increase the interest rate it controls, after almost seven years of the Fed Funds rate being at a historic low of more-or-less zero.

But just possibly the mooted date of September for the last showing of that US blockbuster, "Free Money to Ward off Depression", would be the least apposite timing possible - for the rest of the world (apart perhaps for Britain, as it happens), and for emerging markets in particular.

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Would Corbyn's 'QE for people' float or sink Britain?

  • 12 August 2015
  • From the section Business
Jeremy Corbyn
Image caption Bookmakers have installed Jeremy Corbyn as favourite in the leadership race

So what are the economic policies of the long-serving Labour backbencher, Jeremy Corbyn, who has become the darling of Labour's new members and - out of nowhere - has become favourite to emerge as leader of Her Majesty's Opposition?

Helpfully he produced an economic manifesto, "The Economy in 2020".

Read full article Would Corbyn's 'QE for people' float or sink Britain?

Third time lucky for Greece?

  • 11 August 2015
  • From the section Business
Alexis Tsipras

After months of delay and crisis, Greece has finally agreed a third bailout deal (well almost) - providing up to 86bn euros of new credit.

According to Ministry of Finance sources in Athens, there are still some minor details to be sorted out. We should see a more detailed statement in an hour or two.

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China slowdown forces devaluation

  • 11 August 2015
  • From the section Business
Yuan notes

The world's investors have been obsessing with when the US Federal Reserve will end the era of near-zero interest rates, as America's economy returns to almost-normal shape.

But maybe they've been looking at the wrong monetary tool and the wrong economy, in respect of what matters to the flows of capital across borders and economic activity.

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Would a third Greek bailout work?

  • 10 August 2015
  • From the section Business
Greek Prime Minister Alexis Tsipras
Image caption Greek prime minister Alexis Tsipras remains a popular leader

I haven't been in Greece for three weeks but I am told it is eerily quiet and - in respect of tourism - surprisingly busy.

No demos on the streets of Athens - even though the Syriza government is poised to agree and implement yet more austerity and liberalisation measures, mandated by creditors and of the ilk that till recently it characterised as hateful.

Read full article Would a third Greek bailout work?

Do interest rates need to rise in 2016?

  • 6 August 2015
  • From the section Business
Bank of England

There is what to many will look like a contradiction at the heart of the Bank of England's voluminous pronouncements on inflation and interest rates.

On the one hand it expects price changes to be zero or even negative - or well below the 2% target - for longer than it predicted back in May (and actually nought over the next couple of months).

Read full article Do interest rates need to rise in 2016?