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Wed 28 Nov 2018 / Europe

May deal faces near-impossible hurdles

Prime Minister Theresa May would almost certainly try to counter a rejection of her Brexit deal in the UK parliament by returning with an amended version to avoid the more dramatic alternatives. To stand any chance of success, an amended deal must overcome two hurdles. First, May must keep her cabinet united – which seems unlikely to happen. Second, the EU must be forthcoming in offering something meaningful to appease the UK parliament and Leave MPs – again, what that could amount to is almost impossible to determine.

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Tue 27 Nov 2018 / Global

Countries victims of 'ninja' loans

Countries need infrastructure in much the same way that US families needed houses before the 2008 financial crisis. The 'American dream' was to provide everyone with their own home. Similarly, poorer countries dream of infrastructure, to propel them to prosperity. People in the US bought houses through 'no income, no jobs, no assets' ('ninja') loans, unsure of how to reimburse their bank. Countries are doing the same to fund infrastructure projects. Both groups were lured by easy financing conditions.

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Mon 26 Nov 2018 / Europe

ECB must address QE misallocation risk

By the end of this year, the European Central Bank is expected to end its monthly net asset purchases. This raises several questions about the ECB's reinvestment strategy and the implications for individual countries. The central bank's quantitative easing programme was not as successful as believed. The real issue for the ECB governing council to address when discussing fiscal implications of reinvestment is the risk arising from the misallocation of liquidity and corresponding claims and liabilities.

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Fri 23 Nov 2018

Cheer up, it's the best UK can do

The European Union withdrawal deal will be approved by the House of Commons. The fear of 'no deal', as well as a dislike of 'no Brexit', are strong enough for there to be a small majority to vote the agreement through. The UK withdrawal deal, bad as it is, is the best that can be got, writes Meghnad Desai.

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Thu 22 Nov 2018

Trump stuck with Powell despite strains

Minneapolis Federal Reserve President Neel Kashkari's defiance on the Fed's interest rate increases has made commentators wonder if he was angling for Jerome Powell's job as Fed chair. Donald Trump himself has been complaining loudly and often how much Powell's policy bothers him. In practice, the US president's freedom of action in firing a Fed chief is practically non-existent, writes Darrell Delamaide.

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Wed 21 Nov 2018

May the survivor will plough on

Theresa May is still standing after last week's Cabinet battles. The British prime minister has better cards in her hand than many opponents think. May's strengths are her apparent weakness and the lack of viable alternatives. She is much like the Brexit deal. Not to everyone's liking – but there is no better choice available. For all the bravura talk, it is possible rebel Tories' desire to be rid of May will never become manifest.

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Tue 20 Nov 2018 / Asia Pacific,North America

Opening for US-China renminbi action

Since early April, the renminbi has fallen 10% against the dollar, largely reflecting dollar strength. The causes lie in the cyclical and monetary policy divergence between the US and China. However, there is an alignment of interests. Both want to pursue their domestic economic agendas without the complications of a falling renminbi. This could create an opening for unexpected co-operative action by the US Treasury and the People's Bank of China – a joint foreign exchange intervention operation to strengthen the renminbi.

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Mon 19 Nov 2018 / Europe

Five options if UK rejects May deal

UK Prime Minister Theresa May has clinched her deal with the European Union and persuaded most of her cabinet to support it. But after EU leaders sign off the deal at a summit on 25 November, May has promised the House of Commons a 'meaningful vote'; it is hard to see how she can win it. However, even if May falls, the arrival of a new Conservative party leader would not change the parliamentary arithmetic behind the Brexit deal. If parliament votes against the deal, there are just five possible outcomes.

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Fri 16 Nov 2018 / Asia Pacific

Renminbi's global reserve share rising

Asset class diversification continues to be a key theme for central bank foreign exchange reserves managers. Despite a weaker renminbi/dollar rate this year, the Chinese currency has increased its share in global reserves, according to IMF data. The latest report shows a jump in renminbi holdings of around $50bn in the second quarter of 2018. Less than a decade after the launch of the renminbi internationalisation initiative, we estimate that more than 60 central banks have renminbi in their reserves. But allocations are still relatively small.

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Thu 15 Nov 2018

ECB on brink of egregious policy error

ECB President Mario Draghi sees no need for the central bank to change course from its decision to withdraw monetary policy stimulus by concluding its bond-buying programme later this year. He does so despite growing signs of vulnerability in the European and global economies. Clouds are gathering over Italy, and it is possible that the UK will crash out of the EU without an exit deal by end-March 2019. Meanwhile, risks of a German economic slowdown have risen because of continuing trade tensions with the US.

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