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Commentary

Tue 19 Feb 2019 / North America

Augmenting US Treasury foreign exchange report

The mid-April deadline for the next US Treasury report on the foreign exchange policies of major trading partners looms. The civil servants do an outstanding job, but can do even better. Since the passage of the 2015 Trade Facilitation and Trade Enforcement Act, the report has focused on whether the top 12 US trading partners have significant bilateral surpluses with the US, material current account surpluses, and engaged in persistent one-sided foreign exchange intervention. The Act does not preclude a more fulsome global economic discussion.

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Tue 5 Feb 2019 / Asia Pacific

Election muddies India's outlook

Conditions are becoming murky in the lead up to India's general election in May. Prime Minister Narendra Modi's popularity is falling, and the losses of his Bharatiya Janata Party in state assembly and other by-elections dim his prospects for a clear win. The government's drive to boost growth has shifted economic policies into an expansionary mode. Last October the RBI moved its policy stance to 'calibrated tightening', citing sustained inflation risks. The events since, especially after the resignation of Governor Urjit Patel, shift the bias towards easing.

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Thu 31 Jan 2019 / Europe

PM must push Brexiteers against the wall

Prime Minister Theresa May's Brexit deal has been rejected – again – because she is not in control of her party. In the probable case of no meaningful concessions being agreed with the EU, especially regarding the Irish backstop, May will be left with one option when she goes to parliament on 13 February. She must stand firm on her deal – amended or not – as the only workable outcome and push the hard-core Brexiteers against the wall, shifting responsibility onto them for a possibly catastrophic outcome.

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Tue 29 Jan 2019 / Global

Banxico independence faces scrutiny

Central banks, traditionally considered harmless technocratic institutions, have come under intense scrutiny since the 2008 financial crisis. A distinct set of tensions is unfolding between Mexican President Andrés Manuel López Obrador and the country's central bank. These follow the president's decision to cut his salary as part of a governmental austerity drive. This indirectly affects other top civil servants, including Banco de México officials, as Mexico's constitution stipulates no public official can earn more than the president.

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Fri 11 Jan 2019 / Europe

Back to Brussels on Brexit

Prime Minister Theresa May, facing a crucial House of Commons vote on 15 January on Britain's EU exit, is running down the clock until members of parliament feel they have no option but to back the government's deal over departure on 29 March. But the government will not be able to get May's deal through parliament and so will have to go back to Brussels, not just once, but maybe several times. If the EU refuses to budge, the automatic legal position is that the UK will leave on 29 March, even if there is no deal and stalemate in parliament.

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Wed 9 Jan 2019 / North America

Back to pre-1914 Fortress America

When Trump was elected in November 2016, I said he would be a unilateralist. In that spirit, he has redefined the aims of US foreign policy. We are back to pre-1914 'Fortress America'. The US entered the first world war only because of the German U-boat sinking of the RMS Lusitania. It entered the second only after the bombing of Pearl Harbor. Trump wants to confine US defence activity strictly to defend national interests. He no longer wishes to run the world, and has ended the doctrine of the US as global policeman codified by President John Kennedy in 1961.

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Wed 9 Jan 2019 / Global

Non-American should lead World Bank

Since the creation of the International Monetary Fund and World Bank at the end of the second world war, an American has led the Bank (Jim Yong Kim, who announced his resignation from the presidency on Monday, is Korean-American) and a European the IMF. This convention was logical in the post-war decades when the major advanced economies dominated the world economy, but the changing global landscape makes it outdated. To date, the duopoly has met no effective challenge. It is time for a change.

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Tue 8 Jan 2019 / Europe

British politics caught in zugzwang

The various pro- and anti-Brexit camps in the House of Commons are all caught in a sort of zugzwang, to borrow the phrase from chess – they are safe if they do nothing, but if any camp forces a vote it may end up triggering exactly the outcome it fears most. Prime Minister Theresa May appears to have the initiative, in that she can control the business of the Commons and decide what MPs vote on, when and in what order. But whenever she makes a move, whatever that move is, she risks weakening her position. And she cannot do nothing forever.

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Fri 14 Dec 2018 / Europe

Power vacuum points to no-deal Brexit

With her back to the wall, Theresa May seems to have forged a strategy to achieve her goals, however lofty or improbable they seem. If the opposition parties in parliament and those Conservatives who voted against her in Wednesday's leadership challenge stand firm against May, the prime minister's deal with Europe will fail. A power vacuum seems likely to arise in London. Unless May miraculously reimposes her will over the Conservative party and convinces parliament of the value of her deal, Britain will drift towards a no-deal Brexit.

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Tue 11 Dec 2018 / Europe

Brexit tumult recalls Black Wednesday

The UK is in a fast-changing situation with much at stake. The degree of uncertainty over the future path of government policy on Brexit calls to mind the days running up to Black Wednesday in September 1992, when the UK attempted to raise base rates twice to defend the pound before crashing out of the European exchange rate mechanism. Prime Minister Theresa May has outlined three options for the UK as it looks to exit the European Union: her deal, no deal, or no Brexit at all. Though none seems probable, one of them must happen.

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