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Commentary

Tue 18 Jun 2019 / Latin America Caribbean

Bolsonaro's Brazil in public debt peril

Jair Bolsanoro's move into Brazil's presidential palace raised market hopes that he would revitalise the country's economy, build a political consensus for much-needed pension reform and place public finances on a more sustainable track. So far, he has failed to make much progress in these areas as he engaged in divisive politics and his administration became riven by internal squabbles. Brazil is vulnerable to a full-blown public debt crisis, which will have global consequences, if the government fails to devise a credible programme.

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Thu 6 Jun 2019 / Europe

Merz: German leader in waiting

Germany has a new leader in waiting. Friedrich Merz, long-time Christian Democratic Union rival to Chancellor Angela Merkel, is moving into pole position as her most probable replacement, with strong support from German industrialists disillusioned with the mainstream politicians at the helm of the country's lacklustre 'grand coalition' with the Social Democratic Party. In a speech to the CDU economic council in Berlin on Tuesday night, calling for an 'Agenda 2030' to restore German economic health, Merz signalled his political resurrection.

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Tue 21 May 2019 / Asia Pacific

Renminbi 'weaponisation' talk overblown

A media furore has flared over whether China will dump US Treasury holdings or 'weaponise' the renminbi. The debate is entertaining, but misses the mark. In spite of much rumour and conjecture, in the past China has consistently neither acted to 'dump' or 'weaponise' its Treasuries, nor shown interest in doing so. Instability is anathema to Chinese leaders and portfolio managers. It's contrary to their self-interest. A sell-off could ratchet up US Treasury yields, imposing massive capital losses on Chinese official dollar holdings.

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Thu 9 May 2019 / North America

Powell parries inflation questions

At the press conference that capped the most recent two-day meeting of the Federal Open Market Committee, journalists tried and tried again to get Fed Chair Jay Powell to budge from his stubborn point of view that 'inflation will return to 2% over time and then be roughly symmetric around our longer-term objective'. The new dip in inflation, Powell said, was due to 'transitory factors'. He was at pains to dispel the notion gaining ground in markets that the Fed was contemplating a cut in rates.

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Wed 8 May 2019 / North America

'It's still the economy, stupid'

The campaign mantra it's 'the economy, stupid', first coined by President Bill Clinton's strategist, James Carville, has ruled US electoral politics for more than a quarter-century, and remains critically important. Other issues will of course come into play, such as healthcare and identity politics, but if the US economy remains strong between now and November 2020, the Democrats will find it hard to unseat Trump. The US is just 18 months away from the next election, which has the potential to be even more contentious than the last.

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Tue 7 May 2019 / North America

Fed should focus on winning over public

The Federal Reserve's review of its 'monetary policy strategy, tools and communication practices' – especially during the forthcoming June conference – offers an opportunity to examine the questions surrounding Fed 'independence'. One of its goals should be to win over the public, rather than fascinate markets and high priests of monetary policy. The Fed should dispel public perceptions that it alone can deliver all desired economic outcomes, let alone determine stock market prices.

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Thu 2 May 2019 / Europe

Staunch Keynesian and spiritual disciple

Johan Witteveen will be remembered in the Netherlands as a brilliant economist, the last Keynesian of his generation, a lucid liberal and a life-long adherent of the Sufi spiritual movement. In 2012 he published his memoirs, The Magic of Harmony. The title reflected the pillars of his economic and human wisdom: the natural movement towards harmony and the belief in a spiritual world beyond materialism. Through his Sufi convictions, he found the wherewithal to accept a great many terrible private sorrows.

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Thu 2 May 2019 / Europe

Rationalist suffused with humanity

Hendrikus Johannes 'Johan' Witteveen, economist, philosopher, politician and international public servant, who died on 23 April in the Netherlands aged 97, was best known internationally for his 1973-78 term as IMF managing director. He lived a rich and varied life spanning many worlds, and his academic strength and commitment to economics brought him a succession of roles: the teaching of economics in Rotterdam, and positions in Dutch political life including the posts of finance minister and deputy prime minister.

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Wed 1 May 2019 / Africa

Power struggles weigh on South Africa

After years of poor management, South Africa faces a deteriorating fiscal balance, ballooning government debt and an inefficient and unreliable power grid. These formidable headwinds are stifling growth and deterring corporate investment. The extent to which they can be dealt with depends on the outcome of the election on 8 May. President Cyril Ramaphosa is expected to win, but the size of his victory will determine whether he has the authority to make crucial reforms, as his main opposition comes from within his own African National Congress.

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Tue 30 Apr 2019 / North America,Global

US Treasury misguided on IMF quotas

The US Treasury's welcome stance on sustaining overall International Monetary Fund resources merits support. But its position on quotas will set back multilateralism, promote regionalism and damage US interests, and should be reversed. The IMF should have a large backstop for emergency systemic situations and when quota resources run low. Some separation resources makes sense. Absent the 'new arrangements to borrow', the IMF would rely on massive bilateral loans, creating conditions for opaque deal-making.

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