Questioning China’s governance

The New York Times story on assets held by relatives of China’s prime minister Wen Jiabao led to some interesting ponderings on Chinese kleptocracy by the New Yorker’s Evan Osnos.

Osnos highlights a book by Andrew Wedeman published this year, Double Paradox, which attempts to understand how China has grown rapidly despite its widespread corruption.

“Although there is no good corruption,” Wedeman writes, “there is clearly bad and worse corruption: the corruption that has negative effects, and the corruption that can have potentially catastrophic effects.”

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US underemployment is not as bad as you think

The common retort to a reduction in the US unemployment rate, such as last week’s, goes something like, “Yes, but that doesn’t really capture the underemployment. What about all the part-timers?!” But, as ever, it comes down to how ‘part-time’ is defined. Comparing Bureau of Labor Statistics data with OECD data indicates that US underemployment is not as severe as the headline figures suggest.  Read more

September payrolls 114,000, unemployment rate drops to 7.8%


Today’s jobs report was mostly consistent with other recent economic indicators that suggest a steadily, if not impressively, growing US economy. Read more

Markets Live transcript 5 Oct 2012

Live markets commentary from 

Join Andy Haldane on October 29th

Here’s a talking point: “Socially useful banking.”

As luck would have it, Lisa Pollack has been invited to chair a discussion on this very topic, featuring none other than FT Alphaville favourite, Andy Haldane. (Mr Haldane is the Bank of England’s executive director for financial stability but you knew that.) Read more

The (early) Lunch Wrap

Morgan Stanley chief warns on Wall St pay: Morgan Stanley is preparing to wield its axe again with more job cuts and smaller bonuses planned for next year as the investment bank attempts to boost shareholder returns. James Gorman, chief executive, has said that staff and remuneration would have to be sacrificed as banks cope with lower profits.  Read more

An Indian flash crash

See if you can spot it (chart of the Nifty from Google Finance):

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Investing in credit markets, with matrices

Where’s an investor to start when it comes to assessing the credit market? Hard-nosed analysis from the top down and/or bottom up? Relying on quantitative factors or more subjective factors?

The credit strategy team at Citi start with four areas of examination that they arrange in a convenient 2×2 matrix when required to explain what they are up to by the outside world: Read more

Further reading

Elsewhere on Friday,

- The high rent version of subprime.

- No, not just more Bernanke bashing.

- The B Team (where “B” is for Branson). Read more

The 6am Cut London

Asian stocks gained overall on Friday, but Japanese markets were lower and the yen rallied after the Bank of Japan held off from adding to stimulus. (Bloomberg)

Samsung profits rose 85%, beating estimates: Samsung Electronics reported a record quarterly operating profit of $7.3bn, nearly double last year’s figure, as strong sales of high-end TVs and Galaxy smartphones more than offset reduced orders for chips and screens from Apple. Read more

The Closer

The Federal Reserve considered using forward guidance that would include an economic threshold that would need to be crossed before rates would go up, according to the minutes of the last FOMC meeting. Read more

A German sloowww doowwwnnnn

If you think Germany’s response to the crisis has been less than lightning swift so far…

JP Morgan’s Alex White argues that the German policy motor may be about to properly slow down, and with it the response to the eurozone crisis which usually moves at Germany’s speed: Read more

Why the UK output gap could be a chasm

Capital Economics put out a cracker of a note on UK output this week. It’s taken us a while to get through it but we wanted to do it justice. Here’s the key extract:

‘Supply pessimists’ point to high inflation and growing employment as evidence of a small output gap. But inflation was pushed up by temporary factors and has eased recently, while domestically generated inflation has remained low.

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Markets Live transcript 4 Oct 2012

Live markets commentary from 

The (early) Lunch Wrap

Romney leads presidential debate: Mitt Romney was widely viewed as more successful in the first US presidential debate of this campaign, in which he focused on weak growth and high unemployment. Many observers were confused by why Obama failed to mention Romney’s “47 per cent” gaff. Romney’s chances of being elected president rose to 32 per cent from 25 per cent on Intrade after the debate. Read more

From Gresham to Giffen in Iran

Iran’s new rial-ity is biting hard.

From Bloomberg (with our emphasis):

“Most of my customers just look at products behind the window and pass,” said Behrouz Madani,

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Some hedge fund managers walk onto an Argentinian navy ship…

We are NOT making this up. We couldn’t.

ARA Libertad (Q-2) - Photo copyright - Fabian Pesikonis - pic sourced from Read more

Further reading

Elsewhere on Thursday,

- Mitt Romney ‘absolutely destroyed‘ Obama in the presidential debate.

- Which sent futures surging.

- It seems that Romney’s policy vagueness is paying offRead more

The 6am Cut London

Romney basically won last night’s debate: Mitt Romney was widely viewed as more successful in the first US presidential debate of this campaign, in which he focused on weak growth and high unemployment. Two of Barack Obama’s top campaign advisers conceded that Romney won on style, even as they said the president won on substance. Read more

The Closer

FT markets round-up: “Global equity markets were mixed, while most commodities fell, as weak data from Europe, China and Australia was partially offset by better-than-expected US services and jobs numbers. The FTSE All-World equity index closed fractionally lower, after the FTSE Eurofirst 300 dipped 0.1 per cent and Asian stocks shed 0.3 per cent. On Wall Street, the S&P 500 added 0.4 per cent helped in part by the better-than-forecast reading on private jobs and pickup in the US service industries. Read more

The case against idea monopolisation

Patents and copyrights, a.k.a the process of monopolising ideas.

A gripping new paper from Michele Boldrin and David Levine at the St. Louis Fed argues there are strong economic grounds to abolish patents, because “there is no empirical evidence that they serve to increase innovation and productivity, unless the latter is identified with the number of patents awarded– which, as evidence shows, has no correlation with measured productivity.” Read more

France now has two words for entrepreneur

George W. Bush famously (and reportedly) opined that:

“The problem with the French is that they don’t have a word for entrepreneur” Read more

Gresham’s law takes Iran

What’s happening in the Iranian currency markets at the moment is getting pretty fascinating.

Via Reuters on Wednesday:


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Guest post: Give banks a break on Libor

From Richard Farley, Leveraged Finance partner at lawyers Paul Hastings

Last Friday, Britain’s top financial regulator, Martin Wheatley of the Financial Services Authority, issued his final report with recommendations for the comprehensive reform of the scandal-ridden LIBOR setting process. Read more

Chinese property is baaaaack!

Remember Chinese property? How there was a boom in apartment building that amounted to some 10 per cent of GDP, and now there are gazillions of investment apartments sitting empty, and local governments got really hooked on the revenues from land sales, and it all fueled the development of weird and dodgy securitisations which offered a tempting alternative to letting one’s savings lose value in a deposit account? Read more

Currency wars as global stimulus

Currency wars are back in fashion. Even if you ignore the idea that those who fire the opening shots do so as an after-thought, there is still a feeling this may tip into widespread conflict.

But, the idea of currency wars as a negative may be fundamentally misunderstood (we blame the ‘war’ branding thing). Read more

Rubik’s Revolutions

We introduced our Rubiks QE analogy on Tuesday. This post is a continuation, in which we apply the analogy to the crisis so far.

Before we go on we should point out that the Rubik’s is a simplification, as are the concepts of “tomorrow money” and “today money”. There are and will always be areas that call for further explanation, but which we haven’t covered in this post. If they’ve been left out, it’s mostly due to post-length constraints. It’s not because we are wilfully ignoring them. Read more

MoUs for all! More on that draft EU agenda…

Herman van Rompuy has quite a proposal to kick off discussions to get some kind of eurozone economic union concept bedded down by the end of the year. The FT’s Alex Barker and Peter Spiegel had the scoop, and FT AV can reveal a bit more of the detail of what is essentially another step towards fiscal union.

Here are some of the points that van Rompuy suggests, in a draft proposal, might be considered at the next EU summit, later this month (our emphasis): Read more

Markets Live transcript 3 Oct 2012

Live markets commentary from 

The (early) Lunch Wrap

US steps up probes on insider trading: US authorities have increased the number of new investigations into insider trading by almost half in the past year, building on their recent crackdown on corruption among professional traders, the FT reports. James Barnacle, a supervisor of the Federal Bureau of Investigation’s economic crimes unit in Washington, said the number of new FBI investigations into insider trading was up 43 per cent nationwide for the fiscal year that ended September 30.  Read more