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Economics Headlines for the Week: 1/17/2011

January 17, 2011

Economics headlines from this week’s news, blogs, and op-eds.

To see the week’s economics headlines click here:

 

Aljazeera: Clash in Bangladesh as stocks dive

Apparently in Bangladesh shareholder activism consists of rioting in the streets when local stock markets collapse; unlike the American phenomena of complaining that CEO’s and Corporate Boards are payed too much and have skewed incentives but then not actually doing anything about it. It appears as though a general misunderstanding and lack of experience contributed to false hopes and estimations about the value of local companies. While this tends to happen in developing nations, such as China, I can’t help but think the situation is not too different from naive U.S. investors who own stocks that don’t pay any dividends or confer to the shareholder any actual capabilities of changing company board members or structure.

The Huffington Post: Massachusetts Courts to Banks on Foreclosures: The Law Matters

The Massachusetts Supreme Court ruled that Banks prove that they own the house before they evict the tenants. This should be a costly and difficult ruling for most banks, considering the complex securitization that many mortgages underwent during the housing and securization bubble. This is good news for homeowners, and provides some protection people won’t have their house bulldozed accidentally (see the last link), and means banks who profited from undercutting existing property-ownership legislation should have a harder time seizing property.

Bloomberg: Stocks, Euro Rise on Earnings Results, Japan Pledge to Buy European Bonds

Stocks are up on higher than expected earnings and increasing signs of stability in Europe. The big news here is Japan’s promise to purchase Euro-Bonds. My main question is why? Its obviously good news for the European Union, but does Japan know something other investors don’t? Were there policy discussions between Japan and EU member countries on what steps the EU would take to bailout its member countries?  A bunch of weaker EU countries (Spain,  Italy, Portugal) were about to bring more bonds to the market to raise revenues, the timing here is amazing, and China reportedly also wanted a piece of the action. The timing of Japan’s statement is interesting and brings out the conspiracy theorist in me… what’s going on behind closed doors?

Bloomberg: Euro Climes above 200-Day Average Versus Dollar on Portugal Auction Demand

Obviously the bond-sale (manipulated with apparent backroom shenanigans) was good for the Euro. I just hope the Dollar-Decline Currency hawks don’t jump on this as some sort of sign of the eminent demise of U.S. currency. They should be worrying about the BRIC (Brazil, Russia, India, China) countries’ moves more anyways.

Op-Ed:The New York Times: Beyond the Eternal Food Fight

A good piece on the drivers of rising food prices that I expect are going to continue to rise during 2011. Its not that we won’t be able to feed the world’s growing population, the problem is changing consumption habits and a move to purchasing concrete assets rather than stocks and bonds during uncertain economic times.

Financial Times: Beige Book shows increased Activity

Good news from the U.S. manufacturing front. While manufacturing in the U.S. is no doubt still on a decade or two or three long decline, this is good news for the economy in general. I would caution though, that a lot of U.S. manufacturing output is now being purchased abroad (this is both good and bad, but it certainly complicates the interpretation of this news).

Los Angeles Times: China bars O.C. businessman from returning home, citing contract dispute

Some anecdotal evidence about the difficulties and dangers in managing the Chinese bureaucracy when trying to do business in the country.

Business Week: India’s Industrial Production Expansion Slows to 2.7%

Some bad news about manufacturing out of India. Government Officials are trying to spin it as a one off kind of thing, but it seems as though the economy in India has been swinging back and forth in the past year. Its likely not a long-term problem, but these numbers should serve as a sign of the percieved general shakiness of the global economy as business owners and investors attempt to determine how much actual demand there is for products internationally.

Reuters: Yuan to Spread as Bank of China lets U.S. customers trade RMB
China is now allowing people to purchase the Yuan outside of the country, but only to the tune of about $3,000 a day. I wonder how long it will be until Goldman Sacks or George Soros find a way around this restriction.

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