“Hard Brexit” hint sinks sterling, raises relocation risk

Following Prime Minister Theresa May’s suggestion that the UK is heading for a “hard” Brexit, international companies are now more likely to relocate than risk remaining in the country. After months of speculation as to the timing and direction of the UK’s Brexit negotiations, Prime Minister May not only revealed that she plans to trigger … Continue reading ““Hard Brexit” hint sinks sterling, raises relocation risk”

More details of the Lifetime ISA revealed

Earlier this year, the government announced a new Lifetime ISA will be launched in April 2017 to help young people buy their first home and save for retirement. What is a Lifetime ISA? The Lifetime ISA is to be a new option for those aged between 18 and 40 saving for retirement or a house … Continue reading “More details of the Lifetime ISA revealed”

Keynesian vs. Monetarism

There have been two schools of thought in the history of economics; Keynesian and Monetarism. The former rests on the belief that government actions can determine growth in the economy, spending money on say infrastructure projects when demand is slack and reining back once the economy picks up. Monetarism on the other hand believes the … Continue reading “Keynesian vs. Monetarism”

Forbidden fruit

There are unusual, even bizarre, aspects to the news that the European Commission has ordered Ireland to claw back €13 billion in back taxes from Apple. The figure represents the difference between Ireland’s standard corporation tax rate and the somewhat smaller figure paid by Apple over the past quarter-century. First, the Irish Government has decided … Continue reading “Forbidden fruit”

Where do you find a good yield?

Part of the big idea of Central Banks creating money and buying bonds is to drive other investors to buy riskier assets. They want to stimulate more activity. They hope that by taking interest rates down to very low levels some people will spend more instead of saving, and others will be more adventurous with … Continue reading “Where do you find a good yield?”

The Chinese liquidity trap

It is not just in developed markets that corporates are finding little productive use for easy money. Monetary easing in China, too, is having little apparent impact on the real economy. The M1-M21 gap in China, shown in the chart below, has historically functioned well as an indicator of GDP growth. Typically, if M1 growth … Continue reading “The Chinese liquidity trap”

Return-free risk

Bonds are at the epicentre of what is a highly fragile environment. “Brexit brought forward the size, scale, scope and speed of more monetary policy. No wonder markets are up!” – Former Federal Reserve (Fed) Governor, Kevin Warsh, July 2016 It is often stated that markets hate uncertainty. Like many things this cycle, this notion has been … Continue reading “Return-free risk”

Around the world and back again: has the globalisation theme turned full circle?

2008 may come eventually to be seen as the peak in the trend towards globalisation, the point at which the tide turned and the global spider’s web of supply chains and trade routes began to shrink. For several decades we have witnessed a continued expansion in the trade between economies around the world, crisscrossed by … Continue reading “Around the world and back again: has the globalisation theme turned full circle?”

The US Federal Reserve – Birds of a Feather

What do you get when you cross a hawk with a dove? A fair amount of confusion, if the US Federal Reserve (the Fed) is anything to go by. At this year’s Jackson Hole gathering of the world’s central bankers, Fed Chair Janet Yellen declared that ‘the case for an increase in the federal funds … Continue reading “The US Federal Reserve – Birds of a Feather”

Focus turns to reforms after Brazil votes to impeach Rousseff

The impeachment of Dilma Rousseff had been widely expected. The prospects for Brazilian assets now rest on economic fundamentals and much-needed reforms. With a greater-than-expected majority, Brazil’s Senate voted to impeach President Dilma Rousseff, removing her from office after her suspension in May. Rousseff is replaced as president by Michel Temer, who has been acting … Continue reading “Focus turns to reforms after Brazil votes to impeach Rousseff”

A bull in the China shop?

The Chinese stock market has been making some upward progress this year after the dramatic boom and bust cycle it went through in 2015. The authorities had a plan to involve more Chinese people in the stock market, and to gradually open Chinese shares to more foreign capital and influence. Unfortunately for them, individual investors … Continue reading “A bull in the China shop?”

The case for a UK fiscal reset

With monetary policy measures catching all the headlines this week we thought it worth reflecting on the other side of the equation: fiscal policy. Chancellor Philip Hammond has said that the UK may have to “reset” fiscal policy in the wake of the referendum vote. This sentiment appears to chime with the mood music at … Continue reading “The case for a UK fiscal reset”