1. There’s a way, just a question of the will: There are a couple of early articles out broaching the topic of whether firms will begin hiring. The Wall Street Journaltakes the path of how much money is on the sidelines for large corporations and how this may be used to increase employment. Bloomberg tacks with a focus on small firms improving sales, but how they are staying lean by using temporary help longer rather than adding full time employees. Without job growth, the US economy slides into perdition in the 2nd half of this year.
2. China eases restrictions for domestic firms holding currencies offshore. In an attempt to ease pressure on the yuan to appreciate, China last week loosened capital controls on exporter’s foreign currency earnings. The goal is to not only slow the repatriation of profits into yuan, but also reduce inflation as well. This is an expansion of an existing program that allows exporters to keep their foreign-currency earnings overseas instead of changing them into yuan. (Sounds like a US tax situation, doesn’t it?) Here’s the question: why would an exporter do it? If the currency is managed and if the currency is set to continue to appreciate, then won’t exporters lose money the longer they keep the money outside of the country?
3. 5 rules of thumb to make President Obama’s job easier. Writing in the New York Times, Harvard Prof. and former adviser to George W. Bush Greg Mankiw provides these top five:
- Focus on the long run;
- Think at the margin;
- Stop trying to spread the wealth;
- Spread opportunity instead;
- Don’t make the opposition the enemy.
Mankiw: “The libertarian philosopher Robert Nozick has suggested revising the old leftist slogan “From each according to his ability, to each according to his needs” to “From each as they choose, to each as they are chosen.”
4. European markets could face third crisis. While this is not exactly new news, the UK’s Telegraph hits the hyperbole button early with a prediction of more problems in 2011 for Europe. “Banks alone must refinance about €400bn (£343bn) of debt in the first half of the year, but add in the more than €500bn European governments must replace over the same period, as well as further hundreds of billions of euros of mortgage-backed debt maturing and there is the potential for chaos in the credit markets.” This article dropped the euro currency in early trading and has reminded the markets of the continued debt problems. I expect this to peak in Q2 and keep a lid on the currency for most of the year.
5. The Obama administration gets ahead of Tea Party. Appearing Sunday on ABC’s News program “This Week”, White House economic adviser Austan Goolsbee commented on the debt ceiling: “This is not a game. You know, the debt ceiling ... is not something to toy with…If we hit the debt ceiling, that's ... essentially defaulting on our obligations, which is totally unprecedented in American history…The impact on the economy would be catastrophic. I mean, that would be a worse financial economic crisis than anything we saw in 2008.” He said that Republicans are “playing chicken” with the nation’s financial credibility. While the vote on the debt ceiling is likely to be 3 to 4 months away, the administration is keen to make Republicans appear to be the “crazies” in the fight and be able to point this out early to voters. The bond market is selling off today and this talk is not going to help investors. Watch Federal Reserve Chairman Ben Bernanke weigh in on this issue on Friday when he testifies on the budget.
Andrew B. BuschDirector, Global Currency and Public Policy Strategist at BMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a frequent CNBC contributor. You can comment on his piece and reach him hereand you can follow him on Twitter at http://twitter.com/abusch.