The announcement this week that Japanese and Chinese steel companies were moving to three month contracts with suppliers of iron ore, abandoning the previous annual price negotiations, is significant in a number of ways. All of them however add up to higher global inflation and lower overall economic welfare.

Japan announced this week that it was partially withdrawing its planned Post bank privatization, so that the government would retain a third of the bank’s shares. Meanwhile the latest Japanese budget shows a deficit of 10% of GDP, at a time when Japanese public debt exceeds 200% of GDP. Through two decades of economic malaise, […]

The news that four banks are being charged with fraud for their sales of derivatives to the City of Milan was no doubt met with derision in trading rooms across the globe. Yet the prosecutors have a point, as does a similar prosecution relating to Jefferson County, Alabama, or potentially one in relation to the […]

Over the past 50 years, the United States and most other wealthy economies have moved to a system of managerial capitalism, in which resources are controlled, not by the owners of those resources but by a cadre of professional management, that leeches more and more returns out of the system. No viable economic theory suggests […]

With the retirement of Fed Vice-Chairman Donald Kohn, President Obama now has the right to appoint three Fed governors. Together with the reappointed Bernanke and Daniel Tarullo, whom he appointed last year, that will create a Fed Board of Governors on which five of the seven members are extreme soft-money advocates, and make it almost […]

Ben Bernanke reaffirmed this week that short-term interest rates would be kept at their current ridiculously low rates for “an extended period.” Apart from the danger of inflation this produces there is another problem: Fed monetary policies in the last decade have done great and possibly permanent damage to the US propensity to save. The […]

While I agree with the former British Tory Cabinet minister Lord Tebbitt on nearly everything, his suggestion in the wake of the Greek crisis that the Eurozone needs a centralized finance minister, withdrawing all financial autonomy from its members appears misguided. Tebbitt is correct in that many of the more dirigiste Euro-bureaucrats would like such […]

Greece’s near default and rescue by the European Union has brought one reality starkly into relief: in an age of fiscal and monetary stimulus, it isn’t only banks that can give debt investors sleepless nights. Greece is no more “risk-free” than was Lehman Brothers, and indeed Britain is no more “risk free” than Merrill Lynch. […]

When the banking system imploded in September 2008, commentators immediately feared that the result would be a credit crunch, leading to a major downturn in GDP and rise in unemployment. The US government however deployed all its resources to ensure that housing did not suffer the credit crunch it deserved, while taking its own borrowing […]

Paul Volcker’s proposal that proprietary trading should be spun off from deposit taking banks is a worthwhile step in the direction of stabilizing the financial services business. However when you consider that business in detail, it becomes clear that further breakups are necessary in order to remove the excessive risks from the US economic system.