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Inflation and the Labor Market
BRAZIL ECONOMICS · Report · 13 Jul 2015

With the current real interest rate, inflation will decline significantly in 2016. But for the time being, the trend is still upward: in the 12 months through June it stands at 8.89% and the consensus projections for 2105 are a bit higher than 9%. That growth is only partly due to adjustment of a...

Week of July 13
BRAZIL POLITICS · Report · 13 Jul 2015

The final week of legislative activity before the congressional recess: In the House, the focus is on political reform. The Senate debates the repatriation of resources from overseas to allow for ICMS reform. The government may emit a provisional measure (MP) for companies to pay debts to the fed...

End of Monetary Loosening?
HUNGARY · Forecast · 13 Jul 2015

Executive Summary In H2 2015, Hungarian policy-makers will have to reckon with negative global capital market conditions. Stock markets have reached a mature phase of their bull cycle, characterized by frequent and sizeable corrections, and bond markets have passed their cyclical peak. This envir...

Moments of Definition
BRAZIL ECONOMICS · Report · 13 Jul 2015

Executive Summary The fiscal adjustment has reached a critical moment. To reduce the debt/GDP ratio, Brazil needs higher primary surpluses than promised by the government. Without political support for greater spending cuts, which cannot be restricted only to discretionary spending, the govern...

Cigarettes’ smuggling shooting with political taste
UKRAINE · In Brief · 13 Jul 2015

3 people shot dead and 13 injured in shooting between police and representatives of ultra-right political move “Right Sector” on July 11, in Mukachevo, small town at the Western Ukraine, near 40 km from Hungarian border. This event effectively blew up media and, as a consequence, political life o...

Weekly Tracker: July 12-18
TURKEY · Report · 12 Jul 2015

Executive Summary Long-delayed coalition talks will take start on Monday with a historical meeting between Davutoglu and Kilicdaroglu. The talks are expected to last through July, with final decisions to be made in August. With MHP largely out of the equation, personal trust between AKP and CHP l...

July 10 – The Shanghai Composite and the Keynesian beauty contest
CHINA FINANCIAL · In Brief · 10 Jul 2015 · 3 responses

For months I have been arguing that the most worrying source of volatility in the Chinese stock market was not its speculative nature nor even the unprecedented use of margin. It was the large share of Chinese investors whose strategy was to ride what they believed to be a bubble. This to me is w...

July 10 – A collective decision to rally
CHINA FINANCIAL · In Brief · 10 Jul 2015

With the market up 5.2% by 1 pm, I think the “correction” is over. Analysts have pointed out the many reasons for skepticism, most importantly, I think, that over half of the listed companies have suspended trading in their shares. The full buying power that Beijing can command, plus the return o...

Elections for the President of the Legislative Assembly Unsettles Political Balance
PANAMA · Report · 09 Jul 2015

On July 1, the first-year anniversary of the Varela administration, elections for the new president of the National Assembly (Panama’s legislative branch) took place. The importance of the National Assembly’s Presidency resides in the fact that it sets the legislative agenda, budgets and commitme...

Does size matter?
CHINA FINANCIAL · In Brief · 09 Jul 2015

The Chinese stock market panic is unlikely to trigger a financial crisis in China, but not, as many argue, because of its relatively small size and narrowly dispersed ownership. What matters is that although nationally there are significant mismatches between assets and liabilities among individu...

Why do financial crises happen?
CHINA FINANCIAL · In Brief · 09 Jul 2015

Financial crises are analogous to bank runs. They occur when the liquidity needed to bridge the gaps created by mismatches between assets and liabilities suddenly becomes unavailable. Insolvency by itself is not a sufficient condition, and only leads to a financial crisis when it causes creditors...

Should the government have intervened?
CHINA FINANCIAL · In Brief · 09 Jul 2015

After a terrifying beginning with Shanghai down 3.2%, markets turned around dramatically and Shanghai closed up 5.8% on the day. But 194 more companies suspended trading today. Over half of all companies now don’t trade. As I suggested yesterday, it wasn’t the subtle measures that proved most eff...

Default talks bring volatility at the FX market
UKRAINE · In Brief · 09 Jul 2015

In early July serenity at the FX market was finally broken. The first disturbing signal came from black market few days ago when foreign currency operations’ spread started widening. Finally yesterday official market also reflected the tendency: on July 8th sell bids on cash operations moved to n...

Does the Chinese stock market crash matter?
CHINA FINANCIAL · In Brief · 08 Jul 2015

· It is hard to argue that the stock rally had any significant positive economic impact, so some analysts argue that it collapse will not impact the economy either. · This may be true in a direct sense. But there are three important ways the stock market decline might matter. The first is direct....

What can the government do to move markets move in China?
CHINA FINANCIAL · In Brief · 08 Jul 2015

· Because China’s market is highly speculative, policies that are directed at improving the fundamental value of stocks will have almost no impact on market prices. · Uncertainty is currently so high that it will have sharply undermined the ability of speculators to agree collectively on how to i...

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