Nigeria's war on corruption; We wish them the best of luck.

At the World Economic Forum in Abuja President Goodluck Jonathan announced the “Clean Business Practice Initiative.”  The goal is for corporations in Nigeria to become less corrupt.  Of course, the only way for corporations to be corrupt is to bribe government officials; they certainly don’t bribe each other.  Putting that aside, President Jonathan is to be commended on his fine sense of irony in light of the $20 billion that recently disappeared from the state oil company and his efforts to suppress any inquiry. 

As for reducing corruption I can only say, "Good luck."

For central banks, there are no red lines. Monetary tightening may have become impossible.

Think back: In January 2013 the Fed announced that it would raise its bond buying from $40 billion to $85 and would keep buying bonds and maintaining zero rates until unemployment dropped to 6.5%. Unemployment then was 7.7%.   Today unemployment is 6.3%, but bond buying continues, albeit at a reduced rate, and zero rates persist.  Yesterday Yellen said these policies would continue and bond buying might increase again if housing weakness and unsatisfactory conditions in the labor markets persisted.

 

Meanwhile in the UK Bank of England Governor Carney, who had previously said he would tighten policy when growth reached "escape velocity," which, at more than 3% (.8% q/q, 3.2% y/y in Q1) , it has, now says he's waiting for "sustained momentum".  Chris Giles in FT notes that he does this while at the same time denying he has changed policy.

Maybe it is impossible for any single central bank to tighten policy without dire consequences on the trade and capital flow fronts?  New Zealand, for example, wants to raise rates to curb speculation but cannot do so because its currency is too strong.  It’s a sort of prisoner’s dilemma:  Once a critical mass of countries have bad policies, it is in the interest of each to be the last to implement good policies. The result is paralysis, and perhaps danger.

Blame it on the Bossa Nova: Brazil dances to inefficiency.

A recent study by the Boston Consulting Group rated Brazil as a more expensive manufacturing venue than Europe due to low productivity.  A report in the FT today, however, indicates that what Brazil lacks in efficiency it may be making up in volume.  Government revenues have risen from 33% of GDP in 1999 to 39% today, compared with an OECD average of 36%, while the country ranks 124 out of 148 in government efficiency, according to the World Economic Forum.  Under Lula and Rousseff, the number of ministers has about doubled to 39 and there are other cabinet-level officials, each with his retinue of advisors, consultants, minions, sycophants and hangers-on.  The FT relates the story of the rookie bureaucrat in Brasilia who was warned by her supervisor that she should stop spending eight hours a day at the office and put in four like everybody else. (FT, p2)

Sweden massages its data and is shocked by high household debt

Oops!   Sweden's central bank has adjusted its figures.   They had been concerned that the ratio of household debt to disposable income was 174%, one of the highest levels in Europe.  (In the US it’s more like 120%.)  Delving deeper, they noticed that when one excludes the households with no debt at all, the ratio is 313% of disposable income.  They are shocked.  (Reuters 5/7) 

It seems that the countries that avoided the financial crisis are destined to have one.  Debt and housing prices are soaring in Australia, Canada, Sweden, Holland, and other countries.  Global easy money is undermining the heretofore healthy economies.

Below-average central bankers: The Yellen Years

Janet Yellen testified today before the Joint Economic Committee of Congress.  Sen. Bernie Sanders of the Vermont Progressive Party asked her if the US were an “oligarchy or a capitalist democracy.” Yellen said she doesn't know how to describe our system but she, like Bernie, is troubled by the fact that everybody doesn't have the same amount of money.  (CNBC)

If she doesn't know what our economic system is, wouldn’t she find it difficult to lead monetary policy?

Keep and eye on Tony Blair: His kind are money launderers, say the Feds

JP Morgan is closing the accounts of 3,500 "politically-exposed persons" because new US regulations aimed at squelching money laundering are imposing too many costs and liabilities.  Included among those whose accounts are being terminated are Jose Antonio Campos, former Colombian finance minister and candidate for president of the World Bank, and Tony Blair, a British politico on JP Morgan’s payroll.  (FT, p13)

It appears that the federal bureaucracy thinks all foreigners are bad.

The Zen of the Oligarch: think money

The new Ukrainian governor of Odessa, an oligarch, has adopted a creative way to stifle dissent.  He is planning to offer bounties of $1,000 to $100,000 for the capture of political protesters, following the example of a fellow oligarch governor further east. Oligarchs are limited in their communications ability: they can only speak the language of money. The local police, too, apparently. (FT, p2)