Is this really 2008 all over again?

GEORGE Soros's record is sufficiently impressive, particularly on macro-economic calls, that it is worth taking notice when he sounds the alarm. His latest suggestion is that the current environment reminds him of 2008, the prelude to one of the worst bear markets in history. The reputation of George Osborne, Britain's finance minister, is nothing like as elevated but he is also set to warn today that the current year may be the toughest for the global economy since the financial crisis. 

Stockmarkets certainly seem to be acting as if Mr Soros might be right. China has suspended its share trading for the second day this week (as our correspondent argues, this looks like a counter-productive tactic). The sell-off has rippled through Asia and Europe, with London's FTSE 100 back below 6000 (it closed the last century at 6930; so much for the argument that stocks...Continue reading

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China crashes its stockmarket with circuit-breakers meant to save it

BIG swings in the Chinese stockmarket are par for the course. But even by its wild standards, the alacrity of its latest crash was stunning. Just 13 minutes into trading on Thursday, the CSI 300 index of blue-chip stocks fell 5%, triggering the first circuit-breaker: a 15-minute pause for traders to supposedly regain their cool. When the action resumed, it lasted all of one minute before the second and final circuit-breaker was hit: the CSI 300 fell 7%, which necessitated a closure of the market for the rest of day. Trading, in other words, lasted all of 14 minutes before being halted.

The obvious conclusion to draw from the market sell-off is that China’s economy is in big trouble. Why else would investors be in such a rush to dump their shares? Growth is certainly slowing, but the problem with this view is that the Chinese stockmarket has only ever had a tenuous relationship with reality. It is often derided as a casino. Wu Jinglian, a veteran economist, has quipped...Continue reading

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China crashes its stockmarket with circuit-breakers meant to save it

BIG swings in the Chinese stockmarket are par for the course. But even by its wild standards, the alacrity of its latest crash was stunning. Just 13 minutes into trading on Thursday, the CSI 300 index of blue-chip stocks fell 5%, triggering the first circuit-breaker: a 15-minute pause for traders to supposedly regain their cool. When the action resumed, it lasted all of one minute before the second and final circuit-breaker was hit: the CSI 300 fell 7%, which necessitated a closure of the market for the rest of day. Trading, in other words, lasted all of 14 minutes before being halted.

The obvious conclusion to draw from the market sell-off is that China’s economy is in big trouble. Why else would investors be in such a rush to dump their shares? Growth is certainly slowing, but the problem with this view is that the Chinese stockmarket has only ever had a tenuous relationship with reality. It is often derided as a casino. Wu Jinglian, a veteran economist, has quipped...Continue reading

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Unhappy New Year for markets

CHINESE worries, geopolitical tensions, falling oil numbers, weak trade figures. 2016 seems to have begun as a continuation of 2015. If the old saying "as January goes, so goes the year" holds true, then investors ought to be worried.

The trading year began with a near-7% fall (and trading suspension) on the Chinese stock market, triggered by some weak economic data and by some investors trying to get out of the market before the expiry of a selling ban (imposed as part of the summer crisis). Then on January 5, the Chinese authorities injected money into the financial system and hinted that the selling ban might be extended. But today attention has shifted to the yuan, which was allowed to weaken; some commentators fear the Chinese might devalue their currency more substantially in response to economic weakness. This would send another deflationary shiver round the globe. (There has been much talk that China's economy is shifting from manufacturing to services but the purchasing managers' index for the services sector dropped to a 17-month low.)

North Korea's claim to have tested a hydrogen bomb may be prompting scepticism...Continue reading

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Unhappy New Year for markets

CHINESE worries, geopolitical tensions, falling oil numbers, weak trade figures. 2016 seems to have begun as a continuation of 2015. If the old saying "as January goes, so goes the year" holds true, then investors ought to be worried.

The trading year began with a near-7% fall (and trading suspension) on the Chinese stock market, triggered by some weak economic data and by some investors trying to get out of the market before the expiry of a selling ban (imposed as part of the summer crisis). Then on January 5, the Chinese authorities injected money into the financial system and hinted that the selling ban might be extended. But today attention has shifted to the yuan, which was allowed to weaken; some commentators fear the Chinese might devalue their currency more substantially in response to economic weakness. This would send another deflationary shiver round the globe. (There has been much talk that China's economy is shifting from manufacturing to services but the purchasing managers' index for the services sector dropped to a 17-month low.)

North Korea's claim to have tested a hydrogen bomb may be prompting scepticism...Continue reading

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The Big Mac Index

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An example of poor economics journalism

OWEN JONES, who mainly works for The Guardian, is an excellent and influential writer, but we feel duty-bound to comment on an article he wrote just before Christmas. Plenty of people are saying at the moment that Britain's household debt is getting out of control. The Bank of England released new figures yesterday, showing that mortgage and credit-card lending is growing rapidly. Mr Jones weighed in to argue that the "latest figures confirm Britain’s supposed economic recovery rests on a personal debt timebomb. When it runs out is unclear, but run out it will." 

It proved to be a popular article, but it's necessary to point out some serious misunderstandings. 

When George Osborne became chancellor, Britons were spending £67bn less than they were earning; according to the Office of Budget Responsibility, they’re now running up a £40bn deficit.

The implication here is that Mr Osborne has caused this reversal; that his poor management of the economy has forced people into debt. However, this kind of reversal is...Continue reading

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