“Monetary metaphysics: China”
If interest rates rise in an economic forest and no one hears a central-bank statement, do they still make a tightening sound? This is the metaphysical question of Chinese monetary policy these days. Last week the People’s Bank of China nudged up rates on a series of short-term liquidity tools that lenders can tap if short on cash. But it left benchmark rates untouched and also offered no explanation for its moves. Still, its intentions seem plain enough: worried about a property bubble and excessive credit growth, the central bank wants to tighten monetary conditions. At the same time, it hopes to avoid panicking financial markets or weighing too heavily on growth. So far, investors remain content, pricing in mild downward pressure on stocks and bonds, and not overreacting. But the Chinese central bank is walking a tightrope. It has only taken the first step; keeping balance will get harder.
“Yen Signals More Pain for Dollar Bulls as Trump Trade Unravels”
The Japanese yen is becoming more and more of a proxy for the Trump trade. If that’s true, dollar bulls better keep bailing. Since the beginning of the year, the yen has nearly halved its post-election losses and has broken several major resistance levels. This is a signal the currency has momentum. If the dollar drops another leg — a trading term for a short-term trend – it could be a sign that the Trump-inspired rally is over. The sale of foreign bonds and the repatriation of funds to Japan has helped drive the almost 7 percent slide in the dollar against the yen since the November election.
Demand for yen has been driven by weekly foreign bond sales and dollar sellers have capped every major rally, according to traders in Asia. That has pushed dollar-yen through its 50-day moving average, the top of the Ichimoku cloud and key support around 112 yen. Several technical indicators show the next support at 110 yen may break.
The meeting between Japan’s Prime Minister Shinzo Abe and President Donald Trump on Thursday may also fuel more dollar weakness. Japan has one of the largest trade gaps with the U.S. that widened to almost $69 billion in December. Last week, the president singled out China, Japan and Germany for devaluing their currencies to gain a trading advantage.
New York Times
“A Conservative Case for Climate Action”
During his eight years in office, President Obama regularly warned of the very real dangers of global warming, but he did not sign any meaningful domestic legislation to address the problem, largely because he and Congress did not see eye to eye. Instead, Mr. Obama left us with a grab bag of regulations aimed at reducing carbon emissions, often established by executive order. In comes President Trump, who seems much less concerned about the risks of climate change, and more worried about how excessive regulation impedes economic growth and depresses living standards. As Democrats are learning the hard way, it is all too easy for a new administration to reverse the executive orders of its predecessors.
On-again-off-again regulation is a poor way to protect the environment. And by creating needless uncertainty for businesses that are planning long-term capital investments, it is also a poor way to promote robust economic growth. The idea of using taxes to correct a problem like pollution is an old one with wide support among economists. But it is our unique political moment, combined with the populist appeal of dividends, that may turn the concept into reality.
“Alexei Navalny: Russian opposition leader found guilty”
Russia’s main opposition leader, Alexei Navalny, has been found guilty of embezzlement and handed a five-year suspended sentence. He had recently stepped up his political activity after announcing plans last year to run for the presidency in 2018. Mr. Putin is allowed by the constitution to run for a second consecutive six-year term, but he has not said yet if he plans to do so. But Mr. Navalny, who denies the charges, has vowed to take part in the race regardless. It was not immediately clear if this was legally possible. His conviction came in a retrial after the European Court of Human Rights ruled the first trial to be unfair. The court in the provincial city of Kirov found Mr. Navalny guilty of embezzlement in relation to a timber company called Kirovles, for which he was also handed a 500,000-rouble ($8,500; £6,700) fine.