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Does a trade war loom? Brazil's finance minister set tongues wagging yesterday when he declared that the world is now in a "currency war" as countries try to gain the advantage in an increasingly uncertain recovery. Guido Mantego vowed that the emerging powerhouse, whose currency has surged 35 per cent against the U.S. dollar since the start of last year, will halt the real's climb.
A weaker currency drives down prices of a country's exports, giving a boost to its economy. China has been under pressure for some time to allow its yuan to appreciate, and Japan recently intervened in markets to halt the rise of the yen.
Capital Economics in London today posed the question: Are we on the cusp of a currency war? Not likely, said senior markets economist John Higgins, though he does fear the rise of global trade sanctions.
"We continue to believe that the risk of global trade sanctions - which effectively amount to the same thing - is building," Mr. Higgins said in a research note. "If domestic demand remains depressed, policy makers will inevitably turn their attention abroad for a solution as they did in the 1930s.
As governments in the major developed economies struggle to rebound from the crisis, with fiscal and conventional monetary support basically over, one option is to weaken a currency, he said. Switzerland did it in 2009, then pulled back, and Japan did it earlier this month.
"Nonetheless, in both cases the objective was to stem excessive currency appreciation, not to engineer depreciation from a broadly 'neutral' level," he said. "We are skeptical that policy makers in other major developed economies are set to follow the lead of Switzerland and Japan any time soon."
The G20 has vowed not to engage in "competitive devaluation" of currencies. Here's the threat though, Mr. Higgins said: "This does not preclude them from taking other action if their economies continue to stagnate and they believe that others - most obviously China - are preventing their own currencies from finding a natural level ... A resulting trade war would be a currency war in all but name, and undoubtedly detrimental to the outlook for global growth."
Marriage declines in U.S. The brutal recession in the United States has thrown millions of people out of their jobs and their homes, and destroyed the incomes of many. Now, new research suggests, it may also be hurting the institution of marriage. According to U.S. Census Bureau numbers released today, just 52 per cent of adults 18 and older say they married in 2009, The Associated Press reports. That's down from 57 per cent at the beginning of the decade and the lowest in more than a century, the news agency reported.
The Wall Street Journal looked at it another way: The proportion of adults aged 25 to 34, who have never been married, for the first topped those who are married for the first time in at least 100 years. Those never married accounted for 46.3 per cent, compared to 44.9 per cent.
That fits with a separate Census Bureau study last week that found an "unusually high increase" in unmarried couples living together, probably because of economic reasons such as unemployment.
In a working paper that looked at 2010 data, the Census Bureau's Rose Kreider noted a 13-per-cent increase between 2009 and this year in the number of opposite-sex couples living together, up to 7.5 million from 6.7 million. For same-sex couples, the numbers do not differ statistically.
"Taken together, the ways in which newly formed couples in 2010 differed from existing couples suggest that economic situations such as longer-term unemployment may have contributed to the increase in opposite-sex cohabiting couples between 2009 and 2010," Ms. Kreider says in the paper. "The recession began at the end of 2007, so why wouldn't such an increase happen earlier? Perhaps the length of unemployment resulted in people exhausting other methods of coping - unemployment benefits, savings accounts, available credit, or assistance from friends and family."
Consumer confidence sinks in U.S. Americans are losing faith in their economy. The U.S. Conference Board said today its consumer confidence index dipped in September to its lowest level since February, falling to 48.5 from 53.2 a month earlier. That's far, far below the measure of 90 that suggests a strong economy, a reading unseen since before the recession.
"September's pullback in confidence was due to less favourable business and labour market conditions, coupled with a more pessimistic short-term outlook," Lynn Franco, director of the Conference Board Consumer Research Center, said in a statement. "Overall, consumers' confidence in the state of the economy remains quite grim. And, with so few expecting conditions to improve in the near term, the pace of economic growth is not likely to pick up in the coming months."
Added Paul Dales, U.S. economist at Capital Economics in Toronto: "U.S. consumer confidence is being sapped by high unemployment, rising gasoline prices, low equity prices and now a renewed decline in house prices. The outlook for consumption remains ominous."
Is Fed planning baby steps? Playing into the markets today are reports that the Federal Reserve plans a baby-step approach to new measures. Investors had been concerned that the U.S. central bank would embard on a path of hefty purchases of U.S. Treasuries to help juice the sputtering recovery. But The Wall Street Journal reported late yesterday that the Fed is now looking at a smaller scale, open-ended scheme that could be adjusted as the rebound plays out.
"A go-slow approach to adding stimulus would give the Fed flexibility amid an uncertain recovery, and would represent a compromise between those policymakers who want to move aggressively and those who do not see the need for additional stimulus," said BMO Nesbitt Burns economist Sal Guatieri.
Ireland faces more debt woes Ireland faces increasing risks of a further debt downgrade, which is driving up its borrowing costs at a time it can ill afford them. The country, once known as the Celtic Tiger and now one of the countries at the centre of Europe's debt troubles, is struggling not only with its debt and an ongoing recession, but also troubles in its banking sector, particularly related to Anglo Irish Bank.
Cameron visits oil sands James Cameron, the famed director of Titanic and Avatar, among other movies, is expected today to meet executives from the oil patch as he tours the region. Mr. Cameron, who has labelled the oil sands a "black eye," was in Fort McMurray yesterday, and today also heads to Fort Chipewyan, where he'll meet with residents who live downstream from the oil sands. Tomorrow, he meets with Alberta's Premier Ed Stelmach.
Yesterday, according to The Canadian Press, he told reporters he believes regions such as the oil sands are like the planet Pandora from Avatar, where the population is threatened by environmental troubles.
"People are saying, 'that fantasy that you put up on the screen in `Avatar?' That's my life. That's happening to me right now,' " said Cameron.
From today's Report on Business
- BHP's cool point man
- Crackdown on pomegranate claims
- Drillers to face tougher obstacles
- Wal-Mart takes a chance on Africa
And, read our Streetwise blog and Your Business section