- JP Morgan trader Bruno Iksil, recently dubbed Voldemort (not by me – but high fives to whoever did), has drawn attention to the little-known area of the bank that invests the bank’s own capital. This comes back to the debate around the Volker Rule (part of the Dodd-Frank Act), which seeks to regulate the risks that banks take with their own money. Why regulate it? Well – the money is subsidized by depositors, and federally insured (if they fail, they get bailed out). Although the debate is a bit irrelevant – the investment division that plays those risks lives in London. The US may try to force external compliance with the Volker Rule, but will they do that at the risk of putting the US banks at a serious competitive disadvantage with the other non-US internationals? Unlikely. JPM waves a wand, “Avada Kedavra”, gets a green light. Like a boss. Link: The JP Morgan Trading Debate.
- Myanmar is asking the US to lift sanctions faster. Admittedly, in some very broken English. “This is the time giving more carrots will help more”. Hilary Clinton announced last week that the US would allow companies to invest in certain sectors, but didn’t give any specifics. The question being asked is whether the sanctions are still required to encourage democracy. After all, President Thein Sein’s party, The Union Solidarity and Development Party, is still granted 25% of the Parliamentary Seats under the current constitution. Either way – if US companies can’t go there, the famed mineral wealth of Burma will be the exclusive treasury chest of China, no doubt. All hail the soon-to-be-bejazzled Chinese overloads. Link: Myanmar wants more carrots.
- Chinese consumer prices rose more than the expected 3.4% in the year ended 31 March. The CPI rose 3.6%, which is still below the government’s benchmark of 4%. Food-related costs, however, rose 7.5%. This data may slow the introduction of new quantitative easing measures by China’s Central Bank. Interestingly, this turns the real savings rate of interest negative again (it was briefly positive in February – the first time in 2 years). Negative real rates of interest occur when inflation is higher than nominal interest (the interest rate offered by the banks). In theory, this means that it costs you to deposit money with a bank – and you should therefore spend your money/invest it, rather than leave it with the bank. However, this is offset by the convenience of having money on hand. The danger comes when interest rates are so deeply negative that it exceeds the benefit of convenience. And more so, when the cost of borrowing becomes so deeply negative that borrowing for non-productive purposes (ie. speculation) becomes incentivised. At that point: hyperinflation risk. But I’ve digressed – that’s unlikely to happen to China. The US, on the other hand… Link: Chinese Consumer Prices rise faster than anticipated.
- And the African Business News in brief. The highlights:
- Malawian Vice-President Joyce Banda has been sworn in as the new President of Malawi after the death of Bingu wa Mutharika. And there is a collective sigh of international relief. Mr Mutharika was going a bit crazy toward the end there – tell foreign investors and the World Bank where to get off, and such. Also, Joyce and Bingu had fallen out. Read how here: Joyce Banda: in her own words.
- Nigeria has launched a new taxation system, to “change the way that Nigerians see tax”. Read more here: Nigeria’s New Tax System.
That’s all for now.
Have a good day.