Good morning

The headlines:
  1. A US Government report has shown a 1.1% increase in retail sales for February (equivalent to around 13% per annum). Despite this improvement in retail sales, and the recent improvement in employment figures, the Fed announced that it will not be tightening monetary policy at this time. The question really is: how sustainable are these increases in retail spending? It forms part of that economic myth of everyone wanting higher sales, higher employment, lower inflation, etc. But in the end – it has to stop somewhere. Basic rule number 1: limited resources. There is a limit. An equation. A balance. You can’t have it all because that’s just life. Link: Fed’s policy unchanged despite improvements in economic outlook.
  2. Despite political pressure to continue purchasing government debt issues, the Bank of Japan announced yesterday that it will be expanding its low-cost loan facilities to Japanese industry instead. This is the choice between short-term policy (adding liquidity to the market immediately) and long-term policy (low-cost loans improving capital infrastructure and leading to long-term growth). The move is seen as the Bank of Japan’s attempt to distance itself from political pressure, following their purchase of US $121 billion worth of government bonds on February 14. Further bond purchases are not off the table, however, according to Governer Masaaki Shirakawa. Link: BOJ resistance to political pressure.
  3. This article by Carmen M. Reinhart is worth a read: Financial Repression is here to stay. It gives a great historical perspective to dealing with overburdened government debt. 
  4. There is an editorial about the avoidance of the Credit-Default Swap Time Bomb. Following on from my blog post yesterday, I continue to be amazed by the play on numbers. The article talks about the $32 trillion CDS market (a figure straight off the website of the Bank of International Settlements – and it’s a net figure), and follows it with the $3.2 billion Greek CDS exposure (a net exposure figure straight off the website of the Depository Trust and Clearing Commission’s website). If we’re to accept their point, it would be saying that Greek CDS instruments comprise 0.0001% of the CDS market. What – has everyone just been blind? Or maybe it’s too late to buy insurance when the house is on fire… Link: CDS Time Bomb.
  5. And the Africa Business News in brief. Link: ABN Briefs. The highlights:
    • Mozambique’s Central Bank has cut rates by 125 basis points to increase private sector lending.
    • Nigeria’s fuel regulator has issued fuel import contracts for the second quarter for 4.8 billion litres of gasoline. These contracts have been allocated to 42 marketers.
That’s all for now.
Have a great Wednesday.