Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.
Yuan Drops as PBOC Cuts Reference Rate by Most Since July 2012 (Fion Li, Bloomberg) If the PBoC (People's Bank of China) is depreciating its currency to try to aid exporters it is moving counter to what is needed for them to rebalance the Chinese economy toward more domestic consumption. The longer China avoids moving in this direction the more difficult the rebalancing becomes. Eventually rebalancing could end up being more like a collapse.
Consumers who thought they were doing the right thing by picking up BPA-free plastics were actually endangering themselves more, and paying a premium for it; as with other "green" products, BPA-free plastics were often more expensive than their conventional counterparts.
Vanguard Looks To Enter Actively Managed ETF Market (Reuters, Financial Advisor) In a March 7 filing with the U.S. Securities and Exchange commission, Vanguard said it was seeking permission to issue active ETFs on existing funds. Vanguard says they have not decided which funds could involved, but these could include its Vanguard Explorer Fund, Vanguard Wellington Fund, bond index and municipal bond funds.
SEC Said To Ask Banks To Explain Exchange-Traded Note Disclosure (Bloomberg, Financial Advisor) ETNs are a type of bank debt traded on exchanges that use derivatives to wager on everything from gold and stocks to volatility indexes. Many investors are not properly informed and think that they are investing in securities tied to a physical asset rather than just a bank debt. The SEC is also concerned that fees and expenses are not clearly disclosed.
The Dual Dragon (Andrew Sheng, Xiao Geng, Project Syndicate) Shadow banking and official banking are operating two different Chinas. The authors worry about a hard landing for their country. Their summary about how to avoid a crash involves getting an integrated banking system with more controlled underwriting and one set of interest rates:
The key to merging interest rates thus lies in reforming the credit-allocation mechanism to provide more capital to well-performing projects and enforce hard budget constraints on poor-performing borrowers. While this will inevitably trigger some defaults and erode the quality of banks' loan portfolios, the end result - a more balanced and healthy economy - will be more than worth it.
Don't bet on dollar weakness (Walter Kurtz, Sober Look) U.S. and global economic trends suggest a stronger dollar is in the offing, according to Kurtz.
Why Are Wages Sticky? (David Glasner, Uneasy Money) Excellent discussion that raises some sticky points about sticky wages.
"When you are the one country that has a vault that is more full than anyone else's, it doesn't make any sense to be attacking all day and never defending your vault. And it makes even less sense when you're setting the standards for vaults worldwide and leaving a huge back door open."
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