Below please find a link to our monthly market perspective piece for December. This month we examine the impacts of the rapidly changing low interest rate environment.
Monthly Market Perspective - June 2016David Berger
The drivers of short-term market moves can be vastly different from those which underpin the cycles of longer-term market direction. This month we examine a variety of these factors.
07 August 2013--Understanding the Fed's Latest MovesEconReport
The Federal Reserve Chairman, Ben Bernanke, made some statements on 19 June 2013 that sent shockwaves
throughout the financial markets in the United States and Asia. There is no change in policy. This, Chairman Bernanke,
emphatically stated several times at the 19 June 2013 press conference. So why did the markets react the way they did?
This analysis will assist in understanding why the markets responded in the manner that they did to Chairman Bernanke's
suggestion that the asset-purchasing program will “taper off” in late 2013 or in mid- to late-2014 although this possibility
is clearly stated in the Federal Reserve's Open Market Committee's (FOMC's) 22 May 2013 statement.
Below please find a link to our monthly market perspective piece for December. This month we examine the impacts of the rapidly changing low interest rate environment.
Monthly Market Perspective - June 2016David Berger
The drivers of short-term market moves can be vastly different from those which underpin the cycles of longer-term market direction. This month we examine a variety of these factors.
07 August 2013--Understanding the Fed's Latest MovesEconReport
The Federal Reserve Chairman, Ben Bernanke, made some statements on 19 June 2013 that sent shockwaves
throughout the financial markets in the United States and Asia. There is no change in policy. This, Chairman Bernanke,
emphatically stated several times at the 19 June 2013 press conference. So why did the markets react the way they did?
This analysis will assist in understanding why the markets responded in the manner that they did to Chairman Bernanke's
suggestion that the asset-purchasing program will “taper off” in late 2013 or in mid- to late-2014 although this possibility
is clearly stated in the Federal Reserve's Open Market Committee's (FOMC's) 22 May 2013 statement.
At an event at its central London Headquarters, chaired by The Times’ Economics Editor Philip Aldrick, Resolution Foundation Chief Economist Matthew Whittaker presented new analysis on the impact of monetary policy during the downturn. Former MPC member Kate Barker and Chief Economics Commentator at the Financial Times Martin Wolf then debated the future role of monetary policy, before taking part in a wider Q&A.
Global bond markets fell in May and June, as investors contemplated the end of massive liquidity from the U.S. Federal Reserve’s bond-buying program. The fund’s overweight exposure to the strengthening U.S. dollar aided performance during the quarter, as did our holdings of commercial mortgage-backed securities. Our mortgage credit holdings and our allocation to high-yield bonds generated positive returns early in the period before investors began to shed risk in May, but the positions remained positive overall for the quarter. We have a generally positive outlook for global economic growth and are seeking to capitalize on opportunities in spread sectors exhibiting improved relative value.
US Fed rate hike in September 2015: Who will be the top 4 winners and losers?Aranca
The much hyped US Fed rate hike likely to be in September 2015 will mark the end of an era of free money. While it brings the good news that the most powerful economy of the world is back on track and can sustain a rate hike, there may be certain repercussions for the global markets. Here’s our take on who may win, and who may lose.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
As expected, the Federal Open Market Committee has embarked on another round of planned asset purchases. In its November 3 policy statement, the FOMC wrote that it expects to buy another $600 billion in long-term Treasuries by the end of 2Q11 ($75 billion per month), in addition to the $35 billion per month in reinvested principal payments from its portfolio of mortgage-backed securities. There has been much criticism of the move in the financial press. Certainly, there are risks in the Fed’s strategy. However, it’s hardly reckless or ill-advised.
Despite hopes that the anti-QE rhetoric would die down, the noise continued last week, and unfortunately, become more political. One of the key aspects of the Fed is its independence. The Fed is answerable to Congress, and ultimately, to the American people. However, it is not controlled by Congress – nor would we want it to be controlled by Congress. Attacks on the Fed and its latest round of asset purchases aren’t helping.
Курсы повышения квалификации – это кратко-, средне- и долгосрочные программы от 2 недель до 6 месяцев, ориентированные на людей, заинтересованных в комплексном углублении знаний в рамках профессии или направления профессиональной деятельности. Мы можем предложить курсы для любого специалиста: курсы для бухгалтеров, курсы для кадровиков, курсы для юристов и др.
At an event at its central London Headquarters, chaired by The Times’ Economics Editor Philip Aldrick, Resolution Foundation Chief Economist Matthew Whittaker presented new analysis on the impact of monetary policy during the downturn. Former MPC member Kate Barker and Chief Economics Commentator at the Financial Times Martin Wolf then debated the future role of monetary policy, before taking part in a wider Q&A.
Global bond markets fell in May and June, as investors contemplated the end of massive liquidity from the U.S. Federal Reserve’s bond-buying program. The fund’s overweight exposure to the strengthening U.S. dollar aided performance during the quarter, as did our holdings of commercial mortgage-backed securities. Our mortgage credit holdings and our allocation to high-yield bonds generated positive returns early in the period before investors began to shed risk in May, but the positions remained positive overall for the quarter. We have a generally positive outlook for global economic growth and are seeking to capitalize on opportunities in spread sectors exhibiting improved relative value.
US Fed rate hike in September 2015: Who will be the top 4 winners and losers?Aranca
The much hyped US Fed rate hike likely to be in September 2015 will mark the end of an era of free money. While it brings the good news that the most powerful economy of the world is back on track and can sustain a rate hike, there may be certain repercussions for the global markets. Here’s our take on who may win, and who may lose.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
As expected, the Federal Open Market Committee has embarked on another round of planned asset purchases. In its November 3 policy statement, the FOMC wrote that it expects to buy another $600 billion in long-term Treasuries by the end of 2Q11 ($75 billion per month), in addition to the $35 billion per month in reinvested principal payments from its portfolio of mortgage-backed securities. There has been much criticism of the move in the financial press. Certainly, there are risks in the Fed’s strategy. However, it’s hardly reckless or ill-advised.
Despite hopes that the anti-QE rhetoric would die down, the noise continued last week, and unfortunately, become more political. One of the key aspects of the Fed is its independence. The Fed is answerable to Congress, and ultimately, to the American people. However, it is not controlled by Congress – nor would we want it to be controlled by Congress. Attacks on the Fed and its latest round of asset purchases aren’t helping.
Курсы повышения квалификации – это кратко-, средне- и долгосрочные программы от 2 недель до 6 месяцев, ориентированные на людей, заинтересованных в комплексном углублении знаний в рамках профессии или направления профессиональной деятельности. Мы можем предложить курсы для любого специалиста: курсы для бухгалтеров, курсы для кадровиков, курсы для юристов и др.
Determining Bias to Search Engines from Robots.txtnitchmarketing
Search engines largely rely on robots (i.e., crawlers or spiders) to collect information from the Web. Such crawling activities can be regulated from the server side by deploying the Robots Exclusion Protocol in a file called robots.txt. Ethical robots will follow the rules specified in robots.txt.
Websites can explicitly specify an access preference for each robot by name. Such biases may lead to a “rich get richer” situation, in which a few popular search engines ultimately dominate the Web because they have preferred access to resources that are inaccessible to others. This issue is seldom addressed, although the robots.txt convention has become a de facto standard for robot regulation and search engines have become an indispensable tool for information access.
We propose a metric to evaluate the degree of bias to which specific robots are subjected.
We have investigated 7,593 websites covering education, government, news, and business domains, and collected 2,925 distinct robots.txt files. Results of content and statistical analysis of the data confirm that the robots of popular search engines and information portals, such as Google, Yahoo, and MSN, are generally favored by most of the websites we have sampled. The results also show a strong correlation between the search engine market share and the bias toward particular search engine robots.
For more information, visit http://nitch.marketing
The Hitchhiker's Guide to Yellen's Speech
We spent all week waiting anxiously to see what Our Glorious Leader would say only to get a confused mash-up of central bank water-cooler conversation.
If you want to know what she really said - and, more importantly, didn't say - you might like to read this translation.
What recent and past actions have Canada and the US taken to counter.pdfmeejuhaszjasmynspe52
What recent and past actions have Canada and the US taken to counteract their exchange rates
with the economy in such distress over the past 10 years?
Solution
Since 2007, the world has experienced a period of severe financial stress, not seen since the time
of the Great Depression. This crisis started with the collapse of the subprime residential
mortgage market in the United States and spread to the rest of the world through exposure to
U.S. real estate assets, often in the form of complex financial derivatives, and a collapse in global
trade. Many countries were significantly affected by these adverse shocks, causing systemic
banking crises in a number of countries, despite extraordinary policy interventions. Systemic
banking crises are disruptive events not only to financial systems but to the economy as a whole.
Such crises are not specific to the recent past or specific countries – almost no country has
avoided the experience and some have had multiple banking crises. While the banking crises of
the past have differed in terms of underlying causes, triggers, and economic impact, they share
many commonalities. Banking crises are often preceded by prolonged periods of high credit
growth and are often associated with large imbalances in the balance sheets of the private sector,
such as maturity mismatches or exchange rate risk, that ultimately translate into credit risk for
the banking sector.
Crisis management starts with the containment of liquidity pressures through liquidity support,
guarantees on bank liabilities, deposit freezes, or bank holidays. This containment phase is
followed by a resolution phase during which typically a broad range of measures (such as capital
injections, asset purchases, and guarantees) are taken to restructure banks and reignite economic
growth. It is intrinsically difficult to compare the success of crisis resolution policies given
differences across countries and time in the size of the initial shock to the financial system, the
size of the financial system, the quality of institutions, and the intensity and scope of policy
interventions. With this caveat we now compare policy responses during the recent crisis episode
with those of the past. The policy responses during the 2007-2009 crises episodes were broadly
similar to those used in the past. First, liquidity pressures were contained through liquidity
support and guarantees on bank liabilities. Like the crises of the past, during which bank
holidays and deposit freezes have rarely been used as containment policies, we have no records
of the use of bank holidays during the recent wave of crises, while a deposit freeze was used only
in the case of Latvia for deposits in Parex Bank. On the resolution side, a wide array of
instruments was used this time, including asset purchases, asset guarantees, and equity injections.
All these measures have been used in the past, but this time around they seem to have been put in
place quicker (for detailed informatio.
Base on the article answer 2 According to Austrian schoo.pdfadvanibagco
Base on the article, answer:
2. According to Austrian school, what should be our guiding policy for economic crisis mentioned
in the article?
3. What kind of economic policy is our government pursuing to deal with this crisis? What would
the author of this article recommend?
PLEASE WRITE A MINIMUM OF SIX LINES FOR EACH ANSWER.
The article:
In March 2007 then-Treasury secretary Henry Paulson told Americans that the global economy
was as strong as Ive seen it in my business career. Our financial institutions are strong, he added
in March 2008. Our investment banks are strong. Our banks are strong. Theyre going to be strong
for many, many years. Federal Reserve chairman Ben Bernanke said in May 2007, We do not
expect significant spillovers from the subprime market to the rest of the economy or to the financial
system. In August 2008, Paulson and Bernanke assured the country that other than perhaps $25
billion in bailout money for Fannie and Freddie, the fundamentals of the economy were sound.
Then, all of a sudden, things were so bad that without a $700 billion congressional appropriation,
the whole thing would collapse. In the wake of this change of heart on the part of our leaders,
Americans found themselves bombarded with a predictable and relentless refrain: the free market
economy has failed. The alleged remedies were equally predictable: more regulation, more
government intervention, more spending, more money creation, and more debt. To add insult to
injury, the very people who had been responsible for the policies that created the mess were
posing as the wise public servants who would show us the way out. And following a now-familiar
pattern, government failure would not only be blamed on anyone and everyone but the
government itself, but it would also be used to justify additional grants of government power. The
truth of the matter is that intervention in the market, rather than the market economy itself, was the
driving factor behind the bust. F.A. Hayek won the Nobel Prize for his work showing how the
central banks intervention into the economy gives rise to the boom-bust cycle, making us feel
prosperous until we suffer the inevitable crash. Most Americans know nothing about Hayeks
theory (known as the Austrian theory of the business cycle), and are therefore easy prey for the
quacks who blame the market for problems caused by the manipulation of money and credit. The
artificial booms the Fed provokes, wrote economist Henry Hazlitt decades ago, must end in a
crisis and a slump, andworse than the slump itself may be the public delusion that the slump has
been caused, not by the previous inflation, but by the inherent defects of capitalism. Although my
recently released book, Meltdown explains the process in more detail, an abbreviated version of
Austrian business cycle theory might run as follows: Government-established central banks can
artificially lower interest rates by increasing the supply of money (and thus the funds banks have
a.
1. GLOBAL IMBALANCES1.1 Cheap But Flighty How Global Imbalanc.docxSONU61709
1. GLOBAL IMBALANCES
1.1 Cheap But Flighty: How Global Imbalances Create Financial Fragility
by Toni Ahnert and Enrico Perotti
Bank of Canada Working Paper 2015-33
https://www.bankofcanada.ca/wp-content/uploads/2015/08/wp2015-33.pdf
August 2015
How a wealth shift to emerging countries may lead to instability in developed countries. Investors exposed to expropriation risk are willing to pay a safety premium to invest in countries with good property rights. Domestic intermediaries compete for such cheap funding by carving out safe claims, which requires demandable debt. While foreign inflows allow countries to expand their domestic credit, risk-intolerant foreign investors withdraw even under minimal uncertainty. We show that more foreign funding causes larger and more frequent runs. Beyond some scale, even risk-tolerant domestic investors are induced to withdraw to avoid dilution. As excess liquidation causes social losses, a domestic planner may seek prudential measures on the scale of foreign inflows.
Topics to study:
· Investment / risk - relationship
· Global Imbalances
· Factors to attract foreign investment
· Safety-seeking foreign funding
1. An increasing scale of foreign funding may induce runs even by risk-tolerant investors since they seek to avoid dilution.
2. Result supports a mandate for introducing a macroprudential regulator to oversee the nature of foreign inflows because the socially preferred funding structure would involve less credit volume and more stability than the private choice.
3. Global imbalances shaped the credit boom and, ultimately, the financial crisis
4. The accumulation of wealth in countries with a weak protection of property rights creates a demand for absolute safety provided by intermediaries in developed countries.
5. The safety-seeking nature of foreign flows creates risk.
1.2 Global Imbalances and the Financial Crisis: Products of Common Causes
Maurice Obstfeld and Kenneth Rogoff
University of California, Berkeley, and Harvard University.
Federal Reserve Bank of San Francisco
https://scholar.harvard.edu/files/rogoff/files/global_imbalances_and_financial_crisis_0.pdf
November 2009
This paper makes a case that the global imbalances of the 2000s and the recent global financial crisis are intimately connected. Both have their origins in economic policies followed in a number of countries in the 2000s and in distortions that influenced the transmission of these policies through U.S. and ultimately through global financial markets. In the U.S., the interaction among the Fed’s monetary stance, global real interest rates, credit market distortions, and financial innovation created the toxic mix of conditions making the U.S. the epicenter of the global financial crisis. Outside the U.S., exchange rate and other economic policies followed by emerging markets such as China contributed to the United States’ ability to borrow cheaply abroad and thereby finance its unsustainable housing bubble.
Topics to st ...
Base on the article answer 1 Explain F A Hayeks theory of.pdfadvanibagco
Base on the article answer:
1. Explain F A Hayek's theory of the "Business Cycle".
PLEASE WRITE A MINIMUM OF SIX LINES FOR EACH ANSWER.
The article:
In March 2007 then-Treasury secretary Henry Paulson told Americans that the global economy
was as strong as Ive seen it in my business career. Our financial institutions are strong, he added
in March 2008. Our investment banks are strong. Our banks are strong. Theyre going to be strong
for many, many years. Federal Reserve chairman Ben Bernanke said in May 2007, We do not
expect significant spillovers from the subprime market to the rest of the economy or to the financial
system. In August 2008, Paulson and Bernanke assured the country that other than perhaps $25
billion in bailout money for Fannie and Freddie, the fundamentals of the economy were sound.
Then, all of a sudden, things were so bad that without a $700 billion congressional appropriation,
the whole thing would collapse. In the wake of this change of heart on the part of our leaders,
Americans found themselves bombarded with a predictable and relentless refrain: the free market
economy has failed. The alleged remedies were equally predictable: more regulation, more
government intervention, more spending, more money creation, and more debt. To add insult to
injury, the very people who had been responsible for the policies that created the mess were
posing as the wise public servants who would show us the way out. And following a now-familiar
pattern, government failure would not only be blamed on anyone and everyone but the
government itself, but it would also be used to justify additional grants of government power. The
truth of the matter is that intervention in the market, rather than the market economy itself, was the
driving factor behind the bust. F.A. Hayek won the Nobel Prize for his work showing how the
central banks intervention into the economy gives rise to the boom-bust cycle, making us feel
prosperous until we suffer the inevitable crash. Most Americans know nothing about Hayeks
theory (known as the Austrian theory of the business cycle), and are therefore easy prey for the
quacks who blame the market for problems caused by the manipulation of money and credit. The
artificial booms the Fed provokes, wrote economist Henry Hazlitt decades ago, must end in a
crisis and a slump, andworse than the slump itself may be the public delusion that the slump has
been caused, not by the previous inflation, but by the inherent defects of capitalism. Although my
recently released book, Meltdown explains the process in more detail, an abbreviated version of
Austrian business cycle theory might run as follows: Government-established central banks can
artificially lower interest rates by increasing the supply of money (and thus the funds banks have
available to lend) through the banking system. This is supposed to stimulate the economy. What it
actually does is mislead investors into embarking on an investment boom that the artificially lo.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
Swedbank was founded in 1820, as Sweden’s first savings bank was established. Today, our heritage is visible in that we truly are a bank for each and every one and in that we still strive to contribute to a sustainable development of society and our environment. We are strongly committed to society as a whole and keen to help bring about a sustainable form of societal development. Our Swedish operations hold an ISO 14001 environmental certification, and environmental work is an integral part of our business activities.
INTERNATIONAL MONETARY FUND
Abstract
The U.S. financial and economic crisis has had severe global repercussions. The run-up to the crisis involved a substantial and widespread underestimation of risks—especially in housing—and growing leverage and liquidity mismatches, in particular through off-balance-sheet vehicles and non-bank entities in less-regulated areas. Against a backdrop of easy global financial conditions, this dynamic fed an unsustainable buildup of financial imbalances, above all in housing markets. The sharp decline in housing prices that started in 2007 weakened several systemically important financial institutions, culminating in the collapse of Lehman Brothers, and revealing major weaknesses in the U.S. regulatory and resolution frameworks. This was followed by the worst global financial panic since the Great Depression, with extreme strains in a broad range of markets, volatility in capital flows and exchange rates, and a cascade of systemic events. Economic activity collapsed globally, with trade contracting sharply and advanced economies as a group registering the steepest decline in production in the postwar period. Emerging markets economies also experienced intense pressure, amid retrenching trade and tighter international financing conditions.
I. Overview ; Outlook and Risks
1. Recent data suggest that the sharp fall in output may now be ending, although economic activity remains weak. Economic indicators point to a decelerating rate of deterioration, particularly in labor and housing markets, both of which are key to economic recovery and financial stability. In tandem, financial conditions have noticeably improved, with narrowing interest-rate spreads and growing confidence in financial stability in the wake of measures deployed by the Administration, the Federal Deposit Insurance Corporation (FDIC), and the Federal Reserve. That said, both financial and economic indicators remain at stressed or weak levels by historical standards.
2. 4. The staff's outlook remains for a gradual recovery, consistent with past international experience of financial and housing market crises. The combination of financial strains and ongoing adjustments in the housing and labor markets is expected to restrain growth for some time, with a solid recovery projected to emerge only in mid-2010. Against this background, GDP is expected to contract by 2½ percent in 2009, followed by a modest ¾ percent expansion in 2010 on a year-average basis (on a Q4-over-Q4 basis, -1 ½ percent in 2009 and 1 ¾ percent in 2010). Meanwhile, growing economic slack—with unemployment peaking at close to 10 percent in 2010—would push core inflation to very low levels, with the headline CPI expected to decrease by ½ percent in 2009 and increase by 1 percent in 2010. rates, on concerns about fiscal sustainability; and rising corporate distress. Much will also depend on developments abroad, including progress made in strengthening financial institutions and markets.
II. Near-term stabilization
1. Macroeconomic policies are providing welcome support to demand. The fiscal stimulus—well targeted, timely, diversified, and sizeable—is projected to boost annual GDP growth by 1 percent in 2009 and ¼ percent in 2010. This is being appropriately complemented by a highly expansionary monetary stance and “credit easing” measures that are also relieving financial strains. Continued clear communication on the near-term outlook will be essential to anchor inflation expectations, given the prevailing uncertainty. If activity proves weaker than expected, the Fed could undertake additional credit easing, and further strengthen its commitment to maintain a highly accommodative stance. If necessary, additional fiscal stimulus could also be considered, focused on fast-acting measures, although this would need to be complemented by a concomitantly stronger medium-term adjustment.
2. Steps to s
Question 1Response 1Development inside and out effects t.docxaudeleypearl
Question 1:
Response 1:
Development inside and out effects the entire country's economy. It impacts the managing body, regardless the clearly irrelevant subtleties in the average person's dependably life. Both a conditions and clear deferred results of how the economy is getting along, swelling has the two its fans and spoilers. Distinctive envisions that particular degrees of swelling are helpful for a prospering economy, yet that progressively critical rates raise concerns. It can degrade the money basically and, at logically lamentable, has been a key part to subsidences.
Swelling, as referenced, is the rate a worth ascensions, and fundamentally how much the dollar is worth at a given moment concerning checking. The idea behind swelling being an impact for good in the economy is that a reasonable enough rate can nudge financial movement without debasing the money so much that it ends up being basically vain (Kohn, 2006).
Swelling can in like manner falter from asset for asset. Subordinate upon the season, the expense of gas could go up independently from with everything considered headway as it routinely does as summer moves close. In reality, there is even a term - focus improvement - for swelling that parts in everything except for sustenance and imperativeness (gas and oil), as these regions have separate factors that add to them. There are a wide degree of sorts of swelling, subordinate upon what remarkable is being viewed comparatively as what the development rate truly is by all accounts. For example, what happens if the swelling rate is well over the Fed's normal goal? At a higher rate, yet still in the single digits, that is known as walking swelling. It is seen as concerning yet sensible (Ball, 2006).
Swelling is generally depicted reliant on its rate and causes. By and large, Inflation happens in an economy when vitality for thing and experiences outmaneuvers the supply of yield. in this manner, clarifications behind Inflation have different sides, the intrigue side and supply side. The widely inclusive activity of hazard premiums in driving enlargement pay over the scope of advancing years is dependable with secured budgetary improvement and inside and out oblige cash related procedure events in the moved economies. The degree for further fitting budgetary enabling seen with money related stars seems to have declined amidst the enough low advance charges and gigantic monetary records of national banks (Bodie, 2016).
In relentless time, the correspondence of perils has wound up being constantly phenomenal, the general point of view has lit up, and money related conditions have engaged on net. With the work superstar proceeding to reinforce, and GDP improvement expected to keep up a vital good ways from back in the consequent quarter, it likely will be fitting soon to change the affiliation supports rate. Likewise, if the economy propels as shown by the SEP concentrate way, the affiliation supports rate will probably app ...
But resolving this legacy issue with continued application of past interventionist instruments does not incentivize the much needed structural reforms and private capital market activities. Financial repression has induced a re-allocation of capital across markets and greatly enhanced the role of public markets at the detriment of private market activities. Artificially low – or in some cases even negative – interest rates break the credit intermediation channel which can crowd out viable private investors.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
1. At Chase, we strive to bring you useful information to help you manage your business.
Below, please find highlights from a weekly perspective of the national economy written by
JPMorgan Chase Senior Economist, James Glassman.
Markets and the Economy
February 15, 2010
Market participants are still wondering why the Fed is talking about the fire exits in the
theater before the main feature begins. Is this just the perfunctory warning, a fire drill,
or the real thing?
If macroeconomic policy were coordinated, logic would argue for the following sequence
of “exit” actions:
o First, allow fiscal stimulus to unwind as scheduled in the coming year. The Fed would
need to stay on the sidelines until the economic impact of that, which includes the
hike in marginal tax rates in 2011, is understood. If the Fed exited prematurely,
Congress probably would with justification extend some of the features of the 2009
stimulus initiative (ARRA 2009).
o Second, when the time is right, the Fed begins to sell off the $1,725 billion of
Treasuries, agency debt, and MBS it purchased earlier to cushion the economy when
financial leverage evaporated. This would quell the widely-held but mistaken belief
that the Fed’s reserve expansion is a potential inflation threat. Assertions that the
housing industry is too fragile to weather Fed asset sales but strong enough to
handle a hike in policy rates don’t compute.
o Lastly, normalize policy rates when labor markets get a pulse and inflation stops
falling and edges back toward the 1.5-2.0% goal. These conditions will take a couple
more years to be realized.
This logical sequence implies that there will be no rush for the Federal Reserve to
normalize monetary policy.
So, why is the Federal Reserve spending so much time discussing exit strategies,
detailing a sequence that could as easily be reversed, and focusing so much attention to
controlling the level of excess reserves that surely it understands is not an inflation
threat … when everyone knows that it will take some time for the economy to exit from
the Great Recession?
Is the Fed smarting from the convoluted assertion that its low rates in the mid-2000s
contributed to the housing bubble? No. Ben Bernanke answered that criticism in a
thoughtful and passionate speech at the American Economic Association this winter.
Continued on Page 2
2. The “exit” conversation almost certainly is aimed at a large community that has become
fixated on the $1 trillion of excess reserves and fears that politics will prevent the Fed
from removing this dangerous “inflationary threat”. Rather than explain why, with the
banking system deleveraging, the high level of reserves that were created to pay for the
Credit-Easing policy are not inflationary and were not created with an eye on expanding
the money supply—that is, does not conform to the money expansion model taught in
Money & Banking textbooks—Ben Bernanke apparently believes that it would be more
productive to assure those who worry about this matter that the way out is routine and
mechanical and that he has given an exit strategy considerable thought, if one is
needed.
Monetary policy adjustments aside, the Fed is winding down its liquidity facilities—they
are little used any more—and soon will return the discount rate eventually back to the
normal 100 basis points margin over the target federal funds rate. These actions are
purely technical, although they could cause a temporary stir in the financial markets.
One more aside, while Mr. Hoenig’s dissent at the last FOMC policy meeting is still on the
minds of some … Mr. Hoenig’s reasoning for dissenting from he FOMC decision to
continue to say that economic conditions justify low rates for an extended period is
unconvincing and his ongoing dissents this year likely will be ignored.
Mr. Blanchard’s call for central banks to aim for 4% inflation instead of the common 2%
goal today got some attention last week. The thought has a certain academic appeal but
will be dismissed by the central banking community. He is the Chief Economist at the
International Monetary Fund.
To see the full report, please go to:
https://www.chase.com/ccp/index.jsp?pg_name=ccpmapp/commercial/resource_center/pa
ge/economic_outlook_national
Copyright 2010 JPMorgan Chase & Co. All rights reserved.
Additional information available upon request.