The Federal Reserve's new monetary policy framework aims to allow inflation to run moderately above 2% to compensate for past periods of below-target inflation. This takes monetary policy back to the 1960s and 1970s when a similar emphasis on full employment over price stability led to rising inflation. The Fed now prioritizes job growth and may delay interest rate hikes until inflation is well above 2%, risking an inflationary overshoot like in the 1970s. Additionally, massive government debt from pandemic stimulus risks being monetized through higher inflation or financial repression to reduce debt levels, both of which would boost gold prices by eroding the purchasing power of currencies and lowering real yields. The Fed's shift suggests conditions could become favorable again for
The document discusses how growing acceptance of aggressive fiscal policy could support gold prices over the long term. It notes that government deficits have increased substantially during the pandemic, distributing funds more widely than in previous crises. This may boost inflation and set a precedent for larger responses that increase debt. While rising bond yields recently pressured gold, real yields remain low and inflation expectations are up, suggesting the Fed may act to curb rates, supporting gold. The document analyzes factors that could cause rates and gold prices to rise or fall in the near term.
Gold is currently in a bull market based on price gains since late 2018. Previous gold bull markets in the 1970s and 2000s lasted around a decade and saw price increases of over 600%. The current bull market still has potential as government debt balloons, money supply increases, and inflation remains positive while interest rates are low. Yield curve control policies being considered could further boost gold prices by capping bond yields and risking central bank independence. Overall the macroeconomic environment remains favorable for gold.
Mr. Tohru Sasaki, Managing Director and Head of Japan Rates and FX Research, JP Morgan was one of the keynote speakers at the Asia Business Forum, organised by London Business School's Asia Club, on 27 April 2013. He spoke about the economic policies advocated by Japan's Prime Minister and the implication that they have to the Asian economy.
Find out more about the Asia Club:
Website: https://clubs.london.edu/asiaclub
Facebook: https://www.facebook.com/LBS.AsiaClub
Twitter: https://twitter.com/LBSAsiaClub
Consequences of Abenomics on the Economy and Financial Markets, Ryutaro Kono,...Asia Matters
Ryutaro Kono, Chief Economist, BNP Paribas speaks at Asia Matters' Fifth EU Asia Top Economist Round Table in Japan, looking at the consequences of Abenomics:
Why is private consumption slow in recovering?
Is weak aggregate demand the reason economic growth does not accelerate?
Has the trend growth rate dropped into negative territory?
Why are exports still slow in reviving despite the yen’s weak tone?
Despite the advantages posed by the yen’s marked depreciation in real terms, why don’t manufacturers beef up domestic production capacity?
Will inflation accelerate?
Does Japan have any domestic savings left to finance its net domestic investment?
Can financial repression be avoided?
Can a hard landing be avoided?
This document provides an overview of Abenomics, Japan's economic policy under Prime Minister Shinzo Abe. It discusses the three arrows of Abenomics: 1) aggressive monetary easing by the Bank of Japan, 2) flexible fiscal policy, and 3) a growth strategy to increase private investment. The document analyzes the effects of Abenomics so far, including yen depreciation and declining unemployment. It also examines the future prospects of Abenomics, particularly whether its goals of 2% inflation and higher growth can be achieved through continued monetary easing, fiscal stimulus, and regulatory reforms.
This document summarizes Japan's economic experience since the early 1990s, when it entered a period of low growth and deflation following the bursting of asset price bubbles. Nominal GDP growth has averaged just 0.7% annually since 1990 compared to 3.8% for other G7 countries, while inflation has been mildly negative. Despite various monetary and fiscal stimulus policies, the economy remained stuck in low growth and deflation. The document argues a comprehensive policy package is needed, including an incomes policy, to successfully reflate the economy and achieve sustained higher growth and inflation.
The document recommends increasing the federal funds rate by 0.25% beginning in 2016 to push towards monetary policy normalization and a stronger economy. It argues that economic activity has been expanding moderately across several sectors including household spending, business investments, housing, and the labor market. Inflation remains below targets but unemployment has held steady. A gradual quarterly increase of 0.25% would allow the markets to adjust without being too aggressive as the economy improves and strengthens.
The FOMC left interest rates unchanged but signaled a more patient approach to future rate hikes. Inflation remains near the 2% target while economic growth is solid. The statement removed prior language about further gradual rate hikes. The Fed will be patient in determining rate adjustments in light of global risks and muted inflation. Balance sheet normalization may end sooner with a larger balance sheet size than previously estimated.
The document discusses how growing acceptance of aggressive fiscal policy could support gold prices over the long term. It notes that government deficits have increased substantially during the pandemic, distributing funds more widely than in previous crises. This may boost inflation and set a precedent for larger responses that increase debt. While rising bond yields recently pressured gold, real yields remain low and inflation expectations are up, suggesting the Fed may act to curb rates, supporting gold. The document analyzes factors that could cause rates and gold prices to rise or fall in the near term.
Gold is currently in a bull market based on price gains since late 2018. Previous gold bull markets in the 1970s and 2000s lasted around a decade and saw price increases of over 600%. The current bull market still has potential as government debt balloons, money supply increases, and inflation remains positive while interest rates are low. Yield curve control policies being considered could further boost gold prices by capping bond yields and risking central bank independence. Overall the macroeconomic environment remains favorable for gold.
Mr. Tohru Sasaki, Managing Director and Head of Japan Rates and FX Research, JP Morgan was one of the keynote speakers at the Asia Business Forum, organised by London Business School's Asia Club, on 27 April 2013. He spoke about the economic policies advocated by Japan's Prime Minister and the implication that they have to the Asian economy.
Find out more about the Asia Club:
Website: https://clubs.london.edu/asiaclub
Facebook: https://www.facebook.com/LBS.AsiaClub
Twitter: https://twitter.com/LBSAsiaClub
Consequences of Abenomics on the Economy and Financial Markets, Ryutaro Kono,...Asia Matters
Ryutaro Kono, Chief Economist, BNP Paribas speaks at Asia Matters' Fifth EU Asia Top Economist Round Table in Japan, looking at the consequences of Abenomics:
Why is private consumption slow in recovering?
Is weak aggregate demand the reason economic growth does not accelerate?
Has the trend growth rate dropped into negative territory?
Why are exports still slow in reviving despite the yen’s weak tone?
Despite the advantages posed by the yen’s marked depreciation in real terms, why don’t manufacturers beef up domestic production capacity?
Will inflation accelerate?
Does Japan have any domestic savings left to finance its net domestic investment?
Can financial repression be avoided?
Can a hard landing be avoided?
This document provides an overview of Abenomics, Japan's economic policy under Prime Minister Shinzo Abe. It discusses the three arrows of Abenomics: 1) aggressive monetary easing by the Bank of Japan, 2) flexible fiscal policy, and 3) a growth strategy to increase private investment. The document analyzes the effects of Abenomics so far, including yen depreciation and declining unemployment. It also examines the future prospects of Abenomics, particularly whether its goals of 2% inflation and higher growth can be achieved through continued monetary easing, fiscal stimulus, and regulatory reforms.
This document summarizes Japan's economic experience since the early 1990s, when it entered a period of low growth and deflation following the bursting of asset price bubbles. Nominal GDP growth has averaged just 0.7% annually since 1990 compared to 3.8% for other G7 countries, while inflation has been mildly negative. Despite various monetary and fiscal stimulus policies, the economy remained stuck in low growth and deflation. The document argues a comprehensive policy package is needed, including an incomes policy, to successfully reflate the economy and achieve sustained higher growth and inflation.
The document recommends increasing the federal funds rate by 0.25% beginning in 2016 to push towards monetary policy normalization and a stronger economy. It argues that economic activity has been expanding moderately across several sectors including household spending, business investments, housing, and the labor market. Inflation remains below targets but unemployment has held steady. A gradual quarterly increase of 0.25% would allow the markets to adjust without being too aggressive as the economy improves and strengthens.
The FOMC left interest rates unchanged but signaled a more patient approach to future rate hikes. Inflation remains near the 2% target while economic growth is solid. The statement removed prior language about further gradual rate hikes. The Fed will be patient in determining rate adjustments in light of global risks and muted inflation. Balance sheet normalization may end sooner with a larger balance sheet size than previously estimated.
This document discusses Japan's economic policy package known as "Abenomics", which began in 2013 under Prime Minister Shinzo Abe. It has three main components: monetary expansion, fiscal stimulus, and structural reforms. The paper analyzes each component and finds that while monetary and fiscal policies have boosted inflation expectations, growth, and financial markets, structural reforms face difficulties and their impact cannot yet be determined. It concludes that further bold actions may be needed to ensure the success of Abenomics in stimulating Japan's long-stagnant economy.
Since the wind-down of the Great Recession in early 2009, the latest economic expansion has certainly delivered the goods and rewarded investors’ mailboxes with six consecutive calendar years of positive gains for stocks. “Neither snow nor rain nor heat nor gloom of night” has kept a lid on the continuation of one of history’s greatest bull market advances for stocks, and LPL Financial Research believes this trend of rising equity prices may continue in 2015.
IMPORTANT DISCLOSURES
The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.
To determine which investments may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.
Economic forecasts set forth may not develop as predicted, and there can be no guarantee that strategies promoted will be successful.
The Leading Economic Index (LEI) is an economic variable, such as private-sector wages, that tends to show the direction of future economic activity.
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The Barclays Aggregate Bond Index is an unmanaged market capitalization-weighted index of most intermediate-term U.S. traded investment-grade, fixed rate, non-convertible, and taxable bond market securities including government agency, corporate, mortgage-backed, and some foreign bonds.
NYSE Composite Index is an index that measure the performance of all stocks listed on the New York
Stock Exchange. The NYSE
Composite Index includes more than 1,900 stocks, of which over 1,500 are U.S. companies.
The Federal Open Market Committee (FOMC) is the branch of the Federal Reserve Board that determines the direction of monetary policy. The FOMC is composed of the board of governors, which has seven members, and five reserve bank presidents.
The Labor Market Conditions Index (LMCI) is a dynamic factor model of labor market indicators, which extracts the primary common variation from 19 labor market indicators. This tool was recently developed by the Federal Reserve.
Quantitative easing (QE) is a government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.
The early effects of the reform programme have triggered a surge in the Japanese stock market, accelerated by the anticipation of growth revival. So far, so good for the markets and traders. But how will Abenomics accommodate public debt of over 200% GDP, and will Abe’s radical policies inspire a long-term economic recovery in Japan? Do you think fiscal stimulus, monetary policy and structural reforms will revitalise the Japanese economy? Check out Saxo’s latest infographic and join the debate on Twitter @SaxoMarkets.
This document discusses the long-term implications of fiscal policy, including deficits and public debt. It explains that discretionary fiscal policy can be used to stabilize the economy in the short-run through expansionary or contractionary policies. However, long-term effects include impacts on the budget balance, debt, and implicit liabilities like Social Security. Running large deficits risks increasing debt levels to a point where a government may default or need to resort to inflation. Governments aim to balance budgets over the business cycle to avoid these problems.
Monetary policy aims to control the money supply and interest rates to promote economic growth and stability. The objectives of monetary policy differ for developed and underdeveloped countries. Underdeveloped countries aim to achieve full employment and economic growth, while developed countries focus on high demand without inflation. Monetary policy tools include open market operations, required reserves, and interest rates. Central banks target variables like money supply and interest rates to indirectly influence macroeconomic goals like inflation and growth. The State Bank of Pakistan has utilized tight and easy monetary stances over the years in response to economic conditions, aiming to balance objectives like inflation, growth, and stability.
This document discusses inflation targeting as a monetary policy framework. It argues that inflation targeting is more effective than monetary targeting at stabilizing prices and maintaining credibility for central banks. The document outlines Ben Bernanke's concept of "constrained discretion" which allows central banks to set medium-term inflation targets while having flexibility to respond to economic shocks. Empirical evidence from Switzerland and the US suggests that inflation targeting has helped reduce inflation volatility and price uncertainty compared to monetary targeting.
The central bank uses monetary policy tools like adjusting interest rates and money supply to achieve macroeconomic stability goals like price stability, economic growth, and full employment. It aims to regulate inflation and the money supply through tools like setting bank rates, open market operations, and cash reserve requirements for commercial banks. Both quantitative and qualitative tools are used to influence lending behavior and control the money supply. The central bank plays a critical role in the economy and financial system.
Rania Al-Mashat - Minister of Tourism
ERF 24th Annual Conference
The New Normal in the Global Economy: Challenges & Prospects for MENA
July 8-10, 2018
Cairo, Egypt
The document discusses monetary policy tools and their effects. It begins by outlining the Federal Reserve's main tools: open market operations, the reserve requirement, and the discount rate. It then explains how open market operations work to expand or contract the money supply by purchasing or selling bonds. The document also discusses quantitative easing and how it was used during the Great Recession. It analyzes the short-run effects of expansionary and contractionary monetary policy on real GDP, unemployment, and inflation. Finally, it notes limitations to monetary policy, including its lack of long-run effects as prices adjust and how expectations and behavior can reduce its impact.
There are two types of monetary policy: expansionary and contractionary. Expansionary policy is used during recessions to reduce unemployment by increasing the money supply through actions like bond purchases and lowering interest rates. Contractionary policy is used during expansions to reduce inflation by decreasing the money supply through actions like bond sales and raising interest rates. Monetary policy aims to control the money supply and promote economic stability through influencing the supply of credit and money in an economy.
The document discusses monetary policy and its objectives and tools. The objectives of monetary policy are to ensure economic stability, achieve price stability by controlling inflation and deflation, and promote economic growth. The key tools of monetary policy are quantitative measures like open market operations, cash reserve ratio, and discount rate. Qualitative measures include credit rationing, changing lending margins, moral suasion, and direct controls. Monetary policy uses various tools to contract the money supply and credit to control inflation or expand the money supply and credit to control recession.
This document summarizes the key aspects of monetary policy in Bangladesh. It discusses how the central bank uses interest rates and money supply to influence inflation. However, monetary policy faces limitations in Bangladesh due to imperfect markets and the economy's reliance on imports. The transmission of interest rate changes is also weak as banks determine rates collusively. While price stability is ideal, monetary policy alone has limited impact on inflation in Bangladesh given global price influences and excess bank liquidity reducing the central bank's policy instruments.
Monetary policy is used by central banks to control the supply of money and regulate credit in order to promote economic growth and stability. There are two types: expansionary policy aims to reduce unemployment by increasing the money supply during recessions, while contractionary policy aims to reduce inflation by decreasing the money supply during expansions. The tools for changing the money supply include open market operations, interest rates, and reserve ratios.
This document is a presentation on monetary policy in Bangladesh by Group 16. It begins with introductions of the group members. The presentation covers topics such as the definition of monetary policy, the tools and transmission mechanisms of monetary policy, impacts of monetary policy on inflation and capital markets, Bangladesh Bank's monetary policy stances and challenges to monetary policy in Bangladesh. The presentation provides an overview of key concepts in monetary policy as well as analysis of monetary policies implemented in Bangladesh.
This document discusses monetary policy, including:
- Monetary policy is primarily concerned with interest rates and money supply and is carried out by central banks.
- There are two types of monetary policy - expansionary and contractionary. Contractionary policy raises rates to reduce inflation while expansionary lowers rates to boost the economy.
- The objectives of monetary policy are to manage inflation and reduce unemployment, with inflation being the primary target. Central banks use various tools like interest rates, securities purchases and requirements to implement monetary policy.
The IMF has based much of it policies on a theoretical framework developed by Polak, Mundell, and Fleming over fifty years ago. Their models were based on a set of assumptions that a do not reflect the economic realities in the developing countries. The IMF’s insistence on demand management policies created policy “blind spots” that prevented it’s acknowledgment of causes of macroeconomic imbalances other than government fiscal mismanagement. There has been some movement toward reform by the Fund and better alignment with its sister organization, the World Bank. Just as the East Asian crisis momentum for change, recent events seem to have created a significant shift in the thinking of the Fund’s staff and policy analyst. The recent global crisis has caused the Fund to acknowledge the limits of monetary policy and bring fiscal policy “center stage” as an important countercyclical tool. In short, the crisis has “exposed flaws in the pre-crisis policy framework” [Carlos E. Guice, Sr.]
This document summarizes a study examining the impact of monetary policy on economic growth in Pakistan from 1991 to 2011. It finds that inflation rate, exchange rate, and external reserves are significant monetary policy instruments that influence growth. It recommends establishing primary and secondary government bond markets to increase monetary policy efficiency and reduce reliance on the central bank. The document provides context on monetary policy objectives in Pakistan and reviews literature on the relationship between monetary policy and economic growth.
This document discusses stabilization policy and the ability of governments to reduce business fluctuations through fiscal and monetary policy. It covers topics such as:
- How monetary policy can be implemented through changing money supply or interest rates, and how fiscal policy can be implemented through changing government spending or taxes.
- Objections to the effectiveness of fiscal stabilization policy, including the automatic stabilizer effect, Ricardian equivalence principle, and crowding out effect.
- The inflation-output tradeoff described by the Phillips curve and how expansionary policies can increase inflation in the long run.
- How inflation expectations impact the Phillips curve and the ability of governments to permanently affect unemployment through demand policies alone.
- The importance of
Global synchronization provide upward bias to Equity based investments once again. In depth look at how Janney breaks down the year ahead and where to invest to take advantage of the reemergence of Global Growth.
The document provides a daily currency highlights report for various currency pairs including USDINR, EURINR, GBPINR, and JPYINR. For each currency pair, it includes a technical outlook analyzing recent price movements and trends, as well as relevant fundamental news. It also lists key economic indicators and their potential impact on the currencies. The report is intended for informational purposes and does not constitute investment advice.
- Upcoming inflation may benefit gold prices, especially if inflation persists longer than expected by central banks. Inflation expectations have risen significantly in recent months.
- The large US twin deficits could negatively impact the economy and support gold prices. The US current account and fiscal deficits have ballooned to record levels.
- While gold does not always rise when deficits increase, it has benefited in past periods when easy fiscal policy was accompanied by accommodative monetary policy, as is the case currently. The Fed intends to keep interest rates low to support economic recovery.
The document discusses whether interest rate increases in 2021 could cause gold prices to plunge. It notes that real interest rates have a strong negative correlation with gold prices. While real rates could normalize somewhat as the economy recovers, there is also potential for inflation to rise due to money supply growth and pent-up demand, which could keep real rates low and support gold prices. The document concludes that several factors, including inflation expectations, money supply growth, and a dovish Fed, make higher inflation and continued gold price support more likely in 2021 than a 2013-style plunge.
This document discusses Japan's economic policy package known as "Abenomics", which began in 2013 under Prime Minister Shinzo Abe. It has three main components: monetary expansion, fiscal stimulus, and structural reforms. The paper analyzes each component and finds that while monetary and fiscal policies have boosted inflation expectations, growth, and financial markets, structural reforms face difficulties and their impact cannot yet be determined. It concludes that further bold actions may be needed to ensure the success of Abenomics in stimulating Japan's long-stagnant economy.
Since the wind-down of the Great Recession in early 2009, the latest economic expansion has certainly delivered the goods and rewarded investors’ mailboxes with six consecutive calendar years of positive gains for stocks. “Neither snow nor rain nor heat nor gloom of night” has kept a lid on the continuation of one of history’s greatest bull market advances for stocks, and LPL Financial Research believes this trend of rising equity prices may continue in 2015.
IMPORTANT DISCLOSURES
The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security.
To determine which investments may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.
Economic forecasts set forth may not develop as predicted, and there can be no guarantee that strategies promoted will be successful.
The Leading Economic Index (LEI) is an economic variable, such as private-sector wages, that tends to show the direction of future economic activity.
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The Barclays Aggregate Bond Index is an unmanaged market capitalization-weighted index of most intermediate-term U.S. traded investment-grade, fixed rate, non-convertible, and taxable bond market securities including government agency, corporate, mortgage-backed, and some foreign bonds.
NYSE Composite Index is an index that measure the performance of all stocks listed on the New York
Stock Exchange. The NYSE
Composite Index includes more than 1,900 stocks, of which over 1,500 are U.S. companies.
The Federal Open Market Committee (FOMC) is the branch of the Federal Reserve Board that determines the direction of monetary policy. The FOMC is composed of the board of governors, which has seven members, and five reserve bank presidents.
The Labor Market Conditions Index (LMCI) is a dynamic factor model of labor market indicators, which extracts the primary common variation from 19 labor market indicators. This tool was recently developed by the Federal Reserve.
Quantitative easing (QE) is a government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity.
The early effects of the reform programme have triggered a surge in the Japanese stock market, accelerated by the anticipation of growth revival. So far, so good for the markets and traders. But how will Abenomics accommodate public debt of over 200% GDP, and will Abe’s radical policies inspire a long-term economic recovery in Japan? Do you think fiscal stimulus, monetary policy and structural reforms will revitalise the Japanese economy? Check out Saxo’s latest infographic and join the debate on Twitter @SaxoMarkets.
This document discusses the long-term implications of fiscal policy, including deficits and public debt. It explains that discretionary fiscal policy can be used to stabilize the economy in the short-run through expansionary or contractionary policies. However, long-term effects include impacts on the budget balance, debt, and implicit liabilities like Social Security. Running large deficits risks increasing debt levels to a point where a government may default or need to resort to inflation. Governments aim to balance budgets over the business cycle to avoid these problems.
Monetary policy aims to control the money supply and interest rates to promote economic growth and stability. The objectives of monetary policy differ for developed and underdeveloped countries. Underdeveloped countries aim to achieve full employment and economic growth, while developed countries focus on high demand without inflation. Monetary policy tools include open market operations, required reserves, and interest rates. Central banks target variables like money supply and interest rates to indirectly influence macroeconomic goals like inflation and growth. The State Bank of Pakistan has utilized tight and easy monetary stances over the years in response to economic conditions, aiming to balance objectives like inflation, growth, and stability.
This document discusses inflation targeting as a monetary policy framework. It argues that inflation targeting is more effective than monetary targeting at stabilizing prices and maintaining credibility for central banks. The document outlines Ben Bernanke's concept of "constrained discretion" which allows central banks to set medium-term inflation targets while having flexibility to respond to economic shocks. Empirical evidence from Switzerland and the US suggests that inflation targeting has helped reduce inflation volatility and price uncertainty compared to monetary targeting.
The central bank uses monetary policy tools like adjusting interest rates and money supply to achieve macroeconomic stability goals like price stability, economic growth, and full employment. It aims to regulate inflation and the money supply through tools like setting bank rates, open market operations, and cash reserve requirements for commercial banks. Both quantitative and qualitative tools are used to influence lending behavior and control the money supply. The central bank plays a critical role in the economy and financial system.
Rania Al-Mashat - Minister of Tourism
ERF 24th Annual Conference
The New Normal in the Global Economy: Challenges & Prospects for MENA
July 8-10, 2018
Cairo, Egypt
The document discusses monetary policy tools and their effects. It begins by outlining the Federal Reserve's main tools: open market operations, the reserve requirement, and the discount rate. It then explains how open market operations work to expand or contract the money supply by purchasing or selling bonds. The document also discusses quantitative easing and how it was used during the Great Recession. It analyzes the short-run effects of expansionary and contractionary monetary policy on real GDP, unemployment, and inflation. Finally, it notes limitations to monetary policy, including its lack of long-run effects as prices adjust and how expectations and behavior can reduce its impact.
There are two types of monetary policy: expansionary and contractionary. Expansionary policy is used during recessions to reduce unemployment by increasing the money supply through actions like bond purchases and lowering interest rates. Contractionary policy is used during expansions to reduce inflation by decreasing the money supply through actions like bond sales and raising interest rates. Monetary policy aims to control the money supply and promote economic stability through influencing the supply of credit and money in an economy.
The document discusses monetary policy and its objectives and tools. The objectives of monetary policy are to ensure economic stability, achieve price stability by controlling inflation and deflation, and promote economic growth. The key tools of monetary policy are quantitative measures like open market operations, cash reserve ratio, and discount rate. Qualitative measures include credit rationing, changing lending margins, moral suasion, and direct controls. Monetary policy uses various tools to contract the money supply and credit to control inflation or expand the money supply and credit to control recession.
This document summarizes the key aspects of monetary policy in Bangladesh. It discusses how the central bank uses interest rates and money supply to influence inflation. However, monetary policy faces limitations in Bangladesh due to imperfect markets and the economy's reliance on imports. The transmission of interest rate changes is also weak as banks determine rates collusively. While price stability is ideal, monetary policy alone has limited impact on inflation in Bangladesh given global price influences and excess bank liquidity reducing the central bank's policy instruments.
Monetary policy is used by central banks to control the supply of money and regulate credit in order to promote economic growth and stability. There are two types: expansionary policy aims to reduce unemployment by increasing the money supply during recessions, while contractionary policy aims to reduce inflation by decreasing the money supply during expansions. The tools for changing the money supply include open market operations, interest rates, and reserve ratios.
This document is a presentation on monetary policy in Bangladesh by Group 16. It begins with introductions of the group members. The presentation covers topics such as the definition of monetary policy, the tools and transmission mechanisms of monetary policy, impacts of monetary policy on inflation and capital markets, Bangladesh Bank's monetary policy stances and challenges to monetary policy in Bangladesh. The presentation provides an overview of key concepts in monetary policy as well as analysis of monetary policies implemented in Bangladesh.
This document discusses monetary policy, including:
- Monetary policy is primarily concerned with interest rates and money supply and is carried out by central banks.
- There are two types of monetary policy - expansionary and contractionary. Contractionary policy raises rates to reduce inflation while expansionary lowers rates to boost the economy.
- The objectives of monetary policy are to manage inflation and reduce unemployment, with inflation being the primary target. Central banks use various tools like interest rates, securities purchases and requirements to implement monetary policy.
The IMF has based much of it policies on a theoretical framework developed by Polak, Mundell, and Fleming over fifty years ago. Their models were based on a set of assumptions that a do not reflect the economic realities in the developing countries. The IMF’s insistence on demand management policies created policy “blind spots” that prevented it’s acknowledgment of causes of macroeconomic imbalances other than government fiscal mismanagement. There has been some movement toward reform by the Fund and better alignment with its sister organization, the World Bank. Just as the East Asian crisis momentum for change, recent events seem to have created a significant shift in the thinking of the Fund’s staff and policy analyst. The recent global crisis has caused the Fund to acknowledge the limits of monetary policy and bring fiscal policy “center stage” as an important countercyclical tool. In short, the crisis has “exposed flaws in the pre-crisis policy framework” [Carlos E. Guice, Sr.]
This document summarizes a study examining the impact of monetary policy on economic growth in Pakistan from 1991 to 2011. It finds that inflation rate, exchange rate, and external reserves are significant monetary policy instruments that influence growth. It recommends establishing primary and secondary government bond markets to increase monetary policy efficiency and reduce reliance on the central bank. The document provides context on monetary policy objectives in Pakistan and reviews literature on the relationship between monetary policy and economic growth.
This document discusses stabilization policy and the ability of governments to reduce business fluctuations through fiscal and monetary policy. It covers topics such as:
- How monetary policy can be implemented through changing money supply or interest rates, and how fiscal policy can be implemented through changing government spending or taxes.
- Objections to the effectiveness of fiscal stabilization policy, including the automatic stabilizer effect, Ricardian equivalence principle, and crowding out effect.
- The inflation-output tradeoff described by the Phillips curve and how expansionary policies can increase inflation in the long run.
- How inflation expectations impact the Phillips curve and the ability of governments to permanently affect unemployment through demand policies alone.
- The importance of
Global synchronization provide upward bias to Equity based investments once again. In depth look at how Janney breaks down the year ahead and where to invest to take advantage of the reemergence of Global Growth.
The document provides a daily currency highlights report for various currency pairs including USDINR, EURINR, GBPINR, and JPYINR. For each currency pair, it includes a technical outlook analyzing recent price movements and trends, as well as relevant fundamental news. It also lists key economic indicators and their potential impact on the currencies. The report is intended for informational purposes and does not constitute investment advice.
- Upcoming inflation may benefit gold prices, especially if inflation persists longer than expected by central banks. Inflation expectations have risen significantly in recent months.
- The large US twin deficits could negatively impact the economy and support gold prices. The US current account and fiscal deficits have ballooned to record levels.
- While gold does not always rise when deficits increase, it has benefited in past periods when easy fiscal policy was accompanied by accommodative monetary policy, as is the case currently. The Fed intends to keep interest rates low to support economic recovery.
The document discusses whether interest rate increases in 2021 could cause gold prices to plunge. It notes that real interest rates have a strong negative correlation with gold prices. While real rates could normalize somewhat as the economy recovers, there is also potential for inflation to rise due to money supply growth and pent-up demand, which could keep real rates low and support gold prices. The document concludes that several factors, including inflation expectations, money supply growth, and a dovish Fed, make higher inflation and continued gold price support more likely in 2021 than a 2013-style plunge.
The document discusses whether the current economic boom in the US will continue. It notes that while the US GDP has recovered from the pandemic recession, there are threats on the horizon. Inflation is rising due to excess stimulus and debt levels are high, which could cause economic turbulence if interest rates rise. The recovery also remains vulnerable to coronavirus variants. Overall, the document argues while the economy has recovered, threats remain that could undermine sustained growth and support further gold price rallies.
The document discusses potential inflation scenarios and their implications for gold prices. It analyzes the likelihood of hyperinflation, deflation, stagflation, and a return to previous low inflation levels. The author argues that stagflation, with high inflation and slowing GDP growth, poses the greatest risk and would be most positive for gold. While the Fed expects current high inflation to be temporary, money supply and debt increases make low pre-pandemic inflation unlikely. Slowing growth projections for 2022 could produce the stagflation scenario gold performs well in.
The document provides an overview of the gold market as of June 4, 2021. It covers inflation rates, federal debt levels, gold news and analysis, and the gold price and chart. Inflation unexpectedly surged in April to twice the Fed's target, which could pose upside risks to more persistent inflation if expectations become unanchored. Higher inflation would increase demand for gold as a hedge. However, gold may struggle if interest rates rise in response. The document analyzes factors that could keep inflation elevated and impact the gold market.
The document discusses the outlook for gold and gold mining stocks. It notes that while gold had a temporary rally, gold mining stocks barely moved or declined. This confirms the bearish outlook, as mining stocks typically underperform during gold rallies. The document also discusses factors like the strengthening US dollar index that remain bearish for gold. Finally, it argues that increased government spending under Bidenomics could lead to higher inflation in the long run and be positive for gold prices, despite short-term stimulus boosting economic growth.
Gold may rise as market euphoria about economic recovery ends. While strong GDP growth is expected in the short term due to base effects and stimulus, optimism may be exaggerated, unemployment remains elevated, and risks remain from virus variants. Inflation is already above the Fed's 2% target according to official data, and likely even higher using alternative measures, but the Fed says price increases will be temporary. However, inflation could be more persistent given money supply increases, government spending, and pent-up demand as the economy reopens. Higher inflation would be bullish for gold as an inflation hedge.
The European Central Bank adopted a new inflation target of 2% over the medium term in a symmetric manner, meaning they will view undershooting and overshooting inflation equally. This is a dovish shift that could support gold as an inflation hedge. However, the ECB may be less aggressive than the Fed and a stronger dollar could limit gold's gains. The ECB also emphasized addressing climate change and will only purchase green assets going forward. Gold has been range-bound as markets await clues from upcoming Fed Chair testimony, but lower yields and a dovish ECB provide fundamental support.
The FOMC projected two rate hikes in 2023, which was more hawkish than expected and caused gold prices to drop sharply. The statement acknowledged higher inflation and an improving economy. The dot plot showed most FOMC members foresee rate hikes in 2023 compared to March. Inflation surged to 5% in May, its highest since 2008, but gold's reaction was muted as investors worry about tighter monetary policy. Higher inflation could be positive for gold as a hedge, but the Fed may need to act to contain inflation.
The document discusses tips for trading gold in the context of the Fed becoming more hawkish. It notes that while a hawkish Fed is fundamentally negative for gold prices, gold may still find support if high inflation persists or if the Fed causes economic turmoil by tightening too much. The tips provided strategies for analyzing gold prices, related markets, indicators, ratios, cycles, and sentiment to help time entries and exits from gold positions. Monitoring other assets and investor behavior was recommended to help identify potential tops and bottoms in gold.
The stock market has surged despite a struggling real economy, due to optimism around vaccines, big tech companies' dominance, and monetary policy support. However, this disconnect may not always support gold prices. While high inflation expectations and money supply growth could lead to longer-term stagflation, supporting gold, a stock market decline caused by tighter monetary policy may hurt gold as well. The impact on gold depends on the underlying reasons for any shifts in stock valuations or monetary conditions.
RESEARCH - The Fairfax Monitor - Edition 2Stephen Martin
The document discusses whether the current economic environment is more likely to lead to inflation or deflation. It analyzes factors influencing the debate such as declining asset prices, falling consumer demand, and aggressive monetary stimulus by central banks. While central banks have taken inflationary actions, the document concludes deflation remains the greater threat due to continued weakness in the banking system, low consumer spending, and lack of signs of rising inflation. The environment favors bonds over stocks and commodities in the near term until the banking system shows more stability.
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.
The document discusses the Federal Reserve potentially raising interest rates and the impact on investments. It states that higher rates would signal economic strength and a return to normal rates after the Great Recession. While rates rising may cause initial volatility, historically the stock market has continued to perform well over longer periods as the economy strengthens. The document recommends staying invested in equities, as rates rising from very low levels are unlikely to significantly slow economic growth. Large cap stocks, international equities, and sectors like technology, finance and healthcare tend to perform well when rates rise.
Fed Quantitative Easing Exit: Has It Started?Markets Beyond
The FED unexpectedly hiked the discount rate by 0.25%, raising banks' borrowing costs slightly from 0.5% to 0.75%. While a small change, the author views it as a signal from the FED of preparing to exit quantitative easing and control future inflation. However, the hike only increases the difference between the fed funds rate and discount rate to 0.5% from 1% before the crisis. The author argues this is more of a "marketing" exercise than a policy shift, and that there are no signs of imminent inflation given continued low wage growth and contained food/energy prices. The real test for markets will come when the FED begins shrinking its balance sheet, which could impact mortgage
Our concern is about QE tapering and your investments. When Fed Chairman Powell announced the plan to taper he also noted that there will be no immediate increase in interest rates at least not in the first half of 2022.
https://youtu.be/w6lqHD0HX90
The document discusses the impact of the US Federal Reserve tapering its quantitative easing program on the Indian economy. It provides background on the Fed's bond-buying program and discusses the market reactions when taper talk began in 2013. While Indian markets and the rupee declined initially due to capital outflows from emerging markets, the impacts were moderate and India was better prepared to handle tapering in 2013 than before. The document concludes that India will remain cautious as the Fed further scales back its stimulus program.
Monetary policy involves controlling the supply of money in an economy to achieve goals like price stability and economic growth. The central bank implements monetary policy using tools like open market operations, adjusting reserve ratios, and setting interest rates. These tools work through channels like interest rates and credit to influence money supply, inflation, and other macroeconomic variables. Effective monetary policy requires coordination between fiscal and monetary authorities to avoid conflicting policies. The Bangladesh Bank follows an inflation targeting framework and uses reserve money and broad money as targets to achieve its goals of stable prices, growth, and balance of payments.
This document discusses predictions for the 2021 and 2026 gold price from various analysts and organizations. Most analysts predict the 2021 gold price will exceed $2,000 per ounce, with an average prediction of $2,228. Factors that could increase the gold price include continued monetary and fiscal stimulus increasing inflation, low interest rates, a weaker US dollar, and economic uncertainties from the pandemic or potential black swan events. Prolonged low growth or recession could also boost gold. However, containment of COVID-19 leading to strong economic recovery could cause the gold price to decrease. Overall the document analyzes why gold may rise or fall based on major influencing factors.
Today’s inflation and the Great Inflation of the 1970s Similarities and diffe...Deepak Jha
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Gold exploration expenditure fell slightly in the third quarter, dropping $100,000 to $429.7 million, though it remained higher than other commodities. The price of gold was also firmer on safe-haven demand amid renewed risk aversion in markets. Technical analysis showed gold testing key support at $1800 and at risk of further declines, as the trend remained downward despite opinions of gold bulls.
The gold price has struggled to rise despite increased risk-off sentiment in the markets. While gold is typically seen as a safe-haven asset, its performance has been lackluster recently compared to US Treasuries. Gold futures remain below $1,800/oz despite a falling US 10-year bond yield. Moderna's CEO comments about existing vaccines struggling with Omicron increased market uncertainty but gold did not benefit. Looking ahead, gold prices may continue to be pressured by an elevated US dollar and receding inflation expectations that could allow central banks to tighten monetary policy.
The document discusses the recent rebound in gold prices (XAU/USD) amid renewed fears about the coronavirus. It notes that gold prices fell last week as US Treasury bond yields rose, but then rebounded on Friday when a new COVID variant was detected in South Africa. The variant raises concerns about vaccines' effectiveness and sparked a flight to safe havens like gold. Looking ahead, gold prices could continue strengthening if safe haven demand persists, but US bond yields regaining could cap upside if the Fed signals a need to remain patient on rates.
Gold consolidates below $1,800 as risk sentiment stabilizes on hopes the Omicron variant will be mild. The US dollar and Treasury yields rebound limits gold's gains, though virus concerns could push prices higher. Technical indicators show gold struggling between support and resistance levels around $1,785-1,800.
Gold breached a long-held trendline as inflation rose, prompting increased demand for gold coins from the US Mint. While gold is often proclaimed to be "dead" as an investment, as was claimed in a 1997 article, it has historically risen in value during periods of high inflation and monetary expansion like the current environment. Though the gold mining sector is relatively small compared to technology giants, its small size means investment flows could have an outsized impact on prices.
Elevation Gold reported a drop in gold equivalent production for the quarter ended September 30, 2021 to 7,209 ounces, down from 7,823 ounces in the previous quarter. Revenue was $12.1 million with earnings from mine operations of $2.9 million before depreciation and depletion. During the same quarter last year, production was higher at 14,673 ounces and revenue was $26.8 million. The company said it is focusing on improving mining operations and efficiencies to increase throughput and grades going forward.
Gold prices rebounded from recent losses as fears over the new COVID-19 variant took hold. Inflation remains stubbornly high, supporting gold, but tighter Fed policy could weigh on prices. Technical analysis sees support at $1785 and resistance at $1825, with the near-term trend remaining bearish unless prices break above $1797. Economic data and virus developments are likely to drive volatility in gold prices next week.
The document discusses how gold prices have fallen recently due to the Federal Reserve's signals of potentially speeding up tapering of asset purchases and raising interest rates sooner in response to high inflation. The appointment of Jerome Powell to another term as Fed Chair, seen as more hawkish than alternative candidate Lael Brainard, has raised expectations of rate hikes. Additionally, a strong US dollar and rising Treasury yields have weighed on gold prices. Technically, gold has broken below key support levels and bulls will want to see a close above $1,800 to indicate an overreaction, though $1,835 will be needed to reignite a bullish outlook.
The document discusses the gold price forecast and technical analysis of XAU/USD. It notes that gold gained some traction due to US dollar profit-taking but faces resistance at $1,800. The daily chart shows gold defending an ascending trendline support near $1,722. Traders are awaiting a break below this trendline to confirm a fresh breakdown and shorting opportunity in gold. Key technical levels between $1,779 support and $1,807 resistance are also identified.
- Gold prices have fallen sharply this week due to expectations of higher interest rates from the Fed and deteriorating correlations between gold volatility and prices.
- Technically, gold broke below key support levels, erasing bullish signals and potentially starting a deeper decline back to $1,770 support. Sentiment data also shows traders are heavily net long, suggesting prices may continue falling.
- Near-term technical indicators are extremely oversold on lower timeframes but still heading lower, with resistance around $1,792 and support at $1,771. The overall technical structure has weakened, implying gold could trade choppily within its range for now.
Gold prices have fallen as US yields have risen after Jerome Powell was re-nominated as Fed Chair, lifting the US dollar. Rising nominal yields and falling inflation expectations have boosted real yields, hurting gold. Technically, gold faces resistance around $1,800 and support around $1,750, with bears eyeing a break below $1,790 to target $1,707. Fundamentally, markets await upcoming US data and the FOMC minutes for clues on the Fed's tapering plans.
This document examines the historical relationship between US presidential elections and gold prices. It finds that gold performance around elections is complex, with prices rising or falling under both Republican and Democratic administrations. While gold has become more responsive to macroeconomic factors since the 1970s, there is no clear linear pattern between political parties and gold. The document tracks gold prices in election years since 1980, finding volatility increases around elections but no consistent pattern. It concludes that many factors influence gold, making the impact of any single election uncertain, particularly in today's economically challenging environment.
Gold prices fell significantly, dropping over 2% to near a 2-week low, as the dollar strengthened after Jerome Powell was renominated as Federal Reserve Chair, raising expectations that the Fed will stay on track to taper its economic support. Powell's renomination signaled that monetary policy would likely remain on its current path, boosting the dollar. While gold prices edged up slightly on the following day, the metal continued hovering near its recent low as the dollar remained strong on bets for earlier U.S. interest rate hikes.
Gold prices retreated as a Fed governor said the central bank should speed up tapering its bond purchases to allow for earlier interest rate hikes if high inflation persists. This led markets to price in two full rate hikes for 2022. Looking ahead, upcoming US economic data could influence monetary policy expectations, which may impact gold if a more hawkish shift occurs. Technical analysis indicates gold may test support at $1,827 and resistance at $1,870, with a break below the former opening the door for further declines.
Gold opened weakly on Monday but recovered from its lows in the first hour of trading. While gold prices remained under pressure from profit-taking, haven demand did not taper amid US and European economic uncertainties. The document discusses gold's spot price movements and outlook, noting gold may remain range-bound but to buy on dips as inflation and global uncertainties support the safe-haven asset. It provides charts showing bears eyeing a drop to the 38.2% Fibonacci level this week.
Gold prices consolidated after reaching a monthly high as upbeat US economic data reduced expectations of further Fed stimulus. The gold price may remain supported if the latest US PCE price index shows another month of high inflation, but it faces a pullback ahead of the Fed's policy update. Technical indicators suggest gold could stage a deeper correction if it fails to hold above $1,850 support.
The document discusses the gold (XAUUSD) price analysis. It notes that gold is currently in a bullish long-term trend but bearish medium-term trend. The price may bounce off resistance at $1,873 or break support at $1,831. If support holds, prices could rise to $1,908-$1,959, but a break below $1,831 may see prices fall to $1,796-$1,750. Central bank speakers and the US dollar will be key influences on gold prices going forward.
- Gold broke out strongly in early November, potentially signaling the start of a macro rally. It has since consolidated above $1,877 support.
- For gold to turn bearish in the near-term, it will need a strong break below $1,834 support. Further pullbacks are unlikely and upside targets remain at $1,877 and $1,916 resistance levels.
- Gold rebounded as yields declined, but the strengthening US dollar may limit upside. Key support is at $1,850, with resistance around $1,863-$1,865. The technical outlook remains bullish overall for gold.
Gold prices broke through a major resistance level at $1834 last week, continuing higher to set a new five-month high of $1877. The breakout has formed a bullish channel and bear flag pattern, suggesting further upside if buyers can push above the $1876 50% Fibonacci retracement level from last year's high. However, gold faces resistance around $1900 and the dollar and Treasury yields could rise again to weigh on gold prices if the Fed signals a more hawkish stance at its December policy meeting.
The document discusses whether gold has resumed its role as an inflation hedge. It notes that gold initially did not perform well against inflation this year but has recently strengthened. The key factor for gold is real yields on inflation-protected bonds, which have fallen significantly as investors rush to buy them, indirectly boosting gold prices. The document argues gold's rally could continue in the near term due to ongoing high inflation, geopolitical tensions, and seasonal factors. However, it says inflation may cool in the future as supply chains improve and rates rise, weakening the outlook for gold's performance over the longer term.
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
An accounting information system (AIS) refers to tools and systems designed for the collection and display of accounting information so accountants and executives can make informed decisions.
A toxic combination of 15 years of low growth, and four decades of high inequality, has left Britain poorer and falling behind its peers. Productivity growth is weak and public investment is low, while wages today are no higher than they were before the financial crisis. Britain needs a new economic strategy to lift itself out of stagnation.
Scotland is in many ways a microcosm of this challenge. It has become a hub for creative industries, is home to several world-class universities and a thriving community of businesses – strengths that need to be harness and leveraged. But it also has high levels of deprivation, with homelessness reaching a record high and nearly half a million people living in very deep poverty last year. Scotland won’t be truly thriving unless it finds ways to ensure that all its inhabitants benefit from growth and investment. This is the central challenge facing policy makers both in Holyrood and Westminster.
What should a new national economic strategy for Scotland include? What would the pursuit of stronger economic growth mean for local, national and UK-wide policy makers? How will economic change affect the jobs we do, the places we live and the businesses we work for? And what are the prospects for cities like Glasgow, and nations like Scotland, in rising to these challenges?
Dr. Alyce Su Cover Story - China's Investment Leadermsthrill
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
How to Invest in Cryptocurrency for Beginners: A Complete GuideDaniel
Cryptocurrency is digital money that operates independently of a central authority, utilizing cryptography for security. Unlike traditional currencies issued by governments (fiat currencies), cryptocurrencies are decentralized and typically operate on a technology called blockchain. Each cryptocurrency transaction is recorded on a public ledger, ensuring transparency and security.
Cryptocurrencies can be used for various purposes, including online purchases, investment opportunities, and as a means of transferring value globally without the need for intermediaries like banks.
Navigating Your Financial Future: Comprehensive Planning with Mike Baumannmikebaumannfinancial
Learn how financial planner Mike Baumann helps individuals and families articulate their financial aspirations and develop tailored plans. This presentation delves into budgeting, investment strategies, retirement planning, tax optimization, and the importance of ongoing plan adjustments.
Discovering Delhi - India's Cultural Capital.pptxcosmo-soil
Delhi, the heartbeat of India, offers a rich blend of history, culture, and modernity. From iconic landmarks like the Red Fort to bustling commercial hubs and vibrant culinary scenes, Delhi's real estate landscape is dynamic and diverse. Discover the essence of India's capital, where tradition meets innovation.
Explore the world of investments with an in-depth comparison of the stock market and real estate. Understand their fundamentals, risks, returns, and diversification strategies to make informed financial decisions that align with your goals.
Confirmation of Payee (CoP) is a vital security measure adopted by financial institutions and payment service providers. Its core purpose is to confirm that the recipient’s name matches the information provided by the sender during a banking transaction, ensuring that funds are transferred to the correct payment account.
Confirmation of Payee was built to tackle the increasing numbers of APP Fraud and in the landscape of UK banking, the spectre of APP fraud looms large. In 2022, over £1.2 billion was stolen by fraudsters through authorised and unauthorised fraud, equivalent to more than £2,300 every minute. This statistic emphasises the urgent need for robust security measures like CoP. While over £1.2 billion was stolen through fraud in 2022, there was an eight per cent reduction compared to 2021 which highlights the positive outcomes obtained from the implementation of Confirmation of Payee. The number of fraud cases across the UK also decreased by four per cent to nearly three million cases during the same period; latest statistics from UK Finance.
In essence, Confirmation of Payee plays a pivotal role in digital banking, guaranteeing the flawless execution of banking transactions. It stands as a guardian against fraud and misallocation, demonstrating the commitment of financial institutions to safeguard their clients’ assets. The next time you engage in a banking transaction, remember the invaluable role of CoP in ensuring the security of your financial interests.
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What Lessons Can New Investors Learn from Newman Leech’s Success?Newman Leech
Newman Leech's success in the real estate industry is based on key lessons and principles, offering practical advice for new investors and serving as a blueprint for building a successful career.
2. Points To Be Covered Today:
• Is Gold Market Going Back Into The 1970s?
• Gold Under Fed's New Monetary Regime
• Will the Bomb Explode, Igniting Gold?
• Gold As An Inflation
3. Is Gold Market Going Back Into The 1970s
• They say that time travels are impossible. But we just went back to the
1960s! At least in the field of the monetary policy. And all because of a new
Fed’s framework.
• So, please fasten your seat belts and come with me into the past and
present of monetary policy – to determine the future of gold!
• At the end of August 2020, the Fed has modified its Statement on Longer-
Run Goals and Monetary Policy Strategy – for the first time since its
creation in 2012. As a reminder, the Fed will now target not merely a 2
percent rate of inflation, but an average inflation rate of 2 percent, which
allows overshooting after the periods of undershooting.
• So, the Fed will try to compensate for periods of low inflation with periods
of high inflation.
• Hence, on average, we will see a more accessible monetary policy and
higher inflation -Good news for the gold bulls.
4. Is Gold Market Going Back Into The 1970s - I
• One of the many problems with the Fed’s new regime is that we do not know how
long will be the period over which the US central bank will average inflation, or
what does it mean that the Fed will tolerate temporaral inflation over 2 percent –
it’s not hard to see that practically any policy action could be justified through an
appropriate choice of the period’s length.
• The second significant shift within the Fed’s strategy is a different reaction
function. So far, the Fed reacted (at least in theory, the practice was a different
kettle of fish) symmetrically to both upward and downward deviations from the
natural rate of unemployment.
• When the economy approached full employment, the Fed started its tightening
cycle to prevent overheating and the rise of inflation. Now, the US central bank
will be informed by assessments of the shortfalls of employment from its
maximum level.
• It means that the Fed learned to stop worrying about overheating and loved
the inflation bomb.
5. Is Gold Market Going Back Into The 1970s - II
• The US central bank believes now that a robust job market can be
sustained without causing an outbreak of inflation, so it will not
hike interest rates preemptively, based on the signals coming from the
labor market and other segments of the economy, but will wait for inflation
to materialize and act only later.
• Such an approach may seem right, especially after several years of low
inflation.
• So why to worry about its rise?
• Why hike interest rates too early and kill an economic expansion?
• However, the Fed risks that inflation will get out of control. And that
the US central bank would be surprised and its reaction would be delayed.
In such a scenario, which is not unprecedented, the Fed will have to
tighten its monetary policy to curb inflation aggressively. As a former Fed
Chair William McChesney Martin said, the central banker's job is to “take
away the punch bowl just as the party gets going.”
6. Is Gold Market Going Back Into The 1970s - III
• At some point, the punch bowl has to be taken away, no matter how much
the guests object.
• But the longer the party goes on, and the more drunk participants are, the
harder it is to take the vase. If inflation exceeds 2 percent and continues its
climbing, the Fed will have to take away the punch bowl very abruptly,
much more aggressively than earlier and preemptive actions.
• Indeed, this is why the Fed’s new monetary regime takes us back to the
1960s and, possibly, to the 1970s.
• Then as today, policymakers put a high priority on achieving full
employment relative to price stability.
• The Fed mistakenly believed that unemployment's natural rate was lower
than it was, so the inflationary pressure was unlikely to emerge.
7. PCE & CPI Inflation Rates
• Please look at the chart again. As one can
see, high inflation did not show up overnight.
• Instead, it began to pick up in the late 1960s,
together with massive fiscal deficits (high
deficits – don’t they look familiar?) caused by
the Vietnam war and “Great Society”
programs. But despite the upward trend in
inflation since 1965, the Fed remained
focused on full employment, believing that
inflation would subside, based on an overly
optimistic view of the economy’s potential
output and natural unemployment rate.
• As a result, the monetary policy remained
overly accommodative, with interest rates too
low until Paul Volcker came and hiked
the federal funds rate aggressively to almost
20 percent in the early 1980s
8. Effective Federal Fund Rates
• The Volcker’s aggressive tightening
was clearly bad for gold, which
entered a bear market.
• However, the 1970s, when the Fed
was behind the inflation curve, was an
excellent period for the yellow metal.
• History never repeats itself, but the
Fed’s new strategy increases the risk
of replaying the unpleasant past (as
well as the increased broad money
supply in response to the coronavirus
crisis).
• Even if the 2020s only rhymes with
the 1970s, they should still be
positive for the gold prices.
9. Gold Under Fed's New Monetary Regime
• In August 2020, Federal Reserve Chair Jerome Powell delivered his Jackson Hole
speech, unveiling a new monetary framework in the process.
• He announced a flexible average inflation targeting strategy (FAIT). The new regime
implies that when the inflation undershoots its target in one period, the US central bank
will try to push inflation above the target in the next period to compensate for the previous
shortfalls.
• In other words, after periods of persistently low inflation, the Fed "will likely aim to achieve
an inflation moderately above 2 percent for some time," as said in the
amended Statement on Longer-Run Goals and Monetary Policy Strategy.
• In plain English, the Fed announced that it will accept an inflation that is somewhat
higher. And that it will not continue its standard approach, in use at least since Paul
Volcker, and it will not raise interest rates to curb climbing inflation.
• But shouldn't the central bank rather try to achieve the price stability and protect the
society against high inflation? Of course it should.
• However, the recent years of low inflation persistently below the Fed's target of 2 percent
(here I mean low consumer price inflation, and asset price inflation that is significantly
higher), which are presented in the chart below, raised doubts in the marketplace about
whether the US central bank is able to generate higher inflation at all.
12. 5 & 10 Year Inflation Expectation - I
• The shift to the FAIT is a big move that should be positive in the long run
for gold, which is considered an inflation hedge.
• But, perhaps even more important is the change within the employment side of
the Fed's mandate. Under the previous strategy, the maximum employment goal
referred to the natural rate of unemployment that would be consistent with stable
inflation in the long run.
• When the Fed expected the unemployment rate to fall below its estimate of the
rate of unemployment that would not accelerate inflation, it raised the federal
funds rate to prevent the increase in inflation.
• Under the new regime, the Fed will not hike interest rates preemptively and
unless there are visible signs of accelerating inflation.
• It means that the FOMC will prioritize employment and economic growth over
inflation and will not impede recoveries unless the inflation target is severely
threatened.
• Hence, both major revisions - in the inflation and employment objectives -
are fundamentally positive for the gold prices. It does not, however, mean
that we will immediately see double-digit inflation.
13. The Inflation And Employment Objectives - Are
Fundamentally Positive For The Gold Prices
• Both major revisions - in the inflation and employment objectives - are
fundamentally positive for the gold prices. It does not, however, mean that we will
immediately see double-digit inflation. After all, the Fed could not generate inflation in line
with the target, so why it should boost it above the target, even temporarily?
• But the US central bank has given itself room to loosen its monetary policy for years. The
interest rates will remain close to zero for longer than it would be appropriate under the
old regime, as the Fed will not try any longer raise interest rates to preempt inflation.
• In other words, the central bank is not likely to hike the federal funds rate until inflation is
above 2 percent for some time - according to the recent Fed's dot-plot, this is not going to
happen before 2024. Hence, the Fed's new framework implies lower real interest
rates - is good news for the precious metals investors.
• And the risk of inflation getting out of control should also support the gold prices. After all,
as former Fed Chair William McChesney Martin Jr. said, "the effective time to act against
inflationary pressures is when they are in the development stage--before they have
become full-blown and the damage has been done".
• It seems that the Fed has forgotten this truth. Well, those who cannot remember the past
are condemned to repeat it. Although this statement has negative connotations, I believe
that gold bulls would like to relive the 1970s!
14. Will The Bomb Explode, Igniting Gold
• The bomb can explode one day. And I do not mean here
missiles from North Korea, Iran or China.
• Neither I think about the viral threat - the coronavirus
bomb has already blown up in spring, dragging the
world into deep economic crisis.
• I have in mind the U.S. debt bomb. Just take a look at
the chart below. As one can see, the public debt has
reached 107 percent of the GDP even before
the pandemic.
16. US Federal Debt To GDP - I
• And it further increased in the second quarter of 2020, possibly even to around 137
percent, according to the U.S. National Debt Clock.
• Although the surge in the ratio of debt-to-GDP partially resulted from the unprecedented
collapse in the economic activity triggered by the epidemic and the Great Lockdown, it
was also driven by the vast additional government expenditures.
• As revenues declined, the fiscal deficit is expected to balloon from $984 billion, or
4.6 percent of GDP, in fiscal year of 2019, to $3.7 trillion, or 17.9 percent of GDP in
2020, according to the CBO. In consequence, the already high public debt is forecasted to
increase even more. And Fitch has already downgraded its outlook on the U.S. debt from
stable to negative.
• Some economists claim that government stimulus financed by debt was necessary given
the disastrous economic effects of the coronavirus crisis.
• Maybe it was, maybe not (we believe that increased spending on health should be
accompanied by spending cuts in other areas) - but one thing is certain. When the battle
with Covid-19 will be won (and it will be!), the policymakers will need to detonate the
debt bomb.
17. Ways Supportive For Gold Prices
• The first is obvious and the less harmful one in the long-run. The
government could reduce its excessive spending and, thus, fiscal deficits,
stabilizing the ratio of debt to the GDP. Unfortunately, it is the most difficult
option from the political point of view, especially when both Trump and
Democrats talk about the need of more economic stimulus and higher
spending on infrastructure.
• Second, the government could hike taxes to raise more revenues, filling
the budget hole. Trump is unlikely to raise taxes, but if Biden wins, higher
taxes for the richest are possible. Although they would reduce the fiscal
deficits, hiking taxes, especially in the aftermath of the recession, would be
harmful for the economic growth.
• All this means that policymakers will be tempted to reduce the public debt
through either higher inflation or financial repression.
• Both ways are supportive for the gold prices.
18. Gold As An Inflation Hedge
• Gold is believed to be an inflation hedge, so the increase in inflation - or mere inflation
expectations - would increase the demand for gold and its price. Moreover, higher inflation
means lower real interest rates - which would also make the yellow metal shine. So,
attempts to inflate away the debt would weaken the greenback, lower the already ultra-
low real bond yields, and support the gold prices.
• Financial repression is maybe less spectacular but also positive for the yellow metal. It
works as follows: the government caps the interest rates that financial institutions are
allowed to pay.
• The idea is simple: thanks to the financial repression, government can borrow cheaper
than it could otherwise because people simply are not allowed to get better returns
elsewhere. This method wouldn't be unprecedented, as it was used to reduce the high
public debt after World War II.
• Oh, by the way, the interest-rate ceilings were lower than the rate of inflation, so creditors
received negative returns in real terms.
• It goes without saying that gold should shine during financial repression. After all, the
argument that gold doesn't pay interest would be less convincing in the world where other
assets offer scant yields or even negative returns in real terms.
19. Gold As An Inflation Hedge - I
• Yield curve control contemplated by the Fed would be that kind of financial repression, as
it would also aim to keep the Treasury yields at sufficiently low level to reduce the debt-to-
GDP ratio over time.
• If implemented - so far the U.S. central bank has not endorsed the idea - it would maintain
ultra-low interest rates with all their negative consequences, such as: the prevalence of
zombie companies and misallocation of capital, the search for yield and excessive risk-
taking, the rise in private indebtedness, etc.
• Moreover, the ultra-low interest rates could lead to capital outflows, which would weaken
the U.S. dollar, while strengthening gold.
• Last but not least, the pledge to keep interest rates at very low level could require the
Fed to let inflation turn hot, which would also support the gold prices.
• To sum up, high public debt will be one of the most significant legacies of the coronavirus
crisis. The efforts to reduce it will become an important element of the political debate in
the upcoming years, as policymakers will realize - sooner or later - that they are sitting on
a ticking time bomb.
• It seems that financial repression will be the preferred method of reducing the high debt-
to-GDP ratio, dominating the investment outlook in coming years.
• Precious metals investors holding gold should benefit from negative real interest
rates.