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Search Results for US monetary policy

Christoph M. Schmidt

Interviews 19th April 2021

“The Rapid Recuperation In World Trade Has Already Enabled Industry to Almost Completely Recover”

Lidia Conde (Francfort) | Christoph Schmidt, chairman of the Franco-German economic think tank for the past year – when he stepped down as chairman of the council of wise men advising the Berlin government – makes no secret of his concerns: “Both the European Green Deal and the Next Generation EU nourish the hope that Europe will emerge stronger from this crisis in the end. But between the EU’s ambitious plans and the final success, the final results, there is a long way to go. And on that road, member states will have to undertake the structural reforms that will increase their long-term growth potential and show their readiness to return to compliance with the stability and growth pact, with the debt rules”.

Turkiye central.bank

European economy 24th March 2021

Turkey: Persistent Challenges In Monetary Governance Increase Risk To Macroeconomic Stability

Scope Ratings | The dismissal of central bank governor Naci Ağbal worsens the crisis of confidence in Turkey’s monetary policy, further undermining macroeconomic stability. This is credit negative for Turkey’s B/Negative sovereign ratings. Saturday’s announcement of the sudden change in central-bank leadership, shortly after a market-friendly, above-expectation 200bp tightening of rates on Thursday, underlines Recep Tayyip Erdoğan’s wish for looser monetary policy in support of unsustainably high growth.

Change of cycle to cyclical stocks to defensive

In the World, World economy 22nd March 2021

US Stock Market: Rational Exuberance?

CaixaBank Research (Adriá Morron and Alex Ruiz) | Since the lowest point recorded last March, the main index for the US equity has risen almost non-stop by around 70%. In recent weeks, this rally has also been accompanied by dynamics in certain US equity segments that are reminiscent of events followed by major stock market adjustments in the past. Is the US equity market decoupling from economic fundamentals?

Abengoa copper mine

In the World, World economy 18th February 2021

Chile, Egypt, Senegal, Malaysia and Vietnam: Bright Spots In A World Economy That Just Begins To Recover From Covid-19

Theo Smid (Atradius) | With the economic outlook improving, there are opportunities to be found. We identify markets that have relatively strong prospects. Promising markets are identified based on three criteria: (1) the pace of GDP recovery in the wake of the Covid-19 crisis, (2) a relatively low number of Covid-19 cases (per 100,000 inhabitants), and (3) stable political and institutional conditions. We do acknowledge that for some countries there may be an underreporting of Covid-19 cases, as testing capabilities differ per country. Therefore, we attach a higher weight to the other two factors in the selection of countries. Based on these broad criteria alongside our market experience, we have identified Chile, Egypt, Senegal, Malaysia and Vietnam as the most promising markets.

Biden Yellen tandem

Relevant News Item 20th January 2021

Waiting for President Biden, Next Treasury Secretary Yellen Goes All Out With The Stimulus Plan

The appointment of the day will be in the United States, where Biden will take office as the country’s 40th President. Donald Trump will not attend the simple inauguration ceremony.The health and economic crises are Biden’s main challenges for the current legislature, including the approval of a $1.9 trillion stimulus plan. Just yesterday Janet Yellen, who will serve as Treasury Secretary in the Biden Administration, defended that stimulus plan in her speech at the Senate. “We must act big,” she said.

The interests on the benchmark US bonds rose over 3% in April, for the first time since the start of 2014

In the World, World economy 23rd December 2020

Are US Treasuries Turning Japanese?

Keith Wade (Schroders) | Clearly, Japan’s debt is significantly higher than the US’. However, it is stable rather than rising. This reflects the poor position of US government finances before Covid-19, where the budget deficit was running at 6.3% of GDP at a time when the economy was doing well with unemployment at less than 4%, a 50-year low. (In net terms the comparison is less stark with Japan at 180% GDP versus 114% in the US).

Bulgaria

European economy 14th December 2020

Bulgaria-Recession Softened By Fiscal And Monetary Measures

Crédito y Caución (Atradius) | Bulgaria’s monetary policy framework is strong, with a solid commitment to its currency board arrangement (the lev has been pegged to the euro since 1997). As a result, the Bulgarian Central Bank usually follows monetary policy decisions made by the European Central Bank. Although Bulgaria entered the Exchange Rate Mechanism II of the EU in June 2020, an adoption of the euro seems rather unlikely in the short run. While the currency peg supports foreign investor confidence, it somehow limits Bulgaria’s ability to combat external imbalances.

Fed Powell

In the World, World economy 14th December 2020

USA, Banana Republic: Its Economy In The Hands Of The Fed

Pablo Pardo (Washington) | The catastrophe following the elections, with president Donald Trump refusing to admit electoral defeat and practically the entire Republican Party supporting him, has confirmed the US is almost a developing country but without malaria. With the US in a political situation of underdevelopment, the management of the economy until Trump leaves the White House, passes to the Federal Reserve. In principle, this is on the outside of political disputes.

THE INFLATONARY SUPPLY OF UNBACKED US DOLLARS AND THE PRICE OF GOLD

In the World, World economy 21st November 2020

Why Does The US Benefit From A Dollar That Isn’t Tied To The Value Of A Glittery Hunk Of Metal?

Michael Klein via The Conversation | Going back to a gold standard would create new problems. For example, the price of gold moves around a lot. A year ago an ounce of gold cost $1,457. The pandemic helped drive up the price by 40% to $2,049 in August. As of Nov. 18, it was about $1,885. Clearly, it would be destabilizing if the dollar were pegged to gold when its prices swings wildly. Exchange rates between major currencies are typically much more stable. 

ECB Lagarde signing

Relevant News Item 10th November 2020

Monetary Policy And Fiscal Policy Merge

Flosbach von Storch | National debt-to-GDP ratios have already reached historic highs. Gross national debt will likely exceed 260 per cent of GDP in Japan by the end of the year, and reach around 140 per cent in the USA and around 100 per cent in the eurozone. Concerns about the high level of debt being unsustainable in the long run are at least theoretically unjustifiable as long as interest rates and government bond yields remain close to zero. This is because zero interest rates allow practically any deficit or mountain of debt to be easily funded.