In one year, China has used up $ 676 billion of its reserves, which had reached a total of $4 trillion. It could let the remimbi fall and restore monetary autonomy in order to lower rates and boost an economy which is in recession. But this only serves to worsen the volume of debt in dollars, which of course erodes the status it seeks for its currency. The only solution: EU, US help for China.
In her speech yesterday to the US Congress, Fed chair Janet Yellen made it clear that rates will remain stable over the coming months, despite concerns over China and global growth. The Fed’s monetary policy has no pre-established direction and, if it needed one, it would be adusted to meet the objectives entrusted to the institution. But the problem is that the market will demand more from the Fed.
Vincent Chan via Caixin | The Hong Kong dollar has been under pressure recently. On January 20, the value of the currency plunged to an eight-year low of 7.8228 to the U.S. dollar. Meanwhile, the stock market’s benchmark Hang Seng Index fell 3.8 percent from the previous day to 18,886.3, the lowest level in 42 months.
James Alexander via Historinhas | Where are the John Maynard Keynes’ and Milton Friedman’s when you need them? The Fed, led by Janet Yellen and Stanley Fischer, has made a huge mistake in tightening monetary policy. The other members of the FOMC are largely irrelevant noise, with the possible exception of the NY Fed’s Dudley, though all carry blame.
James Alexander via Historinhas | We often hear from both the right and the left that the relative lack of growth in the US is mostly due to supply issues, in particular changing demographics. Those baby-boomers retiring have created a new stagnation. The US Bureau for Labor Statistics (BLS) has consistently encouraged this view. There’s really nothing that can be done about it.
It’s like a curse. Every time a central bank raises interest rates, it has to retract. Sometimes it’s because the move has been precipitative. Three weeks after the Fed decided to raise rates, oil prices and the Chinese stock market tumbled in unison and Wall Street started a correction. So had the Fed been too hasty?
Marc Chandler via Caixin | Lenin and Kautsky once debated the future of imperialism. Kautsky saw a trend toward a global ruling class. Lenin argued that despite such tendencies, inter-imperialist rivalries would prevent the emergence of global ruling class. The so-called West was never as homogenous as the cold warriors pretended. There were asymmetrical perceptions of the threat posed by the Soviet Union until its dying days. Only now do the United States and Europe contemplate a free-trade pact.
BARCLAYS | In our view, achieving the FOMC’s target of 2% PCE inflation may require a substantial undershoot on the unemployment rate ( to 4% if not below ). Should the unemployment rate remain near current levels or should inflation expectations drift lower, the FOMC would be unlikely to hit its inflation target over the foreseeable future.
Craig Moran | Territorial spats between China and its Southeast Asian neighbors over Beijing’s infamous “nine-dash line” dotted across the South China Sea have substantially soured the mood of its allies.
Fed President Janet Yellen has pointed out very politely that the law to reform the central bank is “a serious mistake.” She believes monetary policy cannot be linked to indicators like in a mathematical formula.