Did you spot the big hole in the Obama speech on job creation today? Nothing new on small business access to credit – possibly the single biggest obstacle to job creation in the US. This is a huge issue for the economy, the White House and the Fed.
With the Fed rightly withdrawing from sectoral intervention via financial markets now the financial system has normalised, supporting small business access to finance is properly a job for the government.
On paper this is not difficult. The government could provide guarantees to limit losses on small business loans or create a funding vehicle to coinvest in such loans alongside banks (I prefer this route as the taxpayer and the bank would have the same economic interests). Read more
Prices rose and yields dropped on India’s benchmark ten-year bonds, after central bank governor Duvvuri Subbarao signaled interest rates aren’t about to rise. Monetary policy action would only be needed if food inflation “persists for a long time,” he said. Inflation has been rising of late, with the November figure the highest for a year, although Subbarao said yesterday that food inflation was a supply-side phenomenon and that monetary policy was an “ineffective instrument” to rein in accelerating costs.
… and pledges to keep the target rate for overnight loans between commercial banks at 0.25 per cent till June, saying a strong dollar could harm economic growth. “Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010,” Bank of Canada Governor Mark Carney said in a statement.
The central bank will probably raise its key rate to 0.75 percent in the third quarter of next year and to 1.25 percent by the end of 2010, according to economists surveyed by Bloomberg News.
Remember that Mervyn King, the Bank of England governor, believes the current UK government’s plans for budgetary consolidation are not credible. “The longer there is not a credible plan that sets out what actions will be taken the more [a credit ratings downgrade] is a risk,” he told the Treasury Select Committee last month.
Pity Japan’s Democratic party. When they took power less than three months ago, party heavyweights were hoping to use the fat from a huge stimulus package drawn up by the former ruling Liberal Democratic party to help fund implementation next year of some of their generous manifesto pledges. Read more
Japan’s cabinet on Tuesday agreed Y7,200bn ($80.6bn) in stimulus spending intended to shore up a fragile economic recovery with measures including support for employment, easier financing for smaller companies and promotion of environmental protection.
Announcement of the package, which is to be implemented in the first quarter of 2010, had been delayed since last week after a tiny but vocal coalition partner in the new Democratic party-led government demanded more generous spending. More on ft.com.