Daily Archives: April 6, 2010

James Politi

Ever heard of asymmetrical risk?

Well, it may be a key reason why Federal Reserve policymakers are keeping interest rates “exceptionally low” for an “extended period”. Read more

Simone Baribeau

Gotta hand it to the Financial Crisis Inquiry Commission – They’ve got their work cut out for them tomorrow, if they want to get any new information at of former Federal Reserve Chairman Alan Greenspan.

Mr Greenspan has written his memoirs, published a 66-page paper on the crisis, and been interviewed by Congress and the media ad naseum.

So what questions could the FCIC possibly ask that would shed more light on Mr Greenspan and his views? We’ve asked the Fed watchers. Here are their responses. Read more

Alan Beattie

The Inquisition Financial Crisis Inquiry Commission, the non-partisan US investigation into what went wrong, is holding an auto-da-fe hearings this week on lessons learned from the crisis. A bit late, frankly, since it is due to report by the end of the year, and the financial regulatory bill is supposed to be done and dusted well before then.

Perhaps instead it can act as a truth and reconciliation commission, or a historical re-enactment society. One of the panel’s victims guests is Chuck Prince, the former Citibank head of “as long as the music’s playing, you’ve got to get up and dance” notoriety, whose bank was eventually rescued by the government for a huge outlay. The historical model for the FCIC is the Pecora Commission, named after the aggressive counsel on the Senate banking committee who tenaciously pursued miscreants and whose investigations led to sweeping federal financial regulation. One of his most notable targets was Charles Mitchell, head of the National City Bank of New York, the speculative behaviour of which was widely blamed for contributing to the stock market crash. And National City Bank later turned into….Citibank. Some things never change.

The election campaign has kicked off with another fight about jobs and the economy. Forgive my naivety, but the distortions and liberties taken with economics by both sides over taxes and jobs have already been breathtaking.

David Cameron, the Conservative leader, launched his campaign promising to stop “the job tax which would wreck our economy”, which is even more starkly illustrated in the latest Tory poster campaign. Pity that poor economic green shoot.

All of this hyperbole is nonsense. But showing no greater regard for economics, Gordon Brown, still prime minister until 6 May at least, warned: “Unemployment is falling but a party that does not believe in government action would put jobs at risk”. I have discussed this canard many times in this blog and will not go through it again today.

Instead, let’s just focus on the economics behind jobs and taxation briefly. The subject is deep, not fully settled and complex. But there are three things on which most economists would broadly agree. The fact Britain’s politicians ignore them does them no credit.

First, Read more

Ralph Atkins

As if Greece was not creating enough gloom about eurozone divergences… A European Central Bank-hosted conference next week is likely to highlight further setbacks to Europe’s monetary union that have resulted from the global economic storms of the past three years.

The occasion will be one of the last set-piece events attended by Lucas Papademos, ECB vice president, who has had responsibility for financial stability issues and steps down at the end of May. He opens the conference on “financial integration and stability: the legacy of the crisis”. Read more

By Peter Smith, Sydney correspondent

Australia’s central bank underlined its determination to reduce monetary stimulus on Tuesday when it lifted its benchmark interest rate from 4 to 4.25 per cent, its fifth such rise since OctoberRead more

Robin Harding

Leave aside for a moment the question of whether you think deflation is a crucial economic problem for Japan (I do but I recognise that others don’t). One of the most frustrating things about the debate is that no one will join up the different policies that would be needed to end it.

Here’s financial services minister Shizuka Kamei via Bloomberg/BusinessWeek:

Japanese Financial Services Minister Shizuka Kamei called for stimulus spending of at least 11 trillion yen ($117 billion) to rid the country of deflation. “Japan’s economy is not at the stage where it has a strong recovery that can pull the nation out of this deflationary spiral,” Kamei said at a news conference in Tokyo today. “Immediate implementation of this year’s budget alone isn’t sufficient.”

So Mr Kamei thinks that if the government spent enough money deflation would get better (Mr Kamei tends to think this will solve a lot of problems).

Here is finance minister Naoto Kan via Xinhua:

“Of course, we understand that each organisation is independent, ” Kan said at a news conference. “But at the same time the BOJ and the government have in a way been united, particularly in connection with addressing deflation.”

Mr Kan is always keen to co-opt the BOJ and paint it as solely responsible for deflation, fixing it at the government’s behest. All the government and the BOJ are really united on is their belief that ending deflation is the other side’s job. The government would like aggressive monetary policy from the BOJ; the BOJ would like structural reform from the government.

To demonstrate that, here is BOJ governor Masaaki Shirakawa in his January speechRead more