Daily Archives: June 18, 2010

This does not look good, says David Beckworth: the US market expects aggregate demand to fall, and if the Fed does not act to stabilise the fall in spending, it will act as an effective tightening of monetary policy.

His logic? Markets’ expectations of inflation fell in the first half of this year as shown by the falling yield spread between inflation-protected and regular bonds (see chart). Productivity growth – which could have explained it – also appears to be falling. “That leaves us with one troubling possibility: the market is expecting aggregate demand to decline going forward.” Read more

“In the recent financial crisis, the ratings on structured financial products have proven to be inaccurate,” reads p822 of Dodd’s bill. “The activities of credit rating agencies are fundamentally commercial in character and should be subject to the same standards of liability and oversight as apply to auditors, securities analysts, and investment bankers.”

Well, Mr Dodd’s wish might just have come true. The WSJ is reporting agreement between the House and Senate:-

A panel of Senate and House lawmakers negotiating final details of a financial-overhaul bill agreed this week to

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Ralph Atkins

Lorenzo Bini Smaghi, European Central Bank executive board member, has offered another reason why fiscal retrenchment need not spell recession. This has obviously become an important theme for the ECB, with the US increasing the pressure for European policy steps that promote growth.

Speaking in Brussels, Mr Bini Smaghi pointed out the role of financial markets is often overlooked when future scenarios are modelled. “An unsustainable fiscal policy will, sooner or later, receive the attention of financial markets; they tend to react abruptly, generating a crisis which impacts heavily on the economy.”

He went on: “A timely fiscal adjustment which puts debt dynamics back onto a sustainable path entails a stronger growth over time. Read more

Current vice-governor Miroslav Singer will start his new role as governor of the Czech National Bank from July 1. He will replace Zdeněk Tůma, who announced in April that he would step down seven months early, saying it was best for the Bank “if the period of uncertainty connected with the changes in the Bank Board is as short as possible”.

Mr Singer has been appointed for a term of six years, and will become the third governor since the Bank’s inception in 1993. As Vice-Governor, Miroslav Singer has been overseeing the activities of the departments responsible for financial market regulation and analyses, licensing and enforcement and financial market supervision since early 2007.

Confirmation of the Bank of Japan’s $33bn loan programme were released in bank minutes today:

1. Eligible Counterparties
Financial institutions that are already counterparties in the Bank’s Funds-Supplying Operations against Pooled Collateral at All Offices and wish to be counterparties for this measure.

2. Form of Loans
Loans shall be provided against pooled collateral (the same form as the Bank’s Funds-Supplying Operations against Pooled Collateral).

3. Duration of Loans
Duration of each loan shall be 1 year, in principle, and the loan can be rolled over.

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