The good news today was that Janet Yellen and Sarah Bloom Raskin were both sworn in today by Ben Bernanke as Federal Reserve governors, meaning the top echelon of policymakers at the US central bank is nearly complete. Six seats on the seven-member board have now been filled, and Ms Yellen can now take up her position as vice-chair replacing the retiring Don Kohn.
Although Ms Raskin and Ms Yellen have enjoyed a relatively smooth ride through the confirmation process in the Senate, their colleague Peter Diamond of the Massachusetts Institute of Technology is having a much tougher time. Following grumblings about his suitability for the job from powerful Republican Richard Shelby, his nomination was scrapped and then resubmitted from the White House, and remains on hold in the upper chamber.
But Mr Diamond’s limbo is by no means the most troubling or most egregious. Jack Lew, the Obama administration’s pick for budget director, was cleared for the post in September by a Senate committee on a unanimous bipartisan vote. Read more
Government bonds bought last week by the European Central Bank totalled €1,384m, a tenfold increase on last week’s €134m purchase.
As Ralph and David will shortly report on ft.com, purchases of Irish bonds were largely behind the increase, according to traders:
Ireland’s escalating banking crisis forced the ECB to ramp-up significantly its government bond buying programme last week, when purchases hit almost €1.4bn. Some of the ECB purchases reported on Monday may have been deals struck in the previous week but only settled last week.
Growing belief in the ECB’s ability to keep prices steady has a systematic effect on money demand and velocity, and should be factored into the Bank’s monetary policy strategy, says research from the Irish central bank’s quarterly bulletin.
In essence, changes in Bank credibility since monetary union are inversely related to changes in money demand. So in Italy, where central bank credibility has risen by a substantial 0.5 per cent since the ECB’s formation, money demand has fallen by 0.35 per cent (see chart).
Money demand has been falling in the euro area since the launch of the currency, though “no generally accepted and plausible rationale seems to have been offered for this phenomenon”.
The researchers’ advice to the ECB?
More rapid money growth than would be forecast o
Today’s announcement that British higher rate taxpayers will no longer receive child benefit from 2013 represents the triumph of simplicity over fairness.
This will cause problems for the coalition government because it disproves the government’s claim that it always pays to work more, it will feel unfair to well-off single-earner families, it will feel wrong to some very well-off two-earner families and, unless the administration is perfect, it will recognise marriage in the tax system in the reverse way to that desired by the Conservative element in this government.
You have to ask yourself – has George Osborne picked the right spot on a difficult trade-off between simplicity and fairness? And all for £1bn of deficit reduction? Scrapping the benefit altogether and tweaking the existing means-tested benefits system would make more sense.
- The cliff-edge. A family with three children with income currently of £43,875 (the personal allowance of £6,475 plus the higher rate threshold of £37,400) receives £2,456 in child benefit. In future, if that family works a bit of overtime and receives an extra £1 in income, it will lose £2,456 in child benefit. The tax rate is infinite at the point of the higher rate threshold. A day after David Cameron, prime minister, said: “It will be worth it for everyone to work, wherever they are in the income scale, whatever benefits they receive,” the coalition announces a policy which refutes that claim. Does the left hand of government know what the right hand is doing?
Signs that Japan’s economic recovery is faltering are fuelling expectations that the Bank of Japan’s policy board might order further monetary easing at a two-day meeting that opens on Monday.
Some analysts believe the action might include an expansion of the bank’s cheap three- and six-month credit facilities or greater purchases of government bonds. Such a move would ease pressure on the BoJ over what critics say is its failure to act forcefully enough to shore up the recovery, [which industrial and survey data has lately cast into doubt]. Read more