Daily Archives: July 13, 2011

Robin Harding

The idea of a small rise in the federal debt limit to buy more time after August 2nd for a larger deal is starting to come up quite a lot. For example, the reporting on the Mitch McConnell fallback plan suggests that a $100bn rise in the debt limit would be made available immediately in order to buy time.

The trouble is that as soon as there is any space under the debt limit, the Treasury will be obliged to replenish the government trust funds that it has been borrowing from in order to stay under the limit for the last few months. The law is unambiguous: Read more

Claire Jones

The Bank of Japan did its bit for Sino-Japanese relations on Wednesday by publishing a paper which calls on Chinese policymakers to do what Tokyo did in the 1970s and rebalance their economy.

Accordingly to the paper, written by two BoJ economists, Chinese growth has relied too heavily on investment. This has meant that workers have failed to get their fair share of the spoils from rising profits. It has also limited job creation in urban areas and contributed to a decline in productivity growth. Plus it’s bad for the environment.

So what is to be done? There are two lessons to be learnt from Japan. Read more

Claire Jones

Federal Reserve chairman Ben Bernanke delivered an assured performance before the House Committee on Financial Services today.

The takeaway for financial markets will undoubtedly be that Fed officials are considering QE3. A rise in the prices of gold and stocks, coupled with a dip in the dollar, indicate that investors now judge a third round of asset purchases likely.

But Gavyn Davies and Robin Harding warn such an interpretation may be incorrect. Read more

Robin Harding

It is instructive to compare Ben Bernanke’s testimony today with his Jackson Hole speech last August. We know that Jackson Hole was deliberately intended to signal the likelihood of further monetary stimulus. The crucial lines there were:

“We will continue to monitor economic developments closely and to evaluate whether additional monetary easing would be beneficial. In particular, the Committee is prepared to provide additional monetary accommodation through unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly. The issue at this stage is not whether we have the tools to help support economic activity and guard against disinflation. We do.”

That speech was marked by a heavy focus on the downside risks to growth and inflation rather than upside and it explicitly stated what the Committee was prepared to do. Compare that with today: Read more

Claire Jones

Ben Bernanke

Welcome to the live blog where we will cover Federal Reserve chairman Ben Bernanke’s appearance before the House Financial Services Committee.

All times are London time; Washington, DC is five hours behind. By Claire Jones in London.

This post should update automatically every few minutes, although it may take longer on mobile devices.

17.43 The questioning ends. That’s the end of the live blog. Analysis of Bernanke’s comments to follow. Read more