Daily Archives: March 23, 2012

Claire Jones

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Bernanke on the labour market

Ben Bernanke delivers the two final talks in his four-part lecture series to college students on the Federal Reserve and the financial crisis.

What will be of more interest to markets, however, will be the Fed chairman’s talk on Monday on recent developments in the US labour market. This from the FT’s US economics editor Robin Harding on what to expect:

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Claire Jones

Obama’s World Bank nominee Jim Yong Kim is a man of many talents…

http://www.youtube.com/watch?v=4lHKJEp5e-8 (Mr Kim’s attempt to be the next Kelly Clarkson begins two minutes in). Read more

Ralph Atkins

Germany’s conservative “awkward squad” — willing to criticise publicly the European Central Bank — has a new member. Jürgen Stark, who quit the ECB’s executive board last year, has voiced alarm at the inflationary consequences of its actions to save the eurozone and warned the global financial system is “on drugs”.

The former Bundesbank vice-president’s comments are given expansive treatment in Handelsblatt, the business newspaper — they are spread over six tabloid pages. Two points struck me as novel. Read more

Claire Jones

The Bank of England has recently found itself accused of “taking far more money from people’s pensions than Robert Maxwell ever did” because of the impact that QE has had on annuities.

It’s not difficult, then, to imagine the uproar from the younger and poorer members of society if the Bank was to ban people getting a mortgage unless they can stump up, say, a 25 per cent deposit.

The lobbyists for the young and poor are less powerful than those serving the interests of the old and rich. Still, one suspects a raft of bad press about how the unelected (and well paid) technocrats that inhabit Threadneedle Street were preventing Mr and Mrs Smith from “getting on the property ladder” — long considered a rite of passage in British life — as the likely result of caps on mortgage lending.

With this in mind, the Financial Policy Committee, the Bank of England body charged with safeguarding stability, today resisted recommending that it be given the power to limit borrowing by would-be homeowners as part of its toolkit to stave off future financial crises.

Such caution in avoiding negative PR is wise for an institution under fire for a lack of public accountability.

But the problem is that the evidence suggests limits on loan to value, or loan to income, ratios for mortgages are by far the most effective tools in preventing financial crises.

Even the Bank’s own research suggests that the effectiveness of two of the three tools that the FPC wants to use instead of caps on mortgage borrowing is mixed at best.  Read more