A plan to place the appointment of the New York Federal Reserve president under the jurisdiction of the White House and Senate, which the central bank fears will lead to its politicisation, could be abandoned on Wednesday.
The House financial services committee, chaired by Barney Frank, announced on Tuesday that it would seek to remove the proposal – which was included in a bill passed by the Senate last month – and replace it with an alternative that removes banks’ say in Fed appointments. Read more
The terror of bad economic policy.
Some 79 per cent of Americans think the budget deficit is an extremely or very serious threat to the future of the country: the same percentage as for terrorism, according to a USA Today/Gallup poll.
US residents also tend to prefer Republicans to Democrats when dealing with these issues.
Is this preference fact-based? Are Republicans, in fact, better than Democrats at keeping America’s shores safe and its budget in line?
There’s no easy way to measure terrorism, but budget deficits are quantifiable. So who’s done a better job balancing them?
Here’s the chart for the last 40 years. Read more
Fans of Donald Kohn, second in command at the Federal Reserve, have a temporary reprieve today. Mr Kohn, who was slated to leave the Fed in a couple weeks, will now stay on perhaps until September.
Here’s the Fed’s statement:
Vice Chairman Donald L. Kohn announced on Friday that, at the request of Federal Reserve Chairman Ben S. Bernanke, he plans to remain on the Board until a new Governor is appointed but to leave no later than September 1. He had announced in March that he intended to resign at the expiration of his term as Vice Chairman on June 23, 2010. While he remains on the Board as a Governor, he will continue to participate in all Board and Federal Open Market Committee meetings.
Janet Yellen, now San Francisco Fed president, was nominated by President Barack Obama back in April to fill the soon-to-be vacant slot, but so far, there have been few visible moves to get the Senate confirmation process in motion – and Republicans have been actively obstructionist in confirming Obama picks to any government post. Read more
In the few days since Naoto Kan took over as Japan’s prime minister an economic narrative has emerged: he’s a deficit hawk who’s going to put up consumption tax and end Japan’s huge and enduring budget deficits.
Mr Kan’s comments and actions have certainly helped. On Tuesday he said that “rebuilding the nation’s finances is a prerequisite for growing the economy,” and he has appointed Yoshito Sengoku as chief cabinet secretary and Yoshihiko Noda as finance minister, both reputed to be deficit cutters.
But hang on a minute. Mr Kan’s focus on Japan’s debt is a clear break from previous prime ministers, but I think it’s only part of the story, and I wonder whether it’ll survive an encounter with the enemy.
Only part of the story
Mr Kan has just ended five months as finance minister. The main feature of those five months was Greece’s debt crisis. It’s hardly a surprise that Japan’s debt is at the top of his mind.
Fiscal policy is hardly the defining issue in Mr Kan’s career, however Read more
By Jude Webber in Buenos Aires
The gospel according to Argentina goes something like this: thou shalt not default.
According to former central bank chief Martín Redrado, Argentina may be in no position to dish out recommendations to the likes of Greece, but if there is one thing it learned in its 2001 crash – the biggest sovereign default in history on nearly $100bn – it is this: default is not an option.
Argentina knows first-hand the pain involved in bailing on creditors and a disorderly exit to a fixed currency regime. The cost was economic and social chaos and it is still paying the price.
Speaking to Bloomberg Television in London, Mr Redrado said markets remained sceptical about relying on fiscal adjustment and so Greece should reschedule debt in a market-friendly way. He also noted how Latin America had moved from fixed to flexible currency regimes and was now a “beacon of stability and growth” in emerging markets. He said: Read more
By Farhan Bokhari
The resignation of Pakistan’s central bank governor, Syed Salim Raza, on Thursday was played down by a finance ministry official in Islamabad. “The stock market’s KSE-100 index rose by more than 1 per cent just today so obviously investors are unmoved” he said, referring to equity prices on the Karachi stock exchange, the main stock market. Read more
By Gillian Tett Read more
By Joe Cochrane
Members of Indonesia’s House of Representatives have certainly been a surly bunch. They spent more than three months investigating the government’s controversial bail-out of ailing state lender, PT Bank Century, back in 2008, before voting that it was “illegal” in March.
The members then set their sights on the country’s internationally respected finance minister, Sri Mulyani Indrawati, who approved the bail-out. Like sniping jackals, the veteran lawmakers hounded her so relentlessly – there were personal attacks in the media and boycotts of sessions to discuss budget issues – that Mulyani had enough and bolted to the World Bank, where she is now a managing director. Read more
The arrival of Vítor Constâncio as the European Central Bank’s new vice-president this week has led to a reshuffling of responsibilities on the bank’s six-person Frankfurt-based executive board. For ECB-watchers, the obvious questions are: who’s up and who’s down? I am not sure if much has changed.
As expected, Mr Constâncio, a former Portuguese central bank governor, will take over responsibility for financial stability issues from his predecessor, Lucas Papademos. That will take up much of his time in coming years, so it is probably not a big deal to him that responsibility for ECB research has been transferred to José Manuel González-Páramo, perhaps the biggest winner from today’s moves. Mr González-Páramo remains in charge of market operations – a busy beat in recent years. Read more
And so Japan loses another prime minister (an annual event in recent years). The economic consequences are hard to read but here are some questions:
A stronger or a weaker government?
Relocation of the Futenma airbase in Okinawa is the issue that turned Mr Hatoyama’s administration into a lame duck with such startling speed. But even right after last year’s election Mr Hatoyama never seemed to have much to say about the economy. His leadership was one reason why, for example, any real confrontation between the government and the Bank of Japan seemed unlikely.
The departure of Ichiro Ozawa as the Democratic Party of Japan’s secretary-general is probably even more important (assuming he doesn’t continue to run things from even deeper in the shadows). His old-style Japanese interest-group politics never sat well with economic reform and cuts to the fiscal deficit. Tobias Harris is worth reading on this.
Unless a new leader can save the DPJ’s upper house majority in July elections, however – and that still looks unlikely – then the government will be weakened. A change in the BOJ law, for example, would go from unlikely to very unlikely. Another question is whether new leaders can contain conflict within the DPJ as successfully as the inoffensive Mr Hatoyama and the menacing Mr Ozawa.
Will it be Naoto Kan? Read more