Creating effective job policy
Sure, sounds good, but will it be effective?
That’s the question everyone’s asking today about BP’s latest effort to stem the tide of oil gushing into the Gulf of Mexico. But it could just as appropriately be asked of the progress of the US HIRE Act, past in March, which gives employers tax credits of up to $1,000 per worker and provides a payroll tax exemption for employer social security payments. Read more
Angola’s attack on its central bank
Since global central banks widely expanded their roles in the financial crisis, their leaders have been warning about the dangers of attacks on their autonomy. Earlier this week, Ben Bernanke, US Federal Reserve chairman, said that undue interference can “impair inflation-fighting credibility” and “worsen the economy’s longer-term prospects”.
And over the past few months central bank leaders warned of attacks in Argentina (where the central bank chief was fired after refusing to transfer foreign exchange reserves to the government), South Korea (where a vice minister attended a monetary policy meeting), Japan (where the central bank faced pressure to increase lending) and Mexico (where some viewed the appointment process of the new Bank of Mexico governor as politicised). Read more
Self-interested economics students?
Economics majors are no less likely to vote than other majors, but if we do, we tend to cast our ballots for Republicans.
This according to a new study from the NY Fed that tests to see if those with undergraduate degrees in economics tend to incorporate our lessons on acting in rational self interest into our day-to-day lives.
Voting is, in economic terms, not very rational. A single person’s vote is unlikely to change the results of an election, so the costs (for instance, the opportunity cost of going to vote) outweigh the benefits.
And yet, it seems, we still do it as frequently as other majors. (On the other hand, one of the school’s polled is Florida Atlantic University – perhaps former students there, remembering the 2000 election, were acting rationally – voting because they thought the election could come down to a single vote).
But when we head to the polls, we vote Republican. Read more
Exit polls from a state election in Germany suggest there was no outright winner. Such a result would strip Angela Merkel’s government of its majority in the Bundesrat, the upper house of parliament in Berlin. This would make legislation harder to pass, and could affect the scale and speed of future eurozone bail-outs.
The new future of the Fed…
…is still very much up in the air. But Senate banking leadership is one step closer to coming to defining the future shape of the US central bank. The Federal Reserve would no longer be able to use its 13(3) lending authorities to help insolvent companies if the bill and the fresh amendment are passed, according to a statement released by Chris Dodd, Senate banking committee chairman.
UPDATE: The Senate has passed the amendment
The amendment comes on the same day that Charles Plosser, Philadelphia Fed president, reiterated Fed leader’s plea that Congress refrain from removing the central banks supervisory authority over smaller banks. (The bill passed by the House doesn’t limit the Fed’s supervisory authority, but the proposed Senate bill would). Read more
‘Yes, I guess’: Further transparency at the FOMC
In December 2004, the FOMC voted to expedite the release of its minutes to three weeks after they announce their policy decisions (about three weeks sooner than they had been).
Recently released transcripts give us a window in to the committee’s thinking, and the decision was not made lightly. You can imagine that now – as legislators call for increased Fed transparency – the FOMC may be having similar debates about what information is it going to offer to share with the public. Read more
Nominations are coming
Barack Obama, US president, is set to nominate Janet Yellen, president of the San Francisco Fed, to replace Don Kohn, the outgoing vice-chairman. Mr Obama is also expected to fill two additional vacancies on the seven-member Fed board of governors with Sarah Raskin, a state banking regulator in Maryland, and Peter Diamond, an economist at the Massachusetts Institute of Technology.
Identifying the US’s fiscal problem
Barack Obama, US president, and Ben Bernanke, Fed chairman, both spoke today at the first meeting of the National Commission on Fiscal Responsibility and Reform.
Notable was their focus on Medicare and Medicaid, rather than Social Security, as a culprit behind US budget deficit woes. Read more
Inflation targets: Shirakawa strikes back
The Bank of Japan is not going to let the government foist an explicit inflation target on it without a fight. In a fascinating speech given in New York yesterday BoJ governor Masaaki Shirakawa argues that inflation targets are one reason that central banks allowed asset price bubbles to develop. For good measure he suggests that the world learned the wrong lessons from Japan’s deflation – and implies that US monetary policy in the 2000s was too loose as a result.
Mr Shirakawa’s argument:
Second, some political, economic and social dynamics influenced central bankers, and it became difficult for them to conduct monetary policy based on factors other than the inflation rate. This mechanism is quite subtle. The logic that price stability is a precondition for economic stability and that the independence of the central bank is necessary for price stability, became gradually but firmly established in the 1990s. At the same time, the granting of independence naturally called for the strengthening of accountability. An easily identifiable benchmark was desired. The framework which best fulfilled such needs was inflation targeting. However, under an inflation targeting regime, the debate tends to center on the relationship between the target inflation rate and the actual or expected inflation rate.
As a result, the cost of justifying adjustments in monetary policy becomes quite high in the eyes of central bankers, when such adjustments are aimed to deal with imbalances which appear in forms other than price indices. Economists focused their attention to the linkage between the output gap and the inflation rate, while awareness toward financial imbalances was limited.
From Ft.com
By Jude Webber, Argentina correspondent Read more
| About this blog | Blog guide |
Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS
Michael Steen, Frankfurt bureau chief, covers the ECB and the eurozone's economies. He joined the Financial Times in 2007 as Amsterdam correspondent and later worked as a front page news editor in London. Before joining the FT, he spent nine years as a correspondent at Reuters, mostly in foreign postings that included a previous stint in Frankfurt, as well as Moscow, Kiev and central Asia. He read German and Russian at Cambridge.RSS
Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS
Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS
Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS
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