A nice article by Pimco’s Bill Gross.
He says market outlook is like a winged eagle which could swerve either right or left depending on which way the central banks talk/move:
Jean Pisany-Ferry of Bruegel has a nice piece in Project Syndicate on the topic.
He says like Bernanke acted on possibility of deflation in 2002, so should ECB.
“Having said that deflation in the United States is highly unlikely,” outgoing Federal Reserve Chairman Ben Bernanke famously remarked in 2002, “I would be imprudent to rule out the possibility altogether.” At that time, annual inflation in the US exceeded 2%, and the risk of it becoming negative was indeed remote; but Bernanke nonetheless felt it necessary to map out an escape route from a potentially catastrophic scenario. The response that he described was essentially a preview of the policies that the Fed implemented in the aftermath of the 2008 shock.
For the eurozone today, the threat is not remote. According to the latest inflation data, annual consumer price inflation is just 0.9% (and 1% if volatile energy and food prices are excluded). That is one percentage point below the European Central Bank’s target of “below, but close to, 2%.” With the economy clearly operating below full capacity and unemployment above 12%, the risk of a further decline cannot be excluded, especially given downward pressure from a gradually appreciating exchange rate and a global context of negative growth surprises and subdued commodity prices. So it is past time to recognize the deflation danger facing Europe and to consider what more could be done to prevent it.
He does not give his policy choices. But are we looking at QE from ECB now?
Women in Parliaments Global Forum (WIP) has this annual summit discussing several issues related to gender, diversity etc.
One such session was stirringly titled as –” Reverse reality – what if: ‘Lehman Sisters’ or the sisterhood ran G20 and big business”.
Thanks to this speech by Jorg Asmussen of ECB at the panel that I came to know of it. He points how ECB is promoting gender diversity in ECB.
Nice thought though..Lehman sisters…
Mr. Norman Chan, Chief Executive, Hong Kong Monetary Authority has this nice speech with a provocative title. Obviously central bankers cannot save the world but they try and try hard. But most of the time they put the world into a bigger hole. Infact the fab book Lords of Finance does suggest central bankers in the four economies could have saved us from the great depression. But it was not just them but the politicians who were reluctant to let gold standard go. At the end of the day it is the political system and the historical path which matters. Central bankers are a part of this system and play their own bit.
He begins asking is the world worth saving?
Prof. Steve Hanke of Cato is a hyperinflation expert and tracks such regions carefully.
In this post, he says Iran is out of hyperinflation for now..
Over a year ago, I uncovered the fact that Iran experienced a period of hyperinflation (in early October 2012), when its monthly inflation rate peaked at 62%. Since then, I have been actively monitoring and reporting on the IRR/USD black market exchange rates and calculating implied inflation rates for the country.
Since Hassan Rouhani took office, on August 3rd, Iranian expectations about the economy have turned less negative. Thus far, it appears Rouhani has been successful in ending the long period of economic volatility that has plagued Iran, since the US imposed sanctions in 2010. This has been reflected in the black-market IRR/USD exchange rate, which has held steady around 30,000 in recent weeks (see the accompanying chart).
There are three main factors at work here. The first is a concerted effort by the Rouhani administration and the central bank to curb Iran’s inflation. This stands in stark contrast to the previous regime, whose strategy was to simply deny that inflation was a problem.
The second is that that Iran’s economy has proved remarkably “elastic” – meaning that the country has ultimately adapted to the sanctions regime and has found ways to keep its economy afloat in spite of them.
The third factor in the rial’s recent stability is an improvement in Iranian economic expectations. This is where the P5+1 talks come into play. Iranians recognized that easing of the sanctions regime would be a bargaining chip in any nuclear negotiations. In consequence, their economic expectations improved as the talks progressed. Indeed, Saturday’s announcement gave these expectations a shot in the arm.
Where will it go is to be seen..
RBI recently released minutes of Technical Advisory Committee on Monetary Policy for meeting held on October 23, 2013. I wanted to write a post on how the TAC members have changed their views this time compared to previous meetings.
Manas Chakrabarty of Mint does the job for me. The advisers are perhaps as confused as anyone is on Indian economy outlook.He narrates the tale of how TAC members voted in same quarter policy in 2012 and compares it to the voting pattern this year:
It has become hugely fashionable to call central bankers these days as a la Volcker. Both central bankers and media love to belong in the group. Being a Greenspan is a pariah but the reality is most are trying to be just like Greenspan — infusing another bubble or believing in the power of financial markets. It is tough, really tough to become a Volcker..
So here is an interview of Paul Volcker in recent JEP. It is conducted by Martin Feldstein and is full of insights and fun. Sample this:
Never mind the fact that RBI has shunned off forward guidance statement under the new regime. But worldwide if there is one thing which central bankers and c-bank watchers are increasingly talking, about it is forward guidance. I mean just talk..how can something else be better?
I guess some bit of forward guidance is fine but this increasingly scientific way of guiding one is never sure..
US House Committee on Financial Services held a hearing on the topic.
Experts shared their concerns on central banks and their policies going ahead:
Useful to read different views. Posen argued for a more powerful Fed. Makin points to risks from monetary cliff, Orphanides shows how intervention helped avert the crisis and Lachman is not sure how these policies have helped..
Central Bank Limited means central bank behaves like a private financial firm free to do things as per objectives stated by stakeholders. Limited central bank means its powers need to be curtailed as it has become too adventurous..The first view prevailed till even say last year. Now we are hearing more concerns from the latter group.
Philly Fed chief Charles Plosser argues for the latter case. This is nothing new as he has been arguing this for a while:
One is always confused whether to compare 2008 crisis with great depression or 1907′s financial panic. Historians keep using the two as analogies with obviously more stress on former. It seems the origins of the crisis resembles more like 1907 panic but the impact is much larger on a global scale as seen during great depression.
Bernanke has this nice speech comparing the 1907 panic with 2008 one: