The Great Debate UK

from Nicholas Wapshott:

Yellen shows her hand

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The difference between the Federal Reserve Board of Chairwoman Janet Yellen and that of her immediate predecessor Ben Bernanke is becoming clear. No more so than in their approach to the problem of joblessness.

Bernanke made clear that in the post-2008 economy, his principal goal was the creation of jobs, not curbing inflation. He settled on a figure, 6.5 percent unemployment, as the threshold that would guide his actions.

While remaining true to the spirit of Bernanke’s principal goal, Yellen and the rest of her board refined the target in their meeting on March 18 and 19, a change in approach that at first sent the wrong signal to the stock and bond markets. At the press conference following the meeting, Yellen said she would not be raising interest rates “for a considerable time,” which could mean “something on the order of around six months.”

The Fed decided it would no longer be tied to the “quantitative” 6.5 percent jobless figure, which is fast being approached. The February unemployment numbers, for example, are 6.7 percent. After listening to Yellen, the markets assumed -- wrongly -- that the Fed was about to abandon the jobless target, end quantitative easing and start raising interest rates.

from Nicholas Wapshott:

The EU-U.S. love-hate relationship

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The elaborate gavotte between the American and European economies continues.

While the Federal Reserve has begun to wind down its controversial quantitative easing (QE) program, the European Central Bank (ECB) the federal reserve of the eurozone, has announced it is considering a QE program of its own.

It is a belated acknowledgement, if not an outright admission, from Mario Draghi, president of the ECB, that five years of the European Union’s austerity policy has failed to lift the eurozone nations out of the economic mire. The ECB has presided over a wholly unnecessary triple-dip recession in the eurozone and sparked a bitter rift between the German-dominated European Union bureaucracy and the Mediterranean nations that must endure the rigors imposed from Brussels. All to little avail.

Why meetings matter to the U.S. economy

This infographic, supplied by the Americas Incentive, Business Travel & Meetings Exhibition (AIBTM), aims to show that the travel sector is critical to economic growth in the U.S.

AIBTM’s exhibition director Mike Lyons says of the figures: “Despite recessionary economic periods, businesses recognise the continued importance and value of face-to-face meetings that current research shows accelerate business results and shorten the sales cycle. With every planned meeting, there’s a ‘cascade effect’ into local economies across the nation, feeding jobs, local spending, and fuelling the success of local business.”

Fiscal cliff deal is depressingly European

–Laurence Copeland is a professor of finance at Cardiff University Business School. The opinions expressed are his own.–

The deal to break the deadlock in the US looks awful, far worse than going over the cliff, which I suspect would have been a lot less damaging than is usually assumed.

What if the U.S. labour market never returns to “normal”?

-Kathleen Brooks is research director at forex.com. The opinions expressed are her own.-

USA-ECONOMY/JOBSWhile the investment community trudged through the snow-fogged January labour market report, the only glimmer of hope was the fall in the unemployment rate to 9 per cent from 9.4 per cent in December. But while investors grabbed that as a sign that the economic recovery in the U.S. was back on track, the data is unlikely to have cheered Federal Reserve chief Ben Bernanke.

What to make of the U.S. resurgence

-Kathleen Brooks isUSA-DOLLAR/ research director at forex.com. The opinions expressed are her own.-

Back in the summer, things in the U.S. were so dire that the Fed had to step in to the breach and boost the economy with a $600 billion cash injection. This was only formally announced in November, yet within two months the outlook for the U.S. economy has brightened markedly. The dollar has had a flying start to the year and appreciated more than 2 per cent against the other major currencies.

from Chrystia Freeland:

What’s good for the world is bad for the U.S. and China

This fall, much of the United States seemed to have settled on a narrative for the country’s struggle to adapt, after a debilitating financial crisis, to a post-industrial and post-unipolar global economy: China and its undervalued currency are largely to blame.

Proof that this was a nationally compelling storyline came during the acrimonious midterm election campaign. U.S. politics have rarely been more polarized, but complaining about China was something both parties could agree on.

Does the world need more QE from the Fed?

- Kathleen Brooks is research director at forex.com. The opinions expressed are her own -

The minutes from the Federal Reserve’s September meeting seems to suggest that more quantitative easing is a done deal for November. So far, the argument has centred on whether or not the U.S. economy needs another shot in the arm from the Fed to boost growth. The Fed certainly thinks it does. According to the minutes “many” members felt that the status quo – sluggish growth, inflation grinding lower  and no sign of a recovery  in the jobs market – was enough to justify more easing in policy.

Issues in monetary normalisation

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john_kemp– John Kemp is a Reuters columnist. The views expressed are his own –

Investors like simple narratives, which is why markets swing erratically and illogically between extremes of hope and fear. Reality is more complex. As F. Scott Fitzgerald remarked “the true test of a first-rate mind is the ability to hold two contradictory ideas at the same time”.

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