Kathleen's Feed
Mar 7, 2011
via The Great Debate UK

Are graduates really immune from U.S. unemployment misery?

A lot has been written about the U.S.’s stubbornly high unemployment rate. Although it fell below 9 percent to 8.9 percent in February, this is unlikely to placate the Federal Reserve who wants to see unemployment drop back to 5-6 percent before it feels comfortable that the economy does not need any more policy support.

But one sector of the U.S. population that doesn’t need more policy support is college graduates. According to U.S. Department of Labor, people over 25 years old with a Bachelor’s degree or higher academic qualification had an unemployment rate of a mere 4.3 percent in February. Although this is roughly 1.5 percent higher than it was before the recession, there is no doubt that graduates have had an easier time than other workers in recent years. For example, for those who didn’t graduate high school nearly 14 percent are without work, which has barely improved over the past year.

Feb 28, 2011
via The Great Debate UK

Did the Fed catastrophically mis-time QE2?

The sternest criticism of QE2 is the way it pumped up asset prices like commodities in recent months without making much of an impact on U.S. economic growth. Rising fuel and food costs have weighed on inflation everywhere from emerging markets to the UK. But this criticism might step up a gear if Middle East tensions lead to a spike in oil prices and the Fed tries to protect growth using a similarly blunt tool as QE2.

The political crisis in the Middle East has been the game-changer for the global economic outlook in the past couple of weeks.  In just five days WTI oil (U.S. crude) jumped $10, and Brent (European oil) surged to within touching distance of $120 per barrel. This showed us what fear is like: since the 1970’s each recession has been preceded by an oil price shock. You don’t need much more evidence than this to see the extremely close relationship between oil and growth especially in the U.S., the largest consumer of crude in the world.

Feb 21, 2011
via The Great Debate UK

Two very different inflation problems

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

There was more evidence in February that the world economy is re-flating; both China and the UK released inflation data that showed prices running above 4 percent. Authorities in these economies have a difficult few months ahead, if prices continue to rise at this clip then they may have an economic crisis on their hands.

Feb 7, 2011
via The Great Debate UK

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.-

While 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.

Jan 31, 2011
via The Great Debate UK

Could the Middle Eastern unrest start to unsettle financial markets?

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

The peoples of the Middle East are rising up and letting their political views be known. In Tunisia, Egypt and Yemen protestors have taken to the streets to demand political change, and in the case of Tunisia they have succeeded. These tensions between the people and their governments have caught the global media’s attention. It has also set off something of a domino effect with other autocratic regimes in the region worrying that the same could happen to them.

Jan 24, 2011
via The Great Debate UK

Who is helping who in the China-Europe relationship?

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

The saying goes that you only really know who your friends are during times of crisis. Well European officials must have been beaming after two of the world’s largest economies promised to purchase the debt of the currency bloc’s most troubled nations. China came out first and pledged to “support Spain’s financial sector”, through participating in its upcoming debt auctions. Likewise, Japan pledged to purchase a quarter of the upcoming euro zone bond sale that will help fund the bailout of Ireland.

Jan 14, 2011
via The Great Debate UK

A new paradigm for inflation

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

Looking through the minutes of the Bank of England’s policy meetings for the past year, there are a couple of patterns that you see emerge. Firstly, that rates are on hold, and secondly, that the UK’s elevated inflation rate is temporary. Now the European Central Bank has joined the chorus. ECB President Trichet recently sounded confident that prices will moderate, even though consumer prices rose above the ECB’s target rate of 2 per cent in December.

Jan 12, 2011
via The Great Debate UK

What to make of the U.S. resurgence

-Kathleen Brooks is 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.

Dec 16, 2010
via The Great Debate UK

Has QE2 worked?

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

Ever since the U.S. Central Bank formally announced its second round of quantitative easing back in November, bond yields have trended higher. Ten-year Treasury yields have jumped by 100 basis points and are back at levels last reached in May 2010. Higher yields underpinned the dollar, which has risen by more than 5 percent over the same time period. So what does this tell us about the market, and has the Fed’s grand plan actually backfired?

Dec 7, 2010
via The Great Debate UK

Should a country always stand behind its banks?

Ever since the financial crisis broke in 2008 some of the world’s major banks have their governments to thank for their survival. The fates of Royal Bank of Scotland or Citibank would have been much worse without large injections of capital from the UK and U.S. authorities. The UK government pumped more than £37 billion into its largest banks in the immediate aftermath of the Lehman Brothers crisis. Ireland took that a step further when it guaranteed all of its banks’ deposits and liabilities. This was affordable, the Irish government said at the time.

However, this policy failed spectacularly. Ireland’s bailout of its banking sector brought the country to the edge of bankruptcy and forced it to accept a 82 billion euro bailout loan from the IMF/ECB and the European Union. More than 30 billion euros of this loan is to re-capitalise the Irish banking sector and the rest is to shore up the state’s finances. The conditions of the loan mean that Ireland will have to implement harsh austerity measures for many years to come that will inevitably hurt growth.