News Items.
28 August 2019. By John Ellis.
1. The Federal Reserve said it rejected political considerations in its policy-making after one of its former top officials called for the central bank to consider the economic risks of President Trump’s re-election when setting interest rates. Former New York Fed president William Dudley, in an article published Tuesday by Bloomberg Opinion, urged the central bank to reconsider its apolitical approach because, by cutting interest rates, it is enabling Mr. Trump to escalate trade wars that are harming the economy. His suggestions, which stunned economists and other Fed officials, would mark a significant departure from the central bank’s practice of ignoring partisan politics when setting policy.
2. Bloomberg columnist John Authers highlights the key passage from Mr. Dudley's column: "....according to conventional wisdom, if Trump’s trade war with China hurts the U.S. economic outlook, the Fed should respond by adjusting monetary policy accordingly — in this case by cutting interest rates. But what if the Fed’s accommodation encourages the president to escalate the trade war further, increasing the risk of a recession? The central bank’s efforts to cushion the blow might not be merely ineffectual. They might actually make things worse."
3. A widely watched indicator of recession sent its most dire signal since the early days of the financial crisis on Tuesday, reflecting increasing gloom in the US bond markets about the economic consequences of Washington’s trade war with Beijing. Yields on two-year Treasury notes were 5.3 basis points higher than those on the 10-year government bond — the largest gap since March 2007. This kind of inversion of the yield curve — in which shorter-term rates are higher than longer-term ones — has preceded every US recession of the past half century.
4. A once-unthinkable collapse in global bond yields is forcing pension funds to buy bonds that offer negative returns -- putting the financial security of future retirees in jeopardy. U.S. institutions managing trillions of dollars in retirement savings -- including the California Public Employees’ Retirement System -- have been ratcheting down return expectations. Japan’s Government Pension Investment Fund, the world’s largest, has warned that money managers risk losses across asset classes. In Europe, pension funds may be forced to cut benefits in part thanks to the decline in rates.
5. Mark Carney is facing questions over a “secret” trip to Silicon Valley for a meeting with the founder of Facebook. The governor of the Bank of England flew to San Francisco in mid-April, where he met Mark Zuckerberg. Two months later Facebook unveiled plans for Libra, which it describes as "a simple global currency and financial infrastructure that empowers billions of people." Last week, at the Jackson Hole Symposium, Mr. Carney called for a global monetary system to replace the dollar.
6. While Facebook’s big cryptocurrency plans have hit a wall with regulators, another big social network, Telegram, is charging ahead with its own digital currency. Telegram has told investors that it is planning to send out the first batches of its coin, the Gram, within the next two months, according to three investors who have spoken with Telegram recently. Echoing Facebook’s hopes for its Libra token, which was unveiled this year, Telegram has said the Gram will become a new online currency and a way to move money anywhere in the world.
7. Prime Minister Boris Johnson will ask Queen Elizabeth II to suspend the U.K. Parliament from mid-September to mid-October -- a move that could hamper lawmakers’ efforts to block a no-deal Brexit and even trigger a constitutional crisis.The pound fell as much as 1.1% to $1.2157.
8. Italy’s anti-establishment Five Star Movement and center-left Democratic Party are headed for a deal on a new government led by Giuseppe Conte after days of stop-and-go negotiations and bickering over cabinet posts. Both parties will meet President Sergio Mattarella on Wednesday afternoon, who is the only one with the power to appoint the prime minister or dissolve parliament.
9. Hong Kong’s embattled leader signaled her readiness to get tough in quelling violent anti-government protests, declaring on Tuesday that her administration would consider all the city’s laws, including those granting her sweeping emergency powers. Her suggestion, however, fueled concerns she would imminently invoke the powerful emergency law, a move two members of her cabinet cautioned against, while legal experts warned it could deal a blow to the city’s rule of law.
10. Interest from Hong Kong residents in leaving the city has surged since street protests broke out in the former British colony. About 200 people showed up at a seminar organized by InvestUK, an adviser that helps people secure investor visas to move to the U.K. from Hong Kong, in July compared with about 40 people usually, according to the firm’s Chairman Rupert Gather. That’s part of a wider trend as applications for Hong Kong good citizenship cards jumped almost 50% in the first two weeks of August from a year earlier, in another sign residents may be more seriously contemplating an exit.
11. After five years, China is putting the finishing touches on a sweeping new system to punish and reward companies for their corporate behavior. But foreigners worry that, amid the continuing U.S.-China trade dispute, Beijing will use its new corporate “social credit” system as a weapon against international businesses. While Beijing’s better-known plans for a social-credit system for individuals have stirred privacy concerns, a parallel effort to monitor corporate behavior would similarly consolidate data on credit ratings and other characteristics, collected by various central and local government agencies, into one central database, according to China’s State Council. The system is set to fully start next year.
12. One of China’s only independent think tanks has been ordered to shut down, another sign of the dramatically shrinking space for public debate under the government of the Chinese leader, Xi Jinping. The Unirule Institute of Economics, one of China’s few remaining outposts of liberal thought, said in a statement on Monday that local authorities had declared the think tank “unregistered and unauthorized.”
13. President Trump’s claim to have the upper hand at the negotiating table does not appear to have convinced the Chinese. “They’ve decided Trump is a vacillating guy who can’t figure out what he wants and gets spooked every time the stock market goes down or someone accuses him of not being tough,” said Arthur Kroeber, managing director of Gavekal Dragonomics, a consultancy in Beijing. “Although there are problems in China, they believe they have their economy under control, more so than Trump. They think he is more vulnerable to a slowdown and that they can afford to wait him out.”
14. The Taliban today said they were close to an agreement with U.S. officials on a deal that would see U.S. forces withdraw from Afghanistan in exchange for a Taliban promise the country would not become a haven for international militants. Negotiations over how to end the 18-year war in Afghanistan have been held in Qatar’s capital, Doha, since late last year. The ninth round of talks began last week.
15. The attack in Beirut early Sunday morning, which has been attributed to Israel, hit a central component of Hezbollah's missile program. It damaged a planetary mixer — an industrial-sized mixer weighing about eight tons, needed to create propellants that can improve the engine performance of missiles and increase their accuracy. The machine was hit, as far as we know, shortly before Hezbollah planned to move it to a secured site.
16. President Putin confirmed yesterday that Russia is ready to sell Turkey its Su-57 stealth fighters, which could push relations between the buyer and its fellow Nato members to the breaking point. Mr Putin made the comment while accompanying President Erdogan to the Maks-2019 international air show near Moscow.
17. Natural-gas prices in Europe and Asia have plummeted this year to historic lows in the midst of reduced demand, the trade dispute with China and brimming storage facilities in Europe. The biggest driver of falling prices, though, has been the U.S. gas that is spilling into global markets. “It was inevitable,” said Ira Joseph, head of global gas and power analytics at S&P Global Platts. “There is simply too much supply coming into the market at one time.”
18. President Trump is so eager to complete hundreds of miles of border fence ahead of the 2020 presidential election that he has directed aides to fast-track billions of dollars’ worth of construction contracts, aggressively seize private land and disregard environmental rules, according to current and former officials involved with the project. He also has told worried subordinates that he will pardon them of any potential wrongdoing should they have to break laws to get the barriers built quickly, those officials said.
19. The income tax is the Swiss Army Knife of the U.S. tax system, an all-purpose policy tool for raising revenue, rewarding and punishing activities and redistributing money between rich and poor. The system could change fundamentally if Democrats win the White House and Congress. The party’s presidential candidates, legislators and advisers share a conviction that today’s income tax is inadequate for an economy where a growing share of rewards flows to a sliver of households. For the richest Americans, Democrats want to shift toward taxing their wealth, instead of just their salaries and the income their assets generate. The personal income tax indirectly touches wealth, but only when assets are sold and become income.
20. New Jersey’s new law allowing terminally ill patients to end their own lives can move forward, a state appellate court ruled. The law went into effect on Aug. 1 but was suspended after a lower court issued a temporary restraining order following a lawsuit filed by an Orthodox Jewish physician who said it violated his religious beliefs. The law allows patients with a prognosis of six months or less to live to self administer medication that would end their lives. The patient’s attending physician and consulting physician must determine that the person is suffering from a terminal disease and that person must voluntarily express a desire to die, under the law.
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