1 US Fed chief says economy ready for rate rise
(NYT/San Francisco Chronicle) Janet Yellen, the Federal Reserve chairwoman, has
said that economic conditions are ripe for the Fed to start raising its
benchmark interest rate this month, a move that appears all but inevitable. “The
economy has come a long way toward the ... objectives of maximum employment and
price stability,” she said.
Yellen said that when the Fed decides to raise
rates, the decision would be “a testament, also, to how far our economy has
come in recovering from the effects of the financial crisis and the Great
Recession.”
“It is a day that I expect we all are looking
forward to,” she said. Yellen underscored that the Fed expects to raise rates
slowly, because the economy remains weak. And she said the Fed’s policymaking
committee will not make a final decision until its meeting Dec. 15 and 16.
It appears that Yellen and her colleagues, who have
held the Fed’s benchmark rate near zero for almost seven years, have finally
concluded that the domestic economy is strong enough to keep growing with less
support from the central bank.
Investors and analysts have generally concluded that
the Fed is likely to raise its benchmark rate to a range of 0.25 to 0.5
percent. By keeping rates low, the Fed has sought to stimulate economic growth
by encouraging risk-taking by investors, and borrowing by businesses and
consumers. As it raises rates, the Fed will reduce those incentives.
2 Another stimulus looms for Eurozone (BBC) The
European Central Bank is expected to announce further stimulus measures to
boost growth in the eurozone's economy later on Thursday. At its policy
meeting, the ECB has the option of stepping up "quantitative easing",
buying financial assets with newly created money.
It could also cut the interest rate on overnight
bank deposits at the ECB. This is to encourage lending, as with a rate of
-0.2%, the banks in effect pay the ECB for holding their reserves. The policy
is designed to make it more profitable for banks to offer loans to consumers
and businesses, ensuring a free flow of money.
The immediate problem driving this expected action
is inflation. It is too low. The most recent figure for the eurozone is 0.1%.
The ECB's target is below, but close to, 2%. The figure has been below zero -
that is, prices were falling - as recently as September. This has been because
of falls in international energy prices, particularly crude oil.
But "core inflation", which strips out
volatile food and energy prices, is also low, hovering persistently around 1%. The
latest figure, for November, was down on the previous month.
So why would low inflation be seen as a problem? ECB
President Mario Draghi spelt out a number of reasons. Low or even below-zero
inflation - otherwise known as deflation - can aggravate debt problems. It can
lead to households and firms delaying spending.
There are several ways the ECB could achieve its QE.
It could increase its monthly spending from the current level of €60bn or it
could commit to continuing beyond the tentative date it has set for ending the
programme, which is September 2016.
3 Zuckerberg’s billions and the world’s problems
(William MacAskill & Deborah Orr in The Guardian) Mark Zuckerberg and his
wife Priscilla Chan have announced that they will donate 99% of their Facebook
shares, currently valued at $45bn, to a new charitable foundation, the Chan
Zuckerberg Initiative.
Zuckerberg and Chan deserve enormous respect for
this decision. The next big question is: where should this money go? A large
proportion of social programmes have no impact at all, whereas the best are
incredibly effective – hundreds of times better than the merely good ones.
The overarching aims they list are broad: “advance
human potential” and “promote equality”. Listed underneath each aim is a
dizzying array of possibilities, from “eliminating poverty and hunger” to
“curing disease so you live much longer and healthier lives”.
That’s a good sign. There are a lot of important
problems in the world. It would be worrying if their foundation had already
narrowed its focus at such an early stage, before they had collected any
evidence about where their donation could have the greatest social impact.
What I’d really hope is that they follow the lead of
Zuckerberg’s cofounder Dustin Moskovitz and his partner Cari Tuna, a former
Wall Street Journal reporter. Together, they founded Good Ventures, which might
be the best model for how to run a charitable foundation.Good Ventures is
extremely transparent, publishing the evidence and analysis behind its grants,
so that others can scrutinise their choices and learn from their experience.
It’s a rookie error. You have your first baby and
it’s very exciting. So, instead of quietly getting on with working out what
life with a baby is going to be like, you noisily tell everyone you can think
of that you’ve had a baby and this is going to be the best baby ever.
Having spent several centuries struggling to
formulate some kind of democratic system in which everyone has the right to
participate, I think humans have every right to find it quite amusing that some
guy with a lot of money thinks he can do better, literally on his own
initiative.
Anyway, since Zuckerberg is personally going to
administer the Chan Zuckerberg Initiative, what he’s actually done is give
himself a really interesting new job for which he’s eminently unqualified. His new
job will be very much unlike other people’s jobs, because it will be all about
giving money away, rather than getting hold of it, to put bread on the table.
At the same time, he’s lectured parents around the
world about how important it is to set their own work aside to spend time with
their children. Hilariously, the new job will largely consist of striving to
promote equality. No prizes for guessing who is first among equals. And second.
And third.
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