gordeeva_o_g_praktikum_po_perevodu_ekonomicheskih_tekstov_s

Dollar sets delicate dance

The dollar’s continued slide against the euro and the pound highlights the delicate task faced by U.S. Treasury Secretary Henry Paulson – allowing the dollar to move down slowly against other currencies without sending it into a catastrophic plunge that damages the U.S. economy.

Bush administration economic officials, while eager to avoid a market-rattling dollar crash, know that the dollar must weaken eventually if the U.S. is to deflate its ballooning trade deficit. “The Treasury cannot help but be pleased to see a gradual decline in the dollar,” said Robert Hormats, Vice Chairman of Goldman Sachs International. A weaker dollar can make American goods less costly for foreigners and foreign goods pricier for Americans, boosting U.S. exports while slowing U.S. imports.

A weaker dollar also can help Mr. Paulson fend off the rising protectionist sentiment he finds alarming. Frank Vargo, the National Association of Manufacturers’ vice president for international economics, says the dollar’s weakening against the euro already is helping to narrow the U.S. trade deficit with Europe, which has widened every year for the past decade. The NAM expects it to come in this year at $95 billion, down from last year’s $100 billion. That may, in part, reflect faster economic growth in Europe, which whets the European appetite for U.S. products and slower economic growth in the U.S. Mr. Vargo argues the weaker dollar is the major source of the shift.

Major European currencies have been lifted lately by strength in the region’s economies and by market perceptions that European interest rates are more likely to keep rising than U.S. rates. Higher interest rates make a currency more attractive to investors because they provide a higher return.

162

Full text: Fed statement

Federal Reserve Statement March 18 2009

Information received since the Federal Open Market Committee met in January indicates that the economy continues to contract. Job losses, declining equity and housing wealth, and tight credit conditions have weighed on consumer sentiment and spending. Weaker sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories and fixed investment. US exports have slumped as a number of major trading partners have also fallen into recession. Although the near-term economic outlook is weak, the Committee anticipates that policy actions to stabilize financial markets and institutions, together with fiscal and monetary stimulus, will contribute to a gradual resumption of sustainable economic growth.

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve’s balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months. The Federal Reserve has launched the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses and anticipates that the range of eligible collateral for this facility is likely to be expanded to include other financial assets. The Committee will continue to carefully monitor the size and composition

163

of the Federal Reserve’s balance sheet in light of evolving financial and economic developments

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Donald L. Kohn; Jeffrey M. Lacker; Dennis P. Lockhart; Daniel K. Tarullo; Kevin M. Warsh; and Janet L. Yellen.

Tight corners

Which central bank will raise interest rates first?

Few central-bank governors flying into Jackson Hole, Wyoming, for the Federal Reserve Bank of Kansas City’s annual economic symposium this week are worrying yet about when to raise interest rates. Having exhausted their usual ammunition, the world’s big central banks are still trying to kick-start their economies with unconventional policies. Minutes of this month’s rate-setting meeting at the Bank of England, for example, show that Mervyn King, the governor, wanted to expand the bank’s asset-purchase plan even more aggressively than it eventually did. But the Reserve Bank of Australia (RBA) and Norges Bank, the Norwegian central bank, are the hawks among the doves. Economic commentators expect them to raise interest rates sooner than anyone else. The near-term yield curve on the pair’s government bonds is steeper than in most other countries, suggesting the markets agree.

Which central bank will move first? Australia’s economic outlook is brighter than many expected. Although GDP dipped a little at the end of last year, the economy has avoided a recession and the unemployment rate has flatlined at 5.8%, below its long-run average of 7%. Levels of consumer and business confidence are pushing two-year highs, and the RBA’s latest statement predicts economic growth for the next two years.

Norway’s outlook is rosy, too. Although its economy has shrunk a little, its central bank observes “renewed growth” and its unemployment rate of 3.1% remains the lowest in Europe. Domestic demand has remained strong, and Norwegian employers are reluctant to cut staff when they sense an imminent upturn. Because both countries primarily export staples like raw materials and food, their sales abroad have held

164

up relatively well. Australia in particular benefits from Asian customers whose economies have remained pretty robust.

Big rate cuts were meant to bolster confidence in the face of uncertainty as much as stimulate demand. Even so, some argue the banks overreacted to begin with. Bjorn Wilhelmsen from First Securities, a financial-services firm in Oslo, says most market economists in Norway think the Norges Bank cut rates too much. Both banks have cumulatively slashed their key interest rates by more than the Federal Reserve and the European Central Bank (see chart). In Australia interest rates are at 30-year lows, which seems disproportionate to the amount of economic misery. Rate cuts in Norway and Australia are more potent than those in the euro area and America because floating-rate mortgages are common: more households have more disposable income when interest rates fall.

Deciding precisely when to tighten is tricky, however. In neither country did residential-property prices fall much from their 2007 peaks. And the latest data suggest house prices are increasing again. In Sydney and Melbourne prices rose by about 5% in the three months to the end of June; they rose even faster in Oslo.

That said, the traditional harbinger of rate rises, consumer-price inflation, remains relatively benign. Norges Bank and the RBA are forecasting domestic inflation rates below 2.8% for the next few years. Continued economic hardship overseas also makes central bankers wary of tightening too early. If trends continue, however, Norway’s central bank is the more likely to shift its rate first. Its 1.25% benchmark interest rate is below the RBA’s 3%; and similar rates of inflation mean the real rate of interest is lower, too.

Now for something completely different

The Bank of England acts to boost the money supply

Just as the supposedly improbable keeps on happening to banks in the financial crisis, so Britain’s economic managers are finding themselves adopting policies they never dreamed would be necessary. The savage downturn induced by the credit crunch has brought the Treasury centre stage, as it throws billions at banks and revives the lost

165

art of active fiscal policy. The Bank of England, for its part, is breaking ever more unconventional ground.

On March 5th the central bank advanced to the frontier of orthodox monetary policy, lowering once again the interest rate it pays on the balances that commercial banks hold with it as liquid reserves. The halfpoint reduction brought the base rate down to 0.5%, probably the final stage in an extraordinarily swift downhill journey from 5% in early October.

Not content with that, the Bank of England crossed the frontier by announcing the start of “quantitative easing”. Central banks typically set interest rates to regulate the economy, pushing them up when it is running hot, pushing them down when it is running cold. Once the base rate gets close to zero, that approach no longer works, however chilly the economic outlook. But if the Bank of England can no longer lower interest rates, it can still raise the monetary base (cash and commercialbank reserves), which gives it another way to boost the economy.

The central bank has already started buying private-sector assets, such as commercial paper, in an attempt to get credit flowing again. But these purchases are being financed by the issue of Treasury bills. Quantitative easing is new territory. The Bank of England will buy giltedged government securities as well as private assets to the tune of £75 billion ($105 billion), and, crucially, will pay for this with its own money. That alarms many people, who fear that the border being crossed may be an inflationary Rubicon. For though the Bank of England will pay for the purchases by crediting the accounts of commercial banks, it is creating money just as surely as if it were printing notes.

The policy may jangle inflationary nerves but it is in fact designed to combat deflation, the new bogeyman. Consumer-price inflation has already dropped from a commodity-driven peak of 5.2% last autumn to 3% in the year to January. The central bank now expects it to reach 0.7% by the end of 2009, well below the 2% target. The broader retail-prices index rose by just 0.1% in the year to January, the lowest since 1960, and looks sure to turn negative soon. Even in two years’ time—the horizon over which monetary-policy settings have their maximum effect on prices—the bank forecasts that consumer-price inflation is likely to be just 0.5%, with a one in three chance that prices will be falling. In a debt-laden economy such as Britain’s, deflation is the last thing anyone would want, as it increases the real weight of the burden.

That inflation projection reflects the exceptionally deep recession that is expected this year. The Bank of England is forecasting that GDP

166

will decline by 3% in 2009, the biggest fall since the second world war; and it fears that the outcome could well be even worse. The economic reverse is opening up spare capacity on a scale that will exert big downward pressure on prices even though the steep fall in the value of the pound has made imports dearer.

Indeed, the main purpose of quantitative easing is not to send the money supply into orbit but to stop it from crashing. On the face of it, the M4 measure of broad money (cash and deposits) has been growing fast. But the increase has been concentrated in specialised financial businesses and thus barely affects overall spending. By contrast, the broad money held by households has risen at a worryingly slow rate over the past year, and holdings by private non-financial firms have actually been dropping (see chart). This cash squeeze on companies is one reason why they have been running down their inventories, which is exacerbating the severity of the recession.

In theory, the Bank of England should be able to reverse these adverse trends by buying assets on a fairly modest scale. That in itself would raise the broad money supply as the central bank pays for its purchases from institutional investors such as insurance companies. And the impact might be much greater. Central-bank money is “highpowered”, as Milton Friedman, the doyen of monetarism, once said. The initial increase in deposits could be multiplied several times as banks find themselves with excess reserves, which they lend in successive rounds, producing yet more deposits and further loans.

But this account assumes that banks are keen to extend credit and are being held back only by insufficient reserves. That is not the case now. They are loth to lend because they are worried that they do not have enough capital to meet losses on their existing loans. Moreover, after the liquidity scares of the past couple of years, they may prefer to hold more reserves in relation to their deposits. So the boost from quantitative easing could prove limited. And even if the supply of money were increased, its velocity of circulation might fall, leaving spending unaffected. “There is nothing mechanical or automatic about the policy, and there are many links in the chain,” points out Jonathan Loynes of Capital Economics, a consultancy.

This highlights the importance of the government’s attempt to get credit flowing by insuring dodgy bank assets. Together with a further infusion of public capital, the effect of the scheme for Royal Bank of Scotland has been greatly to raise its ratio of capital to risk-weighted assets. The bank has pledged to expand its mortgage and corporate loan-

167

book in Britain by £25 billion ($35 billion) in 2009 and the same again in 2010—an increase of 10% a year. Lloyds, undermined by its acquisition of troubled HBOS, is next in the queue.

Yet quantitative easing is no silver bullet. The experience of Japan, which tried it in the early years of this decade, is disheartening to those who hope for great things. Japanese banks hoarded their extra reserves, and the policy had little discernible impact on the broad money supply.

Even if the central bank’s bold new strategy is not a sure remedy for Britain’s economic plight, it is still worth trying, says David Miles, an economist at Morgan Stanley. As for the fear that it may eventually stoke an inflationary surge, the hope is that the Bank of England can reverse course and mop up excess money by selling back the assets once a recovery is under way. That is a job the central bank would surely much prefer to its current task of trying to rescue a sliding economy.

Banks need more capital

Global financial intermediation is broken. This intricate and interdependent system directing the world’s saving into productive capital investment was severely weakened in August 2007. The disclosure that highly leveraged financial institutions were holding toxic securitised American subprime mortgages shocked market participants. For a year, banks struggled to respond to investor demands for larger capital cushions. But the effort fell short and in the wake of the Lehman Brothers default on September 15th 2008, the system cracked. Banks, fearful of their own solvency, all but stopped lending. Issuance of corporate bonds, commercial paper and a wide variety of other financial products largely ceased. Credit-financed economic activity was brought to a virtual standstill. The world faced a major financial crisis.

For decades, holders of the liabilities of banks in the United States had felt secure with the protection of a modest equity-capital cushion, allowing banks to lend freely. As recently as the summer of 2006, with average book capital at 10%, a federal agency noted that “more than 99% of all insured institutions met or exceeded the requirements of the highest regulatory capital standards.”

Today, fearful investors clearly require a far larger capital cushion to lend, unsecured, to any financial intermediary. When bank book

168

capital finally adjusts to current market imperatives, it may well reach its highest levels in 75 years, at least temporarily. It is not a stretch to infer that these heightened levels will be the basis of a new regulatory system.

Even before the market linkages among banks, other financial institutions and non-financial businesses are fully re-established, we will need to start unwinding the massive sovereign credit and guarantees put in place during the crisis, now estimated at $7 trillion. The economics of such a course are fairly clear. The politics of draining off that much credit support in a timely way is quite another matter.

In future, changes to the international financial system are likely to be shaped by Beijing as well as Washington. That is the message of an article by Zhou Xiaochuan, the governor of the People’s Bank of China. Mr Zhou calls for a radical reform of the international monetary system in which the dollar would be replaced as the main reserve currency by a global currency. Mr Zhou’s proposal is China’s way of making clear that it is worried that the Fed’s response to the crisis—printing loads of money—will hurt the dollar and hence the value of China’s huge foreign reserves, of which around two-thirds are in dollars.

He suggests that the international financial system, which is based on a single currency, has two main flaws. First, the reserve-currency status of the dollar helped to create global imbalances. Surplus countries have little choice but to place most of their spare funds in the reserve currency since it is used to settle trade and has the most liquid bond market. But this allowed America’s borrowing binge and housing bubble to persist for longer than it otherwise would have. Second, the country that issues the reserve currency faces a trade-off between domestic and international stability. Massive money-printing by the Fed to support the economy makes sense from a national perspective, but it may harm the dollar’s value.

Mr Zhou suggests that the dollar’s reserve status should be transferred to the SDR (Special Drawing Rights), a synthetic currency created by the IMF, whose value is determined as a weighted average of the dollar, euro, yen and pound. The SDR was created in 1969, during

169

the Bretton Woods fixed exchange-rate system, because of concerns that there was insufficient liquidity to support global economic activity. It was originally intended as a reserve currency, but is now mainly used in the accounts for the IMF’s transactions with member countries.

Mr Zhou’s plan could win support from other emerging economies with large reserves. However, it is unlikely to get off the ground in the near future. It would take years for the SDR to be widely accepted as a means of exchange and a store of value.

There are also big political hurdles. America would resist, because losing its reserve-currency status would raise the cost of financing its budget and current-account deficits.

Долларом и миром правят частные банки Война за власть

В первой статье конституции США записано: «Конгресс имеет право: чеканить монету, регулировать ее ценность и ценность иностранной монеты... Устанавливать наказания за подделку ценных бумаг и находящейся в обращении монеты Соединенных Штатов». Вроде бы все четко закреплено. На века! Американцы же не меняют конституцию. Однако банкиры упорно пытались заполучить в свои руки печатный станок. Еще в 1790 году, когда в США впервые обсуждался закон о частном центральном банке, основатель всемирной банкирской династии Мейер Амшель Ротшильд произнес знаменитую фразу: «Дайте мне право выпускать и контролировать деньги страны, и мне будет совершенно все равно, кто издает законы!»

Первые хозяева Белого дома как могли держали оборону.

Вот заявление президента США Джефферсона, автора Декларации независимости: «Если американский народ когда-либо позволит банкам контролировать эмиссию своей валюты, то вначале посредством инфляции, а затем дефляции банки и корпорации... лишат людей всего имущества... Я искренне полагаю, что банковские институты более опасны для свободы, нежели регулярные армии». В президента Джексона, противостоявшего банкирам, стрелял киллер, но промахнулся.

Боролся с попыткой приватизации печатного станка и Авраам Линкольн. Его застрелили. Менее полугода пробыл в Белом доме

170

Гарфилд. Видно, кого-то очень напугало его заявление: «Тот, кто контролирует денежную массу страны, является полным властелином ее промышленности и торговли... Когда вы поймете, как просто вся экономическая система... контролируется несколькими влиятельными людьми, вам не нужно будет объяснять, где причины депрессий и инфляций». Гарфилду выстрелили в с п и н у. П о г и б и п р е з и д е н т М а к К и н л и , в о з буд и в ш и й антимонопольное расследование против одного из крупных банков.

Заговор на острове

Мечта Мейера Амшеля Ротшильда сбылась через 123 года. В 1910 году на маленький остров Джекиль в Атлантическом океане тайно прибыла «поохотиться на уток» группа солидных заговорщиков. Они представляли крупнейшие международные финансово-промышленные группы: Рокфеллеров, Морганов - Ротшильдов, Заксов, Гольдманов, Куна и Леба. Инициатором встречи был немецкий банкир Пол Варбург, выходец из знаменитой семьи Оппенгеймов. В заговоре принял участие сенатор Олдрич, тесть Джона Рокфеллера. Они и разработали секретный план создания частной организации по печатанию денег США. Для маскировки назвали ее Федеральной (якобы государственной!) резервной системой - ФРС. Однако тогдашний президент Тафт был против такой частной лавочки. Пришлось продвигать в президенты своего человека - Вудро Вильсона. Сенатор Олдрич подготовил законопроект о ФРС. Его спешно утвердили 23 декабря 1913 года - накануне Рождества, когда многие сенаторы разъехались на каникулы. Президент Вильсон в тот же день подписал закон. За что позже был увековечен на самой дорогой купюре в $100 000. Позже конгрессмен Луи Макфедден с горечью заявит, что Федеральный резерв «создал сверхгосударство, управляемое международными банкирами и промышленниками, объединившимися, чтобы поработить мир ради своей прибыли».

Секрет ФРС

Так в чем же интрига сей операции заговорщиков? В каждом государстве есть свой Центральный банк. Один. Он принадлежит государству или находится под его контролем. Однако в Америке слово «федеральная» в названии ФРС - уловка. Это частная структура, состоящая из 12 частных акционерных банков. Каждый имеет право выпускать деньги. И резервов государственных в этой РЕЗЕРВНОЙ системе нет. По закону решения ФРС имеют самостоятельную силу и не требуют одобрения президента или

171