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Monthly Archives: February 2015

The outbreak of recovery

25 Wednesday Feb 2015

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Bank of England, Federal Reserve, inflation, Janet yellen, Mark Carney, money markets, rates

If the Boomtown Rats were interested in economics they might have sung “I don’t like Tuesdays”.

For the world’s most-influential central bank and one which used to enjoy that privilege separately met lawmakers on Tuesday and sang the chorus line of higher interest rates.

Janet Yellen,  chairman of the U.S.  Federal Reserve Board and Mark Carney, the governor of the Bank of England, both indicated rates are about to get hiked.

UK interest rates will rise gradually over the next two years Carney told MPs yesterday, playing down the chance of another rate cut.

Meanwhile Yellen told Senators in Congress that forward guidance would soon drop “patience over rates” which has been the language since December. That change in lingo could come as soon as at the March Fed meeting and Yellen signalled a hike could come swiftly afterwards. The most hawkish predictions are for a June hike.

In all U.S. rates have been anchored at zero for over six years. UK rates at 300-year-lows of 0.5% for six years next month.

Quite apart from whether the global economy is ready, and some signs parts of Asia are limping, the most significant consequence of rate rises for borrowers lulled into leveraging on “easy money ” for years will be the entire recalibration of the money markets and wider economies.

As I have argued before the “outbreak of peace” could be bitter to swallow.

Affluence: It’s not just a numbers game

24 Tuesday Feb 2015

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Britain, DEMOGRAPHICS, FT, pension, pensioners, the young

As an article in today’s Financial Times headlines those aged 20-25 years in Britain are now worse off, switching places with those aged 60-plus.

We have been warned since the 1980s of an ageing population and the phrase “demographic timebomb”  has entered common parlance.

But this expression of social policy was flawed. It relied too much on a numbers game. It suggested that improvements in medicine, technology and quality of life meant that elderly people would live longer and become a pension burden to the young who must pay for it via the state transfer payment system.

It is true that while public servants such as civil servants,  the police,  judiciary,  teachers and nurses have increasingly seen their pension entitlements flow from funded and invested pools – and even the less generous defined contribution schemes – those not employed by the state or those otherwise entitled to basic pension benefits have continued to be paid for from current tax receipts. And they have swelled in numbers.

However,  it is now evident that it is not just about forming public policy based on numbers. But also on what value benefits they enjoy. These have been increasing too.

It is not a peculiarly British problem. All Europe has to face this upheaval too.

— No country for young men – http://www.ft.com/cms/s/0/60d77d08-b20e-11e4-b380-00144feab7de.html

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