– “The old ways of doing business are gone,'’ Joe Hinrichs, Ford’s manufacturing chief, and Marty Mulloy, vice president of labor affairs, said in a March 19 commentary sent to newspapers in communities where Ford has plants. “We must continue to downsize and simply will not have enough jobs for all of our current hourly workers.'’ –
http://bloomberg.com/apps/news?pid=20601068&sid=aXFH4XZOs3Uw&refer=home
– WASHINGTON (Reuters) - The International Monetary Fund board on Friday will recommend a landmark overhaul in the voting power of member countries, with emerging economies saying they will settle for less than they wanted …
IMF’s board of governors, made up of finance ministers or central bank chiefs of the fund’s 185 member countries, will vote on the changes in voting power after the IMF spring meeting on April 11 and 12 in Washington.
Sources said 54 countries, mainly emerging economies, would gain voting power under the new formula including Brazil, India, China, Thailand, Malaysia, Philippines, Singapore, Hungary, Poland and Botswana. –
– CAPE TOWN (Reuters) - The best way for central banks to foster sustainable economic growth and prevent instability is to keep inflation under control, Philadelphia Federal Reserve President Charles Plosser said on Friday.
A broader role for monetary policy is risky, he added, because failure to deliver results could lead to a crisis of confidence in central banking.
“Price stability is not only a worthwhile objective in its own right. It is also the most effective way monetary policy can contribute to economic conditions that foster the Federal Reserve’s other two objectives: maximum employment and moderate long-term interest rates,” Plosser said in prepared remarks at South Africa’s Global Interdependence Center. –
– March 30 (Bloomberg) — UBS AG, the European bank with the highest losses from the U.S. subprime crisis, may ask shareholders to approve a capital increase of as much as 16 billion Swiss francs ($16.1 billion), Sonntag newspaper said, citing people it didn’t identify.
UBS needs money to keep its Tier 1 capital ratio at 12 percent, the newspaper reported, adding UBS will also report a first-quarter loss after writing down as much as 15 billion francs on the value of debt securities. Sonntag said UBS is suffering from a cash drain after customers in the Zurich area alone removed funds worth 700 million francs as of March 26.–
http://bloomberg.com/apps/news?pid=20601087&sid=a7OD4I9MoGVU&refer=home
Comment: The times are over when you could trustfully follow a Swiss banker in case he jumped out of the window, for you could be sure there was a stack of money to be found out there. The lack of sound thinking has become pervasive at all levels, on all continents. It is our current monetary system, ripped off from all anchors, that corrupts the souls and the minds.
posted by Antony MuellerÂ
– “For some time, there has been a tacit agreement among central bankers and the financial ministers of key economies not to allow any bank large enough to jeopardize the system to go under — no matter what the cost. But, on Sunday, the question arose whether this agreement should be formalized and made public. The central bankers decided against the idea, reasoning that it would practically be an invitation to speculators and large hedge funds to take advantage of this government guarantee.
Everyone involved knows how explosive the agreement is. It essentially means that while the profits of banks are privatized, society bears the cost of their losses. In a world in which the rich are getting richer and the poor poorer, that is political dynamite.” –
http://www.spiegel.de/international/business/0,1518,druck-543588,00.html
Comment: It is a a tragic farce that the very same institution that brought about the mess by irresponsible monetary policy is about to be empowered with more regulatory authority: http://biz.yahoo.com/ap/080330/fed_overhaul.html
posted by Antony Mueller
Antal Fekete reminds of the day when Roosevelt stole the people’s gold:
“Roosevelt had been elected on a platform of sound money. Barely in office, he reversed himself. He grabbed the gold of the people, marked up its value, leaving Federal Reserve notes in the hands of the people that were to lose 95 percent of their value during subsequent years. They stand poised to lose their remaining value before long.”
– WASHINGTON (CNN) — The Federal Reserve would have the power to regulate virtually the entire financial industry under a Treasury Department proposal to be announced Monday.
The proposal is part of a sweeping overhaul of the government’s regulatory structure that Treasury Secretary Henry Paulson will propose in a speech Monday, said Treasury Department spokeswoman Michele Davis.
“I am not suggesting that more regulation is the answer, or even that more effective regulation can prevent the periods of financial market stress that seem to occur every five to 10 years,” Paulson will say, according to a text of the speech obtained by The Associated Press.
According to Brookly McLaughlin, another department spokeswoman, Paulson will propose these changes:
• Give the Federal Reserve authority to look at the financial status of any institution that could affect market stability;
• Merge the Securities and Exchange Commission with the Commodity Futures Trading Commission;
• Give stock exchanges more room for self-regulation;
• Consolidate bank supervision into one regulator.
One of the most dramatic changes would extend the powers of the Federal Reserve — designed to regulate the commercial banking industry — to oversight of virtually the entire financial industry.
That change would make the Fed the first responder to a potential financial crisis. Currently, several agencies and commissions have oversight over various parts of the industry, but none has the broad authority.
The proposals have been in the works since June — two months before the current sub-prime mortgage crisis began affecting financial markets … –
Comment: It’s the same old story all over again. At first, government bodies lay the groundwork for the financial crisis; when the crisis comes, government lay the blame on ”the market” and on “laissez faire capitalism”. With the scapegoat named, the government gets ready to grab more power – only to produce the next disaster in due course. More regulation is not the solution, it’s the problem. The problem is a monetary system without any anchor, a monetary system, which allows the Fed to increase the money supply without restraint. Along with that, the financial institutions get a free ride to expand credit with the assurances by the monetary authorities that they bail tham out if things should go wrong. When things go well, the financial institutions cash in, in the crisis phase they will be saved by bailouts, in the end the big winner is government, which gains more power.
Antony Mueller
– March 28 (Bloomberg) — Federal Reserve officials may be rethinking their aversion to acting against asset-price bubbles, an article of faith during former Chairman Alan Greenspan’s 18 years at the helm.
After this month’s near-collapse of Bear Stearns Cos., Minneapolis Fed Bank President Gary Stern — the longest-serving policy maker — said in a speech yesterday that it’s possible “to build support'’ for practices “designed to prevent excesses.'’ New York Fed President Timothy Geithner, whose district bank took on almost $30 billion of Bear Stearns assets to rescue the firm, argued two years ago for a larger role for asset prices in decision-making, and there’s no indication his views have changed. –
http://www.bloomberg.com/apps/news?pid=20601109&sid=aHacfhqvht2Q&refer=home
Comment: What tools does the Fed have to diagnose a bubble other than judgement? And judgement is not the strongest point of the Fed authorities. What instruments does the Fed have to pierce a bubble? You cannot deflate a bubble in a smooth way, once you pierce a hole into it, the bubble deflates usually quite drastically. So let’s forget about “bubble management”, let’s better concentrate on what lies at the heart of the matter: Bubbles are created by excessive credit growth triggered by interest rates that are set too low by the central bank. Now if the central bankers say that they cannot know the natural rate of the interest rate and that they cannot fully control credit growth and do not even any longer know “what money is”, then the consequence should be for the central bankers to resign and shut down the Fed. In a short period of time, a market-based solution would show-up.
Antony Mueller
– March 28 (Bloomberg) — The dollar fell against the euro, headed for its biggest weekly decline since January 2006, as traders increased bets that the Federal Reserve will cut interest rates again to avert a recession. –
http://bloomberg.com/apps/news?pid=20601087&sid=a8A5Jt6pRvXI&refer=home
Comment: What else could be expected when the US central bank stacks up on junk-status mortgage bonds.
Antony Mueller