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In what might be his final years as chairman of the Federal Reserve, Ben S. Bernanke is transforming the U.S. central bank, seeking to shed its reclusive habits and make it a constant presence in bolstering the economy.
The new approach would make the Fed’s policies more responsive to the needs of the economy — and likely more forceful, because what the Fed is planning to do would be much clearer. A key feature of the strategy would be producing a detailed set of scenarios for when and how the Fed would intervene, which would mark a dramatic shift for an organization that throughout its history has been famously opaque.Bernanke has already pushed the Fed far along this path. The central bank this month pledged to stimulate the economy until it no longer needs the help, an unprecedented promise to intervene for years. That’s a big change from the Fed’s usual role as a curb on inflation and buffer against financial crises.
“It’s a re-imagining of Fed policy,” said John E. Silvia, chief economist at Wells Fargo. “It’s a much more explicit commitment than people had thought about in the past. It’s a much stronger commitment to focus on unemployment.”
As the Fed becomes more forceful and interventionist, it creates new risks for itself. Bernanke’s actions have provoked tough criticism from conservatives in Congress, who have proposed more closely regulating what the Fed can do. The Fed takes pride in its independence, but becoming more interventionist may plunge it deeper into the political maelstrom.http://www.washingtonpost.com/business/economy/under-ben-bernanke-a-more-open-and-forceful-federal-reserve/2012/09/23/52f3a1ae-03e1-11e2-8102-ebee9c66e190_story.html
Aussie Debacle Signaling China Hard Landing as Iron Market Melts
From the end of 2008 through July, no major currency appreciated as much as Australia’s dollar, thanks to booming shipments of iron ore and other commodities to China. Since then, it’s the worst performer as the engine of world growth slows.The so-called Aussie depreciated 2.5 percent in the past month, the biggest decline among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. Traders are betting Australia’s central bank will cut interest rates to boost growth, dragging down the currency even though the Standard & Poor’s GSCI Index of commodities has risen almost 20 percent from its low this year in June.Enlarge image
Fortescue Metals Group Ltd.'s property at Cloudbreak in the Pilbara region of Western Australia. Fortescue Metals Group Ltd., Australia’s third-biggest producer, cut its spending plans by 26 percent as iron-ore prices declined. Photographer: Carla Gottgens/BloombergThis reversal shows the dangers for an economy tied too closely to another. China, which buys 28 percent of Australia’s exports, said industrial output grew at the slowest pace in three years last month as Europe’s debt crisis cut sales of Chinese goods. Polls show Prime Minister Julia Gillard’s governingLabor Party is under pressure before elections due next year.“The Australian dollar is very expensive from whichever metrics you look at,” Dagmar Dvorak, a director of fixed-income and currencies in London at Baring Asset Management, which manages $50 billion, said in an interview on Sept. 20. “When a currency overvaluation is that extreme, you have to question what could be a trigger that stops it. For the Aussie, it’s the economic slowdown in China and falling commodity prices. The currency looks vulnerable.”Rebound Curtailed
http://www.bloomberg.com/news/2012-09-23/aussie-debacle-signaling-china-hard-landing-as-iron-market-melts.htmlChina Beige Book Shows Optimism Drops as Job Cuts Rise
China’s manufacturers and retailers are less optimistic about sales than they were three months ago and more companies are cutting jobs, according to a survey modeled on the U.S. Federal Reserve’s Beige Book.The China Beige Book, through interviews of more than 2,000 company executives and bankers from Aug. 9 to Sept. 3, found limits to monetary easing after interest-rate cuts in June and July, with banks loosening credit while fewer companies are borrowing, according to a summary from CBB International LLC, the New York-based researcher that conducted the survey.Enlarge image
The China Beige Book said manufacturing was the area with the biggest declines in companies reporting higher revenue, down 20 percentage points to 43 percent, and higher output, down 15 points to 47 percent. Photographer: Nelson Ching/Bloomberg
7:07Sept. 20 (Bloomberg) -- Gary Shilling, president of A. Gary Shilling & Co., talks about the prospects for global deflation and the Chinese economy. He speaks with Tom Keene and Sara Eisen on Bloomberg Television's "Surveillance." (Source: Bloomberg)The findings build on economic data indicating manufacturing, trade and retail sales slowed in the third quarter, pointing to a seventh straight deceleration in growth and potentially the weakest annual expansion in 22 years. They contrast with the China Beige Book’s report for the previous period, which said it found a rebound not reflected in official statistics and projected government data would reflect a pickup by “mid- to late summer.”“The dramatic and unexpected worsening of the European crisis and slowing of America’s economy brought China’s export order growth to a near-standstill,” said Craig Charney, research director for the China Beige Book.At the same time, the third-quarter report showed some trends continued “despite the overall growth slowdown,” including relatively faster growth in retailing and services, a recovery in the real estate market, and greater strength in poorer and more peripheral regions than coastal industrial areas, Charney said.
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