Quote:Some of the US economic figures are also fudged lah, their "real" unemployment rate would be super high if they included those drop out of workforce and gave up looking for work.
In Sg, the same applies for those who give up searching for work. I even remember reading this as a typical definition on economic textbook in my university years.
In that sense, can't find fault if everyone does it.
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Now the world appears to be a safer place as policy makers explore new methods to keep global economies on life support...
- Sep 19 2015 at 12:15 AM
- Updated Sep 19 2015 at 12:15 AM
Time to forget about the US Fed
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[img=620x0]http://www.afr.com/content/dam/images/g/j/p/f/j/m/image.related.afrArticleLead.620x350.gjm3u1.png/1442568314112.jpg[/img]The sharemarket went nowhere as the Fed yet again stayed its hand. Bloomberg
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by Patrick Commins
As much as it pains me to write this, and as you assuredly already know, the US Fed failed to announce a "lift-off" from its zero interest rate policy that has dragged on for close to seven years. Instead, with the tune of The NeverEnding Story ringing in our ears, chair Janet Yellen now looks even less likely to lift rates at all in 2015. If you, like me, are dreading the thought of ploughing through thousands of words examining what this momentous non-event means for you and your investments, here are the three, and only, things you need to know:
1. THE SHAREMARKET DIDN'T LIKE IT MUCH.
Neither did the Australian dollar, for that matter. A decision to not raise rates, accompanied with a more "dovish" tone to the accompanying statement, should be a straightforward "win" for both of those assets.
Lower rates make shares look better value against alternatives such as bonds and cash, and it also reassures investors that the central bank is committed to supporting the economy through loose monetary policy and easy credit conditions.
That playbook failed to play out Friday morning on Wall St. After initially spiking on the 4am AEST announcement, the S&P 500 index then reversed all those gains to close the down for the day.
The differential between rates here and abroad is a key determinant of our currency's strength, so news that the US hadn't tightened policy, and indeed was looking less likely to do so in the short term, should have added to the allure of our dollar. And, yes, the Aussie jumped by more than 1 US cent to approach 72.8 US cents, but then it gave up all those gains in rapid order to be pretty much where it was 24 hours earlier.
Why, you ask? Well that brings us on to number two, which is …
THE FED HAS DISCOVERED THE WORLD.
And it doesn't like what it sees. The US central bank lowered its collective inflation forecast for next year, but only by a little, and it also reduced its unemployment rate expectations. So what was more notable was the fact the central bank revealed in its statement that it was "monitoring developments abroad".
At the press conference, chair Janet Yellen referred to "heightened concern about growth in China and other emerging market economies" and said those have "led to volatility in financial markets". Just stating the obvious, you might think, but one respected economist pointed out that the last time the Fed focused so heavily on foreign developments was in September 1998. Depressingly, back then it didn't hike for another 10 months.
So it's likely comments in this vein are what spooked investors. Does the Fed know something about China that we don't? Not the kind of question that makes overseas types want to snap up Aussie dollars, or shares for that matter.
The Fed's line is that global growth concerns and emerging market volatility tend to strengthen the greenback and weaken the oil price, both of which have flowed through to lower US inflation and stayed the central bank's hand.
That argument starts becoming circular, however, as NAB currency strategist Emma Lawson has pointed out. It goes something like this: the Fed doesn't hike because emerging markets (EM) are under pressure. But EM is under pressure because the Fed is going to hike, so when the Fed doesn't hike, EM rallies, and the Fed turns hawkish again. But hold on, that leads EM to come off the boil again, and we're back where we started.
To escape this negative feedback loop we need a circuit breaker, reckons Lawson, and "hopefully one to the upside, not the downside of the risk spectrum". The number one contender for this, as confirmed by the Fed on Friday morning, is China and how it manages its economic transition.
And that, neatly, brings us to number three, which is …
3. IT'S TIME TO FORGET THE FED.
"Gasp!" That's right, I said it. The US Fed has done all it can for us. It has pumped more than $US4 trillion ($5.6 trillion) into global financial markets via its now defunct bond purchasing programs. It has sparked one of the longest bull runs in US sharemarket history and kept the world's largest economy on a reasonably steady path of recovery. That's helped us all. When it raises rates – tomorrow or in six months' time – it will be the first, small step on a long and gradual path towards more normal monetary settings. All that stimulus isn't about to be sucked back out of the market overnight.
Imagine that Yellen had called you ahead of this morning's announcement and told you whether rates would be higher or on hold. After you got over the inevitable "How did she get my number?" and, "Really, at this hour?" – ask yourself this: what would you have changed about your portfolio?
That's not an idle question. The local head State Street Global Advisor's investment solutions group, Mark Wills, asked himself that same question.
"How would that change our behaviour? We have no idea," he said Thursday afternoon amid the frenzied US Fed conjecture. "We're happy with our current positioning, and we can't see anything out of a decision that would dramatically move markets either way."
Well, he was right. Worry about Greece and Middle-East conflict, if you must. Read all you can about China. Try to find pockets of growth and stay defensive. But, for now, forget the Fed.
The rate will rise, either in Oct or Dec, based on the suggestion...
Asian shares rise, dollar gains as Yellen revives rate talk
TOKYO - The dollar jumped and U.S. interest rate futures price briefly dropped after Federal Reserve Chair Janet Yellen suggested the central bank is still on track to raise interest rates later this year.
...
http://www.todayonline.com/business/asia...rns-linger
She has added one more uncertainty into the global economy i.e. her health condition...
Yellen resumes schedule after struggling to finish speech
AMHERST, Mass. - Federal Reserve Chair Janet Yellen received medical attention on Thursday after struggling to finish a speech at the University of Massachusetts, Amherst, coughing and pausing to recompose herself a few times before walking off stage.
As head of the central bank of the world's largest economy, Yellen, 69, plays a major role in the global economy.
...
http://www.todayonline.com/business/fed-...s-official
(25-09-2015, 09:46 AM)CityFarmer Wrote: [ -> ]The rate will rise, either in Oct or Dec, based on the suggestion...
Asian shares rise, dollar gains as Yellen revives rate talk
TOKYO - The dollar jumped and U.S. interest rate futures price briefly dropped after Federal Reserve Chair Janet Yellen suggested the central bank is still on track to raise interest rates later this year.
...
http://www.todayonline.com/business/asia...rns-linger
This report missed out another part of her speech:
Quote:Keeping in her even-handed style, Yellen said that if the economic outlook worsens later this year, the Fed could push back a rate hike until 2016.
"If the economy surprises us, our judgments about appropriate monetary policy will change," Yellen said, ending her speech.
http://money.cnn.com/2015/09/24/news/eco...ey_markets
Reckon it's still going to be data dependent.....
Since Obama took office their debt has continued to go up. Despite some shrinkage of budget deficit initially, since early this year the budget deficit has started increasing again and latest is around 149billion. If they don't do austerity soon, US is gonna end up just like greece, only a much bigger version.
Short term fix, long term pain.
USA will always have money , if no money just another round of QE .
(25-09-2015, 08:17 PM)cfa Wrote: [ -> ]USA will always have money , if no money just another round of QE .
I absolutely agree with your observations... printing $ or new way of surviving is the way to convincingly move forward.
Big brothers have little worries as its always the small guys that are being sacrificed...
The world is aging and bankrupt... is there anything new?