Randomly Noted

The incongruity wasn’t lost on the Federal Reserve chairman or the crowd.

“But before asking the last question, a couple of very important matters to take care of,” intoned the moderator at Fed Chairman Ben Bernanke’s rare press conference today in Washington at the National Press Club. “Want to remind our members and guests of future speakers. Harry Shearer, the comedian and humorist, a voice of ‘The Simpsons,’ will discuss media myths on March 14.

“And we might even try to get him to do a few voices for us,” the moderator added, according to a transcript.

Continue reading…

Federal Reserve Chairman Ben Bernanke made clear he is ready for prime time.

In a presumed effort to counter critics of the U.S. central bank’s $600 billion Treasury bond buying plan to spur the economy, Bernanke took to the airwaves via a Sunday broadcast interview on the popular CBS news program 60 Minutes. Fed chairmen of an earlier generation would be shocked at the straight forwardness of it all, though leaders like to talk on television because they feel they can get their points more directly across.

Bernanke didn’t break any big news on 60 minutes, but that wasn’t the point.

Continue reading…

In the 59 pages of sometimes radical notions proposed by the heads of a budget-cutting commission intended to restore discipline and sacrifice to the economic lives of slothful Americans, there’s at least one  idea that should be a no-brainer.

Gradually increase the age at which Americans retire and collect either early or full retirement benefits via the Social Security system. Make provisions for those 62 or older who can’t continue to work.

This one should be widley adopted by Americans if only to show they are ’mature’ about needed belt-tightening measures, given the size of current and future budget deficits. In France, major protests were launched about the plan to gradually increase the retirement age there to 62 from 60.

Continue reading…

Less than a year after Congress came too close to seriously impinging on the crucial monetary policy independence of the Federal Reserve, a much more reasonable idea about the Fed’s role is emanating from the national legislature.

Championed by a couple of conservative Republicans, the latest notion is to make the Fed more like other central banks. Like the European Central Bank, for instance.

The way to do that, according to Rep. Mike Spence, R-Ind., and Sen. Bob Corker, R-Tenn., is to halve the “dual mandate” the Fed has been trying to fulfill for the past 33 years. That dual mandate, put simply by Eric S. Rosengren, president of the Federal Reserve Bank of Boston, involves trying to achieve “the lowest possible unemployment rate consistent with price stability.”

Continue reading…

For the U.S. Treasury Secretary, there are probably no fun days and less fun days. Maybe history will look more kindly, but it’s tough sledding right now.

Today was likely one of those less-fun days for Treasury Secretary Timothy Geithner. He had to appear before angry committees of the Senate and House of Representatives and tell them why retaliatory measures against China for controlling its currency are not the way to go.

Today must have been as much fun for Geithner as heading to Capitol Hill to defend the big bank bailouts. Actually today was probably less fun. Because there are defenses of bank and AIG bailouts, however unpopular they have become from a rear view mirror view.

Continue reading…

Call him the stock market senator. The fix-the-plumbing stock market senator, to be more precise.

Sen. Edward “Ted” Kaufman, the Democrat from Delaware who is filling out the term of Joe Biden after Biden ascended to the vice presidency, has distinguished himself with his knowledge, concern and vigor about the inner workings of U.S. stock trading. He’s now getting some media attention because of it.

There likely are some in the high-frequency trading community and other pockets of Wall Street pleased with the prospect that Kaufman’s term is winding down and that he won’t run for election when his Senate seat comes up in November of this year. He’s keeping the heat on them, as he is on the Securities and Exchange Commission.

Kaufman’s year-long interest in the current state of stock trading reached a high-point with an early August letter to SEC Chairman Mary Schapiro in which Kaufman makes a series of reform recommendations.

Usually, when legislators send letters to regulators, they are looking for answers because something is affecting their constituents or a media report has shed light on a problem in an area where they have an interest because of committee membership or otherwise.

The Aug. 5 Kaufman letter to the SEC bears no resemblance to such documents. Besides showing an acute understanding of the myriad and obscure workings of today’s stock trading - dark pools, high-frequency trading, excessive messaging and the like – Kaufman has eight pages of proposals.

The “flash crash” of May 6, when stocks gyrated wildly and breathtakingly dropped at warp speed in a few minutes of an otherwise uneventual Spring mid-afternoon, has to a degree borne out Kaufman’s pre-dated concerns. He’s questioning the whole thrust of market developments of recent years.

“The proliferation of exchanges and other market centers that has increased fragmentation, the substantial rise in volume executed internally by broker-dealers in dark pools, excessive messaging traffic, the dissemination of proprietary market data catering to high frequency traders, and order-routing inducements all may be combining in ways that cast doubts on the depth of liquidity, stability, transparency and fairness of our equity markets,” he wrote to Schapiro.

Among Kaufman’s specific suggestions: register high-volume, high-frequency traders with the SEC; raise the standards for becoming a market center (there are more than 50); examine whether too much order flow is being hidden from ‘lit’ markets in dark pools; and essentially rethink the whole structure to emphasize truly liquid markets.

The SEC, of course, has quite a bit on its plate. The Dodd-Frank financial reform bill handed over some important new powers. Indeed, just today, the SEC is expected to vote for a controversial plan to make it easier for large shareholders to nominate directors whose candidacy must be carried in company distributed materials.

Kaufman, who earned a master’s of business adminsitration from the Wharton School at the University of Pennsylvania, told the SEC it is at a historic juncture.

Will it be a “regulator by consensus,” which Kaufman described as one that only moves “when it finds solutions favored by large constituencies on Wall Street?” Or, in his view, something more.

You can agree or disagree with Kaufman’s recommendations. It’s hard to disagree with the notion that what we call the stock market has morphed into a complex web of interactions that few truly understand. And it’s good to see a legislator who knows his stuff before he speaks his mind.

Maybe the Group of 20 nations can only find unity of action in the face of true crisis. Maybe that’s okay.

It’s just the beginning of a weekend of multinational and bilateral meetings, with various protests and other side shows thrown in, that will constitute the G20 session here in Toronto.

But it’s likely to end up a meeting of no new big agreements. There will be a big tent erected to incorporate all nations on the continue-the-stimulus/rein-in-the-deficits spectrum. Countries will be told to impose bank levies if they feel the need, but no worries if you do not.

There will be a lot of statements of the obvious. For example: fiscal deficits are a real problem that must eventually be dealt with, but not at the expense of cutting the underpinnings from the still questionable global economic recovery.

The bigger issue about that uneven global recovery is one not fully in control of the political powers gathered here. That’s how to get the private sectors to take over and start hiring in real numbers. Solve that and the rest pretty much falls into place.

Behind the non-agreements likely to emerge here is this reality: we are in a place that can afford non-agreement. For all of the remaining problems, the global economy is far enough out of the woods for that.

Of course, it’s not so simple as the U.S. is for stimulus, Germany and the United Kingdom are for cutting deficits. Even in the U.S. the unease, including in Congress, is growing along with the swollen federal debts. Meanwhile, the more deficit-reduction-focused nations are carving out long-term plans for cuts and higher taxes and they’ll have a difficult enough time making them work. No one is just saying halt.

The G20 might be judged too harshly if this turns into a weekend of non-agreements. That’s because it will be seen against the backdrop of seemingly heroic unity of proper actions taken at the height of the credit crisis.

That recent heritage was summed up nicely by the finance minister of host country Canada, Jim Flaherty. “The fact that we’re in the midst of a recovery, however fragile that recovery may be, is due to the efforts of the G20.”

There’s value in these high-level get-togethers, even when they produce only lots of words and few new or different actions by the sovereign participants. They keep the gears well greased for when actual unified action is essential to avert financial disaster.

A mutiny in Australian politics is not unheard of, but certainly this one has caught many people by surprise.
Kevin Rudd was increasingly unpopular as prime minister in voter opinion polls for a number of reasons—his rollback of a pledge on a carbon emissions scheme and a plan to levy a new tax on profits in the mining sector–but to remove him so close to an election, with one expected within a matter of months, is a high-stakes gamble.

The anecdotal feedback among voters so far is that the manner in which the centre-left Labor party leadership has ousted Rudd, and installed Julia Gillard as the country’s first female prime minister, was all a bit unpleasant.

The move came swiftly, and most probably in response to internal party polling that would have shown Rudd–who came to power on a wave of optimism and popularity in late 2007–would struggle to win a federal election against his Liberal party counterpart, Tony Abbott. The government was in danger of becoming the first since before World War II not to secure a second term.

Continue reading…

Ask a child who broke a chair or drew on the walls or put cat food in shoes what happened, and they are liable to answer: “Dolly did it”.

Apparently dolly is also now to blame for what’s happening in Greece.

We have murmurings that Greece’s woes–the latest being the downgrade of its sovereign debt to junk by Standard & Poor’s amid worries about its financing risks and growth outlook–aren’t of its own making. It was the euro that did it.

Czech President Vaclav Klaus has been quoted in the German daily Frankfurter Allgemeine Zeitung as saying the real cause of Greece’s crisis lies in the euro and not the country’s economic policy. It is “the euro that causes this tragedy,” he’s cited as saying.

In a way it’s surprising that we haven’t heard more of this sooner. Greece’s problems, and the worries about others in the region, like Portugal and Spain, provide the perfect chance to hammer the euro-zone and the euro in particular.

Finance ministers in the euro-zone haven’t shied away in the past in complaining about the euro’s level. It’s either too strong, or too weak, but never just right. The European Central Bank has been much more relaxed about the euro’s level than individual countries, in part because its primary monetary policy objective is to maintain price stability; certainly it’s not indicated any inclination to intervene in the market to adjust the currency.

Finance ministers also tend to grumble about the difficulties of a unitary monetary policy system. Interest rates that suit one country may not suit another.

But that’s not what caused Greece to get into such a mess. Blaming the euro is like giving Greece a leave pass for all its silly mistakes.

Its problems came about in some measure at least because it fudged its fiscal position to gain entry to the euro-zone. That fudging continued after it joined, and allowed government officials for years to sweep the budgetary problems under the carpet and operate in an increasingly precarious position.

Greece ignored its own difficulties, no doubt hoping that if it closed its eyes it’d all magically disappear.

People can argue that an elevated euro hurt the country’s exports or that interest rates were too high (though the ECB has kept them low for some time), and this sorry episode has highlighted the issues of a union like the euro-zone where there is a one-size-fits-all currency and monetary policy, but the Greek tragedy is largely one of its own making.

(This earlier ran on Dow Jones Newswires as a Money Talks column)

For all the talk about new world orders, new blocs, new spheres of influence and such we are yet to see the Group of 20 flex much muscle, or the BRICs (Brazil, Russia, India and China) manage to stay on message.

 This while European Union members wrestle publicly with how to deal with Greece–particularly how much money to hand over.

Governments still prioritize their individual needs over collective decision-making, and some groupings are proving a particularly fractious bunch.

That means, noise aside, we are unlikely to witness a sea change shift from the U.S. as a central decision maker or the U.S. dollar as the main global currency, or a major change in the phrasing and nature of world trade agreements; we are likely to also see a fair amount of protectionism persist.

The weekend meetings in Washington DC of the World Bank, the International Monetary Fund, the G-20 plus the G-7 were a classic exercise in maintaining the status quo. Only last year everyone was talking about how the G-20 would soon supersede the G-7/G-8, especially given the growing influence of China among the pack of the stronger developing nations.

That had implications for all sorts of things in terms of the balance of power, from emerging-market nations’ ability to negotiate things like trade, to what sort of currency should be the world’s dominant medium of exchange.

China and India, et al, are emerging powers. They are gobbling up more of the world’s resources and playing a bigger role as well in global politics.

But why presume the “south” is any more of a united grouping than the “north”? Emerging market nations may be just that, but they don’t necessarily have a lot else in common. Grouping them together and saying they will have the same agenda on trade, currencies and monetary policy is ridiculous.

Countries will act together, but only up to a point. Unions look less solid when their individual interests may be put at greater risk. That’s true for the G-7, G-20, EU and BRICs alike.

Witness the comments from officials from India and Brazil in recent weeks along the lines that it wouldn’t be a bad thing if China allowed its currency to rise. Are we seeing a crack in the BRICs?

Witness the German Foreign Minister Guido Westerwelle reminding everyone on Sunday that his country is “not ready to write a blank check” for Greece, after Athens appealed for an E.U. and IMF bailout.

 
We all like to bang on about a new world financial order. In reality, any change will be slow and incremental. The U.S. (with its outsize influence on the IMF and World Bank) and its currency will be top dog for a while yet.