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    Three pillars of policy tightening by central banks

    Business, Paul Donovan, Published on 27/10/2014

    » Central bank policy is already being tightened. The problem is that in the world after quantitative policy, central bank policy can no longer be represented by a simple interest rate line on a chart. Policy has become more complex, and that complexity is something that markets seem to overlook. Central bank policy now rests on three pillars, and tightening in any of these three policy areas will restrict economic activity.


    Currencies and globalisation's collapse

    Business, Paul Donovan, Published on 18/06/2014

    » We live in stirring times. Mario Draghi, president of the European Central Bank (ECB), has crossed the monetary policy Rubicon and cut one of the euro zone’s key interest rates into negative territory. This is dramatic stuff, as even the most economically oblivious are likely to recognise that negative interest rates are a radical policy. At the same time, the US Federal Reserve is gracefully gliding out of its quantitative policy position, and by October that money-printing process is likely to be effectively at an end. The question from most investors is therefore “what next for US monetary policy?” The answer is likely to be an increase in US interest rates, and those increases may start earlier and take place faster than many investors currently assume. The Bank of England has been even more explicit in signalling a desire to tighten interest rates sooner than financial investors had expected.


    Why the Fed is not worried by emerging market moves

    Business, Paul Donovan, Published on 05/03/2014

    » Several emerging market central banks have been forced to react to market events already this year. Interest rate increases in India, Turkey and South Africa followed bond or currency market volatility. Argentina has endured dramatic moves in its currency, and Brazil has been forced to tighten policy.


    Does transatlantic top transpacific in free trade talks?

    Business, Paul Donovan, Published on 01/10/2013

    » Politicians negotiating international trade deals love their abbreviations. The world of global trade is a vast bowl of alphabet soup _ WTO, Nafta, Apec _ and now we have TTIP and TPP: the Transatlantic Trade and Investment Partnership and the Trans-Pacific Partnership, as they are known officially.


    What happens when the taps turn off?

    Business, Paul Donovan, Published on 19/07/2013

    » The aftermath of the global financial crisis has been marked by two trends in economics. First, central banks have embarked on the aggressive printing of money. Second, some politicians and investors have misunderstood the financial market implications of those policy decisions.


    The japanese are coming (Sort Of)

    Business, Paul Donovan, Published on 26/04/2013

    » The Bank of Japan (BoJ) has a new governor and a new policy. Governor Haruhiko Kuroda plans to print money. Actually the BoJ has always printed money but now plans an explosive printing of money. If it prints money in an aggressive manner, then surely this means global liquidity will surge?


    For whom the yen tolls

    Business, Paul Donovan, Published on 15/03/2013

    » The issue of "currency wars" has generated a great deal of noise from politicians around the world. This in turn has created a great deal of irritation among economists; it is a distraction from more important, complicated decisions that have to be made.


    Money pumping may lead to a currency war that leads to nowhere

    Business, Paul Donovan, Published on 28/09/2012

    » The US Federal Reserve, the European Central Bank (ECB) and the Bank of Japan have all applied additional easing measures to their monetary policy management in the past couple of months. The Bank of England got there first with additional easing announced earlier in the year. The Swiss National Bank is printing money on a scale that is almost Zimbabwean in its volume. Are these salvos in a war to devalue currencies _ a war that must ultimately fail (for you have to have one strong currency to devalue against)? Or are central banks trying to devalue their currencies against commodities such as oil?


    What the euro means for Asia

    Business, Paul Donovan, Published on 21/02/2012

    » The euro should not exist. In a perfect world (run by economists) the euro would never have been created. Sadly, however, the world is not perfect _ and it is run by politicians. The result is an entirely dysfunctional monetary union.

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