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For the most part, Ben Bernanke and his colleagues at the Federal Reserve have been good guys in these troubled economic times.
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They have tried to boost the economy even as most of Washington seemingly either forgot about the jobless, or decided that the best way to cure unemployment was to intensify the suffering of the unemployed. You can argue – and I would – that the Fed’s activism, while welcome, isn’t enough, and that it should be doing even more. But at least it didn’t lose sight of what’s really important. Until now.

Lately, Fed officials have been issuing increasingly strong hints that rather than doing more, they want to do less, that they are eager to start “tapering,” returning to normal monetary policy. The impression that the Fed is tired of trying so hard got even stronger last week, after a news conference in which Mr Bernanke seemed quite happy to reinforce the message of an imminent reduction in stimulus.

The trouble is that this is very much the wrong signal to be sending given the state of the economy. We’re still very much living through what amounts to a low-grade depression – and the Fed’s bad messaging reduces the chances that we’re going to exit that depression any time soon.

The first thing you need to understand is how far we remain from full employment four years after the official end of the 2007-9 recession. It’s true that measured unemployment is down – but that mainly reflects a decline in the number of people actively seeking jobs, rather than an increase in job availability. Look, for example, at the fraction of adults in their prime working years (25 to 54) who have jobs; that ratio fell from 80 to 75 per cent in the recession, and has since recovered only to 76 per cent.

Given this grim reality – plus very low inflation – you have to wonder why the Fed is talking at all about reducing its efforts on the economy’s behalf.

Still, it’s just talk, right? Well, yes – but what the Fed says often matters as much as or more than what it does. This is inherent in the relationship between what the Fed more or less directly controls, namely short-term interest rates, and longer-term rates, which reflect expected as well as current short-term rates.

Even if the Fed leaves short rates unchanged for now, statements that convince investors that these rates will be going up sooner rather than later will cause long rates to rise. And because long rates are what mainly matter for private spending, this will weaken growth and employment.

Sure enough, rates have shot up since the tapering talk started. Two months ago the benchmark interest rate on 10-year US government bonds was only 1.7 per cent, close to a historic low. Since then the rate has risen to 2.4 per cent – still low by normal standards, but, as I said, this isn’t a normal economy.

Maybe the economic recovery will, as the Fed predicts, continue and strengthen despite that increase in rates. But maybe not, and in any case higher rates will surely mean a slower recovery than we would have had if Fed officials had avoided all that talk of tapering.

Fed officials surely understand all of this. So what do they think they’re doing?

One answer might be that the Fed has quietly come to agree with critics who argue that its easy-money policies are having damaging side-effects, say by increasing the risk of bubbles. But I hope that’s not true, since whatever damage low rates may do is trivial compared with the damage higher rates, and the resulting rise in unemployment, would inflict.

In any case, my guess is that what’s really happening is a bit different: Fed officials are, consciously or not, responding to political pressure. After all, ever since the Fed began its policy of aggressive monetary stimulus, it has faced angry accusations from the right that it is “debasing” the dollar and setting the stage for high inflation – accusations that haven’t been retracted even though the dollar has remained strong and inflation has remained low.

It’s hard to avoid the suspicion that Fed officials, worn down by the constant attacks, have been looking for a reason to slacken their efforts, and have seized on slightly better economic news as an excuse.

And maybe they’ll get away with it; maybe the economic recovery will strengthen and all will be well. But rising interest rates make that happy outcome less likely. And now that everyone knows that the Fed is eager to slacken off, it will be hard to get interest rates back down to where they were.

It’s sad and depressing, in both senses of the word. The fundamental reason our economy is still depressed after all these years is that so many policy makers lost the thread, forgetting that job creation was their most urgent task. Until now the Fed was an exception; but now it seems to be joining the club. Et tu, Ben?

The New York Times

The original release of this article first appeared on the website of Shanghai Night Net.

Bill Tupou has left the Warriors with immediate effect and has signed with the Canberra Raiders.
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The 22-year-old winger has played 62 games for the Warriors since making his debut against the Sea Eagles in round four of the 2010 season, but will leave the club on a two-and-a-half-year deal with the Raiders.

In a busy recruiting day for the Raiders, the club has also confirmed the signing of Melbourne Storm forward Lagi Setu for two years, beginning in 2014.

Raiders boss Don Furner said the team views Setu as the ideal replacement for back rower Joel Thompson, who will begin a three-year deal with St George Illawarra next season.

“Lagi is a fine young player and will be a perfect replacement for Joel Thompson,” he said.

“We actually tried to sign him four years ago, but he returned back to Brisbane and then headed off on his two-year Mormon mission. We are very happy to have secured him the second time around.”

Tupou signed a new deal with the Warriors last year for this season and next, plus an option for the 2015 campaign with the Auckland side.

He was a regular starter in the early part of the season but hasn’t played first grade since round 10, with Warriors coach Matt Elliott preferring Glen Fisiiahi or Ngani Laumape ahead of him.

The Warriors agreed to give him an early release to his contract and the Raiders and Eels were quick to offer him a contract.

Both options were of interest. Eels coach Ricky Stuart is rebuilding his Eels side for next season and Tupou would have been a key part of that, but at the Raiders he’ll go into a team that’s already competitive and looking good for a place in the top eight this season.

With the Raiders’ big wing Edrick Lee not due back until round 24 because of a broken arm, Tupou is likely to be rushed straight into their starting team and may even play for them against the Rabbitohs on Friday night if the registration paperwork is completed at the NRL in time.

Tupou needs game time to increase his chances of making it into the Kiwis World Cup squad later this year.

The former Junior Kiwi had been with the Warriors throughout his career. In 2008 he scored 14 tries in 19 games in the newly formed Toyota Cup and scored the same number of tries in two fewer games the following campaign.

He leaves the Warriors with a record of scoring 19 tries in 62 games.

– stuff上海夜生活.nz

The original release of this article first appeared on the website of Shanghai Night Net.

London: Asian powers are outpacing the United States to become the biggest spenders on defence by 2021 and are fuelling an “explosion” in the global arms trade, a study showed.
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The global arms trade jumped by 30 percent to $US73.5 billion ($79.6 billion) between 2008-2012 in spite of the economic downturn, driven by surging exports from China and demand from countries like India, and is set to more than double by 2020, defence and security consultancy IHS Jane’s said on Tuesday.

“Budgets are shifting East and global arms trade is increasing competition. This is the biggest explosion in trade the world has ever seen,” said Paul Burton, a senior manager at IHS Jane’s whose study looked at 34,000 defence acquisition programmes.

The United States has accounted for the lion’s share of global defence spending over the past decade, but budget cuts in Washington, as it withdraws from countries such as Afghanistan, mean that it will account for just 30 percent by 2021 to fall behind Asia at 31 percent.

Military spending in the Asia Pacific region – which includes China, India and Indonesia – will rise 35 percent to $US501 billion in the next eight years, compared to a 28 percent fall in US spending to $US472 billion over the same period, IHS Jane’s said.

“The big Western defence companies have no option – export or shrink – but this could be sowing the seed of their own demise; the opportunities in the East are a double-edged sword, fuelling a trend which threatens US dominance of defence.” said Guy Anderson, senior principal analyst at IHS Jane’s.

China’s ramp-up in defence spending in recent years is worrying its neighbours such as Japan, with whom it is currently embroiled in a stand-off over a series of uninhabited islands, despite its repeated reassurances that there is nothing to fear.

Japan, as well as India and South Korea, are among countries being courted by weapon makers such as Lockheed Martin, Boeing and BAE Systems who want to sell them fighter jets and other equipment to make up for reduced spending in their Western home markets, but such deals tend to require investment in the buyers’s defence industries.

India, for instance, is speaking exclusively to France’s Dassault Aviation on a $US12 billion order of 126 warlanes and wants 50 percent of the work to be given to Indian companies.

China is expected to increase its defence budget by 64 percent to $US207 billion by 2021, compared to India and Indonesia which are respectively forecast to spend 54 and 113 percent more, the study said.

These countries aspire to build thriving defence industries capable of developing modern equipment such as fighter jets and aircraft carriers, and may be able to export “world class kit” rivalling that of the West in a decade as a result of their willingness to spend, IHS Jane’s said.

Reuters

The original release of this article first appeared on the website of Shanghai Night Net.