Untitled

News Summary
Reuters News carried a report that FOMC board members

appeared deeply divided over how seriously problems in the
world economy will effect the US, a fracture that may be
difficult for Fed Chairwoman Janet Yellen to mend as she
guides the central bank's debate over whether to hike interest
rates. Non-voter, St. Louis Fed President James Bullard said
he would have joined Richmond Fed President Jeffrey
Lacker's dissent, and worried the central bank had paid too
much attention to recent financial market gyrations. Reuters
reported 13 of 17 Fed members last week said they still expect
to hike rates this year. Next FOMC is in October and again in
December. In the WSJ, Bullard said, Why do the committees
policy settings remain so far from the normal when the
objectives have essentially been met? The committee has not,
in my view, provided a satisfactory answer to this question.
Fed Res of San Francisco President John Williams believes it
is still appropriate to raise short-term interest rates before
year-end, reiterating a timeline that remains the preference of
a majority of Fed officials. At a symposium on China and the
financial system, Williams said there are arguments on the
side of the ledger arguing for more patience and Fed is
balancing a number of considerations, some of which argue
for greater patience in raising rates and others that argue for
acting sooner rather than later. Williams expects the labour
market to get to full strength and inflation to move above the
Feds long-term objective.
From the Financial Times: Feds dovish message, focusing on
the risk posed by a slowing China and pressure across
emerging markets, has shaken sentiment for equities among
investors.
Ambrose Evans-Pritchard in The Telegraph: Fed Chairwoman
Janet Yellen had to hold fire this week, but risks an even
nastier crunch later if inflation forces the Fed has to slam on
the brakes suddenly. Fed is damned if it does, and damned if
it does not. Contrary to much noise, China is not in fact
collapsing. It had a recession earlier this year as a result of a
triple shock: a fiscal cliff from a botched reform of local
government, a monetary squeeze that went too far, and the
sharpest appreciation of its trade-weighted exchange rate of
any country in the world.
John Authers in Financial Times: The worlds two largest
economies are in a symbiotic embrace. Fed should always
have an eye on international developments. But its choice to
make this clear was taken as a message that the Fed was not in
control of events, and that it was more worried by China than
others are. After months of watching US labour data, we all
need to watch China like hawks (or doves). If signs of a
slowdown intensify, then the zero interest rate regime in the
US could last much longer. If the situation calms down, then
US rate rises might rise before the end of the year
Greg Ip from WSJ: Septembers decision was just a temporary
pause; when the Fed is sure the recent market volatility hasnt
changed the US economic trajectory much, it will press ahead
with higher interest rates by year-end. However, one should
not assume the world will work out that way.
In Australian Financial Review: Reserve Bank of Australia
governor Glenn Stevens has challenged his US counterpart
Janet Yellen to shun fears of upsetting financial markets by
getting on with hiking. Stevens said there would always be
some market move, some weak piece of economic data or
some argument to say, "don't do it just yet. But one day you
are just going to have to do it." Betashares chief economist
David Bassanese slammed the Fed decision as "ludicrous."
Also in AFR: 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.
Andrew Sentance in FT: Monetary policymakers are very

timid at the moment. They are lions, who have lost their roar.
The failure of the US Federal Reserve to raise interest rates is
a major setback to the normalisation of western monetary
policy. Their decisions are getting behind the curve. A sharp
interest rate correction between 2016 and 2018 is becoming
increasingly likely. Central bank independence is not
delivering the benefits we have been promised.
Irwin Stelzer from The American Account: Yellen & Co has
increased uncertainty! Investors now must decide when the
international situation is less uncertain, when growth in
China and other emerging markets satisfies the Feds
economic forecasters. Markets dislike uncertainty, and the
Fed has just increased uncertainty by a not inconsiderable
amount.
Executive board member Peter Praet said ECB is ready and
decisiveness to modify its trillion-euro bond-buying program
should economic turbulence merit decisive action (page 12).
Bank of Englands chief economist, Andy Haldane warned that
the next interest rates move in UK could be down instead of a
hike. He said BOE may need to push its interest rates into
negative territory to fight off the next recession. Haldane is
concerned by the possibility of a massive shock to global
demand at some point soon, and wants to reduce the risk of
prices plunging too far into deflation (page 10). Kathryn
Cooper in The Sunday Times said Bank of England will hold
interest rates at their record low for another year a blow to
the millions of homeowners who have rushed to fix
mortgages.
The Sunday Times: Senior fund managers have warned that
big funds have piled into the global bond market, which is
now worth up to $76 trillion. At the same time, marketmaking investment banks have left, leaving few buffers against
rapid movements in prices. If interest rates were to rise, some
experts think there could be a sudden collapse in prices, with
the gloomiest predicting the seeds of another financial crisis
(page 11).
On late Friday, just before NY ended, Moodys Investors
Service downgraded Frances credit rating from Aa1 to Aa2,
citing issues that include weakness in the nations mediumterm growth outlook. The agency also changed its outlook for
France to stable from negative.
A topic no one is talking or basically ignored. Greeks elections
again, second time in 2015. The Kathimerini published a good
piece on 3 possible outcomes - #1 A coalition with a strong
pro-European mandate, led by either New Democracy, or
SYRIZA, will be the most positive outcome; #2 A bad scenario
in the election would be a SYRIZA-led government, but
without the support of Potami and PASOK; #3 The vote may
lead to a parliament so fragmented that four parties may be
needed to form a viable coalition, or that Tsipras would have
to turn to the pro-drachma Popular Unity party for tacit
support (see page 13). On page 16, flashback to Mar 9 2015,
Greece's defence minister threatens to send migrants
including jihadists to Western Europe.
WSJ reported that FBI has opened an investigation into
allegations of money-laundering related to Malaysias 1MDB.
The media said scope of the investigation wasnt known.
Finally, Australias new PM Malcolm Turnbull is set to
announce his new cabinet on Monday. It's anticipated Social
Services Minister Scott Morrison will replace Joe Hockey as
treasurer.
These information have been obtained or derived from sources believed to be reliable, but I make no representation or warranty as to their accuracy or completeness.
Copyright 2013 The Poon Report by Vincent Poon. All rights reserved.
Post-FOMC
Dovish Fed unnerves global equity markets
Taken from the FT Saturday, 19 September 2015
Stock markets shuddered on Friday, a day after the Federal

Reserve expressed concerns about the global economy and
decided not to tighten US monetary policy, sending investors
rushing for the safety of government bonds.
The S&P 500 index of US stocks closed down 1.6 per cent, its
biggest decline since the beginning of September, after the
Euro Stoxx 50 gauge tumbled over 3 per cent, led by a decline
in the German Dax index.
However, eurozone and UK government bond prices were
sharply higher, pushing yields lower, as bond traders caught
up with a big overnight rally in the US Treasury market, which
was extended even further on Friday. The gold price jumped
for a third day running.
While investors and economists were split as to whether the
Federal Open Market Committee would finally raise overnight
borrowing costs at Thursdays meeting, a dovish message,
focusing on the risk posed by a slowing China and pressure
across emerging markets, has shaken sentiment for equities
among investors.
The markets were taken aback by the fact that the Fed held
up a mirror, leaving uncertainties in place, said Francesco
Garzarelli, an analyst at Goldman Sachs. The [Fed] stressed
greater macro and financial uncertainties, leaving risk
sentiment unsettled.
While the dollar fell on expectations that tighter US rate policy
does not beckon until 2016, a stronger euro and Japanese yen
reflected rising risk aversion among investors.
Nick Gartside, head of international bonds at JPMorgan Asset
Management, said investors were watching the level of
volatility in global markets and the growth picture in
emerging markets.
If both of these stabilise, and if their respective impact on the
US economy remains limited, theres no reason the Fed cant
hit the lift-off button this year.
Interest rate forecasts from Federal Reserve policymakers in
the so-called dot-plot issued alongside the rate call
suggested most still expect that the first increase in short-term
rates since the financial crisis will happen this year.
But three officials now expect the Fed to hold fire
until 2016 with one predicting a negative level for this
year and 2016.
That outlook raised the prospect that the European Central
Bank could extend its bond-buying economic stimulus
programme, or quantitative easing, before the Federal Reserve
acts to tighten monetary policy.
It is now probable that ECB QE2 ultimately arrives before an
FOMC rate hike, if our view that the Chinese slowdown is
likely to be worse than currently feared is confirmed, said
Michael Michaelides at RBS.
The yield on benchmark 10-year German Bunds fell 12 basis
points to 0.66 per cent, the 10-year UK Gilt yield dipped 12bp
at 1.83 per cent, and the equivalent US Treasury yield declined
6bp to 2.13 per cent.
With the Fed removing the immediate hike uncertainty and
delivering a relatively dovish message, we now expect
eurozone fixed income to rally strongly. Our 10-year Bund
target remains 0.4 per cent, added Mr Michaelides.
Guy Dunham at Baring Asset Management said investor
uncertainty reasserted itself after the Federal Reserves
decision.
In the case of risk assets, there was a sense that market
participants preferred certainty to uncertainty and just
wanted clarity on the precise timing of the change in monetary
policy.
In our view, whilst an interest rate rise is unlikely in October,

the Federal Reserve will start to raise rates in December or
early 2016, he said.
(Full article click - FT)
---
Ambrose Evans-Pritchard: Fed is riding the

tail of a dangerous global tiger
Taken from the Telegraph Saturday, 19 September 2015
Janet Yellen had to hold fire this week, but risks an even
nastier crunch later if inflation forces the Fed has to slam on
the brakes suddenly
The US Federal Reserve would have been mad to raise interest
rates in the middle of a panic over China and an emerging
market storm, and doubly so to do it against express warnings
from the International Monetary Fund and the World Bank.
The Fed is the worlds superpower central bank. Having
flooded the international system with cheap dollar liquidity
during the era of quantitative easing, it cannot lightly walk
away from its global responsibilities - both as a duty to all
those countries that were destabilized by dollar credit, and in
its own enlightened self-interest.
Dollar debt outside the jurisdiction of the US has reached $9.6
trillion, on the latest data from the Bank for International
Settlements. Dollar loans to emerging markets have doubled
since the Lehman crisis to $3 trillion.
The world has never been so leveraged, and therefore so
acutely sensitive any shift in monetary signals. Nor has the
global financial system ever been so tightly inter-linked, and
therefore so sensitive to the Fed.
The BIS says total debt in the rich countries has jumped by 36
percentage points to 265pc of GDP since the peak of the last
cycle, and by 50 points to 167pc in developing Asia, Latin
America, the Middle East, Eastern Europe, and Africa.
It is wishful thinking to suppose that the world can brush off a
Fed rate rise on the grounds that most of the debt is in local
currencies. BIS research shows that they will face a rate shock
regardless. On average, a 100 point move in US rates leads to
a 43 point move in local currency borrowing costs in EM and
open developed economies.
Given that the Fed was forced to reverse course dramatically
in 1998 when the East Asia crisis blew up for fear it would
take down the US financial system it can hardly go ahead
nonchalantly with rate rises into the teeth of the storm today
when emerging markets are an order of magnitude larger and
account for 50pc of global GDP.
Even if you reject these arguments, Goldman Sachs says the
strong dollar and the market rout in August already amount to
75 basis points of monetary tightening for the US economy
itself.
Headline CPI inflation in the US is just 0.2pc. Prices fell in
August. East Asian is transmitting a deflationary shock to the
West, and it is not yet clear whether the trade depression in
the Far East is safely over.
The argument that zero rates are unhealthy and impure is to
let Calvinist psychology intrude on the hard science of
monetary management. The chorus of demands and just
from internet-Austrians that rates should be raised in order
to build up reserve ammunition in case they need to be cut
later, is a line of reasoning that borders on insanity.
If acted on, it would risk tipping us all into the very
deflationary trap that we are supposed to be protecting
ourselves against, the Irving Fisher moment when a sailing
boat rolls beyond the point of natural recovery, and capsizes
altogether. So hats off to Janet Yellen for refusing to
listen to such dangerous counsel.
However, the Fed is damned if it does, and damned if it does
not, for by recoiling yet again it may well be storing up a
different kind of crisis next year.
We do not really know whether capital flows from China are

slipping out of control. There is a high likelihood that this
scare is exaggerated or based on technical
misunderstandings and that draconian curbs will slam the
gate shut in any case.
Contrary to much noise, China is not in fact collapsing. It had
a recession earlier this year as a result of a triple shock: a fiscal
cliff from a botched reform of local government, a monetary
squeeze that went too far, and the sharpest appreciation of its
trade-weighted exchange rate of any country in the world.
There was also an equity crash on the Shanghai and Shenzhen
casinos, though this is of no relevance beyond puncturing the
illusion that the Chinese authorities known what they are
doing. Self-evidently they do not.
These shocks have been absorbed. The recession touched
bottom in April. Credit is growing at the fastest pace in two
years. Fiscal spending is back on track. House prices are
shooting up again in Beijing, Shanghai, Tianjin, Guangzhou,
and Shenzhen. Bond issuance by local governments is soaring.
You might argue that the Communist Party is reverting to its
bad old ways, dooming its long-term prospects, but the
immediate implication is that data from China will soon start
looking a great deal better, lifting the whole world out of its
summer sulk.
Indeed, it is not impossible that China will come roaring back,
if only for a few months, in keeping with its pattern of stop-go
mini-cycles.
Simon Ward from Henderson Global Investors said his
measure of the Chinese money supply `true M1 is has
been rising at a pace of 8.4pc in real terms over the last six
months, the strongest since early 2013.
The eurozone is also picking up. The era of self-defeating fiscal
contraction is over. Broad M3 money is growing at 5.3pc, the
fastest since the EMU depression began in 2008. The growth
in M1 soared to 12.1pc in July as QE flooded the banking
system.
While the US money data is more sedate, it is not flashing a
recession signal. The unemployment rate has dropped to 5.1pc
and is now very close to the inflexion point of NAIRU
probably 4.8pc when wage pressures start to build up.
The risk for Janet Yellen, if risk is the right word, is that the
August squall will prove to be a false alarm. Within a few
months the Fed may find itself badly behind the curve,
chasing a full-fledged rebound in the worlds three biggest
economic blocs.
It might too face an asset boom that slips control, just as it
uncorked the dotcom bubble by yielding to global events in
1998, and some would say just as it uncorked the 1929 stock
bubble by cutting rates in 1927 to help Britain stay on the Gold
Standard at pre-war parity.
That is the moment when they may have to slam on the
breaks. Once the bond vigilantes start to suspect that five or
six rates may be coming in rapid succession perhaps by the
middle of next year the long-feared crisis for emerging
markets will hit in earnest.
Nobody said central banking was easy.
(Full article click - Telegraph)
---
John Authers: Look to China for clues on

when the Fed will raise rates
Not for the first time, the worlds two largest economies are in
a symbiotic embrace.
Following months of speculation, the US Federal Reserve
opted this week not to raise rates, from the effective zero level
at which they have been locked for almost seven years. It
palpably wanted to raise rates. US unemployment named a
determining factor ahead of the decision continues to
improve.
The decision not to raise rates was just what many in the
worlds stock markets had been screaming for. Stocks like
cheap money. But the reaction has been negative. Europes
FTSE-Eurofirst 300 index dropped 1.92 per cent yesterday,
following a similar fall for Japans Nikkei 225. In the US, the
S&P 500 had dropped 1.15 per at mid-session.
This reaction was down to the way Janet Yellen and her
colleagues chose to explain their decision. The Fed remains
reluctantly on hold primarily because of a blast of deflationary
pressure from China. As Chinas future is uncertain, the Fed
has to remain uncertain over when it can start to raise rates.
And there is nothing the markets like less, as the old clich
states, than uncertainty.
The market was particularly spooked by the addition of this
sentence to the Feds communique: Recent global economic
and financial developments may restrain economic activity
somewhat and are likely to put further downward pressure on
inflation in the near term.
The Fed should always have an eye on international
developments. But its choice to make this clear was taken as a
message that the Fed was not in control of events, and that it
was more worried by China than others are.
So, what is the matter with China, how does China affect US
monetary policy, and how does the dance between the two
Great Powers affect everyone else?
Chinas economy, by any measure, continues to grow.
However, evidence from official data, and particularly from
private research groups analysis of public data on economic
activity, such as on electricity generation, suggest that its rate
of growth has slowed rapidly.
Further evidence for this comes from Chinas leaders, who
have appeared desperate to prop up their stock market and
allowed their currency to devalue slightly last month with no
prior warning, sparking weeks of volatility.
This does not much affect the US through trade. The US does
not export that much to China although Asian nations, big
commodity exporters like Australia and Brazil, and western
European manufacturing powers led by Germany, are all
prone to be more affected. (The latest German export data
suggest little damage so far from China.)
And it affects commodity prices, which are falling. Demand
for metals (down 2 per cent since the announcement
according to Bloombergs index) rests on China. A slowing
China also slows demand for oil (Brent crude is down 2.3 per
cent since the Fed spoke).
This affects everyone by pushing down prices, which is good
for consumers and for commodity importers, such as India. It
is bad for countries where business investment has been
driven by high oil prices (as in the US shale boom), and it
pushes down inflation, which the easy US monetary policy has
been designed to push up. Inflation forecasts derived from the
bond market suggest that US inflation will run at less than 1.6
per cent over the next decade below the Feds 2 per cent
target.
The implication is that after months of watching US labour
data, we all need to watch China like hawks (or doves). If signs
of a slowdown intensify, then the zero interest rate regime in
the US could last much longer. If the situation calms down,
then US rate rises might rise before the end of the year a
possibility that futures markets now put at 46 per cent (having
rated it a virtual certainty). But it is hard to see such a clear
resolution to Chinas issues in the next three months, so the
odds now appear to me to be strongly against a 2015 rise.
In the longer term, the symbiosis between the US and China
runs deeper. China and many central banks has built up
huge reserves of dollar-denominated assets, which now total
more than $10tn. That Great Accumulation as Deutsche
Bank dubs it appears to be over, and reserves are declining.
When China pays down its reserves, it no longer diversifies its
holdings or in other words, sells dollars to move into other
currencies. That practice weakens the dollar. So in recent
years the euro has strengthened when China is piling up
dollars, and fallen when it is not. Sales of dollars would
weaken the euro, and also the already stretched emerging
market currencies. And they would means higher yields on
short-term US bonds, in which reserves are held. That,
Deutsche says, could mean quantitative tightening. US
yields would rise, doing a job otherwise done by the Fed.
The Fed is right to watch China even if it perhaps scared the
markets by saying it so clearly.
---
Greg Ip: Fed Rate Decision Keeps Monetary

Debate Raging
Taken from the WSJ Saturday, 19 September 2015
The monetary doves have won the battle, but not the war. Not
yet.
In deciding to stand pat on interest rates, the Federal Reserve
cited many of the reasons that some vocal opponents of
tighter creditthe doveshave advanced for keeping rates
near zero.
The Fed acknowledged a troubled global economy and market
turmoil have cast a shadow on both U.S. economic growth and
inflation, still well below the Feds 2% target.
But these were tactical considerations. Janet Yellen, the Fed
chairwoman, and her colleagues still think theyll be ready to
boost rates by the end of this year after the fog lifts from the
global economy and markets.
In other words, this wasnt a concession to the gloomy world
view of extreme doves, such as Harvard Universitys Larry
Summers, who believe a rate increase any time soon could be
catastrophic.
Some of Ms. Yellens own colleagues say the Fed should wait
until inflation, now 1.2% excluding food and energy, is at 2%,
or nearly there, before tightening.
Not Ms. Yellen. Waiting that long would allow unemployment
to fall well below its natural rate, at which point workers
become scarce, and we would likely overshoot substantially
the 2% target, Ms. Yellen said in remarks to reporters
Thursday.
Some doves cite the experience of other central bankssuch
as Japans, the eurozones and Swedens, all of whom raised
interest rates to ward off inflation and then had to reverse
course when growth stumbled and inflation went too low.
The International Monetary Fund this year urged the Fed to
defer rate increases until next year as insurance against the
risks from disinflation, policy reversal, and ending back at a
zero funds rate.
Ms. Yellen was having none of it. She called the possibility of
being stuck at zero interest rates indefinitely an extreme
downside risk that in no way is near the center of my outlook.
Many doves have questioned the usefulness of the Phillips
curve, which holds that inflation should rise as unemployment
falls. Its a theory that forms the backbone of the
macroeconomic models used by Ms. Yellen, her staff, and her
academically accomplished vice chairman Stanley Fischer.
The critics note the failure of wages to accelerate even as

unemployment has dropped from 10% to 5.1%.
But Ms. Yellens faith in the Phillips curve is unshaken: We
would like to bolster our confidence that inflation will move
back to 2%. And of course a further improvement in the labor
market does serve that purpose.
She and her colleagues see unemployment headed to 4.8%
next year, according to the median forecast of Federal Open
Market Committee members, below the 4.9% natural rate of
unemployment, at which point workers become scarce.
Taken at face value, then, Septembers decision was just a
temporary pause; when the Fed is sure the recent market
volatility hasnt changed the U.S. economic trajectory much, it
will press ahead with higher interest rates by year-end.
However, one should not assume the world will work
out that way. As confident as Ms. Yellen is in the case for
higher rates, the markets dont agree, and in recent years, its
the markets, not the Fed, that tends to get it right.
Three years ago, the Fed median official projection was for
interest rates to be 1% by the end of this year. A year later, that
had dropped to .75%. Now, its 0.4%.
Why? Because even though unemployment has dipped faster
than the Fed expected, economic growth consistently has
underperformed, in both the U.S. and abroad. Not only has
inflation persistently run below the 2% target, it seems to be
getting further away.
Fed officials believe thats a transitory consequence of lower
oil prices and the stronger dollar. A less sanguine
interpretation would be that slumping commodity prices and
a strong dollar are evidence of a fragile, deflationary global
economy awash in excess capacity; in other words, too-low
inflation could be a long-term, not temporary, problem.
Meanwhile, Fed officials have come to accept that the
economy is going to grow much more slowly in the future,
with potential growth of just 2%, down from their estimate of
2.5% back in 2012.
In a slower growing economy, interest rates must stay lower to
maintain full employment. Thus, the median Fed official now
thinks short-term interest rates eventually will top out at
3.5%. In 2012, they believed it would top out at 4.25%.
Still, Fed officials remain more optimistic than the markets.
Despite revising down their projected path of rate increases,
they see rates rising by more than investors expect. By the end
of 2017, the market thinks the Federal-funds rate will be just
1.25%, about half what Fed officials believes.
Wall Street dealers put the odds that rates will be back at zero
sometime in the next two years at 20%disturbingly high.
Of course, the U.S. economy could shrug off the jitters from
overseas and grow solidly next year. Commodity prices could
stabilize. Tight labor markets could finally generate the longawaited wage gains for ordinary workers.
In that case, the Fed would be right and the markets would be
wrong, and a rate increase in the next few months would be
the prudent thing to do.
Just dont bet on it.
(Full article click - WSJ)
---
Glenn Stevens to Janet Yellen: One day you

are just going to have to do it
Taken from the AFR Saturday, 19 September 2015
Reserve Bank of Australia governor Glenn Stevens has

challenged his US counterpart Janet Yellen to shun fears of
upsetting financial markets by getting on with hiking for the
first time in nine years the world's most important official
interest rate.
In a sign of deepening frustration at the Federal Reserve's
failure to hike official interest rates early on Friday, Mr
Stevens said there would always be some market move, some
weak piece of economic data or some argument to say "don't
do it just yet."
"One day you are just going to have to do it," said Mr Stevens,
who argued before a House of Representatives committee on
Friday that doing so would be in America's best interests, and
by extension the rest of the world.
Mr Stevens said "they need to [go up] for the US's sake."
After one of the longest and most fevered pre-meeting buildups on record, Dr Yellen left the US benchmark at close to
zero citing China-driven financial market volatility and
renewed worries about the global economy.
The Fed's decision to delay yet again a retreat from the most
stimulatory monetary policy stance in its history - despite
ever-growing fears of adding to dangerous asset-bubbles
around the world - highlights the degree to which it has
become captured by market sentiment and factors outside the
US.
Mr Stevens suggested that while it was right for the Fed to be
conscious of its impact globally it should get started with what
had been a comprehensively telegraphed move.
"It is a better thing, really, if the Fed can get the lift-off
achieved," Mr Stevens said, characterising the pending move
as "easing off the gas a little bit" rather than "jumping to the
brake."
"There will now be furious debate for the next eight or 10
weeks, until we get up to Christmas, on whether they will go in
December."
Mr Stevens' comment was reflected throughout markets in the
wake of the Fed's delay, with analysts expressing exasperation
at the lack of action after so long a build-up.
Betashares chief economist David Bassanese slammed the Fed
decision as "ludicrous."
"The Fed is fighting the wrong war, with misplaced concern
over persistently low US inflation and insufficient regard to
build-up of financial risk associated with keeping interest
rates so low," he said.
The failure to reload its monetary policy "canon" also leaves it
vulnerable should a new economic shock push the US off
course, he said.
The Australian dollar strengthened after the Fed outcome to
just shy of US72, while financial market traders put a 100 per
cent bet on the Reserve Bank cutting its cash rate from a
record-low 2 per cent to 1.75 per cent by May.
Bill Evans, the chief economist at Westpac, had factored a
September Fed rate increase into his forecasts.
"These sorts of decisions are often fine lines and whilst it came
as a big surprise to me, you can understand the degree of
caution given the enormity of the decision," Mr Evans said.
"The risk that people run is just spitting the dummy really and
saying 'if they didn't go now, they'll never go'. Of course they
will, they're central bankers."
Mr Stevens, who spent much of his three-hour testimony
talking up the economy, the speed of the transition away from
resources and his comfort with the Australian dollar at its
current levels, also strongly acknowledged the growing risk of
leaving interest rates too low for too long.
"It is possible and, if it happened, it would not be the first
time," Mr Stevens said, pointing to widespread criticism of the
Fed for leaving rates too low in 2003, 2004 and 2005,
something that has been widely blamed for the US subprime
mortgage crisis.
While historically such mistakes normally resulted in a surge
of "standard" goods and services inflation rates - in turn
requiring policy makers to "crunch the economy to get it
down" the more likely risk in the current environment was
that low rates would lead to too much risk-taking in the hunt
for yield.
This then could result in people running into trouble when
rates eventually go up, he said.
"That risk clearly exists, given that we have not only the Fed
but the Bank of Japan having zero rates more or less for 13
years. The ECB has a zero, even negative, rate, and it will do so
for some time.
"Clearly, that set of issues is on the minds of some people.
That is a risk that attends these very unorthodox policies
very unusual policies. It is a risk that the relevant central
banks think that they have to take."
(Full article click - AFR)
---
Time to forget about the US Fed

Taken from the AFR Saturday, 19 September 2015
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 Never Ending 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.
(Full article click - AFR)
---
Andrew Sentance
The US Federal Reserve has got it wrong
Taken from the FT Sunday, 20 September 2015
These are tough times for monetary policymakers. That is

undeniable. In autumn 2008 and early 2009, the task was
easy. Cut interest rates as fast as you can to as low a level as
possible. I was one of the guilty men and women that
participated in this economic rescue act. But now I see central
bankers delaying taking action both in the US and the UK.
The US Federal Reserve decided not to raise the key policy
rate in the US this week. That would be an understandable
decision if rates were at or close to a normal level. But they are
not. Interest rates of 0.5 per cent in the UK and 0-0.25 per
cent in the US are the lowest recorded levels in history. Seven
years into a recovery, central bankers need to explain why the
interest rate playing field is still so heavily tilted to borrowers.
Continuing with such low interest rates in the UK and the US,
when unemployment rates are back to 5-5.5 per cent and our
economies are growing well, raises some more profound
questions about monetary policy in the west.
First, how independent are central banks? Since the 1990s,
the Fed and the Bank of England have pursued policies similar
to the ones any well-meaning government official would have
chosen. They have cut interest rates very readily, but when
they have raised them (in 1994-5 and 2005-7) they have been
behind the curve. Independent central banks were established
precisely to avoid this behind the curve interest rate policy.
But it has not worked. Once again, they are at serious risk of
lagging behind in their interest rate decisions as the major
western economies climb out of the post-crisis recession.
Second, if interest rates cannot rise now, when will they
increase? In the case of the US, growth has averaged over 2
per cent for more than six years since the recovery started in
mid-2009. Unemployment has halved from around 10 per
cent to 5 per cent over roughly the same period. Yet interest
rates remain stuck close to zero. A similar position prevails
in the UK.
A multitude of reasons have been advanced for delaying the
first rate rise: sluggish growth in all the major western
economies in 2011-12; the euro crisis in 2013-14; and now the
Fed is citing weak economic growth in China and the impact
this has on financial markets.
If you look around hard enough, there can always be a reason
for not raising interest rates. But that highlights the key
problem. Monetary policymakers are very timid at the
moment. They are lions who have lost their roar.
The third problem is that central bankers appear to lack a
clear strategy for monetary policy. Their implicit strategy is
that interest rates will remain at current excessively low levels
until sufficient evidence accumulates to raise them. But a
more realistic approach to keeping monetary policy on a
steady and neutral course would involve a gradual rise in
interest rates over the next few years. The key debate then
should be around the pace and extent of this rise, not whether
it should take place at all.
The discussion of UK and US monetary policy is taking place
on the basis of a false premise that we can maintain nearzero official rates indefinitely and that this would somehow
be a satisfactory basis for economic growth over the medium
term. I do not believe that, and I do not meet many people in
the business and financial world who do either. If they do have
a view about long-term near-zero interest rates, it is that this
is likely to drag the UK and/or the US into a low growth
equilibrium like Japan. That would be a major policy failure
for the leading western economies.
The failure of the US Federal Reserve to raise interest rates is
a major setback to the normalisation of western monetary
policy. But we should not despair. There is another
opportunity to start the process of raising rates in October.
However in cricketing parlance the Fed is now on the

back foot. Their decisions are getting behind the curve. A
sharp interest rate correction between 2016 and 2018 is
becoming increasingly likely. Central bank independence is
not delivering the benefits we have been promised.
---
Irwin Stelzer
American Account: Dammit, Janet: the last
thing we need is more uncertainty
Taken from the Sunday Times 20 September 2015
THE US economy is chugging along. Not at high speed, but at

a steady 2.25% annual rate, with retailers stocking up in
anticipation of a very merry holiday season. The
unemployment rate is down to 5.1%, and according to the
Federal Reserve Board is headed lower to its long-run
normal rate. Employers in many sectors are scrambling to
find workers with the skills they need. Cars are moving off
dealers lots and the housing industry is, if not booming,
recovering its mojo, whatever that modern phrase means.
Inflation is tame, but its failure to rise is due primarily to
factors that Fed chairwoman Janet Yellen said after the
boards policy gurus met in solemn conclave are
transitory . . . will fade over time.
Thus, with the economy notably stronger than when the
banks economists last looked, and performing well [and]
expect[ed] to continue to do so; with more or less full
employment as traditionally measured; and with inflation
likely to increase once the falls in oil and import prices run
their course, Yellen announced last week that she was ending
close to a decade of zero interest rates and that the Fed would
raise rates by 0.25%. Except she didnt.
So St Augustines monetary policy remains in effect. Yellen
would be made chaste, but not yet. And for a new reason. She
might well have said the Fed is not prepared to raise rates just
yet because inflation is too far below the banks 2% target. She
might have said the Fed is staying its hand because, although
the unemployment rate is low, too many workers remain on
the sidelines of the job market or are involuntarily working
short hours. Full stop. She did indeed cite both those things.
Plus a new criterion that must be met. It seems world markets
are volatile: The outlook abroad appears to have become
more uncertain of late, and heightened concerns about growth
in China and other emerging market economies have led to
notable volatility in financial markets.
This is a change in policy that even defenders of the Fed find
difficult to justify. Former Fed governors, always or almost
always protective of the institution, do not quarrel with the
monetary policy committees decision. Neither do other
defenders of the Fed. After all, a good case can be made for
waiting to raise rates until inflation shows its hand and the
labour market tightens sufficiently to trigger a broad-based
and significant increase in wages, which for many workers and
families remain stuck at levels below those prevailing before
the great recession (according to the Census Bureau, median
household income, adjusted for inflation, was 6.5% lower last
year than in 2007, when the recession began). The Fed did
quite properly note that the strong dollar is likely to cut into
net exports, putting downward pressure on economic growth,
and also keeping import prices and therefore inflation down.
All the stuff of which past policy was made. All measurable. All
well understood by markets. All justifying leaving rates where
they are.
But now Yellen & Co have increased uncertainty. Not only
must investors watch the monthly jobs report and other data
on the labour market. Not only must they keep an eye on the
inflation rate and on inflationary expectations. Not only must
they peer into their very clouded crystal balls to see whether
growth is accelerating and whether domestic spending
appears sufficiently robust to warrant a rate rise. They now

must decide when the international situation is less
uncertain, when growth in China and other emerging
markets satisfies the Feds economic forecasters not known
for the accuracy of their predictions of the course of the US
economy that the era of zero interest rates can be brought
to an end. Markets dislike uncertainty, and the Fed has just
increased uncertainty by a not inconsiderable amount.
As with all policy decisions, the decision to hold at zero has
winners and losers. The biggest losers, of course, are savers,
especially small savers who cannot take on the amount of risk
necessary to earn a decent return. The political consequences
of continuing this policy might cause Yellen a few sleepless
nights. The 2016 election cycle is well under way. Vying for the
Republican nomination are several critics of the Fed. Some
want to force it to set hard rules to guide its monetary policy
decisions. Others would have it submit to congressional audits
of those policy decisions. The zero-interest rate policy, which
has deprived denizens of Main Street of an opportunity to
earn a bit on their savings while driving up the value of shares
and other assets of the denizens of Wall Street, is seen as one
of the principal causes of rising inequality. Yellen will find
herself under fire not only from the Feds traditional foes on
the left of the Democratic party who object to any plans to
raise rates, but from the right of the Republican party, which
feels zero interest rates are distorting the economy by
encouraging excessive and destabilising borrowing, for which
the poster boy is Lehman Brothers.
The small saver is not the only loser from the Feds decision. A
companion-in-disappointment is the banking sector. Studies
show that when interest rates go up small savers do benefit
from higher returns on their savings, but that the banks
paying out those higher rates benefit more. Erika Najarian,
head of US banks equity research at Bank of America, reports
that in 2006 banks passed along a mere 17% of the increase in
interest rates to their depositors. The rising margin between
what banks pay depositors and what they charge borrowers
when they lend out those deposits translates into higher
profits.
To set against the losers from the continued rate freeze, there
are winners. The motor industry, its sales pumped up by
cheap financing zero interest for 72 months and the
housing industry, dependent for continued growth on low
mortgage rates, are hoping rates dont move up, ever, but at
least until after Christmas Christmas 2016 if I read the
entrails of the Feds new goose correctly. A hope shared by the
biggest debtor of all, to the tune of more than $18 trillion and
rising: the US government.
(Full article click - Times)
---
St. Louis Feds Bullard Argued Against

FOMC Decision at Fed Meeting
Taken from the WSJ Sunday, 20 September 2015
Committee objectives have essentially been met to begin

raising interest rates
Federal Reserve Bank of St. Louis President James Bullard
said Saturday he argued against holding rates steady during
the Feds policy meeting last week because he believes the
economy has recovered enough to begin raising rates.
I would have dissented, he said. The case for policy
normalization is quite strong since the committees objectives
have essentially been met.
Why do the committees policy settings remain so far from
the normal when the objectives have essentially been met?
Mr. Bullard said. The committee has not, in my view,
provided a satisfactory answer to this question.
Mr. Bullards was a minority view at the meeting. Fed officials
last week decided to hold off on raising rates, citing risks from
economic instability overseas, particularly in China. Officials
said they wanted to wait until they had more information

about the economic and financial fallout of the global
slowdown.
Mr. Bullard described the meeting as pressure packed, and
said the decision to hold rates steady was a close call.
Thirteen of 17 officials have said they still expected to begin
raising short-term interest rates this year, lifting off from
near-zero for the first time since 2008. Economists had
expected the Feds decision, even though until the recent
shakiness in financial markets in the U.S. and in China, most
analysts thought the Fed would begin to raise rates this
month.
The Fed is charged both with maintaining the unemployment
rate at its long-run level of 4.9% and with holding inflation to
a target rate of 2%. Through its actions, the central bank is
about as close to meeting these objectives as it has ever been
in the past 50 years, Mr. Bullard said.
At 5.1%, the unemployment rate is near that long-run level.
But some Fed officials have expressed concern about the
inflation rate, which has run well below the central banks
target for more than three years. But Mr. Bullard said that
wasn't in itself enough to justify such loose monetary policy.
Much of the weakness in inflation, he said, is due to lower oil
prices, which he described as a temporary phenomenon.
Oil prices will stabilize so that when you look at year over
year inflation its going to start coming back to 2% over the
forecast horizon, he said.
He also noted the advantages of lower oil prices.
Lower commodity prices are essentially a bullish factor, not a
bearish factor, he said.
Mr. Bullard also said he disagreed with the reference to
financial conditions in the statement issued following the
meeting.
Traditionally, the Fed has not referred to financial market
conditions when making policy for good reason: Financial
markets tend to wax and wane, sometimes suddenly and
monetary policy has to be more stable than that.
When it begins raising rates, the Fed is expected to move
slowly, starting with an increase of 25 basis points. That, Mr.
Bullard
said,
would
maintain
an
exceptionally
accommodative monetary policy over the next three years.
Mr. Bullard has argued in favor of raising rates in the past. In
an interview with The Wall Street Journal last month he said
the recent bouts of volatility in the financial markets didn't
affect his outlook for the U.S. economy.
---
Feds Williams Sees 2015 Interest Rate Rise

as Appropriate
John Williams, president of the Federal Reserve Bank of San

Francisco, said in a speech Saturday he believes it is still
appropriate to raise short-term interest rates before year-end,
reiterating a timeline that remains the preference of a
majority of Fed officials.
In a speech in Armonk, N.Y., at a symposium on China and
the financial system, Mr. Williams said there are arguments
on the side of the ledger arguing for more patience. But he
said, Given the progress weve made and continue to make on
our goals, I view the next appropriate step as gradually raising
interest rates, most likely starting sometime later this year.
His comments are significant because they typically reflect the
center of Fed officials thinking on interest-rate policy. They
come only two days after the Fed decided not to raise rates at
its September policy meeting this week.
The central bank took interest rates to near zero in 2008 to
help boost the economy in the midst of the financial crisis, and
have left them there ever since. Now, the Feds decision over
when to raise rates again is being closely watched because of
its ability to influence a host of rates that set the tone for the
U.S. economy and markets overseas.
When the Fed moves, it would be the first time the central
bank has raised interest rates in nine years.
Fed officials decided to hold off at their most recent policy
meeting this week, in part to gain more insight into the
strength of the U.S. recovery and also because of a slowdown
in Chinese growth, and turbulence in financial markets both
domestic and abroad.
It was a close call in my mind, in part reflecting the
conflicting signals were getting, said Mr. Williams in his
prepared remarks.
Were balancing a number of considerations, some of which
argue for greater patience in raising rates and others that
argue for acting sooner rather than later.
In the past, I have found the arguments for greater patience
to clearly outweigh those for raising rates, he added. Looking
ahead, he said he expects the labor market to get to full
strength and inflation to move above the Feds long-term
objective. In that context, it will make sense to gradually
move away from the extraordinary stimulus that got us here.
Mr. Williams for most of 2015 had a rosy outlook on the U.S.
economy, but has sounded on the fence more recently.
Factors building the case for the Fed to shift rates higher
include improving U.S. domestic growth and unemployment
falling to 5.1%, nearer its longer-term norm. Mr. Williams said
he thinks the U.S. should reach full employment on a broad
set of measures by the end of this year of early next.
Headwinds include inflation that is running persistently below
the Feds 2% long-term objective, and the turmoil abroad. Mr.
Williams said he sees factors like low oil prices and the
appreciation of the U.S. dollar, which have been dragging
down inflation, as transitory and he sees inflation moving
back up to the 2% goal over the next two years.
He said he was in support of not waiting too long for a rate
rise, because doing so could put policy makers behind the
curve and could risk an economy that runs too hot. It would
force us into the position of a steep and abrupt hike, which
doesnt leave much room for maneuver. Not to mention, it
could roil financial markets and slow the economy.
In a question-and-answer session after the speech, Mr.
Williams said there was some evidence that slower global
growth and longer-term trends could mean U.S. interest rates
hit the zero lower bound more frequently than in the past.
In particular, he said he would be watching the August
employment report for any revisions.
He also said the U.S. central bank has to consider its domestic
economic goals alongside the risks that raising rates may
destabilize foreign economies. A selloff in the bond market in
2013, when the Fed first hinted it would taper its large-scale
bond buying programs, was a very loud reminder of
interconnectedness, and the risk that U.S. policy moves affect
markets abroad and could negatively feed back on the U.S.
recovery.
The Feds goals have to include an effort to minimize undue
negative repercussions on foreign economies, he said, to
make sure the U.S. isn't exacerbating problems overseas that
could boomerang back. But he said he was less worried that a
gradual increase in interest rates in the U.S. would prove a
shock for the rest of the world.
On the sidelines of the symposium, Mr. Williams told
reporters that if the Fed raised rates and saw another
downturn, he didn't see the Feds policy as being irreversible
and the central bank was not out of ammunition to
counteract any future significant downturn, should more tools
be needed.
Fed officials have two more opportunities to raise rates this
year: one at their policy meeting in October and one at
Decembers meeting. Mr. Williams told reporters that Fed
officials have thought a lot about both the mechanics of the

October meeting, if they should move rates and decide to call
a press conference, but also about year-end liquidity issues in
the bond markets that could make a transition to higher rates
more challenging.
He said staffers, particularly those in the markets group at the
Federal Reserve Bank of New York who will be responsible for
implementing any change in monetary policy, were well
prepared and had been testing their various facilities for years
in a way that gives him confidence in their ability to do the job
when the time comes.
In response to criticism about light communication from Fed
officials leading into their September policy meeting, he said
the decision about when to go is proving challenging and it is
appropriate for the Fed not to signal to Wall Street and the
public too many specifics about what they are going to do,
before their very lengthy discussions and analysis, and before
a committee decision.
We dont want to create uncertainty, said Mr. Williams, but
added, Our goal isn't to have participants in financial
markets like us for our communication. Our goal is to
communicate our thinking around our strategy, around our
policies, as effectively as we can given the uncertainties. That
may be uncomfortable for people, because we have been in the
past much more directive about what our policies views were.
At any Fed meeting, he said, some people are going to be
wrong.
---
However at least for now the Fed set aside such concerns out
of deference to a different worry: that a weak global economy
may pull down the U.S. Specifically Fed officials, including
Yellen, said a dip in measures of inflation expectations was
worrisome if it proves to reflect eroding confidence in the
recovery.
The expectations of businesses and consumers about inflation
is thought to play an important role in the actual pace of price
increases, as well as in decisions about savings, investment
and consumption that are central to economic growth.
San Francisco Fed President John Williams in remarks on
Saturday laid out the case for caution, and suggested he and
others now want more proof before a rate hike. Williams said
he still expects rates will rise this year as the "disinflationary"
impact of low oil prices and other outside influences fades,
and the U.S. economy continues to expand.
Still, "getting some more clarity around what is really
happening in the global economy, how is that affecting the
U.S. economy, and also seeing continued progress in the U.S.
economy -- these are all things I'm watching," Williams told
reporters when asked about a possible rate rise in October.
Williams, who is among the regional bank presidents who
does vote on interest rates this year, declined to specify
whether he sees October or December as the appropriate time
to go.
The Fed next meets in October and again in December.
Thirteen of 17 Fed members last week said they still expect to
hike rates this year.
(Full article click - Reuters)
A divided Fed pits world's woes against

domestic growth
Taken from the Reuters News Sunday, 20 September 2015
Federal Reserve policymakers appeared deeply divided on

Saturday over how seriously problems in the world economy
will effect the U.S., a fracture that may be difficult for Fed
Chair Janet Yellen to mend as she guides the central bank's
debate over whether to hike interest rates.
Though last week's decision to again delay an interest rate
increase was near-unanimous, drawing only one dissent, St.
Louis Fed President James Bullard called the session
"pressure-packed" as members debated whether global
uncertainty or the continued strength of the U.S. economy
deserved more attention.
In the end the committee felt that tepid global demand, a
possible weakening of inflation measures, and recent market
volatility warranted waiting to see how that might impact the
U.S.
Bullard, who does not have a vote this year on the Fed's main
policy-setting committee, said he would have joined
Richmond Fed President Jeffrey Lacker's dissent, and worried
the central bank had paid too much attention to recent
financial market gyrations.
Markets sold off sharply this summer over concerns about a
slowdown in China and weak world growth, leaving Fed
officials to vet whether that reflected a short-term correction
or more fundamental problems on the horizon.
"Financial markets tend to wax and wane, sometimes
suddenly. Monetary policy needs to be more stable," said
Bullard, who in prepared remarks here to the Community
Bankers Association of Illinois said he did not think the Fed
"provided a satisfactory answer" to why rates should stay near
zero.
The economy is near full employment, and inflation will
almost certainly rise, Bullard said, leaving the Fed's near
seven-year stay at near zero rates out of line with the broad
economic picture.
In a statement Lacker said he felt the current low rates "are
unlikely to be appropriate for an economy with persistently
strong consumption growth and tightening labor markets."
UK News
We mustnt ban cash or inflate the pound
Andrew Haldane, the Bank of England's chief

economist, could hardly be any more wrong with
his latest economic plan
Slowly but surely, the economic orthodoxy of the past 40 years
is crumbling. There was, of course, much that was wrong with
the old way of thinking: the past few decades were
characterised by a series of massive booms and busts,
financial crises, intense macroeconomic volatility and huge
global economic distortions and misallocation of resources,
among many other ailments. Productivity has ground to a
halt, median wages havent performed well in the West and
the economy has been beset by a plethora of microeconomic
problems.
But for all the many flaws in the received wisdom, it wasnt all
bad. Far from it, in fact: the world is immensely richer than it
was and billions of people have been lifted out of poverty.
Reasons for this include our wonderful embrace of
globalisation and free trade, the privatisation and partial
deregulation programmes of the 1980s and 1990s, cuts to
marginal tax rates and the pursuit of sound money. The
consensus wasnt all right - but wasnt all wrong either. We
should be trying to rescue the good bits while jettisoning the
bad bits. Tragically, we appear intent on doing the exact
opposite.
Many of our leading figures are preparing to give up on sound
money. The intervention Im most concerned about is Bank of
England chief economist Andrew Haldanes call for a 4pc
inflation target, as well as his desire to abolish cash, embrace a
purely electronic currency and thus make it easier for the
Bank to impose substantially negative interest rates, if needed.
I dont want to over-simplify Haldanes lengthy speech: he is a
complex and brilliant thinker, albeit one with whom I often
disagree. But the bottom line is that he wants higher inflation
now as a cushion against future deflation: he is concerned by
the possibility of a massive shock to global demand at some
point soon, and wants to reduce the risk of prices plunging too
far into deflation. Crucially, Haldanes assumption is that the
authorities would be stuck: they would not be able to respond
to this looming shock in an appropriate way.
Conventional theory - and the lesson that was learnt in the
1930s, and again after 2008 - is that central banks must make
sure the money supply doesnt collapse during a downturn.
That means QE at the right time and in the right amount.
But Haldane believes that this time the scale of the QE that
would be required, and the way it would have to be conducted,
would be politically impossible. Hence why he believes in
higher inflation now, and why, in the long run, he wants to
abolish cash, force everybody to hold all their money digitally
and give the Bank the tools to impose negative interest rates.
This, he believes, would be the only practical way for central
banks to loosen monetary policy in a world of very low rates
and useless QE.
Imagine that banks imposed -4pc interest rates on savings
today: everybody would pull cash out and stuff it under their
mattresses. But if all cash were digital, they would be trapped
and forced to hand over their money. Why Haldane believes
this would be more politically acceptable than extreme QE is a
mystery; all spending would become subject to the
surveillance state, dramatically eroding individual liberty.
Many would start using rival currencies such as the dollar or
euro, or resort to barter; sterlings monopoly over the UK
would soon end.
Money is already too loose - turning on the taps would merely
further fuel bubbles at home and abroad. In any case, I dont
buy the idea that QE is now ineffective (though Corbyn-style
government spending monetisation would be a disaster). And

we havent even tried Milton Friedmans helicopter money
idea.
Haldane downplays the costs of higher inflation, especially for
the poor and those on fixed incomes, and forgets that price
rises have a nasty habit of becoming self-fulfilling. Calling for
higher inflation also implies that the state is not serious about
maintaining the integrity of the currency, which undermines
property rights and the rule of law and guarantees random,
extra-legal redistributions of wealth. Haldane is right to be
thinking the unthinkable - but his solutions could hardly be
any more wrong.
---
Kathryn Cooper: Market bets on another

year of low rates
INVESTORS are betting that the Bank of England will hold

interest rates at their record low for another year a blow to
the millions of homeowners who have rushed to fix
mortgages.
Americas Federal Reserve surprised the markets last week by
keeping rates on hold. Traders have now pushed back their
expectations for a UK rise from May to September next year,
according to bets placed in the futures markets.
The move came as one of the Bank of Englands top officials
warned that borrowing costs may have to move down rather
than up next year. Andy Haldane, the chief economist, said
the case for raising rates was some way from being made. He
even floated the idea of imposing negative interest rates by
scrapping cash and charging people for holding electronic
money.
Haldane is one of the most dovish members of the Banks
rate-setting committee and his views are at odds with those of
Mark Carney, the governor.
Homeowners have scrambled to snap up cheap fixed-rate
deals since the summer, when Carney warned that a Bank rate
rise would be on the agenda around the turn of this year.
More than two-thirds of new loans are on fixed rates,
according to the Financial Conduct Authority.
However, the severe downturn in China and other emerging
markets has convinced central banks to stay their hand. The
Fed last week voted to keep rates close to zero for another
month, despite growing expectations of a rise for the first time
in nearly a decade.
Janet Yellen, the Feds chairwoman, insisted the majority of
officials still expected a move this year, but markets focused
instead on her concerns that the global slowdown could
restrain US economic activity somewhat.
I fear the Feds window on hiking is closing, and fast, said
Steen Jakobsen, chief economist at Saxo Bank. None of the
external factors they cited China, emerging markets, the
stronger dollar can be turned round by the end of the year,
which was previously their window for rate rises.
Analysts were also shocked that four Fed officials voted for no
change, and one argued for a cut. Markets are now losing
faith in the Fed, believing they are more dovish than they are
saying, said Azad Zangana, at the asset manager Schroders.
Traders immediately pushed back their forecasts for when the
Fed will move from May to August. They expect the Bank of
England to move a month later.
Higher rates in the US may prompt a fall in sterling, said
Soniya Sadeesh at the investment bank Deutsche.
Haldane, speaking in Northern Ireland last week, said he
feared global markets were only at the start of the third leg of
the financial crisis. Part one was the Anglo-Saxon crisis of
2008-9. Part two was the euro-area crisis of 2011-12. And we
may now be entering the early stages of part three, the
emerging market crisis of 2015 onwards, he said.
Most economists are more hawkish than the markets,

believing the Fed could still raise rates in December or the
first quarter of next year, with the Bank not far behind.
The Feds decision to leave its rates at emergency lows does
not change our view that US monetary policy will be tightened
more rapidly than expected in 2016, said Andrew
Kenningham, senior global economist at Capital Economics,
the consultancy.
---
Carney moves to head off bond market

crisis
Bank governor unveils results of investigation into big

investors head-long rush into buying debt
MARK CARNEY will warn this week of a potentially damaging
liquidity crisis in the gigantic market for government and
corporate bonds.
The Bank of Englands financial policy committee (FPC) will
meet on Wednesday to discuss the results of a six-month
investigation into bond markets.
Senior fund managers have warned that big funds have piled
into the global bond market, which is now worth up to $76
trillion (50 trillion). At the same time, market-making
investment banks have left, leaving few buffers against rapid
movements in prices.
If interest rates were to rise, some experts think there could be
a sudden collapse in prices, with the gloomiest predicting the
seeds of another financial crisis.
The FPC, which was set up to monitor systemic risks in the
financial system, said its report could result in policy changes.
The Bank is concerned that financial bodies, including banks
and insurers, may be underestimating the difficulty they could
have in selling assets if there is a sudden market shock. This, it
says, could lead to panic selling, depressing prices for a
prolonged period.
The economy is particularly vulnerable to liquidity shocks.
Top lenders are active in global markets, leaving them
exposed to crises such as a Chinese stock market collapse or a
Greek default.
Bill Gross, co-founder of fund giant Pimco, warned last June
that conditions were ripe for a liquidity crisis. Investors and
markets have not been tested during a stretch of time when
prices go up and down and policymakers hands are tied, he
wrote to investors.
The IMF has also warned regulators to brace for a global
liquidity shock. Lower market liquidity and higher market
leverage in the US system increase the risk of minor shocks
being propagated and amplified into sharp price corrections,
it said.
The Sunday Times reported last month that Carney, Bank of
England governor, had asked 135 of Britains biggest fund
managers how they planned to cope with customers
demanding their money at short notice.
Also this week, the FPC is expected to sound the alarm about
household indebtedness and is likely to discuss the problem of
high loan-to-value mortgages.
In February, the Bank won powers to cap loan-to-value
mortgages should it consider them a threat to stability.
It is concerned that interest rate rises could leave homeowners
scrambling to liquidate investments to cover higher mortgage
payments. Mortgage lending has soared to its highest level
since 2008. Some 3.2m families are now using 25% of their
monthly income to service unsecured debt.
Euro-zone
Matteo Renzi upbeat as Italy upgrades
growth forecasts
Italy has upgraded its economic forecasts for 2015 and 2016 in
a sign of growing confidence within the government of Matteo
Renzi, the reformist prime minister, that a recovery is taking
hold after three years of recession and stagnation.
Ahead of next months budget law, Italy said output would rise
by 0.9 per cent this year and 1.6 per cent next year, compared
with earlier forecasts of 0.7 per cent growth in 2015 and 1.4
per cent in 2016.
In 2015, we turned the corner, and in 2016 we have to
accelerate, Mr Renzi said at a press conference in Rome on
Friday night.
The improved economic outlook boosted by external factors
such as a lower euro and lower oil but also a bump in domestic
demand will also affect Italys budgetary picture, which has
long been a source of concern because of the countrys high
levels of indebtedness.
Pier Carlo Padoan, Italys finance minister, said he expected
Italys debt to gross domestic product ratio, which is forecast
at 132.8 per cent in 2015, to begin declining from 2016, for the
first time since 2007.
However, the drop in the debt will occur at a slower pace than
forecast last April, as Italy plans to make use of the improved
economic data and the related increase in tax revenues to
push through new stimulus measures, particularly a round of
tax cuts.
Italys budget deficit this year is forecast at 2.6 per cent, which
is well below the European Commissions threshold of 3 per
cent and is due to decline further to 2.2 per cent in 2016.
But that is higher than the 1.8 per cent level predicted in April.
Meanwhile, Italy has said it expects to reach structural
balance, which takes into account changes in the economic
cycle, one year later than previously predicted or in 2018
instead of 2017.
Even though Mr Renzi has frequently skirmished with
Brussels on the budget since taking office in February 2014, he
has also earned credit for pressing ahead with an aggressive
agenda of economic reforms. Italy has argued strenuously that
these should allow for greater flexibility with regard to EU
budget rules.
In an interview with Corriere della Sera, the Italian
newspaper, this week, Pierre Moscovici, the EU commissioner
for economic affairs, said Italys reform drive had been
encouraging, but added that it was too early to judge the
forthcoming budget.
---
German banks at risk of alarming profit

fall
German banks are at risk of suffering an alarming fall in

profits in the next four years because Europes persistently
low interest rates are wiping out their income, the countrys
financial watchdogs warned on Friday.
Profits at banks across the eurozone have been squeezed since
the financial crisis, as the European Central Bank has held
rates unusually low in an attempt to revive the blocs battered
economy.
But German lenders have been hit particularly hard, because
of the highly competitive nature of the local banking sector.
A review of 1,500 small and midsized banks carried out by
BaFin and the Bundesbank Germanys financial regulator
and its central bank found that domestic lenders expect
their pre-tax profits to fall roughly 25 per cent by 2019, mainly

as a result of a decline in net interest income.
Five possible scenarios were tested in the review
encompassing falling, stable and rising interest rates. In the
best case, the regulators found that only 40 banks would make
losses by 2019. In the worst case, however where banks fail
to react to a sharp decline in interest rates profits would
plunge by 75 per cent, and as many as 300 german banks
would make losses by 2019.
Andreas Dombret, the Bundesbank board member
responsible for banking supervision, said the worst case
scenario was unlikely to occur, but warned that the others
were not much better. In all the scenarios reviewed, we
absolutely consider the findings to be alarming, he said.
Germanys banking lobby, the Deutsche Kreditwirtschaft,
played down the regulators concerns, arguing that banks were
already taking active measures to combat the low interest
environment. Even so, it called on the ECB to reverse its low
rate policy as soon as possible.
The DK believes that once there has been a sufficient
stabilisation of Europes economy and financial system, this
policy must immediately, step by step, be reversed, it said.
BaFin and the Bundesbank concluded that most lenders
would be able to survive a period of low interest rates. But
they said it was still important that banks cut costs and
boosted their sources of income, and warned that they were
prepared to intervene.
We will make sure that sufficient reserves are available in the
case of a crisis, Raimund Rseler, head of banking
supervision at BaFin said.
In individual cases, we will take the necessary action, he
added, citing bans on dividend or bonus payments and capital
surcharges as possible steps that regulators impose upon
struggling banks.
BaFin and the Bundesbank did not review the 21 biggest
banks in Germany, including the likes of Deutsche Bank and
Commerzbank, which are supervised directly by the ECB.
However, the lenders that they did cover play a significant role
in the German economy, as they are important lenders to the
Mittelstand the bevy of small and medium-sized companies
central to Germanys economic strength.
---
Moodys Downgrades France,

Outlook to Stable From Negative
Changes
Rating agency cites weakness in nations medium-term

growth outlook
Moodys Investors Service downgraded Frances credit rating
by one rung, citing issues that include weakness in the
nations medium-term growth outlook.
Moodys changed its outlook for France to stable from
negative.
The rating was cut to Aa2 from Aa1.
Moodys said it believes low medium-term growth will be an
obstacle for any material reversal in Frances elevated debt
burden in the foreseeable future.
The rating firm said Frances credit worthiness remains
extremely high and said the nation has a large, wealthy and
well-diversified economy. Moodys said France has a
relatively favorable demographic profile and its working-age
population isnt expected to contract over the long term.
In 2012, Moodys and Standard & Poors Ratings Services
stripped France of triple-A ratings
S&P in June affirmed its AA/A-1+ rating for France while
maintaining a negative outlook. Fitch Ratings affirmed its AA
rating in June, with a stable outlook.
French Finance Minister Michel Sapin on Wednesday said

economic growth will accelerate in 2016 and the government
will meet its pledges to reduce the budget deficit.
President Franois Hollande has pledged that his policies
would help deliver an acceleration in economic growth to 1.5%
in 2016 from the 1% the government expects this year.
---
Kathryn Cooper: France stung by credit

rating cut
THE eurozone suffered a fresh blow this weekend when the

ratings agency Moodys cut Frances credit rating as Greece
prepared to go to the polls.
Moodys cited continuing weakness in Frances medium-term
growth outlook for the move, and persistent slow progress of
the recovery in the eurozones second-biggest economy.
Michel Sapin, the finance minister, moved to reassure the
markets.
The government remains firmly committed to continuing and
increasing its reform policies, he said.
Greece heads to the polls today for its fifth election in six years
amid renewed concern that the debt-laden country could leave
the eurozone.
The left-wing Syriza party, which took the country to the brink
of leaving earlier this year, was ahead in exit polls yesterday,
but no party was on track for an overall majority.
An unstable coalition could threaten the 86bn (63bn)
bailout brokered last month.
Political risks across the Continent are rising, with regional
elections in Catalonia in Spain next Sunday. Polls suggest that
pro-independence parties will gain about 44% of the vote,
which would translate into an absolute majority if turnout
were strong.
The winner of the Greek election will need to oversee deep
reforms demanded by creditors in return for the bailout cash.
Greek banks must be recapitalised before the end of the year,
and capital controls imposed earlier this year must be
unwound.
Alexis Tsipras, leader of Syriza, and his conservative rival
Vangelis Meimarakis have been neck and neck. The polls
swung in favour of Tsipras yesterday, but most analysts
thought a coalition was the most likely outcome.
A weak government could put at risk the bailout programme
execution, further disbursement of official funds, official debt
relief and, ultimately, could reignite exit risks, said Antonio
Garcia Pascual of Barclays.
Details of the bank recapitalisation plan are expected in the
next two months, while the first review of the bailout
programme takes place in the middle of October. Analysts fear
that any political uncertainty could see this timetable slip.
---
ECB chief economist declares 'readiness

and decisiveness' to act
Taken from the Kathimerini Sunday, 20 September 2015
The European Central Bank's chief economist reiterated the

bank's "readiness and decisiveness" to modify its trillion-euro
bond-buying program should economic turbulence merit
decisive action, according to an interview in a Swiss
newspaper.
Interviewed by the Neue Zuercher Zeitung, Peter Praet
defended the bank's stimulus programmers, including
quantitative easing, saying they had helped avoid a damaging
financial panic.
As turbulence in emerging markets intensifies, he said the
ECB remains ready to modify or expand the program, now
seen as buying more than one trillion euros ($1.13 trillion) in
bonds to counter a potentially deflationary spiral.
"What's important is to emphasize our readiness and our

decisiveness, should the need for action arise," Praet, of
Belgian and German ancestry, told the newspaper.
"That's premature, at this time, but the risks in the world
economy have increased significantly. We have had to correct
our economic forecasts downward and we want to be ready to
act, should the conditions demand it."
Earlier this month, the bank cut its growth and inflation
forecasts, warning of possible further trouble from China. For
the first time, ECB President Mario Draghi said explicitly the
bond-buying program may be extended.
Despite risks posed by an expansive monetary policy, Praet
said the ECB is convinced it acted appropriately, in part
because its sees no "speculation bubbles" on the horizon.
"The risks to financial stability are currently limited," said
Praet, who from 2000 to 2011 was executive director of the
National Bank of Belgium.
Praet said the ECB's economic forecasts from earlier in 2015
weren't too optimistic.
"The adjustment downward in September wasn't big and was
mostly related to the correction in emerging markets," he said.
"The economic recovery in the euro-zone is intact."
Praet contended the European Union would be far stronger
and better equipped to manage crises by 2020 as countries
tackle structural reforms and the continents' banks become
fully integrated.
"We're seeing encouraging signs in the euro zone and
especially in countries like Spain and Ireland, but also in
Portugal," he said. "Italy began its reforms too late, but is now
on the right path."
While the situation in Greece remains difficult, he's optimistic
that the new program is a step in the right direction.
"While the program is demanding, we're convinced that the
reforms will help Greece boost growth and wrest itself from
the crisis," Praet said, adding he would limit his remarks,
given the vote in Greece on Sunday will determine the
government to oversee austerity measures demanded by the
country's creditors.
Praet downplayed the contention that the ECB's expansive
monetary policy is the central culprit behind the rise in the
value of the Swiss franc against the euro.
"The ECB took responsibility during the crisis and helped to
reduce uncertainty in the financial markets - I'd even say to
avoid a panic," he said. "Consequently, the ECB helped reduce
pressure on the franc."
(Full article click - Kathimerini)
Greece
Greek election scenarios: the good, the bad,
and the ugly
Taken from the Kathimerini Saturday, 19 September 2015
Greeces election remains too close to call as a three-week

campaign wraps up on Friday with no clear front- runner in a
vote that may put Europes most indebted state on course for
thorny coalition talks as of next week.
Opinion polls show Alexis Tsiprass SYRIZA party and
Evangelos Meimarakiss conservative New Democracy party
running neck and neck ahead of Sundays vote. With a
fragmented parliament and no apparent winner, Greece risks
being dragged into difficult coalition talks that could delay the
implementation of measures required by creditors in
exchange for emergency loans, including for the
recapitalization of banks. Thats a delay Greece can ill afford.
Greece has to act fast after the election, said Holger
Schmieding, chief economist at Berenberg Bank in London.
Fast progress is essential to gradually rebuild the trust in
government and confidence in the future that is needed for
some of the capital outflows to be reversed and for the slump
in investment to end.
A rolling tracker averaging the most recent findings of surveys
by ten Greek pollsters shows SYRIZA retaining a razor- thin
lead over New Democracy, well within the margin of statistical
error, according to data compiled by Bloomberg late on
Thursday local time.
The left-wing party would tie with New Democracy at 28
percent, according to a Pulse poll posted on To Pontiki website
on Thursday. The margin of error in the survey was plus or
minus 2.5 percent, while 5.5 percent of respondents said they
havent decided whether and what to vote yet.
Good scenario
A coalition with a strong pro-European mandate, led by either
New Democracy, or SYRIZA, will be the most positive
outcome, according to Michael Michaelides, a rates strategist
at Royal Bank of Scotland Group Plc in London. This would
determine how willing will the new government be in
implementing the terms attached to its 86 billion euro ($97
billion) bailout, Michaelides said.
Tsiprass inability to garner support for the new bailout from
his own lawmakers stripped him of his parliamentary majority
leading to Sundays elections. The SYRIZA leader has ruled
out a coalition with New Democracy, and said he will seek to
join forces again with anti-austerity Independent Greeks.
In a reversal from earlier statements, though, he left the door
open for pro-bailout To Potami and PASOK parties, during a
television debate earlier this week. Polls show that
Independent Greeks, the right-wing junior coalition partner in
his government, will struggle to make it to next parliament.
According to Greeces electoral system, the winner of the vote
gets a bonus of 50 seats in the countrys 300-seat chamber.
This means that if the party which prevails gets less or just
over 30 percent, as polls project, it will need the support of
one or two smaller parties to secure a parliamentary majority.
If the winner falls considerably short of 30 percent, then a
grand coalition, or repeat elections, may be the only choice left
to the countrys political system.
Even though Tsipras opted for a compromise with creditors,
braving a split within SYRIZA, the good scenario for the
elections would be a New Democracy-led coalition of
moderate parties, said Lefteris Farmakis, an analyst at
Nomura International.
New Democracy, which has governed Greece for much of the
past four decades, has vowed to safeguard the countrys place
in the euro area, and seek to build a broad coalition of all the
parties which supported the latest bailout, including SYRIZA.
Tsipras has built up trust with his European counterparts

since he was elected prime minister in January on a promise
to end austerity, only to sign the bailout accord after six
turbulent months of wrangling with creditors. After bringing
Greece back from the verge of exiting the euro area, hes now
seen as the best bet to secure stability and carry out the
necessary reforms after the elections, officials, who asked not
to be named because of the political sensitivity of the matter,
said earlier this month.
Bad scenario
The bad scenario in the election would be a SYRIZA-led
government, but without the support of Potami and PASOK,
said Michaelides. In this case, the implementation of the
bailout will depend on support from Independent Greeks on
a very tight majority.
For Nomuras Farmakis, a bad outcome would be a highly
fragmented parliament, with SYRIZA and New Democracy
getting very low shares of the vote, in which case more parties
will be needed to form a government.
According to an official directly involved in Greeces bailout
program, the fact that five parties, including Tsiprass
SYRIZA, have committed to the program is a cause for
optimism. Yet, the lack of technical expertise and faith of
some SYRIZA officials in the reforms envisaged in the
agreement may complicate their implementation.
Any new government will have to ensure the successful
conclusion of the first review of the bailout this fall to secure
the first disbursement of funds under the bailout.
The official, who asked not to be named as he wasnt
authorized to speak publicly on the matter, said Greece could
receive over 50 billion euros, including the 25 billion euros
earmarked for the recapitalization of banks, as well as funds
for winding down government repos and clearing up state
arrears to vendors and suppliers by the end of the first review.
With so much at stake, technical competence in completing
the so-called prior-actions of the program, is essential, the
official added.
Europe has handed Greece one last lifeline, said
Schmieding. If Greece does not grasp it, Europe wont send
any further money and Grexit would be back on the agenda
before the year is out.
Ugly scenario
In the worst case-scenario, the vote on September 20 may lead
to a parliament so fragmented that four parties may be needed
to form a viable coalition, or that Tsipras would have to turn
to the pro-drachma Popular Unity party for tacit support,
according to RBSs Michaelides.
Led by former SYRIZA heavyweights Panayiotis Lafazanis and
Zoi Konstantopoulou, who revolted against the compromise
Tsipras struck with creditors, Popular Unity advocates
Greeces departure from the euro area. Far right Golden Dawn
and the Communist Party of Greece, which, according to polls
may place third and fourth in this Sundays vote, also support
rupture with the European Union.
A disastrous scenario would see Golden Dawn, and the antiEuropean parties getting a really high share of the vote, said
Farmakis. But thats just a tail risk and its highly unlikely to
happen, the Nomura analyst added. Even a bad scenario will
probably be good-enough for investors in the grand scheme of
things.
---
Battered Greek banks to flout Brussels new

'bail-in' rules
Greek election: Private sector depositors fear losses over

25bn bank recapitalisation, undermining Germany's
insistence on no more bail-outs
Greeces battered banks are set to provide the first major test
for the eurozones new bail-in rules as authorities race to
avoid depositors footing a 15bn bill to get the country back
on its feet.
With Greeks heading to the polls on Sunday, private sector
creditors face uncertainty over whether they will be forced to
suffer losses to keep the banking system afloat after months of
economic turmoil.
Brussels has earmarked around 25bn to recapitalise the
countrys four biggest banks, but only 10bn is immediately
available to Athens under the terms of its new bail-out
package.
Bank resolution will become more complicated after January
1, when new eurozone rules will force depositors to face the
costs of rescue programmes.
Under the EUs Bank Recovery and Resolution Directive
(BRRD), shareholders and depositors will have to take a hit
worth 8pc of their total liabilities before lenders receive
official sector aid.
The rules have been designed to prevent the taxpayer bail-outs
which imperiled governments in Spain and Ireland in the
wake of the financial crisis. Deposits under 100,000 will still
be protected under the new regime.
But the BRRD could well be flouted as soon as it comes into
force at the start of the year.
Greeces paymasters are reluctant to put depositors in the
firing line for fear of deepening an economic downturn and
preventing money from flowing back into the banks.
"December 31 is a political deadline not a legal one", said
Nicolas Veron of think-tank Bruegel.
Authorities could invoke a provision to shield depositors in
2016, "but this will be politically unpalatable to some of the
stakeholders", said Mr Veron.
Berlin has been one of the biggest champions of the new rules,
seeing them as vital steps to shore up rules in the shaky single
currency.
Germany's Wolfang Schaeuble used an informal gathering of
finance ministers earlier this month to warn Brussels his
country will not support any more taxpayer-funded bail-outs.
Greek banks have suffered from unprecedented levels of
capital flight since the end of 2014. Athens was forced to
impose withdrawal limits and shut down bank branches over
the summer.
Under plans agreed in August, only senior debt bondholders,
rather than depositors, will bear some of the costs of a bailin. Private senior bonds of the four largest Greek banks
totalled just 4.7bn at end of 2014.
The European Central Bank is in the process of carrying out
stress tests to determine the extent of the capital shortfall.
This is set to conclude in November, leaving authorities with
less than two months to get the financial system back to health
before the bail-in rules apply.
ECB president Mario Draghi has explicitly ruled-out depositor
haircuts claiming they would be harmful for the Greek
economy which is set to slump into a 2pc recession this year.
Imposing losses on uninsured depositors in a resolution
scenario would lessen any recapitalisation bill, but would also
hurt the real economy, so would likely be counterproductive,
said Josu Fabo at Fitch Ratings.
Even if depositors are spared, EU authorities could still be
open to possible legal challenges from private creditors.
Concentrating the losses on a single class of creditor could
expose the authorities to compensation claims under the no
creditor worse off than in liquidation safeguard, said Mr

Fabo.
Greece is set for a future of minority goverments and a divided
parliament as elections are likely to result in a deadheat
between the left-wing Syriza and conservative New
Democracy party.
---
Tsipras edges towards

election rival closes in
own
Grexit
as
THE firebrand leftwinger who tried and failed to save

Greece from harsh austerity measures is fighting to avoid his
own personal Grexit in todays general election.
The majority of polls show Alexis Tsipras, 41, whose Syriza
party swept to power in January with 36% of the vote,
narrowly in the lead.
Not one vote should be lost, we should not be beaten by
abstention, he told an emotional rally in Syntagma Square in
central Athens on Friday night, where he was joined by
supporters from other left-wing European parties, among
them Pablo Iglesias, leader of Spains Podemos.
His narrow lead could be just enough to allow Tsipras to form
a coalition with the centrist To Potami and socialist Pasok
parties, thanks to the bonus of 50 seats in the 300-member
parliament awarded to the party that comes first.
Yet Tsipras could yet be beaten into second place by Vangelis
Meimarakis, 61, a moustachioed former defence minister, who
leads the right-of-centre New Democracy party, shown by
polls to be only a percentage point or so behind him. It is the
fifth national vote in Greece in just six years.
Meimarakis told The Sunday Times he would seek to form a
broad coalition with other pro-European parties if he wins.
Our goal is effectively a national coalition government with as
many parties as possible; this is the most beneficial scenario
for Greece, he said.
The only condition is for these parties to promote the
necessary reforms and changes that will enable our country to
remain in the eurozone.
The willingness of both Syriza and New Democracy to comply
with Greeces 63bn bailout programme, brokered in August
to prevent an enforced exit from the euro, will give some
comfort to Germany and other members of the eurozone,
which are monitoring the election anxiously.
Yet with Tsipras having ruled out a grand coalition with New
Democracy, there are fears Greece could be in for more
political instability, with nobody able to form a stable
government quickly.
Tsipras, who became the bane of Brussels for his hardline
stance against the austerity measures demanded by Greeces
international creditors, resigned after seven months when
dozens of members of Syriza rebelled against the reforms that
were agreed.
---
Resigned to years of austerity, Greeks head

to the polls
Taken from the Kathimerini Sunday, 20 September 2015
For once, Greek politicians are not bearing gifts.

Six years into the country's worst post-World War II financial
crisis, Sunday's early parliamentary election is not being
fought over austerity, promised debt forgiveness, public sector
jobs or tax breaks.
If anything, it's about the dim prospect of political
stability that might help restore some kind of economic
normality to a country with 25 percent unemployment, severe
banking restrictions and a crippling public debt.
Both front-runners, the radical left SYRIZA party and the
center-right New Democracy party, accept, with varying
degrees of grace, the new tax hikes and reforms that

international creditors have demanded to keep Greece afloat.
"Given that the (third bailout) has been voted by an
overwhelming majority of members of the Greek parliament,
there is nothing at stake in these elections," said Dimitri A.
Sotiropoulos, assistant professor of political science at the
University of Athens.
"(SYRIZA and New Democracy) will have very small room for
manoeuver regarding policy measures," whoever wins, he
added.
The to-do list was written in July, when former prime minister
Alexis Tsipras, 41, performed a remarkable U-turn under
duress, dumping the anti-austerity platform that brought him
to power in January. As an alternative to bankruptcy, social
meltdown and an exit from Europe's monetary and political
union, he agreed to a third, 86-billion euro ($97 billion)
bailout with tight strings attached triggering a party revolt
that cost him his parliamentary majority.
In what might prove a big miscalculation, Tsipras then called
an election to boost his majority. Until July, SYRIZA was
much more popular than New Democracy, whose ratings rose
under interim leader Vangelis Meimarakis, 61. The gap has
shrunk massively and an outright majority is out of either
party's reach.
For a country that has seen four parliamentary elections and
six governments since 2009, the main issue is whether the
winner will be able to last significantly longer than the
previous SYRIZA administration's seven months. Neither is
within sight of the 151 seats needed to rule alone in the 300seat parliament.
Most likely, a three-party coalition will be required and
should be quite easily achievable with help from two small
centrist, pro-European parties. A total of nine parties could
enter parliament in this vote, including the Nazi-inspired,
ultra-right Golden Dawn party that came third in the last
election and is still polling high.
J.P. Morgan analysts Malcolm Barr and Aditya Chordia said in
a note that coalition talks may be difficult, but cannot take too
long, as bailout creditors are to review the country's reform
progress next month.
Over the next couple of months, Greece has to draft the 2016
state budget and a three-year fiscal strategy, double taxation
on farmers, reform its pension system, merge all social
security funds and privatize its electricity transmission
system.
Also, by the end of the year, it must oversee a bank
recapitalization program, without which depositors with over
100,000 euros ($113,000) in their accounts will be forced to
chip in.
Megan Greene, chief economist at Manulife Asset
Management, said there is little chance the immediate targets
can be met.
"This means at some point, Greece and its creditors will end
up back at the negotiating table wondering what to do about
Greece being behind on its targets," she said, adding that new
talk will arise of Greece possibly being forced out of the 19nation euro currency club.
Greece has survived on international bailouts since 2010,
when it lost access to bond markets after running and
keeping quiet about a huge budget deficit.
SYRIZA's defection to the pro-bailout camp has taken much of
the sting out of a debate formerly peppered with accusations
of treason and kowtowing to creditors.
In past campaigns, Greek parties tried to entice voters by
promising higher government spending, welfare handouts,
subsidies, public sector jobs, tax rebates and cuts.
SYRIZA won in January on pledges to restore the minimum
monthly wage to the pre-crisis level of 751 euros ($849)
from 485 euros ($548) restore labor protection laws
scrapped under the bailouts, raise pensions, negotiate an

advantageous deal with creditors and get most of the public
debt written off.
The new bailout deal makes this impossible, although Tsipras
insists he can restore collective wage bargaining.
Tsipras promises to soften the pain from the inevitable new
measures. Meimarakis has played the stability card, accusing
SYRIZA of nearly obliterating the economy and dropping the
ball on immigration a record 260,000 asylum-seekers have
entered Greece this year and education, with many schools
closed due to staff shortages.
One remaining advantage for Tsipras, despite his U-turn and
signing of the third bailout, is that he is still considered the
new kid in town. He has campaigned on the theme of new
versus old, clean versus corrupt, the likable youngster against
the cynical representatives of the old regime.
"I will vote for SYRIZA, because that's the only chance for this
place to get cleaned up from the dirt that was established in
1974 by all the parties," said retiree Vassilis Betzelos.
"I will give a second chance to Mr. Tsipras," concurred
tourism worker Despina Savvidou.
Teneo Intelligence analyst Wolfgango Piccoli said the
campaign has highlighted both parties' "manifest inability to
put forward credible policies," adding that the overall
prospects are gloomy.
"In the best-case scenario, another phase of improvisation,
hesitation, missed deadlines and much political wrangling will
follow the calm of what has been a singularly apathetic
election campaign," he said.
Polls indicate many of the 9.9 million voters remain
undecided or may not vote at all.
Yannis Xerakias, an unemployed shipyard worker in the
depressed Athens suburb of Perama, said Tsipras "proved to
be a hot potato, just like the rest of them all of these years."
"As for what I'll vote for on Sunday?" he asked. "My bed. I will
enjoy it."
---
FLASH BACK
Greece's defence minister threatens to send
migrants including jihadists to Western
Europe
Taken from the Telegraph Monday March 09 2015
Panos Kammenos, Greece's defence minister, threatens to

open country's borders to refugees including potential
members of Islamic State of Iraq and the Levant (Isil) - unless
Athens receives debt crisis support
Greece will unleash a wave of millions of economic migrants
and jihadists on Europe unless the eurozone backs down on
austerity demands, the country's defence and foreign
ministers have threatened.
The threat comes as Greece struggles to convince the eurozone
and International Monetery Fund to continue payments on a
172billion bailout of Greek finances.
Without the funding, Greece will go bust later this month
forcing the recession-ravaged and highly indebted country out
of the EUs single currency.
Greeces border with Turkey is the EUs frontline against
illegal immigration and European measures to stop extremists
travelling to and from Islamic State of Iraq and the Levant
(Isil) bases in Syria and Iraq.
Panos Kammenos, the Greek defence minister, warned that if
the eurozone allowed Greece to go bust it would give EU travel
papers to illegal immigrants crossing its borders or to the
10,000 currently held in detention centres.
News America
Brazils president feels
impeachment talk grows
the
heat
as
In recent weeks, a new character has entered Brazilian politics

Pixuleco, a giant inflatable doll made in the likeness of
former president Luiz Incio Lula da Silva and dressed in a
prison outfit.
Wielded by activists in protests against president Dilma
Rousseff, Mr Lula da Silvas protg from his ruling Workers
Party, or PT, the word pixuleco is a slang term for bribes
that police say were used by those involved in a giant
corruption scandal at state-owned oil group Petrobras, much
of it during Lulas presidency.
This week opponents of Ms Rousseff, incensed by allegations
that pixulecos mostly involving ruling coalition politicians
have cost Petrobras at least R$6bn (US$1.5bn), took their
campaign to congress by filing a petition for impeachment
with the speaker of the lower house Eduardo Cunha.
While such petitions are not uncommon in Brazil any
citizen has the right to lodge one what was significant this
time was the author: Hlio Bicudo, a founding member of the
PT, who left the party in disgust over an earlier scandal
involving Mr Lula da Silva in 2005.
Im a doctor in impeachment, the 93-year-old told
journalists this week. He was referring to his key role in
Brazils only successful impeachment movement, the removal
by congress of former president Fernando Collor in 1992 for
alleged corruption.
The petition from Mr Bicudo, which was backed by the
opposition in congress, marks the start of what could be a long
process to try to topple the former Marxist guerrilla only nine
months into her second four-year term.
While analysts still rate the chances of Ms Rousseff falling
from office as less than 50 per cent, the calls for impeachment
promise to be another destabilising factor for a president who
is struggling with record low popularity, a rebellious congress
and a deepening recession.
The odds of impeachment happening from now to 2016 will
remain relatively high, said Joo Augusto de Castro Neves of
Eurasia Group. The consultancy recently raised the
probability of impeachment to 40 per cent from 30 per cent.
But he said after 2016 the window for impeachment will close
with the approach of the next election in 2018.
In his petition, Mr Bicudo and an associate, Miguel Reale
Jnior, a former minister of justice with ex-president
Fernando Henrique Cardoso from the centrist PSDB, now the
main opposition party, cited the Rousseff governments
handling of the 2014 federal budget for their action.
The government accounts watchdog, the TCU, is investigating
allegations the accounts were fiddled to produce a more
politically acceptable budget deficit. A finding against the
president, who denies the charges, could be used by congress
as a basis for impeachment.
Just as we fought against the dictatorship of arms, now we
are fighting against the dictatorship of bribes, said Mr Reale,
on delivering the petition to congress. He was referring to
Brazils military dictatorship between 1964 and 1984.
Constitutional experts say, however, that the impeachment
process is complicated. The petition first needs to be accepted
by a majority of congress. The protagonists will need to then
prove the president committed a crime that is relevant to her
current mandate in office. While impeachments are highly
political, essentially a trial of the president by the senate, they
are closely supervised by the Supreme Court to ensure they
stick to the law.
Whats happening in Brazil at the moment is an economic
crisis but there is no act that links the president to something
illegal, said Joaquim Falco of FGV Direito Rio, an academic

institution.
Despite the difficulties, the debate over impeachment is
heating up as Brazils elite contemplate an economy heading
into freefall this year and next with Ms Rousseffs government
flip-flopping over how to arrest a growing budget deficit.
This week, she accused those of seeking to benefit from the
crisis to seize power as golpistas, or coup plotters. Mr
Bicudo responded: Impeachment is not coup-plotting, it is a
remedy prescribed by the constitution.
---
Coca-Cola Owes $3.3 Billion in Taxes Over

Foreign Transfer Licensing
An audit found reported income from 2007 to 2009 should

have been higher
Coca-Cola Co. on Friday said the Internal Revenue Service had
notified it of a potential $3.3 billion federal income-tax
liability, becoming the latest U.S. multinational challenged
over so-called foreign transfer pricing.
The Atlanta beverage giant also disclosed the IRS has
recommended the matter be designated for litigation after a
government audit determined the companys reported income
from 2007 to 2009 should have been higher.
The company firmly believes that the assessments are
without merit and plans to pursue all administrative and
judicial remedies necessary to resolve this matter, Coke said
in a regulatory filing, adding it plans to file a petition in U.S.
Tax Court challenging the notice.
Coke said the dispute relates to how it reports income from
foreign licensing of manufacturing, distribution, sale,
marketing and promotion of products in overseas markets.
Coke said it followed the methodology for the licenses
outlined in a 1996 agreement with the IRS. The companys
compliance with the agreement was confirmed by five audits
covering the subsequent years through 2006, with the most
recent audit ending in 2009, Coke added.
An IRS spokesman declined to comment, citing a federal law
prohibiting the IRS from discussing specific taxpayers.
---
US hedge fund seals 2bn property tie-up

A PROPERTY lending company that pulled a 500m listing

last year has struck a joint venture with an American hedge
fund instead.
Urban Exposure, which has funded projects including a 46storey tower near Canary Wharf in east London, said the tieup with EJF Capital would allow it to plough 2bn into the
housing market in southeast England.
EJF had offered to back its attempt to float and continued
talking after choppy market conditions forced the board to
abandon the fund-raising. The deal will see Urban Exposure
and EJF own 70% and 30% respectively of a new joint venture
company.
Set up in 2002, Urban Exposure aims to fill the gap left by
mainstream banks, which have shunned financing
development projects since the financial crisis. Its founder,
former investment banker Randeesh Sandhu, cited a report by
De Montfort University suggesting that the amount of debt
extended for residential schemes had fallen by 57% from a
peak in 2008.
Sandhu said: This gives us firepower to lend to residential UK
developers, especially in southeast England.
News Asia
Malaysia imposes travel bans over 1MDB
foreign police reports
The battle over a growing international scandal centred on a

Malaysia state investment fund has deepened after authorities
imposed a travel ban on two men who have pressed foreign
police to probe the affair.
The no-fly orders on Matthias Chang and Khairuddin Abu
Hassan came after the pair lodged crime reports in the UK,
Switzerland and Hong Kong over alleged misappropriation at
the debt-laden 1Malaysia Development Berhad fund.
The action sharpens the conflict between Najib Razak,
Malaysias prime minister and his predecessor, Mahathir
Mohamad, whom Mr Chang formerly served as political
secretary. Mr Mahathir has joined Malaysian opposition
parties in a campaign to topple Mr Najib over mysterious
transfers of more than $675m to a bank account in his name.
Mr Najib and 1MDB have denied wrongdoing.
Mr Khairuddin posted pictures on Facebook on Friday of
himself and Mr Chang at the immigration department in
Kuala Lumpur, adding that the men had also been called in for
questioning by police on Monday. Malaysias legal system had
turned upside down, Mr Khairuddin wrote.
Mr Chang told the Financial Times by phone that Mr
Khairuddin had been arrested later on Thursday and his
house raided. Mr Chang said he was acting as lawyer to Mr
Khairuddin, a former regional politician from Mr Najibs
United Malays National Organisation who was expelled from
the party after he went bankrupt.
Sufi Yusuf, an aide to Mr Mahathir, said he could not see a
valid reason why the pair had been targeted. Its very clear
that what they have been doing is making some people
uncomfortable, he said. I didnt think reporting to police
authorities outside would be an offence.
Mr Najibs government now faces multiple probes at home
and abroad over a scandal that has convulsed political life in
Southeast Asias third-largest economy, as Umno scrambles to
maintain its 58-year hegemony. Questions have grown over
1MDB, whose advisory board the premier chairs, after it
racked up debts of more than $11bn and did contentious deals
in the Middle East.
Neither the Malaysian police nor the government responded
immediately to a request for comment on the action against
the two men. Mr Najibs supporters have previously argued
that travel bans imposed on a pair of Malaysian opposition
politicians and a prominent media owner over the 1MDB case
are part of the official investigations process and are not
intended to stifle scrutiny of the affair.
Mr Khairuddin had used social media to give a running
commentary on his efforts over the past few months to push
foreign authorities to investigate the 1MDB case, arguing that
he lacked confidence in investigations under way in Malaysia.
The Swiss authorities said last month that they had launched a
criminal probe into suspected money laundering. Hong Kong
police, whom Mr Khairuddin visited without Mr Chang, said
last week that they had launched their own probe.
People close to Mr Khairuddin said authorities might have
moved against him now because they feared he planned to
travel again soon to lodge further reports. Some observers of
the case argue US authorities may have scope to investigate.
Mr Najib has said little about the payments to his bank
account, save that they came from an unidentified Middle
Eastern donor and were not for personal gain. His supporters
say he hasn't offered a fuller explanation because he doesnt
want to prejudice the domestic probes into the case.
But critics say the premier has tried to hobble the
investigations by removing the attorney-general, sacking the
deputy prime minister for disloyalty and promoting several

MPs off a parliamentary committee that is examining 1MDBs
troubles.
---
FBI Probes Malaysia Development Fund

U.S.
opens
money-laundering
investigation
amid
international 1MDB probe; Malaysia police arrest critic of
prime minister
The FBI has opened an investigation into allegations of
money-laundering related to a Malaysian sovereign wealth
fund, a person familiar with the matter said.
The scope of the investigation wasnt known. It is the latest in
a series of international investigations related to the fund that
have been revealed in the past several weeks.
The international investigations center on entities related to
1Malaysia Development Bhd., which was set up by Prime
Minister Najib Razak in 2009 to help drive the economy. The
fund is having difficulty repaying more than $11 billion of debt
and is at the center of investigations that are destabilizing the
government.
A Malaysian government probe found that nearly $700
million moved through banks, agencies and companies linked
to 1MDB before being deposited into Mr. Najibs alleged
private bank accounts ahead of a close election in 2013, the
Journal reported in July.
The source of the money is unclear, and the government
investigation hasnt detailed what happened to the funds that
allegedly went into Mr. Najibs personal accounts. Malaysias
anticorruption body in August said the funds were a donation
from the Middle East. The donor wasnt specified.
Mr. Najib has denied wrongdoing and denied taking money
for personal gain.
Late Friday, a former member of Malaysias ruling party who
had raised questions about money transfers to the Malaysian
prime minister was arrested on charges of attempting to
undermine democracy, his lawyer Matthias Chang said.
The arrest of Khairuddin Abu Hassan, who remained in
custody on Saturday, prevented him from traveling to New
York where he planned to urge U.S. authorities to investigate
the transfers, Mr. Chang said.
A spokeswoman for the FBIs New York office said that no
agent in the office had arranged to speak with Mr. Khairuddin
or had any previous contact with him.
Two of the transfers were made through the Singapore branch
of a Swiss private bank and routed via Wells Fargo & Co. Wells
Fargo declined to comment.
The Swiss attorney generals office has opened criminal
proceedings against two unidentified executives of 1MDB on
suspicion of corruption and money-laundering. It has frozen
tens of millions of dollars in Swiss bank accounts, officials said
in August.
Last week, 1MDB said none of its executives or board
members were the subject of criminal proceedings by the
Swiss attorney generals office, and that none of its accounts
were frozen there.
Authorities in Singapore also have frozen accounts linked to
1MDB and are investigating allegations related to the fund.
1MDB said none of its accounts were frozen and that it was
ready to assist any investigations subject to advice from the
appropriate Malaysian authorities.
---
Hotel giant to grab Raffles
THE InterContinental Hotels Group (IHG) is closing in on a

1.9bn deal to buy Fairmont, the Canadian giant that owns
Singapores Raffles hotel.
The FTSE 100 company has beaten rivals, thought to include
Wyndham and Accor, and is likely to seal the deal within
weeks, according to City sources.
Fairmont was put up for sale earlier this year by its owner
FRHI, which counts the Qatari government as its biggest
shareholder. It manages more than 100 hotels around the
world.
Earlier this year IHG ruled itself out of a merger with rival
Starwood, owner of the Sheraton and Westin brands. Since
then the Holiday Inn owner has gone on the offensive. It has
also been linked with Swiss operator Mvenpick a deal
banking sources said IHG was still pursuing.
IHG is evolving from hotel owner to hotel manager. It has sold
most of its famous properties, including the InterContinental
Hong Kong and Le Grand in Paris.
Singapores Raffles opened in 1887 and counts the Duke and
Duchess of Cambridge among its former guests.
IHG declined to comment.
---
Turnbull to reveal new cabinet line up

Taken from the Sky News Sunday, 20 September 2015
Malcolm Turnbull's ministry line-up will be announced later

on Sunday, with its members to be sworn in on Monday.
The new prime minister has refused to be drawn on who will
make the cut, however, it's anticipated Social Services
Minister Scott Morrison will replace Joe Hockey as treasurer.
Several long-serving ministers are expected to be excluded
from cabinet, including Employment Minister Eric Abetz and
Defence Minister Kevin Andrews.
Michaelia Cash, Marise Payne, Kelly O'Dwyer, Arthur
Sinodinos and Simon Birmingham are considered likely for
promotion.
Education Minister Christopher Pyne is tipped to move to
defence.
(Full article click - Sky News)

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News Summary

Reuters News carried a report that FOMC board members

Andrew Sentance in FT: Monetary policymakers are very

Stock markets shuddered on Friday, a day after the Federal

In our view, whilst an interest rate rise is unlikely in October,

Ambrose Evans-Pritchard: Fed is riding the

We do not really know whether capital flows from China are

John Authers: Look to China for clues on

Greg Ip: Fed Rate Decision Keeps Monetary

The critics note the failure of wages to accelerate even as

Glenn Stevens to Janet Yellen: One day you

Reserve Bank of Australia governor Glenn Stevens has

Time to forget about the US Fed

As much as it pains me to write this, and as you assuredly

THE FED HAS DISCOVERED THE WORLD.

was in September 1998. Depressingly, back then it didn't hike

These are tough times for monetary policymakers. That is

However in cricketing parlance the Fed is now on the

THE US economy is chugging along. Not at high speed, but at

appears sufficiently robust to warrant a rate rise. They now

St. Louis Feds Bullard Argued Against

Committee objectives have essentially been met to begin

said they wanted to wait until they had more information

Feds Williams Sees 2015 Interest Rate Rise

John Williams, president of the Federal Reserve Bank of San

officials have thought a lot about both the mechanics of the

A divided Fed pits world's woes against

Federal Reserve policymakers appeared deeply divided on

Andrew Haldane, the Bank of England's chief

government spending monetisation would be a disaster). And

Kathryn Cooper: Market bets on another

INVESTORS are betting that the Bank of England will hold

Most economists are more hawkish than the markets,

Carney moves to head off bond market

Bank governor unveils results of investigation into big

German banks at risk of alarming profit

German banks are at risk of suffering an alarming fall in

their pre-tax profits to fall roughly 25 per cent by 2019, mainly

Moodys Downgrades France,

Taken from the WSJ Saturday, 19 September 2015

Rating agency cites weakness in nations medium-term

French Finance Minister Michel Sapin on Wednesday said

Kathryn Cooper: France stung by credit

THE eurozone suffered a fresh blow this weekend when the

ECB chief economist declares 'readiness

The European Central Bank's chief economist reiterated the

"What's important is to emphasize our readiness and our

Greeces election remains too close to call as a three-week

Tsipras has built up trust with his European counterparts

Battered Greek banks to flout Brussels new

Greek election: Private sector depositors fear losses over

creditor worse off than in liquidation safeguard, said Mr

Tsipras edges towards

Taken from the Sunday Times 20 September 2015

THE firebrand leftwinger who tried and failed to save

Resigned to years of austerity, Greeks head

For once, Greek politicians are not bearing gifts.

degrees of grace, the new tax hikes and reforms that

scrapped under the bailouts, raise pensions, negotiate an

Panos Kammenos, Greece's defence minister, threatens to

Taken from the FT Saturday, 19 September 2015

In recent weeks, a new character has entered Brazilian politics

illegal, said Joaquim Falco of FGV Direito Rio, an academic