The current global finance is preposterous24 million jobs per year and it is 10 million9 since the summer 2005 but decreased by 3225 m2 of shops concentrated in the new wing halfThis is not at all up on a model of string satelliteIn one night the LFNY and harvest more than 1In Britain the unions have not a penny moreBut BHP Billiton was not excellent only on its flagship productsThey have everything to gain by a redesign It is not a question of fear it is a matter of priorityThe US Central Bank dropped yesterday, its main interest rate by 50 basis points. Rates, which had already dropped from three-quarters point last week, found the time to 3, 5.25 in September. At a time where the slowdown of the US economy is confirmed, with the lowest growth of gross domestic product in five years (see below), the Fed had, it is true, little choice.
By lowering the rent for the money, the Board of Governors, chaired by Ben Bernanke, takes, of course, the risk of exposure to a return of inflationary pressures. But the Fed, said in its release that inflationary pressures will be moderate, knows that now a policy of high rates it could stifle any potential for growth in a country facing a real estate crisis unprecedented since the 1930s. The US economy might, in these circumstances, capable of overcoming the inflationary threat but as economists remind, the risk would be to see the United States sinking into a recession. The patient would be healed, but dead.
"Artificial elixir".
"Between the inflationary threat or deflationary threat and the crisis, the Bernanke Fed has chosen", notes an investor. Although some criticize the Fed for having too quick to grasp the magnitude of the crisis, the Central Bank is now mobilized for growth. By opening the gates of monetary policy, it thus accompanies the effort of the public authorities, who want to use the budgetary weapon.
For economists, the question now is whether far the Fed will go. After it was too cautious, is it not, tomorrow, to go too far and surréagir For the most pessimistic, as David Rosenberg, Merrill Lynch, the Fed acknowledged his error. At the time, the Economist predicted that rates could drop up to 1 by the end of the year.
However, this radical point of view is no unanimity. Bill Gross, the bond in Pimco market specialist, estimated that reducing rates at the same level in June 2003 would be a mistake. This "would create a new bubble, feed inflation and would weaken the dollar," writes the expert, who opposes such "artificial Elixir". Economists are betting on average over a cut in rates to about 2.5 by the middle of the year.
Bernanke plays big
Ben Bernanke, who lost part of its credibility, plays big. Who appreciate the situation, he, in premium, poorly communicated with a market too often taken by surprise by its decisions. The challenge is that the successor to Alan Greenspan will have to retain some flexibility, to be more predictable. Because, although birds of ill omen for the worst for the US economy, at this time, the wind, a part of the economists do not exclude a strong rebound of economic activity in the second half of the year 2008. In these conditions, the inflationary pressures could re-emerge and, if the Fed had too cut rates, it should be back them brutally, taking by surprise the markets. Would be better perhaps, in those circumstances, that after the massive decline granted since mid-January, the Fed will be more cautious and analyses the impact of monetary policy on the real economy. Yesterday, she announced that she would continue to assess the consequences of the financial and real estate crisis on the economy and that it would be quickly depending on the circumstances.
