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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: THE ANT who wrote (112834)	8/3/2015 1:59:08 PM
From: elmatador	Read Replies (1) \| Respond to of 217910

Why the Economy Is Not Ready for an Interest Rate Increase By THE EDITORIAL BOARDAUG. 1, 2015 Inside The Federal Reserve talked up the economy last Wednesday, in a statement that emphasized improvements in employment, housing and consumer spending. Unfortunately, the optimism is misplaced. On Thursday, the Commerce Department reported that from April through June, the economy grew at an annual rate of 2.3 percent — a modest pace, especially given the expectation of a bigger rebound from weather-related poor growth in the first quarter. In 2014, for instance, when bad weather also reduced first-quarter growth, the economy grew at an annual pace well above 4 percent for the next two quarters. In comparison, the economy’s recent performance is not a rebound but rather a resumption of the sluggish growth that has long characterized the economy. Given the depth of the recession that preceded the current recovery, growth in the 2-percent range has not been enough to pull up wages. That point was driven home on Friday, when the Labor Department reported a slowdown in wages and benefits in the second quarter. In a healthy economy, a more or less steady drop in the unemployment rate — as has occurred in the United States — would translate into rising wages and higher prices. If significant or sustained, such increases would be cause for the Fed to raise interest rates. But so far, no such increases have appeared, and, as a result, most working people have not yet recovered all of the lost ground from the recession or raised their living standards. Fed policy makers know all that. A recent leak of documents from the Fed shows that its staff economists have forecast more of the same modest growth and inflation for years to come. Nonetheless, the Fed seems determined to raise interest rates before the end of this year. Fresh data between now and then may cause it to delay. And any move in interest rates, if it comes, is expected to be tiny. But an increase, however small, would signal that Fed policy makers are basically satisfied with the economy’s performance. Coupled with Congress’s long failure to provide adequate fiscal support to the economy, that message would be a setback for Americans who are still not getting ahead. In recent years, the Fed has generally been good at communicating the reasons for its actions. If it really intends to move ahead soon with interest-rate increases, it needs to explain how an economy in which wages are stagnating is as good as it gets. Follow The New York Times Opinion section on Facebook and Twitter, and sign up for the Opinion Today newsletter.

To: THE ANT who wrote (112834)	8/4/2015 4:33:54 AM
From: elmatador	Read Replies (2) \| Respond to of 217910

Redefining EM: Latam, an emerging or submerging market? John Paul Rathbone Policymaking and a focus on the long term have separated winners from losers; but size also matters I t has been 34 years since a World Bank staffer first coined the phrase “emerging market”. The world has been stuck with the term ever since. Its merit is that it is inspiring: “emerging” implies “improving”. After all, without improvement — be that of governance or per capita wealth — there is no emergence; there are only “more developed” or “less developed” economies. The problem with the term, though, is that it sets the bar quite high. It implies “convergence” with developed economies, which requires relatively better performance, sustained over time. On this metric, how has Latin America fared? The answer, sadly, is not that well. This is especially important now as the end of the commodity boom tests which countries continue to emerge or fall behind. The charts plot Latin American GDP per capita, on a purchasing power basis, as a percentage of US GDP per capita. They reveal three groups of countries: those that have fallen behind, those that have gone nowhere, and those that have moved ahead. They also reveal three clear periods: the “lost decade” of the 1980s, when debt default and high inflation ravaged the region; the painful market reform, or “Washington consensus”, years of the 1990s; and the commodity boom of the 2000s, the so-called “decade of Latin America”. Forecasts out to 2020 are included too, using IMF data. Although all forecasts have to be taken with a pinch of salt, they are signposts to possible futures. The submerging The biggest faller is Venezuela, despite the blessing or curse of its immense oil wealth (“the devil’s excrement”, as a Venezuelan diplomat famously once put it, that “will bring us ruin”). It is followed by Argentina, which some might say is the agricultural equivalent of an oil well. Both countries submerged through the 1980s and 1990s and rose quickly during the commodity boom of the 2000s. But spendthrift policies have left both countries vulnerable to further declines. Consensus forecasts predict that Venezuela’s economy will shrink by 6 per cent this year, and by another 2.5 per cent in 2016. The floating The floaters are those economies that have seen little change in their population’s relative wealth. They are also the continent’s two biggest countries: Mexico and Brazil. Mexico has essentially gone sideways over the past 30 years. Why is one of the mysteries of development economics. The short answer to the conundrum is that the emphasis Mexico has placed on macroeconomic stability has not fed through into higher productivity. There are many reasons for this, ranging from absence of the rule of law, to cartelised domestic industries. Meanwhile Brazil, contrary to popular wisdom, has done little better. Like all commodity producers, it enjoyed a boom in the 2000s. But, as the Petrobras corruption scandal shows, the boom was mismanaged. The country is now suffering a bruising recession but not necessarily an economic crisis (although a political crisis may be on the cards, which could result in the same thing). The emergers The emergers include Colombia and Peru, both of which have emerged slowly but steadily over the past 30 years, and Uruguay, which rode the commodity boom without squandering the windfall. Chile, though, remains far and away the best performer. Alongside Uruguay, it is the only Latin American country that unequivocally enjoys a proportionately higher GDP per capita than it did 30 years ago. Why the divergence between the three groups? Better policymaking is the obvious answer. That, plus a stronger focus on the long term rather than populist short-term fixes. But there is another factor that may be more determining. It is notable that all the better-performing economies are relatively small. This suggests something about the political economy of running a country. Smaller countries may be easier to manage than bigger ones — in part because of sheer geographical size but in part because their constituencies, be that of labour or capital, are less diffuse. Smaller countries, because of their limited internal markets, are also perforce more open to importing best practices from abroad. Such better governance is likely to be especially important in determining which countries continue to emerge during the tougher years that likely lie ahead. Follow us on Twitter @em_sqrd Copyright The Financial Times Limited 2015. You may share using our article tools.