Ben Bernanke was named by President Bush as Alan Green-span’s successor as chairman of the US Federal Reserve and how this man decides to run the US economy will have profound consequences for us all. As Thomas Jefferson, US President in the early 1800s, said: “Banking establishments are more dangerous than standing armies.”The announcement of Greenspan’s successor had not been expected until next month, but while hurricane Wilma may have retreated, there are political storm clouds brewing over Washington. Bush is under pressure. His reaction to hurricane Katrina, Iraq, the appointment of Harriet Miers (his personal lawyer with no experience as a judge) to the Supreme Court and the possible indictment of Karl Rove, his chief strategist, for outing the wife of a former Ambassador as a CIA operative are just a few of the issues on the US President’s plate. So what better than an appointment to keep the media pack busy elsewhere? The markets liked what they heard and Wall Street and the London Stock Exchange both saw sharp rallies, with the Dow Jones soaring. But just who is Bernanke and what might he do? Bernanke was appointed Bush’s chief economic adviser in June and is a respected academic economist. A member of the Fed’s board, he is a vocal advocate of the European model of ‘inflation targeting’ – the idea that central banks should set a target for inflation and stick to it. This is in contrast to Greenspan, who, like the free jazz he plays, likes to keep the markets guessing. But at the press conference, standing at Bush’s side, the Fed chairman in waiting explained that his “first priority will be to maintain continuity with the policy and policy strategies under the Greenspan era”. Bernanke’s appointment has to be approved by the Senate but assuming it is, his in-tray is not to be envied. Much like the UK, the US housing market has boomed, leaving many areas unaffordable for the average American. And continued low interest rates have fuelled consumer borrowing. This has led to recent hikes in interest rates to slow house price inflation. But the Fed is now under pressure to not raise rates further to help the economy recover from hurricane Katrina. There is also mounting concern about America’s budget and trade deficits. In five years, thanks to tax cuts, the war in Iraq, homeland security costs, two hurricanes and a hugely expensive Medicare programme America’s budget deficit has increased by $1.5trillion. Much of this has been financed by borrowing on the dollar, with the Chinese holding a huge amount in US government bonds. If for any reason the Chinese decide not to acquire American debt at such a rapid rate, the dollar could fall sharply and the US could find it difficult to borrow at current rates of interest. Many are now calling for a change in US monetary policy. Bernanke is known as a hawk when it comes to economic policy but, avian flu notwithstanding, let’s all hope he doesn’t sneeze or the world could catch a cold. rachelblackmoreis external affairsmanager at the Building Societies Association
Abacus Permanent has announced that for a limited period it will offer free valuations across its entire adverse product range. The offer will run until December 31 and will be available on a range of products including the Abacus Future 100% with 5.08% two-year London Inter Bank Offered Rate, no overhang and no MIG.The Abacus […]
eMoneyfacts has announced that it has linked its Mortgage Search with Plum Software, an independent software house for financial advisers and mortgage brokers.eMoneyfacts is the adviser portal offered free to all Moneyfacts and Business Moneyfacts subscribers. The site includes whole of market mortgage sourcing, ePages, constantly updated versions of Moneyfacts magazine pages, a mortgage hub, […]
The Money Centre appointed four directors recently. Lynsey Scrivener has been promoted to marketing director, Wayne Kilby to operations director, Dawn Bower to business development director and Bronya Cluer to finance director.
Pink Home Loans has launched a self-cert fixed rate product funded by Platform.The product offers a fixed rate of 4.95% until March 1 2008, up to 85% LTV, with 0.25% cashback and no early repayment charge overhang or higher lending charge.Nic Ekin, lender relationship manager at Pink, says; “This exclusive self-cert rate of 4.95% fixed […]
New figures requested from the Office for National Statistics by Jelf International reveal the countries with the largest numbers of employees working for a UK-controlled parent company (known as UKFAs or UK foreign affiliates).
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