hzahin
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Salam Semua Carigold Fx Trader;
Ada sebarang komen.
Ada sebarang komen.
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Time now:
Jun 1, 12:00 AM
Harapan Besar Tahun 2010....
- Thread starter hzahin
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hzahin
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Article dari yahoo finance
The Fed Must Use Its New Policy Tool Soon
by Jeremy J. Siegel
Thursday, February 11, 2010
The Fed's action to flood the financial system with liquidity in the wake of the Lehman bankruptcy has prevented another Great Depression. But the Fed's job is far from over. As the economy recovers, Bernanke must raise interest rates and withdraw the over $1 trillion of liquidity -- now located in the excess reserves of the banking system -- that he has created to shore up the financial system or risk a flare-up of inflation. In fact, Bernanke is scheduled to appear before Congress later this month to testify about its so-called "Exit Strategy," the methods by which the Fed will abandon its zero-interest rates policy. This will become necessary because as the economy improves, the threat of inflation rises. Fortunately, the Fed now has a new tool to ease the economy and the financial system into a higher-interest rate environment.
Reluctance to Raise
The thought that the Fed might have to tighten soon sends chills down the spines of historians who have studied central banking. The mid 1930s were another period, just like today, when the banks held a massive quantity of excess reserves and interest rates were near zero. In order to prevent those reserves from fueling inflation that was building at the time, the Fed sharply raised reserve requirements on banks in July 1936 and again in January of 1937.
But, much to the Fed's surprise, the banks wanted to keep those excess reserves and responded to the higher reserve requirements by calling in large quantities of loans to restore their reserve position. The decline in deposits and lending brought about a sharp recession, and industrial production fell more than 30%.
In contrast to 1937, the Fed now has an additional monetary tool that greatly reduces the risk that mopping up excess reserves too early will cause a similar contraction. In October 2008, Congress granted the Fed power to pay interest on both required and excess reserves for the first time. Before then, the Fed never paid any interest on bank reserves.
Interest on Reserves
This new policy is a game changer. Before, the Fed could only raise interest rates by making reserves scarce relative to their demand. This was done by "open market sales," or selling government bonds and debiting the reserve accounts of banks. The reduction in the supply of reserves sent the interest rate on reserves upward. That is how the Fed controlled the interest rate on the all-important Federal Funds Market, the market for overnight reserves that the banks lend each other to satisfy both the Fed's reserves requirements and their own liquidity needs.
But now the Fed can maintain a large quantity of reserves to satisfy the banks' desire for liquidity and still fight inflation by simply raising the interest rate that its pays on reserves without removing. The interest rate must set the floor to the Federal Funds and other short-term rates since no bank would loan out reserves in the Fed Funds market at a lower rate than they can receive on deposit from the central bank.
But the Fed cannot use the interest rate on reserves as its only tool. As the economy recovers, banks will want to lend out an increasing fraction of their reserves in the higher-yielding loan market. To prevent excess lending, the Fed must then mop up those excess reserves through traditional open market sales and raise the Fed Funds target above the reserve rate.
Time for Tightening Near
Although inflationary pressures appear quiescent now, the Fed should not delay for long in raising the rate of interest on reserves. Many central banks are already moving into a tightening mode and several have already raised rates. JP Morgan forecasts that only one of the forty countries it monitors (Bulgaria), will contract in 2010, global GDP growth will be 3.3%, and the emerging market economies will grow at a robust 5.7% rate.
The threat of deflation has vanished and, given the rise in the prices of energy and raw materials, the threat of inflation is real. Oil is above $70 a barrel, more than double that $32 level reached last December and above the price it reached in the summer of 2007 when the financial crisis began. The Journal of Commerce Index of raw materials used in industrial production has now regained three-quarters of the 54% plunge it took between July 2008 and January 2009 and gold soared above $1,200 an ounce in December.
By keeping interest rates near zero, the Fed is encouraging speculation in world-traded commodities and against the dollar. Traders can borrow dollars at these near-zero rates and invest them in commodities and foreign currencies, a strategy called the "carry trade." There is no reason to give these speculators a free ride. By raising interest rates sooner rather than later, the dollar will strengthen and commodity prices will fall.
To be sure, raising rates in the short run will be painful for equities. But in the long run a Fed tightening is good for both the bond and stock market. It is a signal that the Fed sees the recovery as sustainable and is serious about controlling inflation and maintaining the purchasing power of the dollar. This action will be especially welcome by foreign investors who have funded a large part of our recent deficits.
Let me be clear that I do not see any immediate threat of inflation and I believe that Bernanke well understands the Fed's primary role as conservator of the value of our currency. Nevertheless, let's not let the memories of 1936 prevent the Fed from taking pre-emptive action to fight inflation and shore up the dollar. The Fed can now raise rates and maintain the liquidity of our banking system.
Source: http://finance.yahoo.com/banking-budgeting/article/108824/the-fed-must-use-its-new-policy-tool-soon
Any Comments :-?:-?:-?
The Fed Must Use Its New Policy Tool Soon
by Jeremy J. Siegel
Thursday, February 11, 2010
The Fed's action to flood the financial system with liquidity in the wake of the Lehman bankruptcy has prevented another Great Depression. But the Fed's job is far from over. As the economy recovers, Bernanke must raise interest rates and withdraw the over $1 trillion of liquidity -- now located in the excess reserves of the banking system -- that he has created to shore up the financial system or risk a flare-up of inflation. In fact, Bernanke is scheduled to appear before Congress later this month to testify about its so-called "Exit Strategy," the methods by which the Fed will abandon its zero-interest rates policy. This will become necessary because as the economy improves, the threat of inflation rises. Fortunately, the Fed now has a new tool to ease the economy and the financial system into a higher-interest rate environment.
Reluctance to Raise
The thought that the Fed might have to tighten soon sends chills down the spines of historians who have studied central banking. The mid 1930s were another period, just like today, when the banks held a massive quantity of excess reserves and interest rates were near zero. In order to prevent those reserves from fueling inflation that was building at the time, the Fed sharply raised reserve requirements on banks in July 1936 and again in January of 1937.
But, much to the Fed's surprise, the banks wanted to keep those excess reserves and responded to the higher reserve requirements by calling in large quantities of loans to restore their reserve position. The decline in deposits and lending brought about a sharp recession, and industrial production fell more than 30%.
In contrast to 1937, the Fed now has an additional monetary tool that greatly reduces the risk that mopping up excess reserves too early will cause a similar contraction. In October 2008, Congress granted the Fed power to pay interest on both required and excess reserves for the first time. Before then, the Fed never paid any interest on bank reserves.
Interest on Reserves
This new policy is a game changer. Before, the Fed could only raise interest rates by making reserves scarce relative to their demand. This was done by "open market sales," or selling government bonds and debiting the reserve accounts of banks. The reduction in the supply of reserves sent the interest rate on reserves upward. That is how the Fed controlled the interest rate on the all-important Federal Funds Market, the market for overnight reserves that the banks lend each other to satisfy both the Fed's reserves requirements and their own liquidity needs.
But now the Fed can maintain a large quantity of reserves to satisfy the banks' desire for liquidity and still fight inflation by simply raising the interest rate that its pays on reserves without removing. The interest rate must set the floor to the Federal Funds and other short-term rates since no bank would loan out reserves in the Fed Funds market at a lower rate than they can receive on deposit from the central bank.
But the Fed cannot use the interest rate on reserves as its only tool. As the economy recovers, banks will want to lend out an increasing fraction of their reserves in the higher-yielding loan market. To prevent excess lending, the Fed must then mop up those excess reserves through traditional open market sales and raise the Fed Funds target above the reserve rate.
Time for Tightening Near
Although inflationary pressures appear quiescent now, the Fed should not delay for long in raising the rate of interest on reserves. Many central banks are already moving into a tightening mode and several have already raised rates. JP Morgan forecasts that only one of the forty countries it monitors (Bulgaria), will contract in 2010, global GDP growth will be 3.3%, and the emerging market economies will grow at a robust 5.7% rate.
The threat of deflation has vanished and, given the rise in the prices of energy and raw materials, the threat of inflation is real. Oil is above $70 a barrel, more than double that $32 level reached last December and above the price it reached in the summer of 2007 when the financial crisis began. The Journal of Commerce Index of raw materials used in industrial production has now regained three-quarters of the 54% plunge it took between July 2008 and January 2009 and gold soared above $1,200 an ounce in December.
By keeping interest rates near zero, the Fed is encouraging speculation in world-traded commodities and against the dollar. Traders can borrow dollars at these near-zero rates and invest them in commodities and foreign currencies, a strategy called the "carry trade." There is no reason to give these speculators a free ride. By raising interest rates sooner rather than later, the dollar will strengthen and commodity prices will fall.
To be sure, raising rates in the short run will be painful for equities. But in the long run a Fed tightening is good for both the bond and stock market. It is a signal that the Fed sees the recovery as sustainable and is serious about controlling inflation and maintaining the purchasing power of the dollar. This action will be especially welcome by foreign investors who have funded a large part of our recent deficits.
Let me be clear that I do not see any immediate threat of inflation and I believe that Bernanke well understands the Fed's primary role as conservator of the value of our currency. Nevertheless, let's not let the memories of 1936 prevent the Fed from taking pre-emptive action to fight inflation and shore up the dollar. The Fed can now raise rates and maintain the liquidity of our banking system.
Source: http://finance.yahoo.com/banking-budgeting/article/108824/the-fed-must-use-its-new-policy-tool-soon
Any Comments :-?:-?:-?
hzahin
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Apa itu Carry Trade?
Menarik sangat.. suatu masa dahulu Maybank ader offer loan kepada individu yang berminat untuk melabur dalam Amanah Saham Bumiputra (ASB)...
Maybank offer loan $50,000.000... Interest rate yang Maybank kenakan kecil berbanding Rate yang dibayar oleh ASB dalam setahun.
Maka ramailah berpusu ke Maybank untuk ambil LOAN nie. :-?
Konsep yang sama; cuma bezanya.. BIG BOYS dapat overnight rate..
Jika US Dollar offer near zero rate.. Dan Aus Dollar offer 3.75%.. berapa banyak $$$ dapat dibuat dalam masa sebulan kalau Borrow USD$ dan Invest di Aus$.
Menarik sangat.. suatu masa dahulu Maybank ader offer loan kepada individu yang berminat untuk melabur dalam Amanah Saham Bumiputra (ASB)...
Maybank offer loan $50,000.000... Interest rate yang Maybank kenakan kecil berbanding Rate yang dibayar oleh ASB dalam setahun.
Maka ramailah berpusu ke Maybank untuk ambil LOAN nie. :-?
Konsep yang sama; cuma bezanya.. BIG BOYS dapat overnight rate..
Jika US Dollar offer near zero rate.. Dan Aus Dollar offer 3.75%.. berapa banyak $$$ dapat dibuat dalam masa sebulan kalau Borrow USD$ dan Invest di Aus$.
hzahin
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kenapa US$ Versus AU$
Interest rate.. kenapa yang menjadi pilihan ialah borrow US$ dan Invest ke AU$... kenapa JPY tidak menjadi pilihan walaupun interest rate cuma 0.1%... Why?
Safe Haven... China demand for commodities.... So; bila fundamental trend ini akan berubah? Salah satunya ialah interest rate US$ dinaikkan... #:-S#:-S
Harapan Besar 2010...
Interest rate.. kenapa yang menjadi pilihan ialah borrow US$ dan Invest ke AU$... kenapa JPY tidak menjadi pilihan walaupun interest rate cuma 0.1%... Why?
Safe Haven... China demand for commodities.... So; bila fundamental trend ini akan berubah? Salah satunya ialah interest rate US$ dinaikkan... #:-S#:-S
Harapan Besar 2010...
hzahin
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Ayat-Ayat Terbaru Uncle Ben Bernanke
In testimony before the House Financial Services Committee, Bernanke said that the outlook for monetary policy has not changed since the FOMC January meeting, and reiterated that low rates are warranted for an extended period. Bernanke said the economy continues to require the support of accommodative monetary policies. However, we have been working to ensure that we have the tools to reverse, at the appropriate time, the currently very high degree of monetary stimulus.
Fed Targets Discount Rate
One of the first steps the Fed is likely to take will be to boost the interest rate it pays banks on money they leave at the central bank. Bumping up that rate, now at 0.25%, would give banks an incentive to keep money parked at the Fed, rather than lend it and would work to raise commercial banks prime rate, increasing the cost to borrow. This means that the Fed will rely less on the usual tool it uses to try and influence the economy – the federal funds rate. The federal funds rate is currently in a range of 0% to 0.25%. The ability to change the interest paid on money parked at the Fed is a relatively new tool, authorized in 2006, though many foreign central banks rely on it.
Also, the Fed is likely to bump up the rate it charges banks for emergency loans, called the discount rate, which is currently at 0.50%. Before long, we expect to consider a modest increase in the spread between the discount rate and the target federal funds rate Bernanke said.
The changes to the discount rate are not expected to lead to tighter financial conditions for households and businesses and should not be interpreted as signaling any change in the outlook for monetary policy, which remains about as it was at the time of the January meeting of the FOMC Bernanke said.
However these steps will be taken when the economy is on better footing. Although at present the U.S. economy continues to require the support of highly accommodative monetary policies, at some point the Federal Reserve will need to tighten financial conditions by raising short-term interest rates and reducing the quantity of bank reserves outstanding, Bernanke said.
11/2/2010 - Uncle Ben Testimony
In testimony before the House Financial Services Committee, Bernanke said that the outlook for monetary policy has not changed since the FOMC January meeting, and reiterated that low rates are warranted for an extended period. Bernanke said the economy continues to require the support of accommodative monetary policies. However, we have been working to ensure that we have the tools to reverse, at the appropriate time, the currently very high degree of monetary stimulus.
Fed Targets Discount Rate
One of the first steps the Fed is likely to take will be to boost the interest rate it pays banks on money they leave at the central bank. Bumping up that rate, now at 0.25%, would give banks an incentive to keep money parked at the Fed, rather than lend it and would work to raise commercial banks prime rate, increasing the cost to borrow. This means that the Fed will rely less on the usual tool it uses to try and influence the economy – the federal funds rate. The federal funds rate is currently in a range of 0% to 0.25%. The ability to change the interest paid on money parked at the Fed is a relatively new tool, authorized in 2006, though many foreign central banks rely on it.
Also, the Fed is likely to bump up the rate it charges banks for emergency loans, called the discount rate, which is currently at 0.50%. Before long, we expect to consider a modest increase in the spread between the discount rate and the target federal funds rate Bernanke said.
The changes to the discount rate are not expected to lead to tighter financial conditions for households and businesses and should not be interpreted as signaling any change in the outlook for monetary policy, which remains about as it was at the time of the January meeting of the FOMC Bernanke said.
However these steps will be taken when the economy is on better footing. Although at present the U.S. economy continues to require the support of highly accommodative monetary policies, at some point the Federal Reserve will need to tighten financial conditions by raising short-term interest rates and reducing the quantity of bank reserves outstanding, Bernanke said.
11/2/2010 - Uncle Ben Testimony
hzahin
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Tamparan Hebat...
NEWS: The reserve requirement will increase 50 basis points, or 0.5 percentage point, effective Feb. 25, the People’s Bank of China said on its Web site today. The current level is 16 percent for big banks and 14 percent for smaller ones.
In April 2007, China raised its reserves to 11% after seven increases within one year. It is now raised to 16.5%. Over that time period, their GDP has increased rapidly with reasonable inflation.
In November 2008, headlines read: China's GDP to slow to 7.5% for 2009. In 2009, China's target GDP was 8% and people were writing in March about the idea that their target was not achievable. Their GDP finished the 4Q 2009 at a rate of 10.7% . Over the entire year they achieved 8.7% GDP with 1.5% inflation. In September, China indicated that their target GDP was again 8% and now they have taken additional steps to lower it to that rate.
Now people are saying that their tightening will endanger the world's recovery.
Ada sebarang komen.. kesan kepada commodities?
NEWS: The reserve requirement will increase 50 basis points, or 0.5 percentage point, effective Feb. 25, the People’s Bank of China said on its Web site today. The current level is 16 percent for big banks and 14 percent for smaller ones.
In April 2007, China raised its reserves to 11% after seven increases within one year. It is now raised to 16.5%. Over that time period, their GDP has increased rapidly with reasonable inflation.
In November 2008, headlines read: China's GDP to slow to 7.5% for 2009. In 2009, China's target GDP was 8% and people were writing in March about the idea that their target was not achievable. Their GDP finished the 4Q 2009 at a rate of 10.7% . Over the entire year they achieved 8.7% GDP with 1.5% inflation. In September, China indicated that their target GDP was again 8% and now they have taken additional steps to lower it to that rate.
Now people are saying that their tightening will endanger the world's recovery.
Ada sebarang komen.. kesan kepada commodities?
cemarajingga
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boleh tak rakyat malaysia pinjam $usd untuk melabur kat malaysia atau negara yg offer rate lebih tinggi cam australia?
ammar5
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aku pun pening nie coz kenapa pulak nak invest di negara yg interestnya lagi tinggi....bkn ke invest di negara interest rendah lagi ok.....~X(~X(
matlan
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aku pun lagi pening...
hzahin
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Sorilah sebab buat bro semua pening...
p/s: cuba google tentang carry trdae; mungkin akan dapat sikit info.
p/s: cuba google tentang carry trdae; mungkin akan dapat sikit info.
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