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Money Supply, Inflation & Currencies

Currencies News from the Financial Times

  1. Yen weakens on back of rising wages
    Japan issues stronger than expected economic data including a 2.6% lift in earnings in July from the year before – the biggest monthly rise since 1997
  2. US manufacturing strength boosts dollar
    Treasury bond yields and the dollar jump amid fresh signs of US manufacturing strength, although equity markets struggle while gold and oil slide
  3. Scots poll has investors rushing for cover
    Biggest reaction came in currency options markets, where investors rushed to buy protection against swings in sterling around the date of the vote
  4. Eurozone: Draghi’s new deal
    The ECB president’s call for a fiscal and monetary compact between it and the currency bloc members is seen as vital by some observers but a ploy by others
  5. Earnings and GDP growth fuel India optimism
    Data showing that Asia’s third-largest economy expanded at 6% in the first quarter give a fillip to a market that has already jumped 28% in six months
  6. Hedging against a Scottish Yes vote
    The uncertainty of drawn-out independence negotiations if Scotland votes to leave the UK would be horrible for investors in British assets
  7. Dollar bulls need to hold their horses
    Dollar enthusiasm has its limits, perhaps because of the cost of betting against emerging markets. Bets against the euro, yen or sterling are cheaper
  8. Indian stocks rally to fresh highs
    The benchmark Sensex index closed up 0.9% at 26,869.55 in Mumbai, while the Nifty crossed the 8,000 mark, up 0.9% at 8,027.7
  9. Draghi approaches his Abenomics moment
    The question is whether we have reached the point where large-scale QE will do more good than harm. It seems the ECB president thinks so
  10. US bonds are tracking ECB policy
    Expectations of European monetary easing could explain why the Fed’s taper of asset purchases has caused such little market disruption

Money Supply News from the Financial Times

  1. This blog will no longer be updated.

    Our thoughts on all things central banking, along with the more wonkish elements of economic policy, will appear on Alphaville and The World blog.

    Continue reading:
  2. ECB caught up in economists’ spat

    The European Central Bank has found itself caught in the crossfire of a battle raging between the world’s leading macroeconomists.

    The Bank for International Settlements’ call last month for the world’s central bankers to hurry up and raise interest rates has reignited the debate over how to explain – and tackle – the financial and economic turmoil that has persisted over the past six years.

    Continue reading: ECB caught up in economists’ spat
  3. TLTRO: how well has the ECB targeted its loans?

    The European Central Bank has revealed the details of arguably the most important element of the package of extraordinary monetary policy measures it unveiled last month to rid the eurozone of the threat of deflation.

    On Thursday, the ECB announced exactly how its targeted longer-term refinancing operation, or the TLTRO, will work. Earlier forward guidance that rates were likely to remain on hold until the end of 2016 was watered down by Mario Draghi, ECB president, possibly in the hope that this would raise the take-up of the TLTRO funds.

    Mr Draghi also revealed that banks would be able to borrow up to €1trn from the central bank, should they smash targets, or benchmarks, set by the ECB. Lenders are already able to borrow an initial amount of $400bn in two auctions, scheduled for September and December. The €400bn figure corresponds to 7 per cent of their lending books to businesses and households, excluding mortgage loans.

    Continue reading: TLTRO: how well has the ECB targeted its loans?
  4. Live blog: Mario Draghi’s monthly ECB press conference

    Despite inflation remaining extremely low across the eurozone and signs that the recovery is weaking in the single currency bloc, the European Central Bank kept its interest rates unchanged at its monthly meeting. Analysts are now looking for Mario Draghi's assessment of the extraordinary measures introduced in June and details of any further measures..

    By John Aglionby and Sarah O'Connor

    Continue reading: Live blog: Mario Draghi’s monthly ECB press conference
  5. Japan’s inflation expectations: glass half empty?

    “Inflation expectations appear to be rising on the whole.”

    Check out the last 11 policy statements from the Bank of Japan: you’ll find the same line, an upgrade from a milder assertion about “some indicators” last July.

    But according to the second round of the BoJ’s survey of companies’ expectations for price rises – the grand-sounding “inflation outlook of enterprises”, published on Wednesday – expectations are not rising. If anything, they’re falling.

    Continue reading: Japan’s inflation expectations: glass half empty?
  6. Carney’s (old) new normal

    There are many uses of the phrase “new normal” in economics these days. Usually, it is used to signify lower growth or a different type of growth than in the pre-crisis period. Mark Carney went onto the radio this morning to talk about the “new normal” in monetary policy.

    Interest rates would be materially lower in future than the 5 per cent rate widely seen as normal before the crisis. The Bank of England governor’s words have been widely reported as a big new statement of policy.

    Is this a new policy?

    No. Carney first talked about future interest rates being “well below historical norms” in his January speech at the World Economic Forum in Davos, which confirmed the BoE had ditched its original forward guidance linking interest rates solely to unemployment. The important passage was reported clearly in the FT at the time and is copied below.

    Continue reading: Carney’s (old) new normal
  7. ECB’s Cœuré backs student calls to overhaul economics curriculum

    Last month, students from four continents joined forces to call for reform of the economics curriculum.

    In an open letter, the students said they wanted their courses to delve into a wider range of economics theories and methodologies than the standard neo-classical model that dominates undergraduate teaching, and to learn more about the implications of policy-making.

    Speaking to those students was a heartening experience – all of them struck me as extremely thoughtful and articulate. Their desire for reform seemed driven by a curiosity about the world and what economics could do to improve it.

    I suspect they’ll be encouraged by comments made in a speech today by the similarly thoughtful and articulate Benoît Cœuré, who sits on the European Central Bank’s executive board.

    Continue reading: ECB’s Cœuré backs student calls to overhaul economics curriculum
  8. Live blog: Bank of England financial stability report

    Mark Carney, the governor of the Bank of England, presented the Financial Policy Committee's report on how it intends to keep the UK economy on an even keel. Most of the press conference was on what it intends to do about the booming housing market and which of its macro prudential tools it intends to use to cool it.

    By John Aglionby and Claer Barrett

    Continue reading: Live blog: Bank of England financial stability report
  9. Iraq’s economy in 5 charts

    As Iraq appears to be descending into all-out sectarian war, the implications for the oil-dependent economy are huge. Iraq is Opec’s second-largest crude exporter, so markets are already feeling a little jittery, sending crude oil to its highest since September on Friday. Here are five charts showing how Iraq’s economy has developed since the 2003 US-led invasion of Iraq and where its vulnerabilities lie.

    Continue reading: Iraq’s economy in 5 charts
  10. UK productivity puzzle: the Bank of England’s answers

    Those hoping for a rapid pickup in UK productivity shouldn’t hold their breath.

    That’s the message from a new Bank of England paper which suggests the UK’s dismal figures are more likely to be the result of “persistent effects” from the financial crisis, rather than temporary, cyclical factors which will fade away as the economy recovers.

    Just under half (around 6 to 9 per cent) of the UK’s productivity gap can be explained by the hypothesis that the crisis resulted in underlying damage to the UK’s productive capacity:

    Continue reading: UK productivity puzzle: the Bank of England’s answers