Interest rate clock ticks for Janet Yellen and the Fed – but is China a wild card?
In just a little over three weeks’ time, on 17 September, the US central bankers are going to have to sit down around a...
In just a little over three weeks’ time, on 17 September, the US central bankers are going to have to sit down around a table and decide whether to raise interest ratesfor the first time since before the financial crisis of 2008 unfolded. And just as the markets were preparing for the news, China has thrown a wrench in the works.
Just to put this in its proper context, the last time the Fed raised interest rates, it was June 2006. Microsoft was releasing a version of Windows Vista; Google officially became a word in the Oxford English Dictionary. The Da Vinci Code ruled at the movie box office. The iPhone hadn’t even been introduced yet; we didn’t yet live in a world of apps and selfies. Hey, you could even collect interest on your bank savings account!
If it all feels blurred and slightly unreal (especially the idea of earning interest from a bank account) in your mind, that’s OK. Time has a habit of doing that to us. Then, too, what has happened since then has rendered the events of 2006 pretty forgettable: the financial crisis, the recession, and the struggle to get back to where we were, all neatly summarized in the glib phrase that some use when describing the first part of the 21st century: the “lost decade”.
But the Fed really, really, really wants to get back to normal. And that would be the old normal – when its team of policymakers meets once every six or seven weeks to monitor the economy and determine whether it’s overheating or cooling down too rapidly. Then they whip out the key tool in their monetary policy arsenal – interest rates – and adjust it accordingly. If the economic environment is too robust and the threat of inflation looms large on the horizon, well then, higher interest rates should make money more costly, dampen demand for it and calm everyone down a bit. On the other extreme, if animal spirits are low and unemployment is high, low interest rates should generate some economic activity and get everything moving again.
For now, the Fed’s leaders have said repeatedly, they are waiting until they are reasonably sure that inflation is heading toward their annual target of 2%. For the last three years, it hasn’t approached that level, and there’s tremendous uncertainty about acting too soon – and causing the economy to stall altogether – or delaying and perhaps allowing bubbles to take shape and jeopardize the credibility of the Fed itself as a policy-making institution.
It doesn’t help that the post-crisis recession seemed to throw the ability of monetary policy as a tool to guide the economy smoothly through storms into question. It certainly wasn’t enough to get the economy going once the financial system had been rescued from bankers intent on dashing off a precipice like lemmings, carrying the whole structure with them.
And now policymakers must continue to grapple with economic news that can be used in whatever way a pundit wants, to advocate for pretty much whatever point of view one wishes. The housing market is recovering at its strongest pace in nearly a decade! But it’s still functioning well below long-term historical averages, when compared to total national GDP levels. It all depends on which data set you prefer to look at. Employment? Well, the good news is that unemployment levels have fallen. On the other hand, there’s absolutely no wage inflation to be found, much less to be contained: most Americans would find the idea to be laughable. Indeed, middle income earners have seen a significant erosion in their buying power. There is inflation, but it’s in the prices of goods and services, not in wages.
Yellen and her fellow policymakers need to wake up and smell the espresso, according to a consortium of progressive policy organizations led by the “Fed Up” campaign, a nonprofit created by the Center for Popular Democracy. They’re putting together an online petition to be delivered to Yellen and other Fed members at their annual Jackson Hole, Wyoming retreat at the end of August. “Working families haven’t made a full economic recovery, and now is not the time to declare victory,” the petition states, noting that higher interest rates would make it more costly for Americans to buy homes or cars, as well as boosting the costs of student loans and credit card or any other form of debt.
All of that is true, but the Fed policymakers aren’t just thinking about working families when they consider boosting interest rates. They’re considering the bigger picture, and specifically what might happen if they don’t act: inflation (in the form of a flood of new, cheap loans from banks) and, far more dangerously, asset bubbles.
The latter is a real risk: the Fed already is stepping up its scrutiny of one particularly risky and active party of the market fueled by ultra-cheap financing, the leveraged loan market. According to at least one source, since the Fed tried to crack down when banks were shrugging off the regulator’s guidelines, the market has only grown still larger, to nearly $875bn. And it is full of the kind of excessive risk taking that led to the 2008 crisis.
In a perfect world, Yellen and the Fed would rather not preside over a repeat of that event, and if the price to pay is higher interest rates, well, that’s a perfectly acceptable tradeoff, thank you very much. Indeed, some economists believe that they already are delinquent; that they should have begun “normalizing” interest rate policy a long time ago. Already, a Bank of America securities report has scoffed that keeping rates unchanged for so long has left the Fed suffering from “central bank policy impotence” – and no little blue pill in sight.
So, will the Fed act?
The minutes of the Fed’s last meeting, held in late July, which were released to the public last week, display a lot more dithering and a considerable amount of wariness. Inflation data just isn’t there; Federal Open Market Committee members say they want more evidence that economic growth is “sufficiently strong”. How Yellen will forge a consensus out of this group is baffling.
And then there is the wild card: China. Is it even possible for the US to consider raising interest rates with the yuan depreciating, stock markets plunging and the contagion spreading to other markets in Southeast Asia? The precise extent to which these events might affect the United States is hard to gauge, but in a globalized economy, of which China and its 1.4 billion citizens play a growing and significant role, the Fed can’t pretend that they are blips on the horizon.
For my part, I’m left with only one certainty. Charged with sorting through all these issues, weighing them, and making the right policy choices for the country, Yellen is earning every penny of her annual salary of $201,700.
Source: The Guardian
Seattle Scales Back Tax in Face of Amazon’s Revolt, but Tensions Linger
Seattle Scales Back Tax in Face of Amazon’s Revolt, but Tensions Linger
Ms. Kniech was one of more than 50 local lawmakers in the United States who sent an open letter to Seattle leaders and...
Ms. Kniech was one of more than 50 local lawmakers in the United States who sent an open letter to Seattle leaders and residents on Monday supporting the tax and criticizing Amazon’s resistance to it. “By threatening Seattle over this tax, Amazon is sending a message to all of our cities: we play by our own rules,” the letter said.
Read the full article here.
ABQ call center workers get more family-friendly workplace rules
More than workers at Albuquerque’s T-Mobile call center began working under new workplace rules this week. The company...
More than workers at Albuquerque’s T-Mobile call center began working under new workplace rules this week. The company has been under increasing pressure to modify work rules to give workers greater flexibility to balance family and work requirements.
The company operates a nationwide call center near Jefferson and Menaul in Albuquerque and recently announced plans to add more employees top the more than 1,500 local workers already employed at the site.
News of the new workplace rules came from the Communications Workers of America which has been leading efforts with local organizations for these changes:
For Immediate Release July 2, 2015
Public Pressure Pushes T-Mobile US to Provide Fairer Paid Parental Leave Policy
WASHINGTON, D.C. – Responding to growing public pressure and local government initiatives, T-Mobile US announced this week that it would be adopt a paid parental leave program. The company also said it would end an oppressive policy that required call center workers to be on the phone 96.5% of their work time, leaving them with virtually no time for follow up on customer issues or to make changes in customers’ accounts as needed.
This is great news for workers who often must struggle to balance family and career. It comes as workers at T-Mobile US and a coalition of community supporters in cities like Albuquerque, N.M., step up efforts to restore a fair workweek and achieve other improvements for workers.
Members of TU, the union of T-Mobile workers, the Communications Workers of America and many organizations, including the Center for Popular Democracy, OLÉ and other coalition partners, have been raising concerns about unfair scheduling and other issues for workers at T-Mobile US and other employers. Workers want a voice in the decisions that affect them in their workplace — not just the ones that the company selectively picks and chooses. That’s why T-Mobile US workers are joining TU.
T-Mobile US’s initial scheduling changes were made just as the Albuquerque City Council was moving forward to consider a proposal to implement paid sick leave and scheduling improvements. The Albuquerque coalition hosted a town hall meeting on irregular scheduling, where Albuquerque City Council members pledged to support their fight for a fair workweek including the right to take sick leave without retaliation.
A recent National Labor Relations Board (NLRB) decision found T-Mobile guilty of engaging in illegal employment policies that prevented workers from even talking to each other about problems on the job. The judge ordered the company to rescind those policies and inform all 46,000 employees about the verdict.
Parental leave is a good first step toward helping workers balance their career and family responsibilities. But workers want real bargaining rights and the right to fairly choose union representation. That’s what T-Mobile must realize.
Source: The New Mexico Political Report
Fed Pressed on Questions of Diversity
The Federal Reserve faces criticism from lawmakers and others over its record on diversity at the same time the central...
The Federal Reserve faces criticism from lawmakers and others over its record on diversity at the same time the central bank is highlighting the economic outlook for minority groups.
Several Democrats on the Senate Banking Committee questioned Fed Chairwoman Janet Yellen on Tuesday about the selection process for regional Fed bank presidents, echoing the concerns of advocacy groups who have said the system should be more open and allow more public input.
The 12 regional bank presidents are appointed by regional boards, subject to approval by the Washington, D.C.-based Fed board of governors. As heads of regional Fed branches, they are expected to keep their fingers on the pulse of their local economies and participate on decisions about interest rates. Just two of the current presidents are women and none are black or Hispanic. The last black president stepped down in 1974.
Sen. Elizabeth Warren (D., Mass.) criticized the selection process, saying Washington officials represented little more than a rubber stamp. Earlier this year, Fed governors signed off on the reappointment of most bank presidents until 2021 “without any public debate or any public discussion,” she said.
“If you’re concerned about this, why didn’t you use either of these opportunities to say enough is enough. Let’s go back and see if we can find qualified regional presidents who also contribute to the overall diversity of the Fed’s leadership?” Ms. Warren asked.
“It just shows me that the selection process for regional Fed presidents is broken,” retorted Ms. Warren, calling on Congress to consider changing the process.
The Center for Popular Democracy, a left-leaning advocacy group, has been pressing the Fed for months to increase the diversity of its leadership, as have many Democrats on Capitol Hill who signed onto a letter from Ms. Warren to Ms. Yellen on the matter last month.
Presumptive Democratic presidential nominee Hillary Clinton has also weighed in. Her campaign released a statement saying the Fed “needs to be more representative of America as a whole.”
In a June 13 response to the lawmakers’ letter, Ms. Yellen acknowledged “there is still work to be done” on diversity within the Fed ranks “and I assure you that workforce diversity remains a priority for the Federal Reserve.”
In her prepared testimony Tuesday, Ms. Yellen stressed the need to ensure that the gains from the economic recovery are widely distributed.
She noted that blacks and Hispanics are still suffering some of the effects of the recession in more pronounced ways than other groups. Black and Hispanic workers still face higher unemployment rates than the workforce as a whole, she said.
“It is troubling that unemployment rates for these minority groups remain higher than for the nation overall, and that the annual income of the median African-American household is still well below the median income of other U.S. households,” Ms. Yellen said.
Diverging economic circumstances between white and black households predate the recession but the gaps widened after the financial crisis and have only barely narrowed in the recovery.
A Fed report released alongside Ms. Yellen’s testimony found that black households, which saw their median incomes fall 16% during the recession, are only 88% of the way back to prerecession levels. White households, by contrast, saw incomes fall only 8% and are already back to 94% of prerecession levels, the report said.
It is rare for the Fed to address the economic conditions for individual demographic groups. The central bank’s congressional mandate requires that it seek to hold down unemployment and keep inflation stable for the country as a whole. In the past, Ms. Yellen has said she was sympathetic to the economic troubles of minority groups but stressed the Fed’s options for addressing them were limited.
Ms. Yellen’s comments Tuesday suggest a rising recognition within the Fed that the racial gaps in the economy are becoming more pronounced and that there is a role for monetary policy to play in shrinking those gaps.
“It’s important for us to be aware of those differences and to focus on them as we think about monetary policy and work that the Federal Reserve does in the area of community development,” she said.
Ms. Yellen is set to address the House Financial Services Committee on Wednesday and could face many of the same questions.
By David Harrison
Source
Williams picked as next president of New York Fed
Williams picked as next president of New York Fed
But Shawn Sebastian, director of the Fed Up Coalition, a collection of liberal groups, said the New York Fed search...
But Shawn Sebastian, director of the Fed Up Coalition, a collection of liberal groups, said the New York Fed search process had failed in its job to offer diverse candidates. "The New York Fed's claims that there are no qualified candidates who are women or people of color working in the public interest who would take this job are untrue," he said in a statement.
Read the full article here.
The Price of Defunding the Police
A new report fleshes out the controversial demand to cut police department budgets and reallocate those funds into...
A new report fleshes out the controversial demand to cut police department budgets and reallocate those funds into healthcare, housing, jobs, and schools. Will that make communities of color safer?
Read the full article here.
Community Organizing Can Deliver Jobs and More Jobs
Huffington Post - December 22, 2014, by Ana Garcia-Ashley - It was heartening to see Missouri's Attorney General...
Huffington Post - December 22, 2014, by Ana Garcia-Ashley - It was heartening to see Missouri's Attorney General finally take action by suing at least 13 municipalities due to their excessive court fees last week.
As the ACLU and the NAACP target the Ferguson Florissant school district to get more diverse representation on their school board, which is heavily white, we see progress on that front as well.
Gamaliel affiliate MCU and its allies are working to get County Executive-elect Steve Stenger to hold a county-wide summit of law enforcement officials and local mayors to promote community policing and an end to racial profiling and excessive court fees. So far, Stenger has agreed in principle to the summit, but a date has not been secured.
We believe it is essential to take a long hard look at what works in the long term in communities of color. In our more than 20 years of organizing, we have found that nothing works better than jobs at getting people off the street and putting money into low-income neighborhoods.
We must put in place criminal justice reforms, but we must put equal attention toward creating more and better jobs as a key long term solution. For that, we must continue our advocacy and organizing efforts.
What we found in our new study, "Jobs and More Jobs" was that in 2012 and 2013, among our 43 affiliates and across 16 states, the Gamaliel network won public policy campaign victories worth more than $13 billion, creating more than 450,000 jobs and generating more than a $17 billion increase in the gross domestic product. The victories ranged from transit access to criminal justice and even included food justice wins. The key takeaway of Jobs and More Jobs is this: organizing creates jobs.
Organizing creates the public space in which real people come together around a shared set of values to build powerful coalitions that improve the civil, social and economic conditions of their communities and it develops leaders who effectively wage and sustain long-term campaigns around the issues they face.
All community organizers have a similar impact -- not just Gamaliel. We urge our colleagues to assess their own impact. Center for Popular Democracy, DART, Casa de Maryland and others could post similar results.
In the end, we know what works post-Ferguson - jobs. We also know how to get there -- organizing. As Margaret Mead said; "Never believe that a few caring people can't change the world. For, indeed, that's all who ever have."
The 25 page study, called "Jobs and More Jobs," is available for download.
Source
The Spy Who Fired Me
Harpers Magazine - March 2015, by Esther Kaplan - Last March, Jim Cramer, the host of CNBC’s Mad Money, devoted part of...
Harpers Magazine - March 2015, by Esther Kaplan - Last March, Jim Cramer, the host of CNBC’s Mad Money, devoted part of his show to a company called Cornerstone OnDemand. Cornerstone, Cramer shouted at the camera, is “a cloud-based-software-as-a-service play” in the “talent-management” field. Companies that use its platform can quickly assess an employee’s performance by analyzing his or her online interactions, including emails, instant messages, and Web use. “We’ve been managing people exactly the same way for the last hundred and fifty years,” Cornerstone’s CEO, Adam Miller, told Cramer. With the rise of the global workforce, the remote workforce, the smartphone and the tablet, it’s time to “manage people differently.” Clients include Virgin Media, Barclays, and Starwood Hotels.
Cornerstone, as Miller likes to tell investors, is positioning itself to be “on the vanguard of big data in the cloud” and a leader in the “gamification of performance management.” To be assessed by Cornerstone is to have your collaborative partnerships scored as assets and your brainstorms rewarded with electronic badges (genius idea!). It is to have scads of information swept up about what you do each day, whom you communicate with, and what you communicate about. Cornerstone converts that data into metrics to be factored in to your performance reviews and decisions about how much you’ll be paid.
Miller’s company is part of an $11 billion industry that also includes workforcemanagement systems such as Kronos and “enterprise social” platforms such as Microsoft’s Yammer, Salesforce’s Chatter, and, soon, Facebook at Work. Every aspect of an office worker’s life can now be measured, and an increasing number of corporations and institutions—from cosmetics companies to car-rental agencies—are using that informationto make hiring and firing decisions. Cramer, for one, is bullish on the idea: investing in companies like Cornerstone, he said, “can make you boatloads of money literally year after year!”
A survey from the American Management Association found that 66 percent of employers monitor the Internet use of their employees, 45 percent track employee keystrokes, and 43 percent monitor employee email. Only two states, Delaware and Connecticut, require companies to inform their employees that such monitoring is taking place. According to Marc Smith, a sociologist with the Social Media Research Foundation, “Anythingyou do with a piece of hardware that’s provided to you by the employer, every keystroke, is the property of the employer. Personal calls, private photos—if you put it on the company laptop, your company owns it. They may analyze any electronic record at any time for any purpose. It’s not your data.”
With the advent of wireless connectivity, along with a steep drop in the price of computer processors, electronic sensors, GPS devices, and radio-frequency identification tags, monitoring has become commonplace.Many retail workers now clock in with a thumb scan. Nurses wear badges that track how often they wash their hands. Warehouse workers carry devices that assign them their next task and give them a time by which they must complete it. Some may soon be outfitted with augmented-reality devices to more efficiently locate products.
In industry after industry, this data collection is part of an expensive, high-tech effort to squeeze every last drop of productivity from corporate workforces, an effort that pushes employees to their mental, emotional, and physical limits; claims control over their working and nonworking hours; and compensates them as little as possible, even at the risk of violating labor laws. In some cases, these new systems produce impressive results for the bottom line: after Unified Grocers, a large wholesaler, implemented an electronic tasking system for its warehouse workers, the firm was able to cut payroll expenses by 25 percent while increasing sales by 36 percent. A 2013 study of five chain restaurants found that electronic monitoring decreased employee theft and increased hourly sales. In other cases, however, the return on investment isn’t so clear. As one Cornerstonereport says of corporate social-networking tools.“ There is no generally accepted model for their implementation or standard set of metrics for measuring R.O.I.” Yet this has hardly slowed adoption.
Read the full article here.
Marvel stars raise at least $500K for Puerto Rico at Atlanta’s Fox Theatre
Marvel stars raise at least $500K for Puerto Rico at Atlanta’s Fox Theatre
Marvel stars who have been filming in Atlanta helped raise at least $500,000 for hurricane recovery efforts in Puerto...
Marvel stars who have been filming in Atlanta helped raise at least $500,000 for hurricane recovery efforts in Puerto Rico at a Monday night event at the Fox Theatre.
Scarlett Johansson came up with the idea to pull together a benefit event. Her colleagues Chris Evans, Jeremy Renner, Mark Ruffalo and Robert Downey Jr., all of whom have been in town filming Marvel’s latest “Avengers” project, eagerly joined the effort. Atlanta’s Tony-winning director Kenny Leon served as director.
Read the full article here.
Former Yellen Adviser Proposes Sweeping Reform of Fed System
A former aide to Federal Reserve Chair Janet Yellen has broken ranks with his former employer and issued a blueprint...
A former aide to Federal Reserve Chair Janet Yellen has broken ranks with his former employer and issued a blueprint for a sweeping reform of the U.S. central bank, including regular government audits and shorter term limits for policy makers.
Dartmouth College professor Andrew Levin targeted four areas of change for the Federal Reserve system: make the Fed a fully public institution; ensure the process of picking regional Fed presidents is transparent; set seven-year term limits for regional presidents and Board governors; and make the entire Fed subject to external review.
The proposals were taken up by the union-backed activist group Fed Up, which promoted them Monday in a conference call with journalists, and come during an election year where the central bank has been a campaign topic.
“There is one key principle in this document which is the Fed needs to become a public institution,” Levin said. “Pragmatic, reasonable Fed reform should be able to be passed by the Congress, by both parties. That is my hope.”
The Dartmouth professor worked two decades at the Fed, and was a special adviser from 2010 to 2012 to former chairman Ben S. Bernanke, and Yellen when she was vice chair, according to his biography page at the university.
Legislative Plans
Republicans in the U.S. Senate and the House of Representatives last year proposed legislation that included reforms of the central bank, though none has become law. Fed spokeswoman Michelle Smith declined to comment.
As recently as February, Yellen said that while the Fed might be structured differently if it were created today, she believed it still worked well and wasn’t “broken.”
“Of course the structure could be something different and it’s up to Congress to decide that -- I certainly respect that,” she said at a Senate hearing. “I simply mean to say I don’t think it’s broken the way it is.”
The Fed system, which sets interest rates for the U.S. economy, is made up of a Board of Governors in Washington and 12 regional Fed banks. It was created by an act of Congress, yet private banks hold stock in the regional Fed institutions as a result of the way the capital structure was set up when the Fed was born more than a century ago.
“The Federal Reserve is the only central bank that I know of that isn’t a fully public central bank,” Levin said in an interview.
Levin said the 12 regional banks should become fully public entities, meaning they have to somehow eliminate or repurchase the stock they have issued to private member banks. He also proposed banning anyone affiliated with financial institutions overseen by the Fed from serving as a regional Fed director.
Three Classes
Each regional Fed has a nine-member board of directors which includes three Class A directors who represent private member banks, three Class B directors picked by the private banks to represent the public -- typically local business people -- and three Class C directors chosen to represent the public by the Fed board in Washington.
The presence of financial interests on Fed boards has been a long-standing source of criticism. Currently, for example, James Gorman, chairman and chief executive of Morgan Stanley, sits on the New York Fed Board as a Class A director.
Prior the passage of the Dodd-Frank financial reform act in 2010, Class A directors also helped pick the 12 regional Fed bank presidents, subject to the approval of the board in Washington. That potential conflict of interest, with bankers appointing their own supervisors, was limited by Dodd-Frank, which restricted the selection process to Class B and Class C directors.
Levin said the current system of picking Fed presidents, which is led by regional board directors, is too secretive. He recommended the reserve bank boards accept nominations from the public, publish a list of eligible nominees, and then engage in a “selection process that involves genuine public participation.”
The Dartmouth professor also said that the entire Fed system should be subject to “external reviews” and disclosure requirements “just like every other key public agency.”
“The Government Accountability Office should produce a regular annual review of all aspects of the Fed’s policies, procedures, management, and operations,” Levin wrote in his proposal. The Fed has strenuously objected to calls by Republican lawmakers that monetary policy decisions be subject to GAO audit. In the interview, Levin said the GAO should focus on the management and operations of the Fed system, “not so much on monetary policy.”
“Part of the financial crisis was due to mismanagement in the division of supervision at the Fed,” Levin said in an interview. GAO reviews would provide assurance to the public and Congress that the “Fed is a well-managed organization,” he said.
By Craig Torres
Source
22 hours ago
3 days ago