China warns Federal Reserve over 'printing money'
China has warned a top member of the US Federal Reserve that it is increasingly disturbed by the Fed's direct purchase of US Treasury bonds.
By Ambrose Evans-Pritchard
Last Updated: 1:52PM BST 27 May 2009
Richard Fisher, president of the Dallas Federal Reserve Bank, said: "Senior officials of the Chinese government grilled me about whether or not we are going to monetise the actions of our legislature."
"I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States," he told the Wall Street Journal.
His recent trip to the Far East appears to have been a stark reminder that Asia's "Confucian" culture of right action does not look kindly on the insouciant policy of printing money by Anglo-Saxons.
Mr Fisher, the Fed's leading hawk, was a fierce opponent of the original decision to buy Treasury debt, fearing that it would lead to a blurring of the line between fiscal and monetary policy – and could all too easily degenerate into Argentine-style financing of uncontrolled spending.
However, he agreed that the Fed was forced to take emergency action after the financial system "literally fell apart".
Nor, he added was there much risk of inflation taking off yet. The Dallas Fed uses a "trim mean" method based on 180 prices that excludes extreme moves and is widely admired for accuracy.
"You've got some mild deflation here," he said.
The Oxford-educated Mr Fisher, an outspoken free-marketer and believer in the Schumpeterian process of "creative destruction", has been running a fervent campaign to alert Americans to the "very big hole" in unfunded pension and health-care liabilities built up by a careless political class over the years.
"We at the Dallas Fed believe the total is over $99 trillion," he said in February.
"This situation is of your own creation. When you berate your representatives or senators or presidents for the mess we are in, you are really berating yourself. You elect them," he said.
His warning comes amid growing fears that America could lose its AAA sovereign rating.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5379285/China-warns-Federal-Reserve-over-printing-money.html
Thursday, May 28, 2009
$99 TRILLION U.S. DEBT!
(TRN) -- Richard Fisher, president of the Dallas Federal Reserve Bank has told the London Telegraph newspaper that the United States is in the hole for $99 TRILLION due to "careless spending by the political class."
The astonishing figure of $99 Trillion includes unfunded or underfunded Pensions as well as projected liabilities for health care and prescription drug coverages provided by government through Medicare and Medicaid.
Fisher's remarks came after he was repeatedly grilled by China over "printing money" to allow the US government to pay its bills.
http://turnerradionetwork.blogspot.com/2009/05/99-trillion-us-debt.html
Declining US GDP casts doubt over recovery
http://www.telegraph.co.uk/finance/financetopics/recession/5056594/Declining-US-GDP-casts-doubt-over-recovery.htmlThe downturn in the American economy is slightly deeper than previously thought, with productivity in the last three months of 2008 at its lowest since 1982.
Final revisions from the Commerce Department show that the US economy contracted by 6.3pc in the fourth quarter of last year, revised down from an earlier estimate of 6.2pc.
The benchmark report also showed corporate profits fell by 16.5pc in the same period – the biggest decline since 1953 – driven by a fall in income at major financial firms and the impact of asset write-downs.
At the same time, the number of people claiming unemployment benefit rose to a fresh weekly record, as some 5.56m signed on in the week ending March 14. New unemployment claims rose by 8,000 to 652,000.
Zach Pandl, Nomura Securities' economist argues that the "decline in GDP reached its trough in the fourth quarter," adding that "GDP will not decline again as fast as it did in the fourth quarter."
But Nariman Behravesh, chief economist at IHS Global Insight, disagrees, arguing: "All the incoming data suggest that the economy will contract by a staggering 7pc to 8oc in the first quarter, before the economy begins to stabilise."
The bleak numbers – the downward revision in GDP and the impact low profits are having on productivity – are at odds with suggestions of "green shoots" in the US economy from luminaries including Tim Geithner, the US Treasury Secretary.
Richard Fisher, President of the Dallas Federal Reserve, said that he believes GDP output in the first quarter of this year will be as bad as that in the fourth quarter, but that he hopes the downturn will begin to temper in the second quarter.
However, while admitting he is the most pessimistic of the 12 members of the Fed's interest rate-setting Open Market Committee, Mr Fisher said that he is personally concerned about output in the second quarter too, warning that there is unlikely to be any pick-up in economic activity without better credit markets.
In speeches by various Fed officials around the country, Minneapolis Fed President Gary Stern said that the US will be in recession through to the middle of the year, while Richmond Fed President Jeff Lacker warned that authorities must not ignore the threat of inflation as the economy begins to recover.
G20 summit: World must take action or recession could get even worse, says Alistair Darling
Alistair Darling, the British Chancellor, has warned that failure to take co-ordinated global action risked worsening the recession, ahead of talks with fellow G20 finance ministers.
http://www.telegraph.co.uk/finance/financetopics/g20-summit/4989949/G20-summit-World-must-take-action-or-recession-could-get-even-worse-says-Alistair-Darling.html
