A blind guide dog

?Forward guidance? is the central bank buzz-word. Three of the top four central banks in the world have now officially adopted it. And the fourth has already made it very clear where its monetary policy is going. Forward guidance is an attempt by the leading central banks to indicate more clearly what monetary policy will be for a reasonable period ahead along with the conditions for sustaining it. It aims to allow households, businesses and financial markets to know what to expect in central bank base rates for the foreseeable future. In the current environment of low growth, high unemployment and an overhang of capacity, central bankers hope that forward guidance will exert downward pressure on long-term interest rates as economies recover.

Following their December 2012 meeting, US Federal Reserve policymakers announced their new policy of ?forward guidance?. The Federal Open Market Committee (FOMC) said it forecast that a target range for the federal funds rate of 0-0.25% will be kept for as long as the unemployment rate remained above 6.5%, inflation between one and two years ahead rose no more than 50bp above the FOMC?s target of 2% a year, and longer-term inflation expectations remained ?well anchored?. The FOMC reckoned that this meant the federal funds rate would be unchanged at least through mid-2015. The thresholds for unemployment and inflation were not trigger points for an immediate change of policy, but points when the FOMC would consider its options.

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The crisis continous: Greece still bust, Spain depressed, Italy paralysed

As the summer rolls on, it is increasingly clear that the depression in the southern Eurozone economies is not going to go away any time soon. Sure, the latest PMI data would suggest that the pace of decline in the Eurozone peripherals is slowing and, overall, the Eurozone may have stopped contracting in Q2 2013.

But the southern states are still deep in depression. The most revealing news came from the latest IMF report on Greece. According to the IMF, Greece is still bust and will not be able to get its huge public debt burden down sufficiently to sustain government finances or repay the loans it has received from the Euro leaders. Despite the largest decline in living standards and real GDP of any European country since the Great Depression of the 1930s and all the austerity measures insisted by the Euro leaders and imposed by the right-wing coalition government, the government budget will still have a shortfall next year and need yet more funding if it is to close the gap. Also, Greece won?t be able to meet the IMF?s target to reduce public sector debt from 176% of GDP this year to 124% by the end of the decade. And remember 124% of GDP would put Greek state debt at a higher ratio than any other European country and way higher than can make debt servicing sustainable.

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Stanislawski: Glasnost & perestroika in the US

IMGP5544Jay Carney, the White House spokesman, stated on August 3rd that the US administration is “extremely disappointed that the Russian government would take this step?. And all this mess despite Washington?s official and private requests to expel him, he added.

What is this major step, which the Russian government took, causing the White House main resident drown in dismay? Moscow granted temporary asylum to NSA leaker Edward Snowden. For the last five weeks his fate was pretty much uncertain. After he had his passport canceled right before getting to the pass-control desk on the Sheremietievo airport on June 23rd he had no other choice, but to stay in the transit zone.

It took five weeks for the Russian government to take this oh so disappointing step and let the man legally cross the border of the Russian Federation. Obama and Co. would have of course preferred to see FSB (Russian secret service) agents or border police functionaries kidnap Snowden and safely escort him either to the US embassy in Moscow or transfer him back on the nearest flight (or at least have him imprisoned!). None of this happened and there was no chance for things unfolding that way. If Obama?s advisers had some geopolitical instinct or feeling (let alone correct in-depth analysis of the situation) they would have saved his administration many embarrassing moments. The pressure on Russia to simply hand Snowden over upon some official statement (even without saying ?please?) shows nothing more or less, but a total detachment from the current reality.

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Detroit: motors, money and municipality

Last week, the mayor of Detroit, America?s 18th largest city and the home of the flagship of Main Street America, the US auto industry, filed for bankruptcy with debts hitting $18-20bn. On the same week, the behemoths of Wall Street, Goldman Sachs, JP Morgan etc announced profits nearly back to their pre-crisis levels. Those two bits of news just about sum up the winners and losers out of this crisis.

The aim of government policy nearly everywhere has been the restoration of the profitability of the capitalist sector, particularly its large companies, at the expense of the wages and conditions of working people, including their public services, pensions and welfare benefits. In the financial crash, governments and the central banks reacted quickly with huge bailouts for greedy, corrupt and failing banks and in the case of the US launched the use of public money in billions to save the auto giants Ford and GM from bankruptcy. The debts incurred from these bailouts and loss of public revenues from the ensuing Great Recession drove up the budget deficits and debt levels of the public sector, particularly the poorer and weaker cities and states in the US.

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