Latest news with #GlobalFinancialCrisis
Telegraph
3 days ago
- Business
- Telegraph
Reeves' vindictive tax raid on the rich was doomed to fail
To no-one's surprise but the Treasury's, Rachel Reeves' attempts to heavily tax highly internationally mobile high-income or high-wealth individuals have backfired. After sparking an exodus sufficient to significantly undermine the revenues from the schemes – potentially even meaning these taxes cost money instead of raising it – she is reportedly considering a U-turn. The focus is now on finding an alternative to imposing a 40 per cent inheritance tax on world-wide assets – identified as the single biggest factor in driving rich people away from Britain. Whilst some specific measures may have bigger effects than others, changing one or two items is unlikely to be game-changing in stopping the UK's loss of high-income and high-wealth individuals – a drain that has persisted for some time now, going back to the 2008/09 Global Financial Crisis, but which has accelerated markedly in recent years. The UK was traditionally attractive to wealthy people, leading to our attracting a disproportionate share of the world's stock for a range of reasons. We had one of the top 'world cities' in London, with fantastic activities for rich people to engage in combined with much lower crime than cities in many other countries, low risk of revolution or civil disorder, a long tradition of opposing the arbitrary confiscation of wealth, little political support for extremely high taxes on high income, secure property rights, internationally famous schools for the children of the wealthy to attend, and a year-round gentle climate. Many of these factors are already gone and others are declining. London nightlife and other activities were already in decline but badly hit by Covid, never properly recovering. Casual crime has become endemic in many UK cities, along with unsightly rubbish in the streets. We came close to civil disorder in 2019 and fears of the same are now re-emerging. Talk of wealth taxes is popular. Property rights no longer seem secure. Retrospection is not unthinkable. Our private schools have seen sex scandals and taxes. Even the climate is less gentle. In such an unconducive environment, many rich people may not need much of a trigger to leave. And once they have adjusted emotionally to going, it will often be too late to get them back. Governments used to be very keen on the factors delivering 'competitiveness' – the attraction of high-income workers and of mobile capital. British government policy has, for a long time, apparently taken little to no interest in its impacts on competitiveness. Now we see the fruit.
IOL News
3 days ago
- Business
- IOL News
Gold dips despite escalating Israel-Iran conflict as volatility looms
Gold, traditionally a safe haven for investors, has seen its value drop below $3,400 amid rising tensions between Israel and Iran. Experts warn of increased market volatility as geopolitical conflicts unfold. Image: File photo Gold – the metal investors flee to in times of turmoil – slipped below its Friday close on Tuesday even as the conflict between Israel and Iran escalated and market watchers warned of more volatility. The precious metal, long seen as a safe place to store money, was trading at around $3,394.49 as of lunch time on Tuesday, down 0.08% on its opening price. Andre Cilliers, currency strategist at TreasuryONE, said in a note that gold had dropped below Friday's close of $3,450 level despite these geopolitical tensions. The metal is still off its $3 500 record high in April. Cilliers said that US President Donald Trump's warning to Iranians to evacuate Tehran has raised fears of an escalation in the Iran/Israel conflict and is keeping markets on edge. 'Iran has warned that it will unleash the biggest ballistic missile attack on Israel in the next few days while Israel is targeting government facilities,' he noted. Bianca Botes, director at Citadel Global, has also cautioned that there may be 'heightened volatility as markets react to fast-moving developments in the Middle East.' Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Advertisement Next Stay Close ✕ Ad loading Information from axi indicated that gold was worth just under $19 an ounce in the years between 1833 and 1849, only moving above $1,000 in 2010. It stated that gold rose dramatically in January 1980, 'reacting not only to high inflation but also to geopolitical tensions with the Iranian Revolution and the Soviet Invasion in Afghanistan'. During the Global Financial Crisis of 2008, the metal soared more than 50% in just nine months to $1,011 an ounce. Concerns over the economic impact of the COVID-19 pandemic pushed the metal past $2,000 and it pushed higher again in 2023 when central banks started a rate-hiking cycle. On Monday, the rand closed 1.7% stronger at R17.81, even though trade was thin due to the holiday. It opened at R17.82, and was trading at R17.83. Cilliers expected a range of R17.70/R17.90 as traders watch the Middle East developments. IOL
Mint
5 days ago
- Business
- Mint
Barry Eichengreen: Is the US Federal Reserve's independence at threat?
The independence of the US Federal Reserve is back in the spotlight. Late last month, Fed Chair Jerome Powell met at the White House with President Donald Trump 'to discuss economic developments," as the Fed antiseptically put it in a post-meeting statement. Market participants will wonder what went on. Held at the president's request, the meeting was exceptional but not unprecedented. Fed chairs have met with presidents on occasion, although those occasions generally were less than propitious. In 1965, William McChesney Martin met with Lyndon B. Johnson at LBJ's Texas ranch. Johnson worried that a Fed interest-rate hike had created headwinds for growth, and anticipated a challenging midterm election. Also Read: Powell versus Trump: Why Fed independence matters in times of turmoil Johnson confronted the Fed chair physically as well as verbally, using his considerable girth to pin Martin to a wall. The impact on Fed policy is disputed to this day. President Richard Nixon met with his Fed Chair Arthur Burns on scores of occasions, regularly pressing him to pursue expansionary monetary policies, which Burns obligingly did. In 1984, with another election looming, Ronald Reagan summoned Paul Volcker to the White House, where James Baker, the president's chief of staff, instructed Volcker not to raise rates. Ben Bernanke met repeatedly with George W. Bush during the Global Financial Crisis, when cooperation to prevent collapse of the financial system was imperative. Powell himself dined with Trump at the White House in 2019. Periodic meetings pose no threat to central bank independence. Independence requires accountability. And in describing the Fed's priorities and general outlook to the president, the Fed chair is demonstrating accountability to the public. But as in the case of Nixon and Burns, a president who regularly harangues the Fed chair, specifically over interest-rate policy, threatens that independence. Also Read: The US-China trade truce doesn't solve the Fed's headache Trump has, of course, repeatedly criticized the Fed's interest-rate decisions. The post-meeting statement issued by the Fed was careful to say that 'expectations for monetary policy" were not discussed. So far so good, assuming the statement can be taken at face value. The second event raising questions about Fed independence was the Supreme Court's 22 May decision in Trump vs Wilcox in which the court granted an administration request to allow the president to fire members of independent government agencies such as the National Labor Relations Board (NLRB), which oversees union elections and labour laws. Technically, the court paused a lower court ruling that would have stayed the president's power of dismissal, suggesting that presidential discretion is justified because NLRB members 'exercise considerable executive power." In other words, they are de facto members of the executive branch, subordinate to the president. This logic would appear to put the Federal Reserve squarely in Trump's crosshairs. Also Read: Barry Eichengreen: Trump is taking aim at the IMF, World Bank and US Fed But in a 6-3 ruling, the six-member majority on the court explicitly exempted the Fed. 'The Federal Reserve," the justices reasoned, 'is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States." This argument might be seen as providing strong support for Fed independence, except that it is illiterate, illogical and ahistorical. The First and Second Banks of the US, which executed limited functions on behalf of the government between 1791 and 1836, were private banks, full stop. Along with providing depository services to the government, they competed with other banks, extending commercial loans. There was nothing quasi about their private status. In contrast, the Federal Reserve Board—if we assume that's what the justices mean when they write 'Federal Reserve"—is made up of seven presidentially-appointed public servants. The Federal Open Market Committee (FOMC), responsible for interest-rate policy, includes those seven board members and five regional Reserve Bank presidents, who are appointed by Reserve Bank directors, subject to the approval of the Federal Reserve Board. The regional Reserve Banks come closest to being 'quasi-private,' because private citizens serve on their boards. But to argue that the same is true of the FOMC or the Federal Reserve System as a whole is a non sequitur. Also Read: The Fed's 'Mission Impossible' is now 'Mission Accomplished' Beyond the Fed's governance is the scope of its authority. The First and Second Banks of the US lacked statutory authority to regulate banks, a key public-policy mandate of the Federal Reserve. In justifying its decision, the majority cited an earlier ruling, Seila Law LLC vs Consumer Financial Protection Bureau, in which the court affirmed the president's power to remove the heads of agencies led by a single director and not a board. That decision included a footnote that the Second Bank and the Fed 'can claim a special historical status." But it provided no legal basis for that statement, and no judgment of validity of the claim. The note reads like a ChatGPT hallucination. Removing checks on presidential powers while arbitrarily exempting the Fed opens the door to arbitrarily not exempting the US central bank. Advocates of Fed independence should be worried. Maybe that's what Trump and Powell talked about. ©2025/Project Syndicate The author is professor of economics and political science at the University of California, Berkeley, and the author, most recently, of 'In Defense of Public Debt'
Yahoo
11-06-2025
- Business
- Yahoo
Jeremy Siegel Backs Ted Cruz's Plan To End Fed Interest Payments On 'Excess Reserves,' Potentially Saving $2 Trillion In Deficits: 'Not A Trivial Concern'
Benzinga and Yahoo Finance LLC may earn commission or revenue on some items through the links below. After Sen. Ted Cruz (R-Texas) pushed for abolishing the interest paid by banks on their deposits with the Federal Reserve, senior economist Jeremy Siegel supported his arguments, whereas the JPMorgan Chase & Co. strategists opposed the idea, warning of serious implications. What Happened: Cruz, while speaking to CNBC on June 5, suggested that the Federal Reserve should eliminate paying interest on reserve balances (IORB), which could save nearly $2 trillion worth of the ballooning federal deficits over the next decade. Don't Miss: Maker of the $60,000 foldable home has 3 factory buildings, 600+ houses built, and big plans to solve housing — you can become an investor for $0.80 per share today. Invest Where It Hurts — And Help Millions Heal: Invest in Cytonics and help disrupt a $390B Big Pharma stronghold. Siegel, from WisdomTree and a former professor at the University of Pennsylvania, suggested that this political interest in the Fed's operating regime was a 'potentially underappreciated development.' According to him, 'This is not a trivial concern. The Fed's shift from a profit-contributing institution to a deficit-expanding one may provoke greater scrutiny of its operating framework.' The Federal Reserve should shift from its current 'ample reserve' regime to a 'scarce reserves' regime that would eliminate the need for large interest payments on excess reserves, explained Seigel. Additionally, he said that 'Fed's current operating protocol has gone very wrong in the last 15 years.' However, according to a Bloomberg report, strategists at JPMorgan warned that abolishing IORB would make it difficult for banks to manage liquidity, and they would have to shift cash to money markets. thus, crowding out existing participants in Treasury bills, repurchase agreements, and fed funds. Their analysis also highlighted that profitability would likely decline, and holding reserves would become more costly for banks. Why It Matters: The central bank started paying interest on reserves in 2008, which was initially slated to begin in 2011 but moved forward after the Global Financial Crisis. "In essence, the absence of IORB could jeopardize the Fed's control over money market rates, complicating its monetary policy efforts in guiding broader financial conditions through the fed funds rate and other money market rates," Teresa Ho told Bloomberg. Read Next: In terms of getting money back, these bank accounts put traditional checking and savings accounts to shame. Maximize saving for your retirement and cut down taxes: Schedule your free call with a financial advisor to start your financial journey – no cost, no obligation. Photo courtesy: RozenskiP / Shutterstock This article Jeremy Siegel Backs Ted Cruz's Plan To End Fed Interest Payments On 'Excess Reserves,' Potentially Saving $2 Trillion In Deficits: 'Not A Trivial Concern' originally appeared on Sign in to access your portfolio
Yahoo
10-06-2025
- Business
- Yahoo
Forget about the Fed's dual mandate—this investment advisor says they've added a third mandate, and won't be cutting rates anytime soon
After running interest rates near zero for a decade and a half, the Federal Reserve has turned cautious and is unlikely to cut anytime soon, according to Jeff Klingelhofer, a managing director and portfolio manager for Aristotle Pacific Capital. That's because the central bank is concerned about social stability and inequality following its brush with record-high inflation—and low rates make inequality worse. Most everyone knows about the Federal Reserve's dual mandate. Set by Congress, the charge for the U.S. central bank is twofold: Create the conditions for stable prices (i.e., low inflation) and maximum employment. (The third mandate—to moderate long-term interest rates—flows naturally out of keeping inflation steady.) Increasingly, though, the third mandate is changing, according to Jeff Klingelhofer, a managing director and portfolio manager for Aristotle Pacific Capital, an investment advisory. And that new task is social cohesion. It's a tough call for an entity that has seemed somewhat battered in recent years, bruised by its failure to catch COVID-era inflation in time and, increasingly, in a fight with the president of the United States, who is pressing on the Fed's nominally independent head to lower interest rates. 'It's out with the old—financial stability—and in with the new: social stability,' Klingelhofer told Fortune. Klingelhofer notes that, before the 2007–2009 Global Financial Crisis, the Fed used to be very proactive in raising interest rates, hiking them well before any sign of inflation. Post-crisis, when unemployment was stubbornly slow to fall, critics accused the Fed of hiking rates too quickly and stymieing the recovery. (The Fed's first rate cut came in late 2015, with unemployment at 5% and the Fed's preferred measure of inflation at just 1%.) Inflation didn't come close to hitting the Fed's 2% target for seven years after the hike. Years later, two Fed governors admitted they got the balance wrong and should have kept rates lower for longer. In 2020, that shifted. The Fed, by keeping rates low, 'learned the biggest wage gains went to the lowest earners,' Klingelhofer said. 'Coming out of COVID, the third mandate was social stability, compression of the wage gap.' But the central bank also got burned with its prediction that inflation would be 'transitory.' That miss, coupled with the fastest and steepest rate-hiking cycle in modern history, has made the central bank loath to move too quickly on cutting rates this time. This shift is evident in the tenor of Chair Jerome Powell's speeches, starting at Jackson Hole, Wyo., in 2022. 'Without price stability, the economy does not work for anyone,' Powell said in 2022, adding that the Fed was 'taking forceful and rapid steps to moderate demand…and to keep inflation expectations anchored.' 'We will keep at it until we are confident the job is done,' he said. That experience has pushed the Fed from proactive to reactive, Klingelhofer said. 'They'll need to see inflation below 2%, and think it'll stay there.' If a recession hits, 'I don't think the Fed will step in as they have in the past,' he added. 'Maybe if it's a deep recession, with high unemployment, and inflation falls below 2% dramatically—maybe.' Historically low interest rates had another effect—they redistributed wealth upward by encouraging asset bubbles. In this way, as a recent body of economic research has shown, low rates have contributed to skyrocketing wealth inequality. Low interest rates tend to juice stock-market appreciation, benefiting the 10% of the population that owns more than 90% of stock, and encourage investors to create novel assets as they chase bigger returns. These benefits accrue most to those who have the biggest financial assets—i.e., the wealthiest—while doing little for the poor. And while low rates encourage higher employment, 'the 1% of Americans who own 40% of all the assets just get tremendous gains before that first job is created for the middle class,' said Christopher Leonard, who criticized the Fed's ultra-low-rate policies in The Lords of Easy Money, a 2022 book describing this dynamic. In this way, he said, the Fed exacerbates the gap between the ultrarich and the rest of us, which he called 'the defining economic dysfunction of our time.' It's another argument against cutting rates, in addition to the risk of reigniting inflation—whose burdens, as Powell repeatedly notes, '[fall] heaviest on those who are least able to bear them.' 'The alchemy of low interest rates is over,' Klingelhofer says. He isn't convinced the Fed has that much influence on rates like the 10-year Treasury, which closely influences mortgage rates. These bonds trade in international markets where investors buy or sell them based on how they perceive the risks of U.S. debt. 'Where should 10-year Treasuries be? With inflation at 3%, and the government running 6%–7% deficits, 4.5% feels roughly correct,' he said. In fact, some economists say the Fed cutting rates would be perceived as a recession indicator—and would have the opposite effect, sending bond yields and interest rates soaring. As Redfin economics research head Chen Zhao told Fortune previously, 'the Fed only controls that one Fed funds rate. Everything else is determined by markets.' This story was originally featured on
