World economy talk

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US 10Y yield

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the BSP can control money supply to fight inflation

meaning the BSP can reduce money in circulation to drive down demand

but what if inflation is coming from the supply side?

BSP seeks help, says it can?t temper inflation on its own | Inquirer Business

The government must sort out the issues that have led to a tightening in the country’s supply of goods, if it hopes to keep inflation from climbing further in the coming months, the Bangko Sentral ng Pilipinas (BSP) said.

While controlling inflation has always been the main task of monetary authorities, interest rate hikes and the like cannot and must not be the state’s only line of defense against rising prices.

“We will continue to coordinate with other agencies of government to address pressures from the supply side,” BSP Governor Amando M. Tetangco Jr. said last week.

Speaking at a forum organized by Bloomberg for foreign exchange traders, Tetangco said the central bank could not fight inflation on its own.

The BSP’s main responsibility is to protect the public’s purchasing power by keeping prices stable. It does so by controlling the amount of cash circulating in the economy which, in turn, influences consumer demand. The central bank measures, considered to be forms of “demand management,” merely counteract instead of address inflationary pressures that spring from the supply side.

In keeping inflation in check, the BSP said administration officials should ensure the timely importation of certain food products and tighten price monitoring activities to prevent speculative trading.

Lowering logistics and shipping costs, and pushing projects that improve the agriculture sector’s productivity, should also ease the tightness in the country’s food supply.

Last July, inflation rose to its highest level for the year at 4.9 percent, faster than June’s 4.4 percent. It was brought on by the rise in prices of rice and other food products, which weighed heavily on the official consumer price basket used to compute inflation.

[Lady Bathory]

US 10Y yield

Last Friday, geopolitical problems sent the U.S. 10-year yield falling to 2.30%. One thing i learned in the past several weeks is not to bet against the rally in U.S. Treasuries. The rally goes against expectations of yields rising as the U.S. economy improves. Record low European bond yields are also driving down U.S. Treasury yields. The wide spread between the German 10-year and the U.S. 10-year makes it an attractive carry trade for European investors (sell Bunds and buy Treasuries).

[Monseratto]

Welfare State...

[tidus1203]

PH unemployment rate rose to 25.9 pct in Q2 | ABS-CBN News

25.9% unemployment rate... Jobless growth...

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Welfare State...

^^

that's a social security funding problem

countries with aging population and low birth rate

as more people retire social security funds have to write more checks

but not enough young people are replacing those retiring -- so there are fewer contributors to social security funds

there used to be more working age people than pensioners

now it's reversing

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[Lady Bathory]

EURUSD is making a new low for the year. Next support is the Nov. 2013 low at 1.3295/1.3300.

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[Lady Bathory]

Consumer prices in the U.S. is up only 0.1% in July, the smallest increase in 5 months. Downward pressure came from energy prices which fell 0.3% reflecting the 5% decline in oil prices in the past month despite geopolitical problems. With CPI running at 2% YoY, inflation is not strong enough to make the Federal Reserve change monetary policy soon. The market is expecting hawkish language from the FOMC minutes tonight and Janet Yellen's speech on Friday. Investors bought U.S. dollars aggressively which sent EURUSD and GBPUSD crashing through key levels.