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Daily Archives: February 25, 2013

BIS – Benign neglect of the long-term interest rate

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Benign neglect of the long-term interest rate, by Philip Turner, Working Papers No 403, February 2013

  • “Large-scale central bank purchases of government bonds have made the long-term interest rate key in the monetary policy debate. How central banks react to bond market movements has varied greatly from one episode to another. Driving the term premium in long-term rates negative may stimulate aggregate demand. And a negative term premium encourages borrowers to lengthen the maturity of their debts. Such a reduction in maturity risks makes the financial system more resilient to shocks, and in particular can help emerging economies finance their heavy infrastructure and housing investment needs more safely. But an extended period of very low long rates and high public debt creates financial stability risks. Interest rate risk in the banking system has grown, and some institutional investors face significant exposures. Central banks in the advanced economies now hold a high proportion of bonds issued by their governments, most of which have so far failed to arrest the rise in the ratio of government debt to GDP. Implementing an effective exit strategy will be difficult. Current policy frameworks should be reconsidered, with a view to clarifying the importance of the long-term interest rate for monetary policy, for financial stability and for government debt management.”
  • Related postings on the financial system

    • NY Fed – The Macroeconomic Effects of Forward Guidance

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    The Macroeconomic Effects of Forward Guidance – Marco Del Negro, Marc Giannoni, and Christina Patterson: “In this post, we quantify the macroeconomic effects of central bank announcements about future federal funds rates, or forward guidance. We estimate that a commitment to lowering future rates below market expectations can have fairly strong effects on real economic… Continue Reading

    New NOAA study estimates future loss of labor capacity as climate warms

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    News release: “A new NOAA study projects that heat-stress related labor capacity losses will double globally by 2050 with a warming climate. The impact will be felt the most by those who work outside or in hot environments, such as firefighters, bakery workers, farmers, construction workers, factory workers, and others who will be forced to… Continue Reading

    New GAO Report: Defense Contracting, Iran's Energy and Communications Sectors, Iran, Water Quality

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    Defense Contracting – Actions Needed to Explore Additional Opportunities to Gain Efficiencies in Acquiring Foreign Language Support, GAO-13-251R, Feb 25, 2013 Firms Reported to Have Engaged in Activities Related to Iran’s Energy and Communications Sectors While Having Had U.S. Government Contracts, GAO-13-344R, Feb 25, 2013 Iran – U.S. and International Sanctions Have Adversely Affected the… Continue Reading

    EPIC – DHS Working Group to Consider Privacy Impact of Drones

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    “The Department of Homeland Security has released a previously internal memo regarding the establishment of a working group to “Safeguard Privacy, Civil Rights, and Civil Liberties in the Department’s Use and Support of Unmanned Aerial Systems” (drones). The memo states, “[t]he overarching goal of the working group is to determine what policies and procedures are… Continue Reading

    FindLaw – 10th Circuit rules that permits allowing people to carry concealed weapons are not protected by Second Amendment

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    Findlaw: “The Second Amendment and gun control remain controversial issues in the U.S. A federal district court judge tossed out Gray Peterson’s 2011 lawsuit filed against Denver and Colorado’s Department of Public Safety. Peterson had claimed that being denied a concealed-weapons permit because he was not a Colorado resident violated his Second Amendment right to… Continue Reading

    Book Industry Study Group – Best Practices for Identifying Digital Products

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    BISG Policy Statement POL-1101. Best Practices for Identifying Digital Products. Revised Publication: February 25, 2013 “This BISG Policy Statement on recommendations for identifying digital products is applicable to content intended for distribution to the general public in North America but could be applied elsewhere as well. The objective of this policy statement is to clarify… Continue Reading

    Multilateral Development Banks: U.S. Contributions FY2000-FY2013

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    CRS – Multilateral Development Banks: U.S. Contributions FY2000-FY2013, Rebecca M. Nelson. Analyst in International Trade and Finance. February 1, 2013 “This report shows in tabular form how much the Administration requested and how much Congress appropriated for U.S. payments to the multilateral development banks (MDBs) since 2000. It also provides a brief description of the… Continue Reading

    CFPB – Request for Information Regarding an Initiative to Promote Student Loan Affordability

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    CFPB – “There are more than 38 million student loan borrowers with over $1.1 trillion in outstanding debt. The majority of the market consists of loans originated under Title IV of the Higher Education Act. The remainder of the market consists of private student loans. In July 2012, the Director of the Bureau and the… Continue Reading