ALEX BRUMMER: Dovish glow of Fed chairman nominee calms market nerves
The changing of the guard at the Federal Reserve generally has been a smooth process.But in the age of the ‘Tea Party’ – that tends to regard central bankers as over-powerful, undemocratic policymakers who have debauched the currency – it could have been tricky.
The choice of Janet Yellen – a benign, clearly-spoken woman who is a paid-up member of the economic aristocracy – certainly has calmed market nerves.The President’s nominee will, however, cause some disquiet among conservatives on the Hill with her stout defence of quantitative easing.
Yellen left no doubt that she regarded QE, the purchase of government bonds by the central bank, as having been responsible for higher economic growth and an improving labour market.
Fed chair: Janet Yellen argued that quantitative easing is essential to supporting a fragile economy
She gave no indication, however, gamepoker that she is ready to contemplate the tapering – the lowering of QE targets – first aired by the current incumbent Ben Bernanke last May.
She argued that QE is essential to supporting a fragile economy and that the jobless rate of 7.3 per cent in the US was still too high.
Accommodation will only be eased back once there is a more robust recovery.
Yellen’s vocal support for QE came amid some striking research from consultants McKinsey. It has concluded that money printing by central governments has been worth $1.7billion to the exchequer of the US, Britain and the eurozone in 2010-2012.
Companies have also been big winners through cheaper borrowing costs to the tune of $710billion. But QE is not a zero sum game.
Over the same five years, income on savings and investment has lost out by $630billion, gamepoker with an older generation hurt most.
The young, with debts such as student loans and mortgages, have been gainers. McKinsey’s analysis confirms what everyone sort of knew.
But the elderly would have been none too happy had the financial crisis caused a domino effect that saw money market funds and pensions collapsing.
Indeed, income may have been squeezed but many people with shares have benefited from a roaring equity market.
If the tapering rocks global markets, smashing equity values, people with investments are not going to like that very much either.
Out of gas
The new chair of Centrica, Richard Haythornthwaite, who takes over in 2014, will not inherit the happiest of vessels.
The nation’s dominant gas supplier finds itself battling on all fronts.Politically, it is in the firing line over the decision to lift gas and electricity tariffs just as the nation was turning up the thermostats.
Labour leader Ed Miliband is pledging a price freeze and the Tory response is the promise of a shake-up of green taxation. Fearing the energy companies were about to become the new banks, chief executive Sam Laidlaw sought to detoxify the company by waiving a bonus worth an estimated £1.7million.
That left Laidlaw – who is building himself a second swimming pool (in case perhaps the heating system fails on the first one) – only to find that his fellow directors are less than pleased.
Having waved farewell to Phil Bentley, the combative head of British Gas, Laidlaw is said to have a mini-revolt among the rest of the board on his hands about the bonus pool.
The real question is should there be any bonuses at all?The group’s shares took a 5 per cent beating in latest trading after it admitted that keeping the profits tap rising at a utility is not quite as easy as the critics like to think. At home the company whinges about having to absorb higher costs.
If Centrica feels like this, imagine how all the other enterprises and homes that have to buy its main products feel.
Overseas the hoped-for North American bonanza, following the deregulation of gas markets, has not quite materialised.It may now be the dominant gas firm on the North Eastern seaboard of the US, but falling oil and gas prices have made for a very competitive and less profitable marketplace.
Gas storage has stopped being profitable and the cost of extraction from the North Sea may have provided some security of supply but is becoming more expensive.Essentially, gamepoker it is a tale of woe from one of only two domestically owned big energy groups.
There used to be speculation that one day Gazprom would buy Centrica and put it out of its misery. We already have the Chinese finger on our nuclear power button. We can only hope that someone has the good sense to make sure the Kremlin gets nowhere near our gas.
It is several decades since BHS offered some of the best value luncheon venues on the high street.
At a moment when all the major grocers are battling it out for prime high street and neighbourhood sites for convenience stores, BHS owner Sir Philip Green is planning to join the chase.
That is if someone doesn’t come along and make him an offer for the struggling BHS stores that he cannot resist.Such fun.