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Monday December 11th, 2023

Paul Volcker, the man who tamed the Fed, dies at 92

ECONOMYNEXT – Paul Volcker, who tamed the Federal Reserve which was generating high inflation and stagflation in the US after the collapse of the Bretton Woods gold-peg system had died at the age of 92, US media reports said.

The US Federal Reserve was generating high levels of inflation in the US with a floating exchange rate, after money printing under Arthur Burns led to the collapse of the US dollar and the Bretton Woods system.

Burns was trying to close an output gap by loosening monetary policy at the behest of President Richard Nixon.

Volcker took over in 1979, after a short stint by William Miller both of whom were appointed by President Carter.

Volcker, as a Treasury official in charge of monetary policy was also involved in the break of up the Bretton Woods, which came in the form of President Nixon ‘closing the gold window’ and imposing trade controls (Nixon shock).

Gold, commodity and energy prices soared as the Fed’s monetary policy went out of control.

Volcker halted so-called ‘full employment’ policies that had brought high inflation and the breaking of the dollar’s peg to gold, by raising policy rates to nearly 20 percent.

He killed double digit inflation in the US (and dollar pegged nations around the world), at the cost of a short recession, during President Ronald Reagan’s term of office and found a way to tame the negative effects of a floating exchange rate.

Around the same time, Britain’s Margaret Thatcher, advised by Alan Walters, as well as the Bank of England followed tight policies to kill inflation and pave the way for a strong period of growth.

The Fed did not do major damage to the world until the 2008, when excessively low interest rates in the preceding years (the mother of all liquidity bubbles) generated a massive housing, oil and commodity bubble, leading to bank runs and collapses of insurance firms. (Colombo/Dec09/2019)

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Sri Lanka wants university research to lead to commercially viable products

ECONOMYNEXT – Sri Lanka’s ministry of industries wants to ensure commercially-ready products and services are produced by university research, by facilitating partnerships with factories and entrepreneurs.

After a currency crisis, Sri Lanka’s government is in a drive to boost its trade balance by increasing exports.

“Our export basket hasn’t changed recently, partly because our small and medium entrepreneurs don’t have sufficient research and development facilities (like the multinationals) to innovate their products for the export market,” Additional Secretary of the Ministry of Industries, Chaminda Pathiraja said.

“At the same time, state universities and research institutes produce a large amount of research findings yearly, which end up sitting in those institutions; they don’t reach the industry,” Pathiraja said at a press briefing to announce a program on commercialization of new products and research, to be held tomorrow at the Waters Edge.

The networking forum will bring innovators and manufacturers together to focus on the commercialization of research for the value added tea, coir, spice, dairy products, gem and jewellery and packaging products industries.

“We want to encourage collaboration, through programs like our University Business League etc, so that the research output can be commercialized, and what is produced by our factories can increase in quantity and quality. We must focus on the export market.”

The objective of this program, he said, was to reduce the gap in acquiring innovators’ ideas and skills by the investors, and ultimately boost the manufacturing sector’s efficiency in alignment with the export market.

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Sri Lanka rupee opens at 327.00/50 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee opened at 327.00/50 to the US dollar on Monday, from 327.00/30 Friday, dealers said.

On the Colombo Stock Exchange, both indices opened up: The All Share Price Index 0.28 percent at 10,823, and the S&P SL20 0.35 percent at 3,113.85.

Bond yields were up.

A bond maturing on 01.08.2026 was quoted at 14.05/20 percent from 14.05/15 percent.

A bond maturing on 15.01.2027 was quoted at 14.05/20 percent from 14.10/25 percent.

A bond maturing on 01.07.2028 was quoted at 14.20/50 percent from 14.20/35 percent.

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Sri Lanka promoting Buddhist tourism from Vietnam, ASEAN

ECONOMYNEXT – Sri Lanka is planning to boost Buddhist tourism by linking temples in the country with those in East Asia, Foreign Minister Ali Sabry said after to welcoming a delegation of monks from Vietnam.

President Ranil Wickremesinghe, and Minister Sabry have initiated a temple-to-temple program where 100 Sri Lanka temples will be linked with counterparts in the Association of South East Asian Nations region.

“Tourism development will get a lot of growth with the temple-to-temple program,” Minister Ali Sabry said.

Along with the delegation of monks, five travel agents from Vietnam were also invited.

Under the first phase of the Temple-to-temple programs, several monks from Sri Lanka had received invitations from Indonesia, Malaysia, South Korea and Vietnam the Foreign Ministry said.

The Temple-to-Temple diplomacy program will be extended to Singapore, Japan, Thailand and Cambodia during the second phrase of the program.

Sri Lanka is targeting 2.3 million tourists in 2023, after getting about 1.5 million this year. (Colombo/Dec10/2023)

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