samchain/econo-pairs-v1 huggingface dataset:
Surveys indicate that relative income and wealth are crucial to perceptions of happiness.7 Economic theories of wages, asset prices, employment and consumption often embed concerns about relative standing.8 When making many of life’s choices, it appears to be important to “keep up with the Jones’s”, to earn and spend with reference to one’s neighbour. This concern with relative standing sows the seeds of arms-race behaviour. Finance is far from immune to these pressures. Indeed, some structural features of the financial system make it particularly prone to arms-race behaviour. One such structural feature is information asymmetry. Imperfections in information generate risk. Finance provides an information bridge between end-savers and investors, thereby prospectively reducing risk. Success in finance means forming that bridge at least cost and risk to those travelling across it. But judging how much risk is really being taken, and whether it is being managed well, is rarely easy for either end-savers or end-borrowers. Risk shows its true face perhaps only once in a generation. So as much as investors might wish to risk-adjust their returns, this is a daunting informational task. Facing this problem, many participants in the financial system (investors, managers, trustees, remuneration committees, pay consultants etc.) have resorted to simpler, indirect metrics to gauge skill in navigating risk. Ranking is one such performance metric. It provides a simple way of ordering the apples, the oranges – and in particular the lemons.

The dispersion seen in this probability distribution can be attributed to two factors: disagreement across point forecasts and uncertainty around individual point forecasts.6 Uncertainty, which is calculated by first taking the standard deviation of each dealer’s distribution and then averaging these individual uncertainties, provides a sense of how confident respondents are about their individual point forecasts. Based on this calculation, the uncertainty around dealers’ expectations for the size of the SOMA portfolio at the end of 2014 is large. In fact, at around $ billion it is almost as large as the entire size of the large-scale asset purchase program announced in November 2010 or the MEP announced in September 2011. Moreover, this uncertainty has not changed significantly since the start of the purchases in September 2012. The dispersion around individual point forecasts likely reflects uncertainty about both how the economy will evolve and how the FOMC will adjust its purchases in response to changes in the economic outlook or changes in its understanding of the efficacy and costs of the policy. Disagreement among dealers about the likely amount of purchases is measured as the standard deviation across their average forecasts for the size of the SOMA portfolio at the end of 2014. In the January survey, disagreement was about $ billion, significantly lower than its level in October.
A second war of independence with Britain was looming. A trade embargo with Britain was imposed and led to a steady drop in import tax revenues over the coming years. At the same time, Gallatin needed additional revenues for war preparations. This left him with next to nothing to sustain his debt reduction strategy. By 1809, the first deficit emerged since Gallatin had taken office. In addition, and against Gallatin’s advice, Congress opted not to renew the charter of the Bank of the United States in 1811, just one year before war broke out. Congress thereby removed the main tool for arranging war financing that Gallatin would have relied on. Foreseeing financial disaster and unable to prevent it in his capacity as Secretary of the Treasury, Gallatin resigned from the Treasury in 1814. 1814-1849: Diplomacy This brings me to the fourth distinct period of Gallatin’s life, covering his post-treasury years. In 1814, Gallatin went to Russia to represent the United States and help settle hostilities at the peace conference with England and France. The conference ended successfully the same year with the signing of the Treaty of Ghent. Much of this success has been credited to Gallatin. 25 Before returning home, Gallatin made his first visit to Geneva since he had left his birthplace 35 years earlier. Geneva received him with great honors. According to his son, who accompanied him at the time, the visit was very emotional. Gallatin remained deeply attached to his native city throughout his life. 26 Albert Gallatin never returned to Treasury.

  JPM has made material contributions to Singapore’s financial markets with developments such as the launch of the Singapore Kilobar Gold Contract with the SGX in October this year. 2  BIS central bankers’ speeches    JPM was one of the lead managers in Singapore’s first RMB corporate bond issuance earlier this year, which helped to broaden the range of RMB product offerings in the market. On this note, let me congratulate JP Morgan on 50 years of growth in and with Singapore. MAS looks forward to deeper partnership with JP Morgan in further developing Singapore’s financial sector. I am confident that your strong presence in Singapore will serve you well as you extend your footprint in Asia. Thank you for being part of the Singapore growth story. BIS central bankers’ speeches  3
Labour market indicators such as redundancy notices and the number of job vacancies are pointing to a continued rapid decline in the labour market. In the February Report our forecast is for employment to decline by almost 200,000 persons at the end of 2010, from the top level in 2008, and for unemployment to rise to around 9 per cent in 2010. However, our most recent forecast is that the current economic downturn will not be as severe as that during the crisis in the 1990s. On the other hand, we are assuming that it will be more severe than the most recent economic downturn in connection with the dotcom crash in 2000. This is indicated by the various measures of resource utilisation we regularly produce. Since the monetary policy meeting in February Statistics Sweden has published the National Accounts for the fourth quarter of 2008. GDP fell by just over 9 per cent calculated as an annual rate during the fourth quarter of 2008. This is the weakest rate of change measured during the period for which statistical comparisons are available, that is, since 1980. Our forecast in the February Monetary Policy Report assumed that GDP would fall by almost 4 per cent calculated as an annual rate during the fourth quarter. Inflation will fall rapidly In 2008 CPI inflation rose up to September. It then peaked at 4.4 per cent. Since then inflation has fallen rapidly. In January 2009 it amounted to 1.3 per cent.

On the other hand, inflation expectations one year ahead are not as interesting in this perspective. They do not say very much about the credibility of monetary policy, as inflation in the short term can deviate quite substantially from 2 per cent, even if monetary policy is well-balanced. The weak krona The financial crisis has also given rise to large fluctuations in the international foreign exchange markets. Investors have turned to large currencies, which are perceived as more liquid and secure. In this situation the krona has experienced the largest weakening since it was allowed to float in November 1992. The Riksbank does not have any target for the krona, but our assessment is that the weakening is temporary and primarily a result of the financial crisis. We are expecting the krona to strengthen again as the crisis wanes, partly because Sweden has for a long period of time had a stable surplus in its foreign trade. But there is a risk that the weakening will be more prolonged. This would lead to exports strengthening and imports slowing down, but at the same time provide an inflationary impulse. In the current situation this may be an advantage in the short term, as economic activity is now weak and inflation is low. But in the longer term a currency that fluctuates substantially can be a problem. It increases uncertainty. At the monetary policy meeting Lars E.O.
This borrowing was in turn channelled via domestic banks into projects with long-term funding. When foreign and domestic investors began to show concern over uncertainty regarding the growth potential of these countries, the course of events moved rapidly. This development shows how a misdirected economic policy can soon have devastating consequences for a country. However, instead of focussing on the content of the economic policy, many critics have singled out the open capital markets as culprits. Some of these critics have therefore considered capital controls to be a good means of avoiding future crises. Yet the experiences of the 1970s and 1980s show that these controls cannot counteract the effect of an inadequate domestic economic policy in the long term. Sooner or later it will be necessary to adapt the exchange rate. It is also very doubtful whether capital controls have contributed to increasing monetary policy independence during these decades, which was one argument put forward in favour of the controls. In practice, it was probably the case that the arguments for keeping the controls were often used to postpone necessary macroeconomic adaptations and structural reforms. Nevertheless, while financial deregulation creates opportunities for increased welfare, it is important not to ignore the problems in the financial system. Over the years, authorities and organisations have tried to minimise these by producing various international standards and codes, and have continued to debate what more needs to be done to prevent as far as possible the emergence and spread of any new financial crises.

Whereas it was once natural to put money into a normal savings account, this is no longer the case. Today, an increasingly large share of savings is being invested in various securities and the rapid expansion in the mutual fund market is an important part of this development. One only needs to look at the Swedish Mutual Fund Association's own report on mutual fund investment in Sweden to realise this. The statistics show that new mutual fund investment has increased gradually during the 1990s. In 1994 net investment in mutual funds totalled SEK 7.5 billion. Last year the corresponding figure was SEK 99.1 billion. This is an entirely natural development, as it has been possible to obtain a significantly higher yield from savings invested in various types of securities than from savings paid into a traditional savings account. Swedish investors have not only realised this, they have also understood how to use the financial market to spread their risk by investing money both in fixed income funds and in shares in different types of companies within different sectors and countries. Many people, including me, see this development as a positive thing; others are critical and express concern over what they call an insensitive fund capital, shovelling money around the world and quickly withdrawing from countries that show the slightest sign of problems. This criticism cannot be completely dismissed, but I do feel that it often does not fully take account of the importance of the financial sector for economic development.
The total capital ratio, meanwhile, has increased by 1.7 percentage points over the last four years, and the leverage and liquidity ratios are above the European averages. Indeed, the recent stress tests carried out by the European Banking Authority (EBA) and the Banco de España show the considerable resilience of Spanish banks’ solvency under adverse scenarios. However, while recognising the significant progress made in recent years, the Spanish banking industry continues to face significant challenges, which are largely shared by other euro area banking systems. Notable among them are: i) the need for further progress in reducing unproductive assets which remain at high levels; ii) raising profitability; iii) strengthening the industry’s reputation by preventing misconduct; iv) adapting to the new regulatory framework and strengthening the highest-quality capital ratios; and v) competing in a new financial environment arising from technological progress and the emergence of new players (see Chart 2). Reducing unproductive assets As I have already said, the reduction in non-performing loans and foreclosed assets from the peak levels they reached during the crisis has been significant. Private-sector nonperforming loans, which have fallen by 60% from their peak in 2013, currently stand at the same level as in 2009. Foreclosed assets have followed a similar pattern, falling by 40% from their peak in 2012. The economic recovery has certainly contributed to this process, but it has also been driven by credit institutions’ management of troubled assets and by supervisory pressure.

This predominantly affects the lower2/4  BIS central bankers' speeches  skilled workers who are at risk of lay-offs or are already being displaced and facing daunting challenges to shift to the new norm, and those with daily incomes that are halted due to suspension of certain economic sectors. The disparity shoves wider. It is indeed a sobering wake up call for us. I reminisce on how Islamic history is replete with prophetic precedence on the importance of positioning inclusive and equitable growth and wealth as the foundational principle. We have learned from the exemplary leadership under the reign of Khalifah Umar bin Abdul Aziz, where social finance instruments such as zakat, waqf and sadaqah were optimised to reduce poverty and empower the community. In today’s landscape, we do acknowledge efforts in similar light. Institutionalised forms of social finance which blend social dimension and financial returns are being pursued to provide alternative funding options for micro-entrepreneurs to venture, sustain, and grow their business. Such integration of diverse social finance instruments into micro financial products is envisioned to address the growing concerns on over-dependence on debt-based instruments that could reduce the financial flexibility of businesses in supporting their recovery. Before I conclude, I would like to touch on the importance to future-proof the industry and the role of Shariah scholars. As we navigate beyond the pandemic, agility in thinking, approach and process is the way forward in dealing with the transformed future.
•  Policymakers allowed market structures, particularly in wholesale funding markets, to evolve in directions that were efficient from a private perspective in normal times, but amplified run dynamics and therefore externalities in times of stress. Examples include the growth in triparty repo activities and the reliance of many large financial institutions on funding from money market mutual funds, as well as many other elements of the shadow banking system. 3  Under Section 13(3) of the Federal Reserve Act, the Federal Reserve is authorized to lend to individuals, corporations and partnerships. But this may occur only if a super majority of the Board of Governors of the Federal Reserve System has determined that circumstances are “unusual and exigent”. Subsequently, the Dodd-Frank Act further constrained this authority by prohibiting its use to rescue an individual company from bankruptcy. BIS central bankers’ speeches  3  The TBTF problem was further aggravated by the financial crisis and the policy response. Faced with systemwide stress, the Federal Reserve, with the support of the U.S. Treasury, intervened to prevent the disorderly failure of Bear Stearns, a firm that would not have been high on the list of TBTF firms a few years earlier. Meanwhile, the failure of Lehman Brothers demonstrated that the cost to society of the uncontrolled failure of a TBTF firm in a period of generalized stress was considerably greater than anticipated.

But a bank’s goal should be to provide service to its customers through financial intermediation, as Mark Carney has explained so eloquently. 6 Christine Lagarde sees this as a  4  Cf. E. Gerald Corrigan, Are Banks Special? Federal Reserve Bank of Minneapolis Annual Report, January 1983, (“[T]he presence of the public safety net uniquely available to a particular class of institutions also implies that those institutions have unique public responsibilities and may therefore be subject to implicit codes of conduct or explicit regulations that do not fall on other institutions.”). 5  See Thomas C. Baxter, Jr., Reflections on the New Compliance Landscape, Remarks at “The New Compliance Landscape: Increasing Roles – Increasing Risks” Conference, July 24, 2014. 6  See Mark Carney, “Inclusive Capitalism: Creating a Sense of the Systemic,” Address to the Conference on Inclusive Capitalism, May 24, 2014. BIS central bankers’ speeches  3  question of animating purpose – of “telos” – and I agree. 7 Similarly, the Archbishop of Canterbury, Justin Welby, has called for financial institutions to reset to the first principle of service, playing a role in the world that contributes to “human flourishing.” 8 If you don’t believe me, listen to the Archbishop: It is possible to do good and do well at the same time. And remember one of attributes that attracts the best and the brightest to an organization is the prospect of quality work.
When shocks to money demand are large, expressing the stance of monetary policy in terms of an interest rate – in other words, as a price rather than as a quantity – can help to insulate the wider economy and price developments from the volatility that those demand shocks induce in monetary quantities. This insight had long been embedded in central bank practice, with short-term interest rates being the operational instrument of monetary policy. And it is now central to the canonical model of monetary policy outlined in Woodford’s magnum opus Interest and Prices, which both captures and has catalysed the large and still growing literature on interest rate rules for monetary policy. Three questions: Past, present and future While I will revisit some of these arguments in what follows, you should not expect much innovation from me on those dimensions. But, two decades on, a number of new questions have emerged, which I do hope to address. Page 4  Past: What are the lessons of the past twenty years? A natural focus is to explore how we should think about the expansion of central bank balance sheets via quantitative easing (QE) and other mechanisms. In Lord King’s article, discussion of QE is limited to the case of Japan and treated as something of an anachronism.

The potential for money to play a role as ‘nominal anchor’ to the economy, outside the standard forecasting framework – as it often has in the face of elevated levels of inflation, such as during the experiments with monetary targetry from the late 1970s – remains an open and challenging question. Monetarism revisited Before addressing these questions, it is worth recalling the central tenets of the monetarist approach to monetary policy. Foremost among these are: First, a focus on price stability as the objective of monetary policy, reflecting the ‘classical dichotomy’ at the heart of most macroeconomic models. In the long run, money and monetary policy are neutral: they have no influence over real variables, such as output and employment, but pin down the evolution of the price level. Second, a preference for using rules rather than discretion to direct monetary policy. Policy decisions need to be credible and consistent if they are to be effective. Assigning responsibility for monetary policy to an independent central bank, largely insulated from short-term political pressures and given the freedom to employ judgment flexibly as necessary, supports this systematic approach to policymaking. Third, a medium-term orientation of monetary policy, recognising the famous long, variable and less-than-fully predictable lags in the transmission of monetary policy to price developments. Owing to these lags, monetary policy cannot control high frequency inflation developments on (say) a month-to-month basis.
In Chart 5 (Four-quarter cash flow from borrowing) we measure the amount of borrowing – both mortgage and nonmortgage borrowing – that U.S. households were engaging in over time. Consider that in 2007, households were receiving in aggregate $ billion in cash from borrowing. These funds were available for consumption expenditures or for household investments such as home improvements. However, with their borrowing limits lowered as house values fell and income levels declined, households began to pay down debt rapidly. (Of course, while many households acted to pay down debt, some debt was written off through foreclosures and bankruptcies, and other households were increasing debt by borrowing for home purchases, as normally would be the case. But we exclude those kinds of transactions here.) In sum, however, households in 2010 actively reduced their net indebtedness by $ billion. The reversal in cash available for household expenditures was a massive $ billion over the period from 2007 to 2010. This fact was established by Brown, Haughwout, Lee, and van der Klaauw in our Liberty Street Economics blog in 2011.4 Allow me a brief digression here, because I think it touches on an important point. A lot of people refer to this pay-down of debt as “deleveraging,” but in my view that’s a misuse of the term. Since the distinction is more than just semantic, let me explain what I mean. Financial leverage is usually thought of as a ratio. Consider a typical home purchase with 20 percent down.

Finally, with somewhat stronger growth of output, I expect inflation to gradually rise toward the Federal Open Market Committee’s objective of 2 percent as measured by the PCE deflator. This forecast is based on the projected gradual increase in the levels of resource utilization, which would lessen downward pressure on firms’ marginal costs and prices, a firming in global demand, and the continued upward pull exercised by stable inflation expectations on actual inflation. Underpinning the latter assumption is the broad stability of long-term inflation expectations across different financial and survey measures, combined with ongoing moderate growth of wages and unit labor costs, all of which are consistent with well-anchored inflation expectations. As mentioned above, the key development behind the firmer tone of consumer spending over the second half of 2013 is the significant strengthening in household balance sheets. One aspect of that improvement is that from mid-2008 through mid-2013, total household liabilities declined significantly after a period of quite rapid debt growth over the preceding decade. The reduction in household debt is an extremely rare event for the U.S. economy. In fact, this has been the only period of sustained declines in nominal household indebtedness over the period since the early 1950s. The household sector In the remainder of my remarks, I’d like to focus on the finding, made public in our most recent Quarterly Report on Household Debt and Credit, that for the first time since 2008, households increased their borrowing on a year-over-year basis, at least in nominal terms.