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The US Federal Reserve has already raised interest rates in 2021-2022 to 5-5.25%. The Fed under Jerome Powell has taken a pause on interest rate increases this month but expects to make two interest rate increases of quarter percentage point to take interest rates up to 5.6% by the end of 2023. Jerome Powell has shown determination at the US central bank to control inflation that went up quickly in 2021 with supply chain disruptions and oil flow disruptions. This has led to slower US inflation with inflation down to 4% in May 2023, half of what it was at its peak in 2022. The higher interest rates help savers including retired people deprived of interest income over the last decade, and hurt borrowers making higher payments on mortgage and car loans.

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The Fed's Jerome Powell makes a half percentage point rate cut that takes the federal funds rate to between 4.75% and 5.00%.  11 of 12 Fed governors supported the decision for a half percentage point rate cut.

Powell said:

"We are committed to maintaining our economy’s strength. This decision reflects our growing confidence that with an appropriate recalibration of our policy stance, strength in the labor market can be maintained.”

This is the US central bank's, the Fed's response to high cost of living concerns in the US. It provides relief to households with credit card balances, and business with variable rate debt. Rates for corporate debt and mortgages had started declining in anticipation of rate cuts.

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Reseerve Bank's efforts to slow inflation by increasing the cash deposits banks have to keep with the central bank by half percentage point to 8%, this is the cash-reserve ratio. Wholesale price inflation is at above 7% above the Reserve Banks desired rate of 5%, but growth estimates of Crisil are still above 8%, at 8.1%, for year ending March 2009.

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Adding in local government debt to central government debt, railways, asset management companies and state owned banks, gives a better picture of total debt for China. This is an estimated $3.55 trillion or close to 59% of GDP compared to 93% for the U.S. The problem is no one really knows how much debt there is in the local government in China. Analysts say this understates nonperforming loans from China's lending binge after the 2008 financial crisis. Stephen Green of Standard Chartered Bank estimates China's total debt, including contingent liabilities, to be 77% of GDP. Arthur Kroeber of Dragonomics estimates it at 75%. China's Banking Regulatory Commission estimates that investment vehicles that have local government guarantees borrowed $1.17 trillion in 2009 and the first half of 2010. Century Weekly, a leading financial magazine, estimates this to be $1.52 trillion at the end of 2010. The large local government debt limits the ability of China's central bank to raise rates to control inflation, as every increase in rates increases the local government debt. For the U.S., excluding debt owed by one part of the government to another, such as Social Security, would bring U.S. debt to 62.2%. This would'nt include the debts of local and state governments, overhaul of Fannie and Freddie, or liabilities to pay future retirement and health benefits....

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The credit lending boom in Brazil is leading to rising levels of household indebtedness and credit card abuses. In Brazil and Chile consumer lending regulations are lax. Credit card interest rates in Brazil can be as shockingly high as 220% annually. The household debt to income levels were 70% at the end of 2010 in Chile, according to the Central Bank. In Brazil this ratio is 40%, according to LCA Consultores. Consumer appliance and electronics stores such as La Polar and Casa Bahias are lightly regulated and offer lower priced products to a new class of consumers in lower classes that have no experience with consumer credit. La Polar is under investigation in Chile for increasing rates and changing the terms on loans unilaterally for 418,000 customers. In Brazil the federal prosecutors office is charging banks such as Itau, HSBC, and Santander with $300 million of illegal bank charges on clients from 2008 to 2010.

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Russia needs to find a solution to end the Ukraine war in coming months to protect it's economy, says Le Monde. After 3 years of war a sudden deterioration is apparent. The central bank has raised rates to 21% to tackle rising inflation of 9%.. This is seen as an alarming signal. Bank rates are close to 30% a situation that is not sustainable for long. 

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With interest rates at 22% and inflation of over 20% Turkey's foreign investment and consumer driven economy continues to struggle. In Istanbul's markets fruit vendors say buyers buy half the quantity they normally used to buy. Prices are high with the loss of value of the Turkish currency the lira, that lost about 40% of its value in the space of about 1 year. Turkish president Erdogan has in the past increased support with the economic boom in Turkey, which is now fading. High interest rates need to be brought down for the economy to recover. Erdogan fires the central bank chief for not cutting interest rates. In the past foreign investors continued investments in Turkey, yet today the confidence of foreign investors is declining, affecting the value of the Lira currency. High interest rates are a central bank policy response to keep the value of the Lira from declining further, but at a cost for ordinary Turkish people who pay high prices, reducing the standard of living. High interest rates to attract foreign capital to support the Lira also reduce investment and employment with the higher cost of borrowing.  The high prices because imports cost more with a weak Lira mean less can be purchased reducing what can be purchased with existing incomes. ...

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The U.S. Fed, America's central bank, barrs bank buyback of shares and limits dividend payouts to quarterly profit. The Fed does this as it warns banks they could sustain heavy losses of $700 billion for soured loans if the economy is slow to recover over several quarters, and unemployment remains high. The Fed's latest stress test for banks included the impact of the coronavirus epidemic. At this time the Fed says banks are healthy and this is protective action to keep the banks in safety.

Another sign of the changes taking place in finance and banking- swift action by the U.S. central bank leadership to stop early any potential improper behaviour of banks to do debt buybacks or dividend payout not meeting rules related to profit. 

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China imports most of Iran's oil exports about 1.8 million barrels a day which flow through the Straits of Hormuz. Iran is heavily dependent on these exports for oil revenues that support it's economy. All Asian economies are heavily dependent on the oil flowing from Saudis, UAE and Iran through the Straits.  For Iran it would mean the loss of oil revenues needed to support its economy if the Straits are shut down. Iran's central bank says it get $67 billion from oil exports 90% of it going to China alone.  82% of oil imports of Asian countries  from Saudi, UAE, Qatar and Iran sources go though the Straits.  The US is not dependent on the Straits- less than 10% of its oil. Also true of Germany. The US  would have to use air strikes to prevent any mining of the waters seaway, and China, US, Japan, India would join in combined effort to keep all sea navigation open for international shipping.  ...

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About 565,000 workers are missing in the UK workforce in December 2022. The Guardian asks the question- Will they ever come back? Many left under stress from healthcare work, from the hotel and restaurant business, and from manufacturing during the pandemic. Some took early retirement, some taking care of family members. A similar situation exists in the US. Jay Powell at the US Federal Reserve, its central bank, and Fed Governors including the head of the Federal Reserve for California are working on ways to get these people back. Brian Deese of Biden's National Economic Council is also working to find solutions including better child care and better benefits for workers. Settling the rail strike on terms attractive for workers and getting rid of onerous rules for workers who could not get paid heath care leave in rail companies, are ways the Biden administration is responding.

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This inflation is different from anything that happened before as it is driven by both demand and supply side situation. Seeing it as only demand side and acting on that would only damage the economy, says Greg Ip in the WSJ. On supply chain shortages there is little the government or the central bank can do to fix this in the short term. This is also why the Families and Workers Plan and Infrastructure plan of president Biden with about $2 trillion dollars in spending is not expected to cause much impact on inflation. The Fed is carefully looking at the situation because of the unique nature of the problem in 2021 to avoid any missteps that hurt the US economy and US growth for the coming decade, on which so much of the hope of America and the world rests.

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India's foreign exchange reserves reached an all time high of $545 billion in October 2022. By December this had dropped to $561 billion because of the central bank RBI's effort to maintain the value of the Indian currency in relation to the US dollar. This is at Rs 81 to the the dollar in Dec 2022. India' needs healthy foreign exchange reserves to finance imports for its industrialization and investment efforts to modernize the country. Inflation is also a priority to keep the cost of living at levels that provide affordability. This is at about 5% in Dec. 2022. Finance minister Sitharaman cited this as key achievements. Including large foreign investment inflows as part of changing the supply chain to include India as a manufacturing hub for the west. This sets the stage for long term growth.

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In its performance review for Pakistan the IMF says growth estimate is 2.8% for 2014. The IMF sees a poor outlook for the balance of payments situaion, and has raised the issue of critically low foreign exchange reserves. Inflation is increasing and is at about 11%. Foreign currency reserves have declined from over $6 billion in 2013 to less than $4 billion. Yaseen Anwar resigned as head of Pakistan's central bank in Jan 2014, as Pakistan begins its second quarterly review with the IMF representatives in Dubai. The IMF has only released $1.1 billion from a $6.7 billion bailout in Sept. 2013. The quarterly reviews are designed to see that Pakistan meets the bailout conditions. The new administration of prime minister Nawaz Sharif is making an effort to bring the security situation under control in Karachi and other cities to generate business confidence and expansion.

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Looking at Europe, Krugman sees a continent adrift, with no strong action by the European governments or by the European Central Bank. And bankers, central bankers, governmnt leaders in Europe are actually doing little in the face of the crisis compared to the action that the United States is taking.

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The impact on ASEAN countries of the monetary expansion policy of the Bank of Japan, Japan's central bank, and the policies of the Abe administration. Infusion of new liquidity into Malaysia, Singapore, Indonesia, Thailand and Vietnam.

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Chinese exporters are required to bring their revenue in dollars after covering costs such as imported materials, back into China, exchanging it with the central bank for yuan. This foreign currency is the main source of the Chinese foreign exchange reserves of $2.6 trillion. The system was based on an earlier period when China worried about capital outflows. Now with rising inflation, and a lot of money circulating in the economy after the recent stimulus and huge lending surge, China is rethinking this practice. Hu Xiaolian, vice governor of the People's Bank of China, says it makes it harder to control liquidity levels in China in todays situation.Because of this China's government is easing controls and letting exporters keep more of their revenues earned overseas. However with the expected declining value of the dollar Chinese exporters may prefer to convert their dollars into yuan. Some companies may want to accumulate dollars and other overseas foreign currency for investments abroad. The difference with Japan is striking. For Japan, also a major exporter, the bulk of foreign currency assets are held by companies, which are available for use to invest in manufacturing and other assets. By concentrating these decisions in the state, China has accumulated a huge reserve of foreign exchange. But this also creates major problems as China is concerned about the impact of the declining dollar on its huge holdings of US treasury debt. ...

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With inflation running at 6.7% in Russia, the central bank has decided not to increase interest rates following the U.S. Fed's bond purchase tapering decision in Jan 2014. The ruble declined by 6% in Jan 2014 and 15% for the last year. With the economy slowing the central bank finds it difficult to raise interest rates, and with inflation the bank has less flexibility to lower rates and increase credit availability. The ruble's lower value is a result of a shrinking current account surplus, with the added effect of capital flight from markets seen as riskier by investors. Currency collapse is a sensitive issue for many Russians after the 1997 crisis and collapse of the ruble. Central bank chief Ms. Nabiullina was on television explaining the decline to ordinary Russians, saying- " It's not that the ruble is weakening but the dollar and the euro are rising in price." Economists say the ruble's weakening won't add as much to inflation as slowing demand will make it harder for retail chains to raise prices....

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Seib draws parallels between the situation in 1889 with the large immigration, growing inequality, impact of science and technology, and progressive parts of the two main political parties. Teddy Roosevelt and Woodrow Wilson pulled together progressives in the Republican and Democratic parties in the next two decades, and FDR-Truman continued progressive policies in the nineteen thirties and forties to tackle the Depression and promote economic recovery. Financial crises are not mentioned by Seib. The recurring financial crises since that period led to the creation of the central bank, the U.S. Federal Reserve and financial regulations for banks. The financial crises with asset bubbles in 2000 for tech and bubble in real estate in 2009, resulted from the lifting of financial regulation and lack of close supervision of financial markets.

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European Central Bank executive board member Benoit Coeure, says the ECB will act quickly on a program to buy government bonds, so as not to fall behind the curve in taking action. He said the ECB had a moral and legal responsibility to act, considering the low annualized inflation of 0.3% in November 2014. Analysts say this could come as early as Jan 22, at the next ECB meeting, because the meeting in March may be too late. Coeure pointed out that the design of the program will be made in the manner similiar to that of the Outright Monetary Transactions Program of 2012, so that broad consensus is achieved. The ECB's staff is currently working on this. The U.S. and Japan have implemented monetary easing programs with quantitative easing, and the ECB is now moving in this direction to increase growth and bring inflation to about 2%. The ECB also now plans to put out detailed policy minutes after each meeting. The euro is expected to weaken further below $1.24 with the announcement of the program....

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A review of the aid program for Greece done for European leaders meeting in Brussels on October 23, 2011, shows that most of the money sent to Greece has gone to pay off bondholders (mostly European banks that lent to Greece). For the initial bailout program of the European Union and the IMF in May 2010, international loans amount to $91 billion. Of this $52 billion has gone to repay bonds that came due between May 2010 and September 2011, according to this review. The report was prepared by the European Commission in coordination with the IMF and the ECB. Greece owes over $300 billion dollars and Greece's borrowing extends far beyond the country's size and ability to repay, creating extraordinary risks to the financial system in Europe. The initial bailout program based its lending on little or no haircuts for the bondholders, who are mainly the European banks (mostly French and German banks) that loaned the money, which creates another set of risks, and a logjam, because taxpayers in the stronger financial countries such as Germany are equally adamant on not paying for the excess lending of the French and German banks. The financial leaders in Germany, Finance Minister Schauble, Axel Weber, the former head of the Bundesbank, and other prominent financial experts have also adamantly insisted on following prudent financial practices, and are opposed to using the European Central Bank to buy the sovereign bonds of France, Italy and Spain....

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Proposed ideas being considered at the EU headquarters in Brussels include the European bailout fund, the European Financial Stability Facility (EFSF), being made a bank with funding from the European Central Bank. The EFSF would be able to buy the bonds of Spain and Italy in primary and secondary markets alongside private buyers. As an alternative the ECB would be able to buy Spanish and Italian bonds directly. Here the problem is keeping private investors in the market given the large financial needs of Spain and Italy. In the restructuring of Greece's government bonds the ECB took the position that it would subordinate the claims of private investors in Greece's government bonds and not take loss. Concerns of private investors could be addressed by the eurozone governments giving an explicit indemnity to the ECB to cover any losses suffered in the purchase of Spanish and Italian bonds. Both steps, the direct purchase of Spain's and Italy's bonds by the ECB or through the EFSF would mean doing something that is not in the ECB's charter- the financing of government debt- and would be done cautiously and only in a crisis situation. The caution would also be motivated by the need to ensure there is action to improve the competitiveness of Spain, Italy and other eurozone countries through specific measures, and no backtracking bygovernments....

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The discount for Canadian crude oil prices, because of higher shale oil output in the U.S. midwest and lack of enough pipeline capacity to get Canadian crude to Gulf Coast refineries, is affecting the Canadian economy. The lower price for Canadian crude was at about $20 per barrel lower than the U.S. benchmark price in April 2013. This discount has reduced Canada's GDP growth for the second half of 2012 by 0.4%, according to the Canadian central bank. The discount was as high as $40 to U.S. benchmark price for Canadian heavy crude in January and Febuary 2013. Continued discount is expected till enough pipeline capacity is created for Alberta's heavy crude to get to Gulf Coast refineries in the U.S.

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France's central bank chief Christian Noyer, says public spending to create jobs has the drawback of creating yesterday's jobs, but lasting job creation has to look at today and the future for effective job creation. Once government spending crosses a certain level, about 55% of GDP, a level France has crossed, further spending becomes counterproductive, reducing public confidence in the economy, as higher future taxes are anticipated canceling any benefits.

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John Steele Gordon has done a good job of covering the history of banking in the United States since the days of Alexander Hamilton. One of his books is "Hamilton's Blessing", describing the first effort to set up a central bank in the US, the Bank f the United States, modeled on the Bank of England. Here he describes the resistance by Jeffersonians and their successors like Andrew Jackson who did not understand the purpose served by a good central bank and did everything to either dissolve it or to not give it the powers and the authority and the staffing that it needed. It was not till after the crisis of 1907 in which JP Morgan acted as the central bank in loaning his own money to prevent a bank and financial panic and collapse, that the first central bank the Federal Reserve was set up in 1913. Even then it was not given the authority and powers and staffing needed to command the economy in panic or financial collapse which happened in 1931. Part of the reason the crises were less frequent after 1931 is because of a better understanding of economics and also because of the Federal Reserve's ability to step in during a crisis. What went wrong in the 1990's with the S&L crisis and in 2008? Gordon points to a system of undue political influence as one big problem. And the lack of a unified, coherent regulatory system free of undue polticial influence. Both in the 1990's and in 2008 Congress and the regulatory authorites failed to keep undue political influence from distorting and damaging the financial system. In the 2008 crisis ideology simply componded the problem as deregulation and dependence on free markets without any checks simply compounded the problem into its huge dimensions. ...