Money and Metals

The BBC reports on the inside scoop at the IMF. "The worlds' top central bankers and finance ministers will be among the 10,000 people converging on Singapore next month for the IMF's annual meetings, and one of the big talking points will be how to make the Fund more relevant to Asia and developing countries. Rather than being best known for lending, should it instead be policing world economics?"

"While the world economy is stable the IMF says it wants to turn its focus to surveillance. It says this would involve tackling 'the difficulties of unprecedented global imbalances and the challenges facing individual countries.' One of the main imbalances, it says, is between the US and the rest of the world."

"In a recent speech, the IMF's managing director, Rodrigo de Rato said this was not sustainable, saying: 'American consumers cannot support demand in the rest of the world indefinitely.' He warned an 'abrupt depreciation of the US dollar' could have disastrous consequences, pushing up the cost of Asian exports to the US, bad news for Asian exporters and American consumers who are already juggling rising fuel and household bills."

"Meanwhile, such a fall could also be exacerbated by countries switching out of the dollar and into other currencies or commodities like gold. It's this type of scenario the IMF wants to avoid."

"The IMF has reformed itself many times claims think-tank chief Jean Pisani-Ferry, but this time it will be a significant gamble for an institution which is 'losing influence.' 'If the IMF succeeds, it will position itself again at the core of administrative discussions which has not been the case over the last couple of decades because of the creation of G7,' he said. 'If it fails, it's a significant failure.'"

The Christian Science Monitor. "The United States is the world's only military superpower and has the globe's largest economy. Yet, by some measures, the US is a second-rate industrial nation, at best. 'Compared to other advanced economies, our market-driven model yields highly varied results regarding the living standards of our citizens,' notes a study by the Economic Policy Institute (EPI), a nonpartisan think tank in Washington."

"In terms of the percent of its population living at or below the poverty line, for instance, the US ranks worst among 16 wealthy countries, according to the Luxembourg Income Study. That study found that 17 percent of Americans are poor. As for child poverty, the US also sits on the bottom, with 21.9 percent."

"The usual comeback to such comparisons is that the US has a marvelous job-creation economy. But the EPI study find this claim 'exaggerated.' US job growth since 2000 has been 'lackluster' and 'far worse' than several other well-to-do nations belonging to the Organization for Economic Cooperation and Development."

The Financial Times. "The US Federal Reserve is wrong to focus on core measures of inflation that exclude energy prices, Charles Bean, chief economist at the Bank of England, has suggested. It should focus instead on headline inflation, which is much higher, he argued. Including energy and food costs, US consumer price inflation is running at an annual rate of 4.1 per cent, against 2.7 per cent for core inflation."

"Since both price trends had a common cause, he said it makes little sense to focus 'on measures of core inflation that strip out energy prices while not stripping out falling goods prices as well.'"

"The Fed has tended to treat the rise in oil prices as a step change to a new equilibrium price level, which in itself does not generate ongoing inflationary pressure. It focuses on trying to prevent the “pass through” of higher energy costs to consumers in the form of higher prices for other goods and services."

"But the Bank of England and the ECB increasingly take the view that energy prices may be on a long-term upward trend."

From Reuters. "The dollar weakened slightly in quiet trade on Monday ahead of key signals this week of where U.S. interest rates might be headed, including Federal Reserve meeting minutes and the August payrolls report."

"'Economic data in the U.S. this week is likely to reinforce expectations that the Fed tightening cycle has ended,' UBS currency strategists wrote in a note to clients. 'The combination of slowing activity data and tame inflation is negative for the dollar and should keep euro/dollar elevated.'"

"Markets are also looking to the August U.S. payrolls report on Friday, as well as the core personal consumption expenditures index for July due on Thursday. 'A moderate gain (in payrolls) in line with the past few months will confirm the stand-pat stance for the Fed,' said Avery Shenfeld, chief economist at CIBC World Markets in Toronto. This is 'no surprise, but part of a bearish underlying picture for the U.S. dollar versus overseas majors,' he added."

"The European Central Bank is also scheduled to meet on Thursday, but markets expect the bank to keep rates steady at 3 percent."