Economy
Richmond Fed chief: With outlook hazy, economy needs support – Yahoo Canada Finance
WASHINGTON — As president of the Federal Reserve Bank of Richmond since 2018, Tom Barkin is a member of the Fed’s powerful committee that sets interest rates. The committee has been engaged this year in an extraordinary drive to support the economy and the financial system through ultra-low rates and new lending programs designed to keep credit markets running smoothly and encourage companies and households to borrow and spend.
Barkin takes part in the rate-setting committee’s discussions, though under the Fed’s rotation system, he is not a voting member of the committee this year.
The Associated Press spoke recently with Barkin about the unusual uncertainty surrounding the economic outlook, how the coronavirus may be affecting financial inequality and the economy’s ongoing need for rescue aid.
Q: What’s the biggest risk facing the economy right now?
A: The biggest risk is on the health side. Will we have a vaccine or a treatment or will we have a set of infections that causes consumers to withdraw from the economy again? As I’ve talked to my contacts in the district, (among) firms, you see such a wide range of uncertainty that it does lead to a level of caution on things like hiring, on things like investing, on things like spending. And so I do think, similarly on the consumer side, how are you going to engage in commerce if you don’t know if you’re going to be putting your family at risk?
Q: Will inequalities in income or wealth slow the recovery?
A: One of the tragic things about this virus is it’s gone very hard after low-end service-level personal contact jobs. And this question of how many of those jobs will recover if restaurants reopen with only 50 or 60 or 70 per cent capacity — you’re going to lose restaurant jobs. If amusement parks and entertainment venues are not able to come back at the same scale or density, you’re going to lose those sorts of lower-pay service-level jobs. And so I do think there is a real risk there — that the normal we get back to will be less robust than the one we just left.
Q: Does the economy need more stimulus from the government or can it recover on its own?
A: One of my concerns as I look at the economy over the next six months, 12 months, 18 months, is whether we will have enough support from (from Congress) to get us back to where we were. That support could be things like deployment of broadband to enhance online learning. It could be things like making Pell Grants available for (job training) programs. My understanding of 2010, 2011, 2012 is that state and local governments had to cut back. And of course, you had the federal government eventually also cutting back. And it would’ve been helpful to have those entities continuing to spend into the recovery. And we’ll need that here as well.
____________________________
Interviewed by Christopher Rugaber.
Edited for clarity and length.
Christopher Rugaber, The Associated Press
Economy
Parallel economy: How Russia is defying the West’s boycott
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When Moscow resident Zoya, 62, was planning a trip to Italy to visit her daughter last August, she saw the perfect opportunity to buy the Apple Watch she had long dreamed of owning.
Officially, Apple does not sell its products in Russia.
The California-based tech giant was one of the first companies to announce it would exit the country in response to Russian President Vladimir Putin’s full-scale invasion of Ukraine on February 24, 2022.
But the week before her trip, Zoya made a surprise discovery while browsing Yandex.Market, one of several Russian answers to Amazon, where she regularly shops.
Not only was the Apple Watch available for sale on the website, it was cheaper than in Italy.
Zoya bought the watch without a moment’s delay.
The serial code on the watch that was delivered to her home confirmed that it was manufactured by Apple in 2022 and intended for sale in the United States.
“In the store, they explained to me that these are genuine Apple products entering Russia through parallel imports,” Zoya, who asked to be only referred to by her first name, told Al Jazeera.
“I thought it was much easier to buy online than searching for a store in an unfamiliar country.”
Nearly 1,400 companies, including many of the most internationally recognisable brands, have since February 2022 announced that they would cease or dial back their operations in Russia in protest of Moscow’s military aggression against Ukraine.
But two years after the invasion, many of these companies’ products are still widely sold in Russia, in many cases in violation of Western-led sanctions, a months-long investigation by Al Jazeera has found.
Aided by the Russian government’s legalisation of parallel imports, Russian businesses have established a network of alternative supply chains to import restricted goods through third countries.
The companies that make the products have been either unwilling or unable to clamp down on these unofficial distribution networks.
Economy
Japanese government maintains view that economy is in moderate recovery – ForexLive
Economy
Can falling interest rates improve fairness in the economy? – The Globe and Mail
The ‘poor borrower’ narrative rules in media coverage of the Bank of Canada and high interest rates, and that’s appropriate.
A lot of people have been financially slammed by the rate hikes of the past couple of years, which have made it much more expensive to carry a mortgage, lines of credit and other borrowing. The latest from the Bank of Canada suggests rate cuts will come as soon as this summer, which on the whole would be a welcome development. It’s not just borrowers who need relief – the boarder economy has slowed to a crawl because of high borrowing costs.
But high rates are also a big win for some people. Specifically, those who have little or no debt and who have a significant amount of money sitting in savings products and guaranteed investment certificates. The country’s most well-off people, in other words.
Lower rates will mean diminished returns for savers and less interest paid by borrowers. It’s a stretch to say lower rates will improve financial inequality, but they do add a little more fairness to our financial system.
Wealth inequality is often presented as the chasm between well-off people able to pay for houses, vehicles, trips and high-end restaurant meals and those who are driving record use of food banks and living in tent cities. High interest rates and inflation have given us more nuance in wealth inequality. People fortunate enough to have bought houses in recent years are staggering as they try to manage mortgage payments that have risen by hundreds of dollars a month. You can see their struggles in rising numbers of late payments and debt defaults.
Rates are expected to fall in a measured, gradual way, which means their impact on financial inequality won’t be an instant gamechanger. But if the Bank of Canada cuts 0.25 of a percentage point off the overnight rate in June and again in July, many borrowers will start noticing how much less interest they’re paying, and savers will find themselves earning less.
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Rob’s personal finance reading list
A look at two strategies for paying off debt – the debt avalanche and the debt snowball. I’ll go with the avalanche.
How not to ruin your kitchen countertop
Anyone who has renovated a kitchen lately knows how expensive stone countertops can be. Look after yours by protecting it from a few common kitchen items.
What you need to know about stock market corrections
A helpful explanation of stock market corrections. It seems an opportune time to look at corrections, given how volatile stocks have been lately. Like scouts, investors should always be prepared.
Food inflation requires more careful grocery shopping. Here’s a roundup of food products – cookies, snacks, ice cream – that don’t taste as good as they used to. Food companies have always adjusted their recipes from time to time. Is this happening more because of inflation’s impact on raw material prices? A U.S. list – most products are available are familiar to Canadians, too.
Ask Rob
Q: I have Tangerine children’s accounts for my kids. Can you suggest a better alternative?
A: The rate on the Tangerine children’s account is 0.8 per cent, which actually compares well to the big banks and their comparable accounts. For kids aged 13 and up, check out something new called the JA Money Card.
Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.
Tools and guides
A comprehensive guide on how to build a good credit score.
In the social sphere
Social Media: An offbeat way of fighting high food costs
Watch: Is now the hardest time ever to buy a home?
Money-Free Zone: Singer-songwriter Maggie Rogers has a new album called Don’t Forget Me and it’s generating some buzz because it’s a great listen. Smooth vocals and a laid back countryish vibe that hits a faster pace on one of my favourite cuts, Drunk.
More PF from The Globe
– He keeps ‘a few thousand in crisp new bills’ at home – is that a good idea?
– The pension pivot: Employers recognizing that workers need help with debt as much as retirement
– Her bond ETF is ‘a dud and not promising at all’ – should she sell?
– Despite high fees, Canadians remain perplexingly loyal to mutual funds. Here’s why
More Rob Carrick and money coverage
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