Federal Reserve Chairman Jerome Powell, pledging to “strike a balance” between the risk of an overheating economy and the need to keep growth on track, told U.S. lawmakers on Tuesday that the central bank would stick with gradual interest rate increases despite the added stimulus of tax cuts and government spending.

Fed policymakers anticipate three rate increases this year, and Powell gave no indication in prepared remarks to the House Financial Services Committee that the pace needs to quicken even as the “tailwinds” of government stimulus and a stronger world economy propel the U.S. recovery.

“The [Federal Open Market Committee] will continue to strike a balance between avoiding an overheating economy and bringing … price inflation to 2 percent on a sustained basis,” Powell said in prepared remarks for his first monetary policy testimony to Congress as Fed chief.

“Some of the headwinds the U.S. economy faced in previous years have turned into tailwinds,” Powell said, noting recent fiscal policy shifts and the global economic recovery. Still, “inflation remains below our 2 percent longer-run objective. In the (FOMC‘s) view, further gradual rate increases in the federal funds rate will best promote attainment of both of our objectives.”

The testimony sent Powell’s first signal as Fed chief that the massive tax overhaul and government spending plan launched by the Trump administration will not prompt any immediate shift to a faster pace of rate increases. “Gradual” has been the operative word since the Fed began raising rates under Powell’s predecessor, Janet Yellen, in late 2015.

The Fed is expected to approve its first rate increase of 2018 at the next policy meeting in March, when it will also provide fresh economic projections and Powell will hold his first press conference.

“This is a continuation of where this Fed was under Chair Yellen,” said Robert Albertson, principal and chief strategist at Sandler O‘Neill & Partners in New York.

“They are normalizing, they are not tightening … The surprises, if we are going to see them, are going to be after more data comes out in the next month or two,” and accounts for things like the tax cuts and whether business investment spending continues higher, he said.

Market reaction was muted. U.S. stocks were trading slightly lower while the dollar .DXY was stronger against a basket of currencies. Prices of U.S. Treasuries were mixed.

Valuation pressures

Powell’s appearance before the House panel is his first as Fed chief. He used his prepared remarks to strike notes likely to be welcomed by the Republican majority on the panel – including promises of “transparency” and a nod to the monetary policy rules some of them favor.

“I am committed to clearly explaining what we are doing and why we are doing it,” Powell said.

But in his remarks and in a monetary policy report issued to Congress by the Fed last week he also stuck close to a safe script, mentioning none of the new initiatives that some of his colleagues have pushed for, such as a review of the Fed’s system for managing inflation.

That report acknowledged “valuation pressures” in parts of the economy, and noted the recent return of volatility in stock markets.

Though rising long-term interest rates and recent equity market volatility have tightened financial conditions, Powell said, “we do not see these developments as weighing heavily on the outlook for economic activity, the labor market and inflation.”

Rather, “the robust job market should continue to support growth in household incomes and consumer spending, solid economic growth among our trading partners should lead to further gains in U.S. exports, and upbeat business sentiment and strong sales growth will likely continue to boost business investment,” he said.
…

Federal Reserve Chairman Jerome Powell, pledging to “strike a balance” between the risk of an overheating economy and the need to keep growth on track, told U.S. lawmakers on Tuesday that the central bank would stick with gradual interest rate increases despite the added stimulus of tax cuts and government spending.

Fed policymakers anticipate three rate increases this year, and Powell gave no indication in prepared remarks to the House Financial Services Committee that the pace needs to quicken even as the “tailwinds” of government stimulus and a stronger world economy propel the U.S. recovery.

“The [Federal Open Market Committee] will continue to strike a balance between avoiding an overheating economy and bringing … price inflation to 2 percent on a sustained basis,” Powell said in prepared remarks for his first monetary policy testimony to Congress as Fed chief.

“Some of the headwinds the U.S. economy faced in previous years have turned into tailwinds,” Powell said, noting recent fiscal policy shifts and the global economic recovery. Still, “inflation remains below our 2 percent longer-run objective. In the (FOMC‘s) view, further gradual rate increases in the federal funds rate will best promote attainment of both of our objectives.”

The testimony sent Powell’s first signal as Fed chief that the massive tax overhaul and government spending plan launched by the Trump administration will not prompt any immediate shift to a faster pace of rate increases. “Gradual” has been the operative word since the Fed began raising rates under Powell’s predecessor, Janet Yellen, in late 2015.

The Fed is expected to approve its first rate increase of 2018 at the next policy meeting in March, when it will also provide fresh economic projections and Powell will hold his first press conference.

“This is a continuation of where this Fed was under Chair Yellen,” said Robert Albertson, principal and chief strategist at Sandler O‘Neill & Partners in New York.

“They are normalizing, they are not tightening … The surprises, if we are going to see them, are going to be after more data comes out in the next month or two,” and accounts for things like the tax cuts and whether business investment spending continues higher, he said.

Market reaction was muted. U.S. stocks were trading slightly lower while the dollar .DXY was stronger against a basket of currencies. Prices of U.S. Treasuries were mixed.

Valuation pressures

Powell’s appearance before the House panel is his first as Fed chief. He used his prepared remarks to strike notes likely to be welcomed by the Republican majority on the panel – including promises of “transparency” and a nod to the monetary policy rules some of them favor.

“I am committed to clearly explaining what we are doing and why we are doing it,” Powell said.

But in his remarks and in a monetary policy report issued to Congress by the Fed last week he also stuck close to a safe script, mentioning none of the new initiatives that some of his colleagues have pushed for, such as a review of the Fed’s system for managing inflation.

That report acknowledged “valuation pressures” in parts of the economy, and noted the recent return of volatility in stock markets.

Though rising long-term interest rates and recent equity market volatility have tightened financial conditions, Powell said, “we do not see these developments as weighing heavily on the outlook for economic activity, the labor market and inflation.”

Rather, “the robust job market should continue to support growth in household incomes and consumer spending, solid economic growth among our trading partners should lead to further gains in U.S. exports, and upbeat business sentiment and strong sales growth will likely continue to boost business investment,” he said.
…

Just as “Black Panther” is setting records at the box office, a new study finds that diverse audiences are driving most of the biggest blockbusters and many of the most-watched hits on television.

UCLA’s Bunche Center released its fifth annual study on diversity in the entertainment industry Tuesday, unveiling an analysis of the top 200 theatrical film releases of 2016 and 1,251 broadcast, cable and digital platform TV shows from the 2015-2016 season. Among its results: minorities accounted for the majority of ticket buyers for five of the top 10 films at the global box office, and half of ticket buyers for two more of the top 10.

“There has been some progress, undeniably. Things are not what they were five years ago,” said Darnell Hunt, director of the center, which focuses on African American studies, at the University of California, Los Angeles. “People are actually talking about diversity today as a bottom-line imperative as opposed to just the right thing to do. We’ve amassed enough evidence now that diversity does, in fact, sell.”

Minorities make up nearly 40 percent of the U.S. population, but Hispanic and African-American moviegoers over-index among moviegoers. According to the Motion Picture Association of America, Latinos make up 18 percent of the U.S. population but account for 23 percent of frequent moviegoers. Though African Americans are 12 percent of the population, they make up 15 percent of frequent moviegoers.

UCLA found that films with casts that were 21 to 30 percent minority regularly performed better at the box office than films with the most racially and ethnically homogenous casts.

Hunt believes that the wealth of data, as well as box-office successes like “Black Panther,” have made obvious the financial benefits of films that better reflect the racial makeup of the American population.

“I think the industry has finally gotten the memo, at least on the screen in most cases, if not behind the camera,” said Hunt. “That’s where there are the most missed opportunities.”

The report, titled “Five Years of Progress and Missed Opportunities,” covers a period of some historic high points for Hollywood, including the release of the best picture-winning “Moonlight,” along with fellow Oscar nominees “Hidden Figures” and “Fences.”

But researchers found the overall statistical portrait of the industry didn’t support much improvement in diversity from 2015 to 2016.

“With each milestone achievement, we chip away at some of the myths about what’s possible and what’s not,” said Hunt. “Every time a film like this does really well, every time we see a TV show like ‘Empire,’ it makes it harder for them to make the argument that you can’t have a viable film with a lead of color. Or you can’t have a universally appealing show with a predominantly minority cast. It’s just not true anymore because the mainstream, itself, is diverse.”

Some of the largest disparities for minorities detailed by the UCLA report were in roles like film writers (8.1 percent of 2016’s top films) and creators of broadcast scripted shows (7.1 percent). Hunt blamed the lag behind the camera on, among other factors, executive ranks that are still overwhelmingly male.

“It’s a white-male controlled industry and it hasn’t yet figured out how to incorporate other decision-makers of color and women into the process. So you have these momentary exceptions to the rule,” said Hunt, pointing to “Black Panther,” which has grossed $700 million worldwide in two weeks of release.

Such films, he said, show the considerable economic sense of making movies and television series that don’t ignore nearly half of their potential audience.

“It’s business 101,” Hunt said.
…

Just as “Black Panther” is setting records at the box office, a new study finds that diverse audiences are driving most of the biggest blockbusters and many of the most-watched hits on television.

UCLA’s Bunche Center released its fifth annual study on diversity in the entertainment industry Tuesday, unveiling an analysis of the top 200 theatrical film releases of 2016 and 1,251 broadcast, cable and digital platform TV shows from the 2015-2016 season. Among its results: minorities accounted for the majority of ticket buyers for five of the top 10 films at the global box office, and half of ticket buyers for two more of the top 10.

“There has been some progress, undeniably. Things are not what they were five years ago,” said Darnell Hunt, director of the center, which focuses on African American studies, at the University of California, Los Angeles. “People are actually talking about diversity today as a bottom-line imperative as opposed to just the right thing to do. We’ve amassed enough evidence now that diversity does, in fact, sell.”

Minorities make up nearly 40 percent of the U.S. population, but Hispanic and African-American moviegoers over-index among moviegoers. According to the Motion Picture Association of America, Latinos make up 18 percent of the U.S. population but account for 23 percent of frequent moviegoers. Though African Americans are 12 percent of the population, they make up 15 percent of frequent moviegoers.

UCLA found that films with casts that were 21 to 30 percent minority regularly performed better at the box office than films with the most racially and ethnically homogenous casts.

Hunt believes that the wealth of data, as well as box-office successes like “Black Panther,” have made obvious the financial benefits of films that better reflect the racial makeup of the American population.

“I think the industry has finally gotten the memo, at least on the screen in most cases, if not behind the camera,” said Hunt. “That’s where there are the most missed opportunities.”

The report, titled “Five Years of Progress and Missed Opportunities,” covers a period of some historic high points for Hollywood, including the release of the best picture-winning “Moonlight,” along with fellow Oscar nominees “Hidden Figures” and “Fences.”

But researchers found the overall statistical portrait of the industry didn’t support much improvement in diversity from 2015 to 2016.

“With each milestone achievement, we chip away at some of the myths about what’s possible and what’s not,” said Hunt. “Every time a film like this does really well, every time we see a TV show like ‘Empire,’ it makes it harder for them to make the argument that you can’t have a viable film with a lead of color. Or you can’t have a universally appealing show with a predominantly minority cast. It’s just not true anymore because the mainstream, itself, is diverse.”

Some of the largest disparities for minorities detailed by the UCLA report were in roles like film writers (8.1 percent of 2016’s top films) and creators of broadcast scripted shows (7.1 percent). Hunt blamed the lag behind the camera on, among other factors, executive ranks that are still overwhelmingly male.

“It’s a white-male controlled industry and it hasn’t yet figured out how to incorporate other decision-makers of color and women into the process. So you have these momentary exceptions to the rule,” said Hunt, pointing to “Black Panther,” which has grossed $700 million worldwide in two weeks of release.

Such films, he said, show the considerable economic sense of making movies and television series that don’t ignore nearly half of their potential audience.

“It’s business 101,” Hunt said.
…

The governor of Sao Paulo and likely centrist presidential candidate Geraldo Alckmin said on Monday that he would privatize Brazil’s state-run oil company Petroleo Brasileiro SA if he wins the elections in October.

Alckmin, who has single digit support in opinion polls, said during a television interview with Band TV that he favored private ownership of Petrobras, as Brazil’s biggest company is known, as long as the sale was conducted within a strict regulatory framework.

Once a taboo issue in Brazilian politics because of national sovereignty concerns, the privatization of Petrobras is set to become a campaign issue this year as Brazil struggles to bring an unsustainable budget deficit under control.

Brazil’s left fiercely rejects the sale of Petrobras, but the leftist leader leading early opinion polls, former President Luiz Inacio Lula da Silva, will likely be barred from running because of a corruption conviction and there are no obvious politicians who can fill his shoes.

It is not clear where the far right candidate Jair Bolsonaro, who is currently second in opinion polls, stands on relinquishing state control of Petrobras.

But his economic policy advisor Paulo Guedes told Valor newspaper in an interview published on Monday that he favored selling all state companies to raise 700 billion reais that would help pay off one fifth of Brazil’s public debt.
…

President Emmanuel Macron on Saturday faced heckles and whistles from French farmers angry with reforms to their sector, as he arrived for France’s annual agricultural fair.

For over 12 hours, Macron listened and responded to critics’ rebukes and questions — only to return home to the Elysee Palace with an adopted hen.

“I saw people 500 meters away, whistling at me,” Macron said, referring to a group of cereal growers protesting against a planned European Union free-trade pact with a South American bloc, and against the clampdown on weedkiller glyphosate.

“I broke with the plan and with the rules and headed straight to them, and they stopped whistling,” he told reporters.

“No one will be left without a solution,” he said.

Macron was seeking to appease farmers who believe they have no alternative to the widely used herbicide, which environmental activists say probably causes cancer.

Mercosur warning

He also wanted to calm fears after France’s biggest farm union warned Friday that more than 20,000 farms could go bankrupt if the deal with the Mercosur trade bloc (Brazil, which is the world’s top exporter of beef, plus Argentina, Uruguay and Paraguay) goes ahead.

Meanwhile, Macron was under pressure over a plan to allow the wolf population in the French countryside to grow, if only marginally.

“If you want me to commit to reinforce the means of protection … I will do that,” he responded.

And he called on farmers to accept a decision on minimum price rules for European farmers, “or else the market will decide for us.”

But it wasn’t all jeers and snarls for Macron at the fair.

He left the fairground with a red hen in his arms, a gift from a poultry farm owner.

“I’ll take it. We’ll just have to find a way to protect it from the dog,” he said, referring to his Labrador, Nemo.

It was a far cry from last year, when, as a presidential candidate not yet in office, Macron was hit on the head by an egg launched by a protester.
…

President Emmanuel Macron on Saturday faced heckles and whistles from French farmers angry with reforms to their sector, as he arrived for France’s annual agricultural fair.

For over 12 hours, Macron listened and responded to critics’ rebukes and questions — only to return home to the Elysee Palace with an adopted hen.

“I saw people 500 meters away, whistling at me,” Macron said, referring to a group of cereal growers protesting against a planned European Union free-trade pact with a South American bloc, and against the clampdown on weedkiller glyphosate.

“I broke with the plan and with the rules and headed straight to them, and they stopped whistling,” he told reporters.

“No one will be left without a solution,” he said.

Macron was seeking to appease farmers who believe they have no alternative to the widely used herbicide, which environmental activists say probably causes cancer.

Mercosur warning

He also wanted to calm fears after France’s biggest farm union warned Friday that more than 20,000 farms could go bankrupt if the deal with the Mercosur trade bloc (Brazil, which is the world’s top exporter of beef, plus Argentina, Uruguay and Paraguay) goes ahead.

Meanwhile, Macron was under pressure over a plan to allow the wolf population in the French countryside to grow, if only marginally.

“If you want me to commit to reinforce the means of protection … I will do that,” he responded.

And he called on farmers to accept a decision on minimum price rules for European farmers, “or else the market will decide for us.”

But it wasn’t all jeers and snarls for Macron at the fair.

He left the fairground with a red hen in his arms, a gift from a poultry farm owner.

“I’ll take it. We’ll just have to find a way to protect it from the dog,” he said, referring to his Labrador, Nemo.

It was a far cry from last year, when, as a presidential candidate not yet in office, Macron was hit on the head by an egg launched by a protester.
…

Investor Warren Buffett says Wall Street’s lust for deals has prompted CEOs to act like oversexed teenagers and overpay for acquisitions, so it has been hard to find deals for Berkshire Hathaway.

In his annual letter to shareholders Saturday, Buffett mixed investment advice with details of how Berkshire’s many businesses performed. Buffett blamed his recent acquisition drought on ambitious CEOs who have been encouraged to take on debt to finance pricey deals.

“If Wall Street analysts or board members urge that brand of CEO to consider possible acquisitions, it’s a bit like telling your ripening teenager to be sure to have a normal sex life,” Buffett said.

Berkshire is also facing more competition for acquisitions from private equity firms and other companies such as privately held Koch Industries.

Sticking with guideline

Buffett is sitting on $116 billion of cash and bonds because he’s struggled to find acquisitions at sensible prices. And Buffett is unwilling to load up on debt to finance deals at current prices.

“We will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own,” Buffett wrote.

He said the conglomerate recorded a $29 billion paper gain because of the tax reforms Congress passed late last year. That helped it generate $44.9 billion profit last year, up from $24.1 billion the previous year.

Investors left wanting

Buffett’s letter is always well-read in the business world because of his remarkable track record over more than five decades and his talent for explaining complicated subjects in plain language. But this year’s letter left some investors wanting more because he didn’t say much about Berkshire’s succession plan, some noteworthy investment moves or the company’s new partnership with Amazon and JP Morgan Chase to reduce health care costs.

Edward Jones analyst Jim Shanahan said he expected Buffett to devote more of the letter to explaining his decision to promote and name the top two candidates to eventually succeed him as Berkshire’s CEO. Buffett briefly mentioned that move in two paragraphs at the very end of his letter.

That surprised John Fox, chief investment officer at FAM Funds, which holds Berkshire stock.

“He didn’t say a lot about succession. I was expecting more,” Fox said.

Greg Abel and Ajit Jain joined Berkshire’s board in January and took on additional responsibilities. Jain will now oversee all of the conglomerate’s insurance businesses while Abel will oversee all of the conglomerate’s non-insurance business operations.

Bet pays off for charity

Buffett, 87, has long had a succession plan in place for Berkshire to ensure the future of the conglomerate he built even though he has no plans to retire. Until January, he kept the names of Berkshire’s internal CEO candidates secret although investors who follow Berkshire had long included Jain and Abel on their short lists.

Shanahan said it also would have been nice to read Buffett’s thoughts on why he is selling off Berkshire’s IBM investment but maintaining big stakes in Wells Fargo and US Bancorp.

But Buffett did offer some sage investment advice based on his victory in a 10-year bet he made with a group of hedge funds. The S&P 500 index fund Buffett backed generated an 8.5 percent average annual gain and easily outpaced the hedge funds. One of Buffett’s favorite charities, Girls Inc. of Omaha, received $2.2 million as a result of the bet.

Buffett said it’s important for people to invest money regularly regardless of the market’s ups and downs, but watch out for investment fees, which will eat away at returns.

Succeeding in the stock market requires the discipline to act sensibly when markets do crazy things. Buffett said investors need “an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period — or even to look foolish — is also essential.”

Buffett said investors shouldn’t assume that bonds are less risky than stocks. At times, bonds are riskier than stocks.

Berkshire owns more than 90 subsidiaries, including clothing, furniture and jewelry firms. It also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.
…

Investor Warren Buffett says Wall Street’s lust for deals has prompted CEOs to act like oversexed teenagers and overpay for acquisitions, so it has been hard to find deals for Berkshire Hathaway.

In his annual letter to shareholders Saturday, Buffett mixed investment advice with details of how Berkshire’s many businesses performed. Buffett blamed his recent acquisition drought on ambitious CEOs who have been encouraged to take on debt to finance pricey deals.

“If Wall Street analysts or board members urge that brand of CEO to consider possible acquisitions, it’s a bit like telling your ripening teenager to be sure to have a normal sex life,” Buffett said.

Berkshire is also facing more competition for acquisitions from private equity firms and other companies such as privately held Koch Industries.

Sticking with guideline

Buffett is sitting on $116 billion of cash and bonds because he’s struggled to find acquisitions at sensible prices. And Buffett is unwilling to load up on debt to finance deals at current prices.

“We will stick with our simple guideline: The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own,” Buffett wrote.

He said the conglomerate recorded a $29 billion paper gain because of the tax reforms Congress passed late last year. That helped it generate $44.9 billion profit last year, up from $24.1 billion the previous year.

Investors left wanting

Buffett’s letter is always well-read in the business world because of his remarkable track record over more than five decades and his talent for explaining complicated subjects in plain language. But this year’s letter left some investors wanting more because he didn’t say much about Berkshire’s succession plan, some noteworthy investment moves or the company’s new partnership with Amazon and JP Morgan Chase to reduce health care costs.

Edward Jones analyst Jim Shanahan said he expected Buffett to devote more of the letter to explaining his decision to promote and name the top two candidates to eventually succeed him as Berkshire’s CEO. Buffett briefly mentioned that move in two paragraphs at the very end of his letter.

That surprised John Fox, chief investment officer at FAM Funds, which holds Berkshire stock.

“He didn’t say a lot about succession. I was expecting more,” Fox said.

Greg Abel and Ajit Jain joined Berkshire’s board in January and took on additional responsibilities. Jain will now oversee all of the conglomerate’s insurance businesses while Abel will oversee all of the conglomerate’s non-insurance business operations.

Bet pays off for charity

Buffett, 87, has long had a succession plan in place for Berkshire to ensure the future of the conglomerate he built even though he has no plans to retire. Until January, he kept the names of Berkshire’s internal CEO candidates secret although investors who follow Berkshire had long included Jain and Abel on their short lists.

Shanahan said it also would have been nice to read Buffett’s thoughts on why he is selling off Berkshire’s IBM investment but maintaining big stakes in Wells Fargo and US Bancorp.

But Buffett did offer some sage investment advice based on his victory in a 10-year bet he made with a group of hedge funds. The S&P 500 index fund Buffett backed generated an 8.5 percent average annual gain and easily outpaced the hedge funds. One of Buffett’s favorite charities, Girls Inc. of Omaha, received $2.2 million as a result of the bet.

Buffett said it’s important for people to invest money regularly regardless of the market’s ups and downs, but watch out for investment fees, which will eat away at returns.

Succeeding in the stock market requires the discipline to act sensibly when markets do crazy things. Buffett said investors need “an ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look unimaginative for a sustained period — or even to look foolish — is also essential.”

Buffett said investors shouldn’t assume that bonds are less risky than stocks. At times, bonds are riskier than stocks.

Berkshire owns more than 90 subsidiaries, including clothing, furniture and jewelry firms. It also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co.
…

Australia appears to be failing in its efforts to crack down on bribery, according to the latest survey conducted by Transparency International, a non-governmental organization based in Germany.

The group said developed countries – including Australia – appeared to be lagging in their efforts to combat corruption in the public sector.  It pointed to an inadequate regulation of foreign political donations in Australia, conflicts of interest in planning approvals, revolving doors and improper industry lobbying in large-scale mining projects.  

While Australia’s ranking is unchanged – it remains ranked 13th out of 180 countries – its corruption score has slipped eight points since the index started in its current form in 2012.

Concern about Australia’s ranking comes as debate continues about the need for a nationwide anti-corruption body similar to the Independent Commission Against Corruption in the state of New South Wales.  It was set up in 1989 and has scored many notable victories, including the jailing of corrupt state politicians.

Professor A.J. Brown, who leads a project called “Strengthening Australia’s National Integrity System” for Transparency International, says much more work needs to be done.

“We do not have a federal anti-corruption body amongst other things, so it is also about the fact that our track record in terms of government commitment to controlling foreign bribery or money laundering and some of the things that the private sector is also involved in internationally is not that strong.  We are moving but we have been moving very slow and very late, and not very comprehensively,” Brown said.

This year, New Zealand and Denmark were ranked highest in the Transparency International survey, the U.S. is ranked 16th, while South Sudan and Somalia were the lowest-ranked nations. The best performing region was Western Europe, while the most corrupt regions were Sub-Saharan Africa, followed by Eastern Europe and Central Asia.

The survey found that more than 6 billion people live in countries that are corrupt. Transparency International said most countries failed to protect the independence of the media, which plays a crucial role in preventing corruption.

 
…

Federal Reserve policymakers fretted on Friday that they could face the next U.S. recession with virtually the same arsenal of policies used in the last downturn and, with interest rates still relatively low, those will not pack the same punch.

In the midst of an unprecedented leadership transition, Fed officials are publicly debating whether to scrap their approach to inflation targeting, how much of its bond portfolio to retain, and how much longer they can raise interest rates in the face of an unexpectedly large boost from tax cuts and government spending.

After years of near-zero rates and $3.5 trillion in bond purchases all meant to stimulate the economy in the wake of the 2007-09 recession, the Fed has gradually tightened policy since late 2015. Its key rate is now in the range of 1.25 to 1.5 percent, and while the Fed plans to hike three more times this

year it has also forecast that it is about halfway to its goal.

That could leave little room to provide stimulus when the world’s largest economy, which is heating up, eventually turns around.

“We would be better off, rather than thinking about what we would do next time when we hit zero, making sure that we don’t get back there. We just don’t want to be there,” Boston Fed President Eric Rosengren told a conference of economists and the majority of his colleagues at the central bank.

Rosengren, one of only a few sitting policymakers who also served during the last downturn, said the expanding U.S. deficits could further erode the government’s ability to help curb any future recession. “With the deficits we are running up, it’s not likely [fiscal policy] will be helpful in the next

recession either,” he said.

Since mid-December, the Republican-controlled Congress and U.S. President Donald Trump aggressively cut taxes and boosted spending limits, two fiscal moves that are expected to push the annual budget deficit above $1 trillion next year and expand the $20 trillion national debt.

Overheating

That stimulus, combined with synchronized global growth, signs of U.S. inflation perking up, and unemployment near a 17-year low could set the stage for overheating that ends one of the longest economic expansions ever.

“We want more shock absorbers out there and really … the main shock absorber is the ability to reduce the fed funds rate, which means that you want to get to a higher inflation rate so that the pre-shock fed funds rate is 4 and not 2,” said Paul Krugman, the Nobel Prize-winning economist and professor at City University of New York.

In a speech to the conference hosted by the University of Chicago Booth School of Business, Krugman said every recession since 1982 has been caused by “private sector over-reach” and not Fed tightening, as in decades past.

The conference’s main research paper argued the central bank should focus on cutting rates in the next recession and avoid relying on asset purchases that are less effective in stimulating investment and growth than previously thought.

In October the Fed began trimming some of its assets and it has yet to decide how far it will go. William Dudley, president of the New York Fed, told the conference that, to be sure, the ability to again purchase bonds if and when rates hit zero “seems like a good tool to have.”

The Fed’s approach to any economic slowdown would likely be to cut rates, pledge further stimulus, and only then buy bonds.

Rosengren and others dismissed the possibility of adopting negative interest rates, as some other central banks have done.

Yet five years of below-target inflation, combined with an aging population and slowdown in labor force growth, has sparked a debate over ditching a long-standing 2 percent price target.

Some see this month’s succession of Fed Chair Janet Yellen by Jerome Powell as ideal timing to consider new frameworks that could help drive inflation, and rates, higher. Cleveland Fed President Loretta Mester, whom the White House is considering for Fed vice chair, told the conference the central bank could begin to reassess the framework later this year, though she added that the threshold for change should be high.
…

Federal Reserve policymakers fretted on Friday that they could face the next U.S. recession with virtually the same arsenal of policies used in the last downturn and, with interest rates still relatively low, those will not pack the same punch.

In the midst of an unprecedented leadership transition, Fed officials are publicly debating whether to scrap their approach to inflation targeting, how much of its bond portfolio to retain, and how much longer they can raise interest rates in the face of an unexpectedly large boost from tax cuts and government spending.

After years of near-zero rates and $3.5 trillion in bond purchases all meant to stimulate the economy in the wake of the 2007-09 recession, the Fed has gradually tightened policy since late 2015. Its key rate is now in the range of 1.25 to 1.5 percent, and while the Fed plans to hike three more times this

year it has also forecast that it is about halfway to its goal.

That could leave little room to provide stimulus when the world’s largest economy, which is heating up, eventually turns around.

“We would be better off, rather than thinking about what we would do next time when we hit zero, making sure that we don’t get back there. We just don’t want to be there,” Boston Fed President Eric Rosengren told a conference of economists and the majority of his colleagues at the central bank.

Rosengren, one of only a few sitting policymakers who also served during the last downturn, said the expanding U.S. deficits could further erode the government’s ability to help curb any future recession. “With the deficits we are running up, it’s not likely [fiscal policy] will be helpful in the next

recession either,” he said.

Since mid-December, the Republican-controlled Congress and U.S. President Donald Trump aggressively cut taxes and boosted spending limits, two fiscal moves that are expected to push the annual budget deficit above $1 trillion next year and expand the $20 trillion national debt.

Overheating

That stimulus, combined with synchronized global growth, signs of U.S. inflation perking up, and unemployment near a 17-year low could set the stage for overheating that ends one of the longest economic expansions ever.

“We want more shock absorbers out there and really … the main shock absorber is the ability to reduce the fed funds rate, which means that you want to get to a higher inflation rate so that the pre-shock fed funds rate is 4 and not 2,” said Paul Krugman, the Nobel Prize-winning economist and professor at City University of New York.

In a speech to the conference hosted by the University of Chicago Booth School of Business, Krugman said every recession since 1982 has been caused by “private sector over-reach” and not Fed tightening, as in decades past.

The conference’s main research paper argued the central bank should focus on cutting rates in the next recession and avoid relying on asset purchases that are less effective in stimulating investment and growth than previously thought.

In October the Fed began trimming some of its assets and it has yet to decide how far it will go. William Dudley, president of the New York Fed, told the conference that, to be sure, the ability to again purchase bonds if and when rates hit zero “seems like a good tool to have.”

The Fed’s approach to any economic slowdown would likely be to cut rates, pledge further stimulus, and only then buy bonds.

Rosengren and others dismissed the possibility of adopting negative interest rates, as some other central banks have done.

Yet five years of below-target inflation, combined with an aging population and slowdown in labor force growth, has sparked a debate over ditching a long-standing 2 percent price target.

Some see this month’s succession of Fed Chair Janet Yellen by Jerome Powell as ideal timing to consider new frameworks that could help drive inflation, and rates, higher. Cleveland Fed President Loretta Mester, whom the White House is considering for Fed vice chair, told the conference the central bank could begin to reassess the framework later this year, though she added that the threshold for change should be high.
…

European Union leaders staked out opening positions Friday for a battle over EU budgets that many conceded they are unlikely to resolve before Britain leaves next year, blowing a hole in Brussels’ finances.

At a summit to launch discussion on the size and shape of a seven-year budget package to run from 2021, ex-communist states urged wealthier neighbors to plug a nearly 10 percent annual revenue gap being left by Britain, while the Dutch led a group of small, rich countries refusing to chip in any more to the EU.

Germany and France, the biggest economies and the bloc’s driving duo as Britain prepares to leave in March 2019, renewed offers to increase their own contributions, though both set out conditions for that, including new priorities and less waste.

Underlining that a divide between east and west runs deeper than money, French President Emmanuel Macron criticized what he said were poor countries abusing EU funds designed to narrow the gap in living standards after the Cold War to shore up their own popularity while ignoring EU values on civil rights or to undercut Western economies by slashing tax and labor rules.

Noting the history of EU “cohesion” and other funding for poor regions as a tool of economic “convergence,” Macron told reporters: “I will reject a European budget which is used to finance divergence, on tax, on labor or on values.”

Poland and Hungary, heavyweights among the ex-communist states which joined the EU this century, are run by right-wing governments at daggers drawn with Brussels over their efforts to influence courts, media and other independent institutions.

The European Commission, the executive which will propose a detailed budget in May, has said it will aim to satisfy calls for “conditionality” that will link getting some EU funding to meeting treaty commitments on democratic standards such as properly functioning courts able to settle economic disputes.

But its president, Jean-Claude Juncker, warned on Friday against deepening “the rift between east and west” and some in the poorer nations see complaints about authoritarian tendencies as a convenient excuse to avoid paying in more to Brussels.

At around 140 billion euros ($170 billion) a year, the EU budget represents about 1 percent of economic output in the bloc or some 2 percent of public spending, but for all that it remains one of the bloodiest subjects of debate for members.

Focus on payments

The Commission has suggested that the next package should be increased by about 10 percent, but there was little sign Friday that the governments with cash are willing to pay that.

“When the UK leaves the EU, then that part of the budget should drop out,” said Dutch Prime Minister Mark Rutte, who leads a group of hawks including Sweden, Denmark and Austria.

“In any case, we do not want our contribution to rise and we want modernization,” he added, saying that meant reconsidering the EU’s major spending on agriculture and regional cohesion in order to do more in defense, research and controlling migration.

On the other side, Czech Prime Minister Andrej Babis said his priorities were “sufficient financing of cohesion policy” a good deal for businesses from the EU’s agricultural subsidies.

German Chancellor Angela Merkel said there had been broad agreement that new priorities such as in defense, migration and research should get new funding and she called for a “debureaucratization” of traditional EU spending programs.

Summit chair Donald Tusk praised the 27 leaders — Prime Minister Theresa May was not invited as Britain will have left before the new budget round starts — for approaching the issue “with open minds, rather than red lines.” But despite them all wanting to speed up the process, a deal this year was unlikely.

Quick deal unlikely

Although all agree it would be good to avoid a repeat of the 11th-hour wrangling ahead of the 2014-20 package, many sounded doubtful of a quick deal even early next year.

“It could go on for ages,” Rutte said. He added that it would be “nice” to finish by the May 2019 EU election: “But that’s very tight.”

Among the touchiest subjects will be accounting for the mass arrival of asylum-seekers in recent years. Aggrieved that some eastern states refuse to take in mainly Muslim migrants, some in the west have suggested penalizing them via the EU budget.

Merkel has proposed that regions which are taking in and trying to integrate refugees should have that rewarded in the allocation of EU funding — a less obviously penal approach but one which she had to defend on Friday against criticism in the east. It was not meant as a threat, the chancellor insisted.

In other business at a summit which reached no formal legal conclusions, leaders broadly agreed on some issues relating to next year’s elections to the European Parliament and to the accompanying appointment of a new Commission for five years.

They pushed back against efforts, notably from lawmakers, to limit their choice of nominee to succeed Juncker to a candidate who leads one of the pan-EU parties in the May 2019 vote. They approved Parliament’s plan to reallocate some British seats and to cut others altogether and also, barring Hungary, agreed to a Macron proposal to launch “consultations” with their citizens this year on what they want from the EU.
…

European Union leaders staked out opening positions Friday for a battle over EU budgets that many conceded they are unlikely to resolve before Britain leaves next year, blowing a hole in Brussels’ finances.

At a summit to launch discussion on the size and shape of a seven-year budget package to run from 2021, ex-communist states urged wealthier neighbors to plug a nearly 10 percent annual revenue gap being left by Britain, while the Dutch led a group of small, rich countries refusing to chip in any more to the EU.

Germany and France, the biggest economies and the bloc’s driving duo as Britain prepares to leave in March 2019, renewed offers to increase their own contributions, though both set out conditions for that, including new priorities and less waste.

Underlining that a divide between east and west runs deeper than money, French President Emmanuel Macron criticized what he said were poor countries abusing EU funds designed to narrow the gap in living standards after the Cold War to shore up their own popularity while ignoring EU values on civil rights or to undercut Western economies by slashing tax and labor rules.

Noting the history of EU “cohesion” and other funding for poor regions as a tool of economic “convergence,” Macron told reporters: “I will reject a European budget which is used to finance divergence, on tax, on labor or on values.”

Poland and Hungary, heavyweights among the ex-communist states which joined the EU this century, are run by right-wing governments at daggers drawn with Brussels over their efforts to influence courts, media and other independent institutions.

The European Commission, the executive which will propose a detailed budget in May, has said it will aim to satisfy calls for “conditionality” that will link getting some EU funding to meeting treaty commitments on democratic standards such as properly functioning courts able to settle economic disputes.

But its president, Jean-Claude Juncker, warned on Friday against deepening “the rift between east and west” and some in the poorer nations see complaints about authoritarian tendencies as a convenient excuse to avoid paying in more to Brussels.

At around 140 billion euros ($170 billion) a year, the EU budget represents about 1 percent of economic output in the bloc or some 2 percent of public spending, but for all that it remains one of the bloodiest subjects of debate for members.

Focus on payments

The Commission has suggested that the next package should be increased by about 10 percent, but there was little sign Friday that the governments with cash are willing to pay that.

“When the UK leaves the EU, then that part of the budget should drop out,” said Dutch Prime Minister Mark Rutte, who leads a group of hawks including Sweden, Denmark and Austria.

“In any case, we do not want our contribution to rise and we want modernization,” he added, saying that meant reconsidering the EU’s major spending on agriculture and regional cohesion in order to do more in defense, research and controlling migration.

On the other side, Czech Prime Minister Andrej Babis said his priorities were “sufficient financing of cohesion policy” a good deal for businesses from the EU’s agricultural subsidies.

German Chancellor Angela Merkel said there had been broad agreement that new priorities such as in defense, migration and research should get new funding and she called for a “debureaucratization” of traditional EU spending programs.

Summit chair Donald Tusk praised the 27 leaders — Prime Minister Theresa May was not invited as Britain will have left before the new budget round starts — for approaching the issue “with open minds, rather than red lines.” But despite them all wanting to speed up the process, a deal this year was unlikely.

Quick deal unlikely

Although all agree it would be good to avoid a repeat of the 11th-hour wrangling ahead of the 2014-20 package, many sounded doubtful of a quick deal even early next year.

“It could go on for ages,” Rutte said. He added that it would be “nice” to finish by the May 2019 EU election: “But that’s very tight.”

Among the touchiest subjects will be accounting for the mass arrival of asylum-seekers in recent years. Aggrieved that some eastern states refuse to take in mainly Muslim migrants, some in the west have suggested penalizing them via the EU budget.

Merkel has proposed that regions which are taking in and trying to integrate refugees should have that rewarded in the allocation of EU funding — a less obviously penal approach but one which she had to defend on Friday against criticism in the east. It was not meant as a threat, the chancellor insisted.

In other business at a summit which reached no formal legal conclusions, leaders broadly agreed on some issues relating to next year’s elections to the European Parliament and to the accompanying appointment of a new Commission for five years.

They pushed back against efforts, notably from lawmakers, to limit their choice of nominee to succeed Juncker to a candidate who leads one of the pan-EU parties in the May 2019 vote. They approved Parliament’s plan to reallocate some British seats and to cut others altogether and also, barring Hungary, agreed to a Macron proposal to launch “consultations” with their citizens this year on what they want from the EU.
…

U.S. stocks rallied on Friday, lifted by gains in technology stocks and a retreat in Treasury yields as the Federal Reserve eased concerns about the path of interest rate hikes this year.

The U.S. central bank, looking past the recent stock market sell-off and inflation concerns, said it expected economic growth to remain steady and saw no serious risks on the horizon that might pause its planned pace of rate hikes.

Investors largely expect the Fed to raise rates three times this year, beginning with its next meeting in March, the first under new Chair Jerome Powell. Traders currently see a 95.5 percent chance of a quarter-percentage-point hike next month, according to Thomson Reuters data.

“Certainly bond yields pulling back today is helpful for stocks, at least for the short term, that has been the narrative that is out there — that higher bond yields are weighing on stocks and this preoccupation with three percent,” said Willie Delwiche, investment strategist at Baird in Milwaukee. “So moving away from that, for today at least, provides a bid for equities.”

Powell’s first public outing will be on Tuesday, when he will testify separately before the House and Senate committees.

The Dow Jones Industrial Average rose 347.51 points, or 1.39 percent, to 25,309.99, the S&P 500 gained 43.34 points, or 1.60 percent, to 2,747.30 and the Nasdaq Composite added 127.30 points, or 1.77 percent, to 7,337.39.

Benchmark 10-year U.S. Treasury notes last rose 13/32 in price to yield 2.8714 percent, from 2.917 percent late on Thursday.

The dip in yields helped boost bond proxy sectors such as utilities, up 2.66 percent, and real estate, up 1.72 percent. The sectors have been among the worst performers so far this year on expectations of climbing rates.

Tech shares climbed 2.17 percent led by gains in Hewlett Packard Enterprise, which rose 10.5 percent and HP Inc, up 3.5 percent.

The two companies created from the split of Hewlett Packard Co in 2015, reported strong results and HPE also announced a plan to return $7 billion to shareholders.

For the week, the Dow rose 0.37 percent, the S&P advanced 0.56 percent and the Nasdaq gained 1.35 percent.

Blue Buffalo Pet Products jumped 17.23 percent after General Mills said it would buy the natural pet food maker for $8 billion. General Mills was the biggest percentage decline on S&P 500, falling 3.59 percent.

Advancing issues outnumbered declining ones on the NYSE by a 4.54-to-1 ratio; on Nasdaq, a 2.82-to-1 ratio favored advancers.

The S&P 500 posted 10 new 52-week highs and one new low; the Nasdaq Composite recorded 64 new highs and 57 new lows.

Volume on U.S. exchanges was 6.05 billion shares, well below the 8.38 billion average over the last 20 trading days.

Reporting by Chuck Mikolajczak.
…

Sub-Saharan Africa continues to appear at the bottom of Transparency International’s annual index, with the violent, chaotic East African nation of Somalia maintaining its 12-year streak as the lowest rated nation on the chart that tracks perceptions of corruption in 180 countries.

The index also found that more than two thirds of the countries surveyed scored below 50 points on the 100-point scale, with an average score of 43.  African nations averaged a score of 32.  No nation has ever earned a perfect score.  New Zealand leads the index with 89 points.  Somalia scored just nine.

Transparency International’s regional adviser for Southern Africa, Kate Muwoki, described the year in corruption on the continent.

“To put it simply, most African governments are failing to address corruption in the region, although we do have leaders that have invested in systemic responses to build strong institutions and create behavior change,” she told VOA from Berlin, where the organization is based.  “… So, in terms of some of these rays of hope, at the top of the table we have Botswana, Seychelles, Cabo Verde, Rwanda and Namibia, who all score, currently, over 50 … And then, in terms of the very bottom of the table, there hasn’t been much change.  We still have the likes of South Sudan, Somalia, right at the bottom, and significant declines from countries like Malawi, Madagascar, Mozambique and Guinea-Bissau.”

But Muwoki says things may change, as the African Union and several key African leaders, notably the presidents of the two largest economies on the continent, Nigeria and South Africa, have recently made clean governance a pet issue.

Key resignations

The year 2017 also saw the fall of several regimes long accused of shady dealings.

No fewer than four heads of state accused of major financial crimes resigned in the past year: Gambia’s Yahya Jammeh, Angola’s Jose Eduardo dos Santos, Zimbabwe’s Robert Mugabe and, most recently, South Africa’s Jacob Zuma.  A high-level corruption scandal also tainted the administration of Ethiopian Prime Minister Hailemariam Desalegn, who resigned earlier this month amid mounting anti-government protests.

But holdouts remain: The Democratic Republic of Congo’s entrenched, corruption-accused leader has repeatedly postponed elections, and the leaders of Uganda, Equatorial Guinea, Gabon, Congo, and Cameroon have all long remained in power amid allegations of mismanagement.  Corruption investigations continue into current and former officials across the continent.

Rays of hope

Zuma’s successor, Cyril Ramaphosa, has made fighting corruption his key issue.  The multi-millionaire  businessman, this week, called for top government officials to be audited, starting with himself.  Several other African heads of state have done the same in recent years.

“Now, if there ever has been anything that many South Africans would like to have line of sight of, it is the lifestyle audit of their public representatives,” he said Tuesday.  “Now that is something that I believe we have to do, and this will be done starting with the executive of the country, yes, we will go in that way,” Ramaphosa said.

And in Nigeria, President Muhammadu Buhari recently announced that all national assets recovered in a recent anti-corruption drive would be sold to benefit the treasury.  Buhari is also the chairman of the AU anti-corruption effort.

Muwoki says the global watchdog has noted these new developments, but urged citizens to keep up the pressure by shining light on suspected corruption.

“2018 marks a very important year for the continent,” she said.  “We have seen this renewed commitment from the African Union and from leaders at the recent summit in Addis Ababa.  It is encouraging and we definitely support this … these are some of the things that we would be encouraging civil society and media, and some of these other key stakeholders to hold these leaders to account.”

 
…

Sub-Saharan Africa continues to appear at the bottom of Transparency International’s annual index, with the violent, chaotic East African nation of Somalia maintaining its 12-year streak as the lowest rated nation on the chart that tracks perceptions of corruption in 180 countries.

The index also found that more than two thirds of the countries surveyed scored below 50 points on the 100-point scale, with an average score of 43.  African nations averaged a score of 32.  No nation has ever earned a perfect score.  New Zealand leads the index with 89 points.  Somalia scored just nine.

Transparency International’s regional adviser for Southern Africa, Kate Muwoki, described the year in corruption on the continent.

“To put it simply, most African governments are failing to address corruption in the region, although we do have leaders that have invested in systemic responses to build strong institutions and create behavior change,” she told VOA from Berlin, where the organization is based.  “… So, in terms of some of these rays of hope, at the top of the table we have Botswana, Seychelles, Cabo Verde, Rwanda and Namibia, who all score, currently, over 50 … And then, in terms of the very bottom of the table, there hasn’t been much change.  We still have the likes of South Sudan, Somalia, right at the bottom, and significant declines from countries like Malawi, Madagascar, Mozambique and Guinea-Bissau.”

But Muwoki says things may change, as the African Union and several key African leaders, notably the presidents of the two largest economies on the continent, Nigeria and South Africa, have recently made clean governance a pet issue.

Key resignations

The year 2017 also saw the fall of several regimes long accused of shady dealings.

No fewer than four heads of state accused of major financial crimes resigned in the past year: Gambia’s Yahya Jammeh, Angola’s Jose Eduardo dos Santos, Zimbabwe’s Robert Mugabe and, most recently, South Africa’s Jacob Zuma.  A high-level corruption scandal also tainted the administration of Ethiopian Prime Minister Hailemariam Desalegn, who resigned earlier this month amid mounting anti-government protests.

But holdouts remain: The Democratic Republic of Congo’s entrenched, corruption-accused leader has repeatedly postponed elections, and the leaders of Uganda, Equatorial Guinea, Gabon, Congo, and Cameroon have all long remained in power amid allegations of mismanagement.  Corruption investigations continue into current and former officials across the continent.

Rays of hope

Zuma’s successor, Cyril Ramaphosa, has made fighting corruption his key issue.  The multi-millionaire  businessman, this week, called for top government officials to be audited, starting with himself.  Several other African heads of state have done the same in recent years.

“Now, if there ever has been anything that many South Africans would like to have line of sight of, it is the lifestyle audit of their public representatives,” he said Tuesday.  “Now that is something that I believe we have to do, and this will be done starting with the executive of the country, yes, we will go in that way,” Ramaphosa said.

And in Nigeria, President Muhammadu Buhari recently announced that all national assets recovered in a recent anti-corruption drive would be sold to benefit the treasury.  Buhari is also the chairman of the AU anti-corruption effort.

Muwoki says the global watchdog has noted these new developments, but urged citizens to keep up the pressure by shining light on suspected corruption.

“2018 marks a very important year for the continent,” she said.  “We have seen this renewed commitment from the African Union and from leaders at the recent summit in Addis Ababa.  It is encouraging and we definitely support this … these are some of the things that we would be encouraging civil society and media, and some of these other key stakeholders to hold these leaders to account.”

 
…

General Motors has proposed $2.8 billion of fresh investment into its South Korean operations over the 10 years as part of its plan to restructure the embattled unit, a South Korean senior government official said on Wednesday.

The offer comes as the Detroit carmaker and the South Korean government discuss restructuring options at loss-making GM Korea, one of GM’s largest offshore operations.

The official with direct knowledge of the matter said GM had also asked South Korea to inject funds into GM Korea in which the country’s state bank also holds a stake. However, the official added that a close look into GM’s proposal was necessary to determine whether the investment plan was sufficient to rescue the unit, which directly employs some 16,000 workers.

“We need to have a closer look through the audit,” the official said.

South Korea’s trade minister said the government has also asked for an audit into GM’s “opaque” management in the country.

“By opaque we mean the high rate of profits to raw material costs, interest payments regarding loans and unfair financial support made to GM’s headquarters,” said Minister Paik Un-gyu told lawmakers in parliament.

Last week, the U.S. automaker announced it would shut down a factory in Gunsan, southwest of Seoul, and said it was mulling the fate of its three remaining plants in South Korea.

A South Korean lawmaker said earlier that GM had put forward a proposal including the investment plan and a debt to equity swap of the Korea unit’s borrowings to the parent company.

In return, GM requested South Korea to take part in financing the investment and raising capital, according to a statement by Jung You-sub, the lawmaker from Bupyeong where GM runs its biggest factory in South Korea.

Jung’s office was not immediately available for comment.

On Tuesday, Reuters reported GM had offered to convert debt of around $2.2 billion owed by its ailing South Korean operation into equity in exchange for financial support and tax benefits from Seoul, four sources with direct knowledge of the matter said.

 
…

General Motors has proposed $2.8 billion of fresh investment into its South Korean operations over the 10 years as part of its plan to restructure the embattled unit, a South Korean senior government official said on Wednesday.

The offer comes as the Detroit carmaker and the South Korean government discuss restructuring options at loss-making GM Korea, one of GM’s largest offshore operations.

The official with direct knowledge of the matter said GM had also asked South Korea to inject funds into GM Korea in which the country’s state bank also holds a stake. However, the official added that a close look into GM’s proposal was necessary to determine whether the investment plan was sufficient to rescue the unit, which directly employs some 16,000 workers.

“We need to have a closer look through the audit,” the official said.

South Korea’s trade minister said the government has also asked for an audit into GM’s “opaque” management in the country.

“By opaque we mean the high rate of profits to raw material costs, interest payments regarding loans and unfair financial support made to GM’s headquarters,” said Minister Paik Un-gyu told lawmakers in parliament.

Last week, the U.S. automaker announced it would shut down a factory in Gunsan, southwest of Seoul, and said it was mulling the fate of its three remaining plants in South Korea.

A South Korean lawmaker said earlier that GM had put forward a proposal including the investment plan and a debt to equity swap of the Korea unit’s borrowings to the parent company.

In return, GM requested South Korea to take part in financing the investment and raising capital, according to a statement by Jung You-sub, the lawmaker from Bupyeong where GM runs its biggest factory in South Korea.

Jung’s office was not immediately available for comment.

On Tuesday, Reuters reported GM had offered to convert debt of around $2.2 billion owed by its ailing South Korean operation into equity in exchange for financial support and tax benefits from Seoul, four sources with direct knowledge of the matter said.

 
…

South Korea’s cryptocurrency industry is anticipating much better times as the market regulator changes tack from its tough stance on the virtual coin trade, promising instead to help promote blockchain technology.

The regulator said Tuesday that it hopes to see South Korea — which has become a hub for cryptocurrency trade — normalize the virtual coin business in a self-regulatory environment.

“The whole world is now framing the outline [for cryptocurrency] and therefore [the government] should rather work more on normalization than increasing regulation,” Choe Heung-sik, chief of South Korea’s Finance Supervisory Service (FSS), told reporters.

FSS has been leading the government’s regulation of cryptocurrency trading as part of a task force.

Cryptocurrency operators have drawn a new optimism from Choe’s comments, seeing them clearly indicating the government’s cooperation in their plans for self-regulation.

“Though the government and the industry have not yet reached a full agreement, the fact that the regulator himself made clear the government’s stance on cooperation is a positive sign for the markets,” said Kim Haw-joon of the Korea Blockchain Association.

Wednesday’s news is a stark reversal of the justice minister’s warnings in January that the government was considering shutting down local cryptocurrency exchanges, throwing the market into turmoil.

Instead, South Korea banned the use of anonymous bank accounts for virtual coin trading as of January 30 to stop cryptocurrencies being used in money laundering and other crimes.

Bitcoin, the world’s most heavily traded cryptocurrency, is now changing hands at a three-week high of $11,086 on the Luxembourg-based Biststamp exchange after falling as low as $5,920.72 in early February.

South Korean electronics giant Samsung has already started production of cryptocurrency mining technologies, local media reported in January.
…

South Korea’s cryptocurrency industry is anticipating much better times as the market regulator changes tack from its tough stance on the virtual coin trade, promising instead to help promote blockchain technology.

The regulator said Tuesday that it hopes to see South Korea — which has become a hub for cryptocurrency trade — normalize the virtual coin business in a self-regulatory environment.

“The whole world is now framing the outline [for cryptocurrency] and therefore [the government] should rather work more on normalization than increasing regulation,” Choe Heung-sik, chief of South Korea’s Finance Supervisory Service (FSS), told reporters.

FSS has been leading the government’s regulation of cryptocurrency trading as part of a task force.

Cryptocurrency operators have drawn a new optimism from Choe’s comments, seeing them clearly indicating the government’s cooperation in their plans for self-regulation.

“Though the government and the industry have not yet reached a full agreement, the fact that the regulator himself made clear the government’s stance on cooperation is a positive sign for the markets,” said Kim Haw-joon of the Korea Blockchain Association.

Wednesday’s news is a stark reversal of the justice minister’s warnings in January that the government was considering shutting down local cryptocurrency exchanges, throwing the market into turmoil.

Instead, South Korea banned the use of anonymous bank accounts for virtual coin trading as of January 30 to stop cryptocurrencies being used in money laundering and other crimes.

Bitcoin, the world’s most heavily traded cryptocurrency, is now changing hands at a three-week high of $11,086 on the Luxembourg-based Biststamp exchange after falling as low as $5,920.72 in early February.

South Korean electronics giant Samsung has already started production of cryptocurrency mining technologies, local media reported in January.
…

Through medication and narcotics smuggling, ivory and people trafficking, oil theft and piracy, Africa is, by conservative estimates, losing about $50 billion a year in illicit financial flows — more, in fact, than it receives in official development assistance. 

A report by the Paris-based Organization for Economic Cooperation and Development offers a bigger look at the illegal economy behind the losses and how African and richer nations can fight it.

The OECD report zooms in on West Africa, and one sector in particular stands out. Catherine Anderson, who heads governance issues as the OECD, said 80 percent of illicit financial flows from West Africa are generated from the theft of natural resouces, principally oil.

But West African countries aren’t the only ones losing out from illicit flows, Anderson said. So are developed nations. Migrant trafficking, a hot-button issue in Europe, is a case in point.

“One of our case studies is on al-Qaida in the Islamic Maghreb, which is benefiting from the kidnap-for-ransom activities,” she said. “They are interdicting the trade and passage of goods across the Sahel, levying protection fees and revenues from the population. These have significant implications, not just for West African populations but for OECD countries, for Europe, in terms of insecurity and instability.”

She said illegal resource flows need to be tackled holistically — not only by the countries of origin, but also by those where the finances are transiting, and those where they finally end up, including developed countries. Doing so can be particularly tricky in West Africa, where a huge informal economy blurs the boundary of what is legal and what isn’t.

Ambassador Según Apata of Nigeria is a member of a U.N. high-level panel looking into illicit financial flows from Africa. He said some African governments are beginning to tackle the problem, but they don’t always have the capacity to do so.

“We have not made giant strides yet,” Apata said. “We are still at the elementary, at the mundane level of implementation.”

Apata said that if the $50 billion in losses from illegal activities were channeled into development in West Africa, it could help check the illegal migration that European countries worry about.
…

Through medication and narcotics smuggling, ivory and people trafficking, oil theft and piracy, Africa is, by conservative estimates, losing about $50 billion a year in illicit financial flows — more, in fact, than it receives in official development assistance. 

A report by the Paris-based Organization for Economic Cooperation and Development offers a bigger look at the illegal economy behind the losses and how African and richer nations can fight it.

The OECD report zooms in on West Africa, and one sector in particular stands out. Catherine Anderson, who heads governance issues as the OECD, said 80 percent of illicit financial flows from West Africa are generated from the theft of natural resouces, principally oil.

But West African countries aren’t the only ones losing out from illicit flows, Anderson said. So are developed nations. Migrant trafficking, a hot-button issue in Europe, is a case in point.

“One of our case studies is on al-Qaida in the Islamic Maghreb, which is benefiting from the kidnap-for-ransom activities,” she said. “They are interdicting the trade and passage of goods across the Sahel, levying protection fees and revenues from the population. These have significant implications, not just for West African populations but for OECD countries, for Europe, in terms of insecurity and instability.”

She said illegal resource flows need to be tackled holistically — not only by the countries of origin, but also by those where the finances are transiting, and those where they finally end up, including developed countries. Doing so can be particularly tricky in West Africa, where a huge informal economy blurs the boundary of what is legal and what isn’t.

Ambassador Según Apata of Nigeria is a member of a U.N. high-level panel looking into illicit financial flows from Africa. He said some African governments are beginning to tackle the problem, but they don’t always have the capacity to do so.

“We have not made giant strides yet,” Apata said. “We are still at the elementary, at the mundane level of implementation.”

Apata said that if the $50 billion in losses from illegal activities were channeled into development in West Africa, it could help check the illegal migration that European countries worry about.
…

When Markus Rohner flew into Cape Town’s airport this month, he found an unexpected line at the men’s washroom.

With the city facing an unprecedented water shortage, airport authorities had turned off all the sink taps but one, leaving visitors to wait in line to wash their hands, under the watchful eye of a bathroom attendant.

“In Johannesburg, there were a lot of jokes about the situation. People were saying to each other: ‘Let’s go to Cape Town for a dirty weekend,'” said Rohner, who visited both cities recently for his job as a sales and marketing director for a Swiss machinery manufacturer.

Cape Town, which is battling to keep its taps flowing as reservoirs run close to dry following a three-year drought, declared a national disaster this month. Without rain, Cape Town could run out of water by July 9, city authorities predict.

For visitors thinking of flying into one of the world’s tourism hotspots, threats of a water “Day Zero” raise a range of questions: Will a visit waste scarce water local people need? Will I be able to flush my hotel toilet and have a shower? Should I come at all?

Sisa Ntshona, who heads the tourism marketing arm of South Africa’s government, has the answer you’d expect: Tourists — who support an estimated 300,000 jobs in South Africa’s Western Cape province — should come but they should be prepared to help out and “Save like a local,” as the slogan goes.

In a city where residents now are expected to use no more than 50 liters of water a day — enough to drink, have a 90-second shower, flush the toilet at least once and wash a few clothes or dishes — tourists “don’t have special privileges,” he said.

That means no baths, swimming pools now sporting salt water instead of fresh, sheets and towels changed less regularly, and signs urging visitors to flush toilets as infrequently as possible.

At one Cape Town hotel, visitors who insist on a bath — which takes 80 liters of water — now have to conspicuously carry a large rubber duck placed in their bathtub to reception to exchange it for a bath plug.

With climate change expected to bring worsening water shortages to cities around the world — from Sao Paulo to Los Angeles to Jakarta — such changes are going to be needed in many places in years to come, said Ntshona, the CEO of South African Tourism.

“How do we recalibrate the norm for global tourism?” he asked, on a visit to London to reassure potential visitors. “Tourists are aware of recycling, carbon emissions. But now it’s water.”

“This is the new norm,” he said. “Even if it rains tomorrow, we can never go back to the old way of consuming water.”

Tourist cash

For Cape Town, keeping tourists flowing through the city is an urgent priority.

Foreign tourists represent only about 1 percent of the people in the city even at peak times, but tourism — foreign and South African — contributes $3.4 billion to the province’s economy each year, said Ravi Nadasen, deputy chair of the Tourism Business Council of South Africa.

Any tourism drop-off in Cape Town also hits the rest of the country, Ntshona said. With many visitors booking itineraries that start in Cape Town and move east, he said, a loss of visitors to Table Mountain also means fewer people at the country’s game parks, vineyards and beaches.

“If South Africa falls off the tourism radar screen globally, to get it back on will take so much attention and focus,” he said.

Bookings for the first quarter of the year have so far not fallen, Ntshona and Nadasen say, though they have been fielding inquiries from worried potential visitors.

“We’ll get a better sense by the end of March, when we look at forward bookings for the next six months,” Ntshona said.

Tourism officials are well aware of the potential threat, however. In 2014, an Ebola crisis in West Africa — a six-hour plane flight away — led to a 23 percent drop in visitors to Ebola-free South Africa as tourists shunned African destinations, Ntshona said.

To try to prevent a repeat of that disaster, government and business leaders are rushing to shore up water supplies — and confidence.

Organizers of dozens of big conferences held in Cape Town each year are making plans to ship in water from other less thirsty parts of the country, Ntshona said.

Hotels have installed low-flow showerheads, turned off fountains and replaced cloth napkins with paper ones.

A Cape Town subsidiary of leading hotel chain Tsogo Sun is this week taking delivery of a pioneering desalination plant, to suck seawater from Cape Town’s harbor and churn out enough fresh water for the chain’s 1,400 Cape Town hotel rooms.

Cape Town itself is also making plans to bring in desalination plants — though not quickly enough to deal with the impending “Day Zero,” now pushed back to July after a successful campaign to cut the city’s water consumption by half.

Political obstacles

Experts have warned of water risks in Cape Town for years, but political infighting has gotten in the way of action, Ntshona admits.

Cape Town is run by an opposition party to the ruling African National Congress — and even the ANC saw its embattled leader, President Jacob Zuma, pushed out of office last week.

“Part of the lesson we’re learning as a country is that when you have a crisis, stop bickering and focus on the issues,” Ntshona said.

Another lesson, he said, is that water shortages — predicted to become longer and deeper across southern Africa as climate change strengthens droughts — cannot be seen as a passing problem.

Winter rains are expected in Cape Town starting in May or June. If they arrive, the current crisis will ease, officials predict.

But, regardless, “we need to recalibrate our relationship with water as a country,” Ntshona said.
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