December 15, 2017

Common Sense: The Disney-Fox Deal Has Friends in High Places

Even though antitrust decisions are supposed to be independent of political influence, Mr. Trump didn’t hesitate to weigh in as soon as the deal was announced. “I know that the president spoke with Rupert Murdoch earlier today, congratulated him on the deal and thinks that, to use one of the president’s favorite words, that this could be a great thing for jobs,” the White House press secretary Sarah Sanders Huckabee told reporters.

“It looks bad to me,” said Christopher L. Sagers, an antitrust professor at Cleveland-Marshall College of Law.

Larry Downes, an antitrust expert and a fellow at the Georgetown McDonough School of Business, agreed. “The government’s theory in Time Warner very much applies to Fox and Disney,” he said. If the government “doesn’t challenge this, it will look very weird,” he added. “But I’m not sure appearances matter to this administration.”

The Disney-Fox deal is shaping up as another litmus test for President Trump’s new antitrust enforcement chief, Makan Delrahim, who is already under fire for taking ATT and Time Warner to court. Mr. Delrahim has said repeatedly that antitrust decisions are independent from political interference.

“I have never been instructed by the White House on this or any other transaction under review by the antitrust division,” he said of the ATT case.

That’s unlikely to stop speculation about his division’s handling of the latest blockbuster. Antitrust experts told me this week that in many ways the Disney-Fox deal raises even more antitrust questions than does the combination of ATT and Time Warner. That’s because it’s both a merger of direct competitors — a so-called horizontal merger, which typically get close scrutiny — and has some of the same vertical elements that caused the Justice Department to try to block the ATT-Time Warner merger.

Whether a combination of the Fox film and television studios with Disney’s entertainment arm would raise red flags under Justice Department guidelines depends on how the government defines the market. The deal would reduce the number of Hollywood studios to five from six. Last year, Disney’s studio accounted for 26.4 percent of the domestic theatrical box office, the largest share, and Fox was third, with 12.9 percent. Although the combined studios would have had close to 40 percent of the market in 2016, that’s typically not enough to run afoul of the department’s merger guidelines, Mr. Sagers pointed out, unless the government decides to define the market differently.

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If the market is as narrow as films about superheroes, and Disney gains control of Fox’s “X-Men” franchise, that would almost surely trigger concerns.

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Randall Stephenson, left, the ATT chairman, and Jeffrey Bewkes, Time Warner chairman and chief executive, at a Senate Judiciary subcommittee hearing on the proposed merger of their companies, which the government is trying to block. Credit Evan Vucci/Associated Press

There are more serious antitrust issues about Fox’s regional sports networks, given ESPN’s dominance of cable sports. If that market is measured by cable sports revenue, the Disney-owned ESPN is so dominant that nearly any acquisition of another cable sports provider, even Fox’s relatively small regional networks, would trigger antitrust review.

“From a horizontal perspective, sports is the main issue,” said Scott Hemphill, a law professor and antitrust expert at New York University School of Law.

If the Justice Department really wanted to be aggressive, it might also invoke the words of former Supreme Court Justice Hugo Black, who wrote in a landmark opinion, “The widest possible dissemination of information from diverse and antagonistic sources is essential to the welfare of the public.”

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Under terms of the proposed deal, Fox shareholders would own about 25 percent of Disney in an all-stock transaction. Given the concentrated market for cable news, a combination of Fox News and Disney’s ABC would likely not have passed antitrust muster. But depending on how much influence the Murdochs are able to exert at Disney, the family might achieve much the same objective, perhaps with a board seat, or, as some have speculated, if James Murdoch joins Disney as an executive and even becomes a potential successor to the Disney chief executive, Robert Iger.

Such speculation may not be all that far-fetched. “Reports suggest that James Murdoch is apparently in line for a senior management role within Disney as part of the deal,” said Doug Creutz, senior media and entertainment analyst for Cowen Co. in a note to clients Thursday.

Mr. Iger said during a conference call Thursday that James Murdoch’s future role, if any, hasn’t been decided.

Mr. Hemphill, the law professor and antitrust expert, pointed to an emerging antitrust doctrine called common ownership, which looks beyond the formality of separate companies to examine who actually exerts control.

All those concerns are based on traditional antitrust review standards. But since the case against ATT and Time Warner was filed, those standards have been anything but traditional.

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Vertical mergers like that of ATT and Time Warner — ATT buys content from Time Warner, but doesn’t compete directly with it — used to be approved almost routinely, albeit often with conditions. No longer. “We’re in a topsy-turvy antitrust world,” Mr. Downes said.

One of the government’s main concerns in its effort to block the ATT deal, according to its complaint, is the risk that ATT would withhold Time Warner content from rival distributors such as Netflix, thus hurting consumers.

But Disney, as it prepares to start its own direct-to-consumer Netflix rival, is already withholding some of its content, and has said it would withhold much more as existing agreements expire. It will almost surely pull 21st Century Fox content, like “X Men,” the planned “Avatar” sequels and TV shows like “The Simpsons” and “The Americans,” and offer them on its own service.

Mr. Downes said he doesn’t see how the Justice Department would distinguish between the two deals, should it approve the Fox-Disney transaction.

How Mr. Delrahim and the antitrust division handle the Fox-Disney review remains to be seen, of course. But whatever he decides, the shadow of Mr. Murdoch will loom large.

“I hesitate to make any predictions about Trump and what he’ll do,” Mr. Sagers said. “But there’s a long tradition that the White House shouldn’t get involved in these decisions.”

He said he was “reluctant to believe” that Mr. Delrahim would allow political considerations or Mr. Trump’s friendship with Mr. Murdoch to influence his decision — “but maybe I’m being naïve.”

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Article source: https://www.nytimes.com/2017/12/14/business/media/antitrust-disney-fox.html?partner=rss&emc=rss

Stuart Evey, a Founding Force at ESPN, Is Dead at 84

“Stu was skeptical, and he was constantly trying to figure out what might go wrong,” Mr. Rasmussen said in a telephone interview. “But he was a sports enthusiast, and it would be a feather in his cap if it turned out well.”

Mr. Evey persuaded the Getty board to invest $10 million in ESPN for an 85 percent stake, with Mr. Rasmussen and his family owning the rest. It was a critical investment. The network went on the air on Sept. 7, 1979, and eventually became the largest force in sports media.

But something more than a willingness to take a risk attracted Mr. Evey to the ESPN proposal.

By the time Getty invested in ESPN, Mr. Evey had been at the company for 20 years. He had built his career largely around that of George F. Getty II, one of the billionaire J. Paul Getty’s five sons. As George Getty’s administrative assistant and then his executive assistant, Mr. Evey was given a privileged view of the oil business and close-up exposure to his boss’s drinking and depression.

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Stuart Evey, right, with ESPN’s president, Bill Grimes, center, and the network’s production chief, Scotty Connal, at company headquarters in Bristol, Conn. in 1982. Credit Rick LaBranche

Because of his friendly relationship with George Getty, Mr. Evey became a protector, a kind of fixer; he thought of Mr. Getty as a brother who had “likely led me down the road to overindulgences that might have killed me if I hadn’t smartened up later in life,” he wrote in his memoir, “ESPN: Creating an Empire” (2004).

By 1972, Mr. Evey was officially vice president for Getty Oil’s diversified activities, which included commercial real estate, hotels, lumber mills, wine and farming. The job kept him close to George Getty.

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“A lot of times when I was with him, he would say, ‘Stu, one of my great hopes is to develop an operating company that doesn’t have my father’s name on it,’ ” Mr. Evey said in a lecture at Washington and Lee University in 2010.

Mr. Getty died of an overdose of alcohol, diet pills and barbiturates in 1973 in what was ruled a probable suicide, but Mr. Evey believed that owning ESPN would have satisfied his ambition to break away from his father.

“It was far removed from the core business of Getty,” he said.

Stuart Wayne Evey was born on Feb. 26, 1933, in Havre, Mont., and lived in nearby Chinook as a child. His father, Clare, was a railroad dispatcher and administrator; his mother, Evelyn, was a homemaker. The family later moved to Washington State.

Mr. Evey graduated from high school in Spokane and studied business at the University of Washington. He served in the Army honor guard in Berlin.

He joined Tidewater Oil, which was controlled by J. Paul Getty, as a management trainee in 1958 and remained with the company after it relocated from San Francisco to Los Angeles, where it eventually merged into Getty Oil.

Mr. Evey worked in several capacities at Getty, but ESPN was his most high-profile project.

“I was laughed at in the company, in a kind of kidding way,” he was quoted as saying in “Those Guys Have All the Fun.” “They called it ‘Evey Sports Programming Network,’ not ESPN. My whole business reputation was on the line.”

As ESPN’s chairman, Mr. Evey hired Chet Simmons from NBC to be the network’s first president; helped make rights deals with the N.C.A.A. and the United States Football League; sold a 10 percent stake in the network to ABC in 1982 (at a point where Getty’s investment in ESPN had reached $55 million); and quixotically, if briefly, pursued the rights to televise the 1984 Summer Olympics in Los Angeles.

“He was not at all easy to get along with,” Mr. Rasmussen said. “We were three people going in different directions: Stu, Chet and me. Stu got Chet to come on board with the guarantee that I wouldn’t interfere, which led to my demise.”

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Mr. Rasmussen left in 1980, and Mr. Simmons, in 1982, moved to another start-up, the ultimately short-lived United States Football League, as its first commissioner.

Two years later, Mr. Evey was out after Texaco acquired Getty for $10 billion and sold its stake in ESPN to ABC for $188 million.

Mr. Evey said he was stung by the abruptness of his departure from ESPN — which also concluded his 26 years at Getty.

“The thing was, it was really beginning to shine,” he said of the network in an interview with KHQ-TV in Spokane in 2007. “I was hurt about that. Here’s the one thing I shepherded through that people said couldn’t happen.”

ESPN was not his only television venture for Getty. In 1980, he was involved in a Getty partnership with several Hollywood studios in Premiere, a proposed pay-TV network that was planning to compete against HBO, Showtime and the Movie Channel.

But Premiere never started. The Justice Department opposed the venture, and a federal judge issued an injunction, saying that the government was likely to prove that it would violate antitrust laws.

In the decades since, Mr. Evey served as a management consultant and as a director on corporate boards.

In addition to his daughter Christine, Mr. Evey is survived by his wife, the former Mary Dailey; another daughter, Susan Glamuzina; and three grandchildren. His first marriage, to Shirley Kinne, ended in divorce. She died in 2006.

Mr. Evey remained proud of his part as a founder of ESPN.

“There’s absolutely no way Getty would have gone into ESPN without me. None,” he said in “Those Guys Have All the Fun.”

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He added: “I was given the opportunity to take the risk for past performance, perhaps, but also for personal relationships. I did this primarily because I thought George Getty would’ve liked it.”

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Article source: https://www.nytimes.com/2017/12/14/obituaries/stuart-evey-a-founding-force-at-espn-is-dead-at-84.html?partner=rss&emc=rss

‘Are You Normal?’ Putin Asks U.S. Congress in Annual News Gathering

“This is all made up by people who oppose Trump to make his work look illegitimate,” Mr. Putin said, adding that there is a “deep state” in the United States that fosters hostility toward Moscow: “Do they want to ban all contact?”

Asked to assess Mr. Trump’s record, he said that was up to the American people, but noted some “serious achievements.”

“Look at the markets, how they went up; that speaks about investors’ trust in what he does,” said Mr. Putin.

He also held out hope that Mr. Trump would keep his campaign promise to improve ties with Moscow, repeating that there were many areas of common concern, such as terrorism, Afghanistan and the spread of nuclear weapons.

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The buffet table at Mr. Putin’s annual news conference, which he used to promote his presidential campaign and to jab the United States. Credit Maxim Shemetov/Reuters

On North Korea, also known as the Democratic Republic of North Korea, Mr. Putin mocked Congress for condemning Russia while seeking its help.

“You are interesting guys,” the president said with a smirk. American lawmakers appear to be good-looking, well dressed and smart, he said, but they “are placing us on the same shelf with D.P.R.K. and Iran while simultaneously pushing Trump toward solving the North Korean and Iran nuclear problems through joint efforts with us. Are you normal at all?”

A few Russian journalists from the independent press managed to ask serious questions on issues like the absence of political competition, the lack of rule of law and government favoritism toward Putin cronies. Mr. Putin inevitably sidestepped them.

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He did sometimes concede there were problems, but invariably laid the blame somewhere outside the Kremlin walls. The Olympic doping scandal was one such topic.

Mr. Putin, who cut his teeth as a K.G.B. spy, suggested that Grigory M. Rodchenkov, the whistle-blower who revealed the state-backed Russian doping program, had become a hostage of the F.B.I. after fleeing to the United States.

“What are they doing with him?” Mr. Putin said. “What drugs are they giving him to make him say what they want him to say?”

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On domestic matters, interest was focused on the presidential election, which Mr. Putin is expected to win handily.

One of his opponents, Ksenia A. Sobchak, attended the news conference in her role as a leading journalist for the independent television channel Dozhd, saying it was her only chance to ask him a question since he refused to debate.

Ms. Sobchak said that being an opposition candidate in Russia meant being jailed or worse, and cited the case of Aleksei A. Navalny, who has been repeatedly harassed through physical attacks and what he calls politically motivated court cases and convictions that make him ineligible to run.

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The journalist Ksenia A. Sobchak, one of Mr. Putin’s opponents, asking a question of Mr. Putin during the news conference. Credit Pavel Golovkin/Associated Press

“Is the government literally afraid of genuine competition?” she asked.

To this and another question, Mr. Putin said that Russia should have a competitive electoral system and that the lack of support for the opposition was not because of repression but their own actions.

“It is important to not just make noise out there on public squares or behind the scenes, and talk about a regime that is against the people,” he said. “It is important to offer something, some improvement.”

Mr. Putin compared Mr. Navalny to Mikheil Saakashvili, the former president of Georgia who became a figure in the Ukrainian opposition and has been making a spectacle of himself at anticorruption protests in Kiev in recent weeks.

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“The people you mention are Saakashvilis; you want them to destabilize the situation in the country?” said Mr. Putin, who avoids mentioning Mr. Navalny by name. “I am sure that the majority of Russians do not want this and won’t allow this to happen.”

The annual news conference is the main chance for journalists from all across Russia to come to Moscow to try to ask the president a question, and every year it becomes a little more chaotic, with some 1,640 journalists accredited this year. Those attending were jammed into one auditorium trying to attract Mr. Putin’s attention by screaming, and many waved signs naming their region or issue.

Republic.ru, a online magazine, said the event had become such a bore that it refused to cover it this year and offered readers a 50 percent discount on subscriptions while it was happening.

One of the few electric moments occurred when the owner of a fish plant in the northern city of Murmansk was called on. After admitting that he had lied about being a journalist, he made an impassioned plea for the president to rescue his industry.

At another point, scanning the room, Mr. Putin started to answer a question about the lack of competition in the presidential election by noting that somebody was holding up a sign saying “Bye-bye Putin.”

The woman holding it explained that it was actually “Babay Putin,” Grandpa Putin in the language of the ethnic Tatar minority, and she asked about its preservation.

“Ah, babay,” said Mr. Putin. “My vision does not seem to be getting any better with age.”

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Article source: https://www.nytimes.com/2017/12/14/world/europe/vladimir-putin-media.html?partner=rss&emc=rss

‘Curb Your Enthusiasm’ Will Return for Season 10


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Larry David, left, and Lin-Manuel Miranda in “Curb Your Enthusiasm.” The show has been renewed for a tenth season. Credit John P. Johnson/courtesy of HBO

In September, “Curb Your Enthusiasm” cast member Jeff Garlin slyly told Seth Meyers that the odds of the show returning for a tenth season were “49 percent.” That number is now closer to 100: HBO announced that “Curb” has been renewed for another season, with production resuming in the spring.

“As I’ve said many times, when one has the opportunity to annoy someone, one should do so,” Larry David, the creator and star of the series, said in a statement.

“Curb Your Enthusiasm” returned to HBO this fall after a six-year hiatus. The season followed Larry’s attempts to stage the musical “Fatwa!,” about the Ayatollah Khomeini issuing a fatwa in 1989 ordering Muslims to kill Salman Rushdie after the release of his novel “The Satanic Verses.” Lin-Manuel Miranda played an exaggerated version of himself, and Mr. Garlin, Susie Essman, J.B. Smoove, Cheryl Hines and Richard Lewis all returned to their roles.

A premiere date for the next season of “Curb Your Enthusiasm” has yet to be announced.

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Article source: https://www.nytimes.com/2017/12/14/arts/television/curb-your-enthusiasm-season-10.html?partner=rss&emc=rss

Morgan Spurlock: ‘I Am Part of the Problem’

In his post, he reflected on the details of an encounter that he had when he was a student in college. In that account, he said he “hooked up” with a woman who later wrote a short story for a class about it, accusing him by name of rape.

He said he was “floored” when a friend told him about the woman’s short story. “This wasn’t how I remembered it at all,” he said.

He said that the two went back to his room after a night of drinking. In his account, he said they “started having sex” although she had pushed him off while “fooling around” and saying she did not want to.

At one point the woman started to cry.

“I didn’t know what to do,” Mr. Spurlock wrote. “We stopped having sex and I rolled beside her. I tried to comfort her. To make her feel better. I thought I was doing O.K., I believed she was feeling better. She believed she was raped. That’s why I’m part of the problem.”

In recent months, multiple women have come forward with stories of sexual assault and harassment, particularly after The New York Times and The New Yorker published reports in October about numerous harassment, sexual assault and rape allegations against the Hollywood producer Harvey Weinstein.

Amid a relentless series of revelations, many high-profile men in the entertainment, news media, restaurant and other industries have been fired or forced to resign. Men in the movie and restaurant business have had projects canceled or suspended.

Mr. Spurlock appears to be an unusual case because he has opened up about his behavior before any public accusation. A representative said in an emailed statement on Thursday that Mr. Spurlock had no further comment.

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Mr. Spurlock also said in his statement that about eight years ago, he settled a sexual harassment allegation for calling his assistant “hot pants” or “sex pants” from across the room in the office.

“Something I thought was funny at the time, but then realized I had completely demeaned and belittled her to a place of non-existence,” Mr. Spurlock wrote.

“So, when she decided to quit, she came to me and said if I didn’t pay her a settlement, she would tell everyone. Being who I was, it was the last thing I wanted, so of course, I paid. I paid for peace of mind. I paid for her silence and cooperation. Most of all, I paid so I could remain who I was.”

He said he had been unfaithful to every wife and girlfriend that he has had. “Over the years, I would look each of them in the eye and proclaim my love and then have sex with other people behind their backs,” he wrote. “I hurt them. And I hate it. But it didn’t make me stop.”

In his post, Mr. Spurlock tried to examine the reasons for his actions. He said he was sexually abused as a boy and as a teenager, which he only told his first wife about because he was afraid of “being seen as weak or less than a man.”

“Is it because my father left my mother when I was child? Or that she believed he never respected her, so that disrespect carried over into their son?”

He also said he struggled with daily depression and had been consistently drinking since the age of 13.

Mr. Spurlock said that he hoped, by openly admitting what he had done, that he could change for the better. “I’m finally ready to listen,” he said.

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Article source: https://www.nytimes.com/2017/12/14/arts/morgan-spurlock-sexual-misconduct.html?partner=rss&emc=rss

India’s tax regulators crack down on major bitcoin exchanges

Beware of bitcoin, India’s central bank warns investors

Nine cryptocurrency exchanges have been inspected, according to the media, in Delhi, Pune, Bengaluru, Hyderabad, and Kochi.

Tax department officials said the operation was conducted under section 133A of the Indian Income Tax Act to determine the identities of digital currency investors, their transactions, the bank accounts used, emails, and other data.

They have reportedly used software tools to capture exchange data, including “cloning and mirror imaging” and identified the accounts of a number of high-net-worth individuals.

“The income tax officials are gathering evidence to establish the identity of investors and traders, the transactions undertaken by them, the identity of counterparties, and the related bank accounts used, among other things,” an income tax official told the PTI.

The regulators said they were also investigating cases from last year when large amounts of “black money” had been laundered using bitcoin during the demonetization process in the country.

Last week, India’s central bank warned “users, holders, and traders” of cryptocurrency related risks. Finance Minister Arun Jaitley said the government does not recognize bitcoin. Authorities even started a so-called ‘Virtual Currency Committee’ in April to research and propose a regulatory framework for cryptocurrencies in the country.

READ MORE: India’s central bank rejects bitcoin other cryptocurrencies as legal tender

Demand for bitcoin is outweighing supply in India, pushing its price in the country up to 20 percent higher than international prices. Statistics show that about 30,000 customers are actively trading at any one time.

Article source: https://www.rt.com/business/413211-india-bitcoin-exchanges-raids/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

What’s ripple & why is it setting cryptocurrency world on fire?

The world’s fourth most valuable cryptocurrency was trading at 70 cents at 14:40 GMT on Thursday, according to CoinMarketCap data. Ripple has seen its price grow by 10,000 percent since the beginning of the year, when it was trading at just $0.006 per token.

Though the price for ripple is more affordable than its rivals, ripple’s market cap has reached $27 billion, compared to litecoin’s $16 billion trading at $297.83, and IOTA’s $11.5 billion at $4.13. Ripple’s rally dragged litecoin down to fifth among the most valuable cryptocurrencies.

Ripple was launched in 2012 in California and is currently listed on 30 exchanges. The digital currency is closely connected to the banking world, as it was initially designed as a worldwide payment and transmission system. Ripple, the company behind the cryptocurrency, has licensed its blockchain technology to over 100 banks as of October.

Last month, American Express introduced instant blockchain-based payments using ripple for US corporate clients sending funds to UK- based businesses, which bank with the British branch of Santander. At the same time, Michael Arrington’s $100 million cryptocurrency hedge fund will be reportedly valued in ripple’s XRP.

Experts see no apparent reasons for ripple’s recent rally other than positive momentum. The launch of bitcoin futures last weekend pushed the price of bitcoin to new record highs with the rest of the top virtual currencies, including litecoin and ethereum following the leader, as investors began to believe in the potential acceptance of digital assets.

“The launch of bitcoin futures by Cboe Global Markets earlier this week has been seen as a celebrity endorsement and a stamp of approval on crypto. Ripple is very promising … and many people are excited about this particular coin. It is in a powerful position and serves as a payment network allowing you to transfer dozens of different currencies worldwide at lightning speed,” said Standpoint Research’s Ronnie Moas, as quoted by CNBC.

Article source: https://www.rt.com/business/413191-ripple-surge-beats-bitcoin-litecoin/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

China about to knock out petrodollar by trading oil in yuan

China’s launch of ‘petro-yuan’ in two months sounds death knell for dollar’s dominance

According to Bloomberg, which cited a statement from the exchange, 149 members of Shanghai International Energy Exchange traded 647,930 lots in the rehearsal with a total value of 268.2 billion yuan. The system met the listing requirements of crude futures after the exercise, it added.

“This contract has the potential to greatly help China’s push for yuan internationalization,” said Yao Wei, chief China economist at Societe Generale in Paris.

She added, however, “its success will hinge critically on the degree of freedom allowed for the capital flows related to the contract.”

A former China division chief at the International Monetary Fund, Eswar Prasad said: “It is not unreasonable to envision a world in which the overwhelming share of commodity contracts, especially for oil, are no longer denominated just in dollars.”

But “the yuan’s role in global finance will ultimately be determined by the degree of commitment of Xi Jinping’s government to economic and financial market reforms.”

Since the 1970s, the global oil trade has almost entirely been conducted in US dollars. The largest energy consumer, China, is interested in having oil contracts in yuan. Beijing plans to introduce its own oil benchmark which will rival Brent or West Texas Intermediate. Analysts say Chinese authorities will need to first convince large oil producers and consumers to use the yuan and invest in the Shanghai benchmark.

The Chinese government announced plans to start a crude oil futures contract priced in yuan and convertible into gold earlier this year. The contract will enable the country’s trading partners to pay with gold or to convert yuan into gold without the necessity to keep money in Chinese assets or turn it into US dollars.

The new benchmark will reportedly allow exporters, such as Russia, Iran or Venezuela to avoid US sanctions by trading oil in yuan.

In September, Venezuela ditched the greenback for oil payments. Caracas has ordered oil traders to convert crude oil contracts into euro and not to pay or be paid in US dollars anymore. The measure followed the rolling out of sanctions by the United States against the country.

Article source: https://www.rt.com/business/413107-petro-yuan-futures-trading/?utm_source=rss&utm_medium=rss&utm_campaign=RSS

Europe’s Central Bank, Lagging Its Counterparts, Faces Eventful 2018

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Mario Draghi, the president of the European Central Bank, was scheduled to attend the central bank’s final meeting of 2017 on Thursday. The bank has kept its interest rate at zero as the Federal Reserve and the Bank of England have raised their rates.CreditArne Dedert/DPA, via Associated Press

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Dec. 13, 2017

FRANKFURT — A lot is happening in the central banking world.

In Washington, the Federal Reserve has raised interest rates again to brake the sizzling United States economy. And the Bank of England is also in rate hiking mode.

Not so the European Central Bank. Expectations are low that Mario Draghi, the bank’s president, will make news on Thursday when he meets with reporters at the bank’s final meeting of 2017. The fireworks, though, will probably be coming in the New Year.

The central bank is not likely to make any major policy pronouncements in the short term, but the coming year may be a watershed. It could mark the end to the crisis measures that have been in place in the eurozone since 2008, and the beginning of a new era — with monetary policy returning to normal and the central bank beginning to gently push up interest rates.

Mr. Draghi’s news conference Thursday will most likely be dominated by questions about what 2018 holds for the eurozone economy and how the central bank would react.

Here are some of the things to watch for.

How much stimulus, and for how long?

The European Central Bank’s Governing Council set a course for 2018 when it announced plans in October to scale back the purchases of government and corporate bonds that it has been using to hold down interest rates and stimulate inflation. The bank said it would keep buying bonds at a reduced rate at least through September, and left open the door for continued purchases after that.

But investors and analysts have already begun speculating about whether the central bank will, at some point, rule out an extension of the debt purchases past September. That would set the stage for the central bank to start raising rates again for the first time in a decade.

Statements recently by members of the Governing Council have reinforced the speculation. Benoît Coeuré, a member of the European Central Bank’s executive board, said in November that he hoped the need for central bank stimulus will have run its course by September.

“There is a growing sense that the effectiveness of our monetary policy is now less reliant on our net asset purchases,” Mr. Coeuré said in an interview with the German newspaper Handelsblatt.

Reporters will grill Mr. Draghi about his opinion.

Will the economy stay on track?

The eurozone economy is humming. But it’s an open question what will happen when the central bank is no longer flooding the eurozone with cash.

The bank’s outlook on the state of the eurozone economy will be clearer Thursday, when its in-house economists issue their latest forecasts for growth and inflation. The estimates do not necessarily reflect the views of Mr. Draghi or all members of the Governing Council, but are closely watched for hints of where the bank thinks the economy is going.

If the bank’s economists raise their forecast for inflation, for example, that could push forward expectations of when the Governing Council will begin raising its benchmark interest rate, which is currently zero.

The new economic projections, “could well turn out to be the most interesting aspect of the E.C.B.’s December meeting,” economists at Oxford Economics said in a report to investors.

Out of sync?

The European Central Bank exercises strong influence over interest rates in the eurozone but it is also at the mercy of financial markets. They react to a host of forces — not the least of which is what the Fed is doing.

Now that the Fed is busy raising rates, there is a risk that the rising cost of credit could spill over to the eurozone, slowing down the economy before the European Central Bank is ready. The Bank of England raised its benchmark rate in November for the first time in a decade and, with British inflation on the rise, more hikes could be on the way. In effect, the European Central Bank is moving at a different speed than its two most important counterparts, even though their economies are closely intertwined.

Mr. Draghi will certainly be asked about the Fed’s action, and what the European Central Bank might do to keep rates low. At the same time, he is skilled at deflecting questions. But 2018 will be another matter.

“The E.C.B. has said and done everything it wanted to do this year,” Carsten Brzeski, an economist at ING Bank, said in a report to clients.

Follow Jack Ewing on Twitter: @JackEwingNYT.

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Article source: https://www.nytimes.com/2017/12/13/business/economy/ecb-draghi-rates.html?partner=rss&emc=rss

Fed Predicts Modest Economic Growth From Tax Cut

The Fed and Congress are moving in opposite directions. The Fed, in raising rates, is reducing the support it has provided to the economy since the financial crisis. Congressional Republicans, meanwhile, are preparing a $1.5 trillion tax cut for businesses and individuals with the aim of stimulating economic growth.

Some Fed officials, including Ms. Yellen, cautioned earlier this year that tax cuts could push the pace of growth to an unsustainable level, resulting in higher inflation, and that the Fed might respond by raising interest rates more quickly, to restrain growth and keep a lid on inflation.

After seeing the details of the tax plan, however, Fed officials have concluded that there is no need to raise rates more quickly. A quarterly update of the Fed’s economic forecast showed that officials still expect to raise rates three times next year — unchanged from the last economic forecast.

“We continue to think that a gradual path of rate increases remains appropriate even with almost all participants factoring in their assessment of the tax policy,” Ms. Yellen said on Wednesday.

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A worker at an Amazon warehouse in New Jersey. By raising rates for the third time this year, Federal Reserve policymakers signaled their confidence that the economy is in good health. Credit Lucas Jackson/Reuters

In part, the Fed has concluded the tax plan doesn’t pack a large punch. Fed officials predicted that the economy would grow at a 2.5 percent pace next year; the previous forecast was 2.1 percent.

President Trump has predicted that the tax plan could deliver 4 percent growth or more.

Apprised of those comments by a reporter, Ms. Yellen responded: “I wouldn’t want to rule anything out. It is challenging, however, to achieve growth of the levels that you mentioned.”

The Fed also has learned that it’s not so easy to increase inflation, which has remained persistently low despite a tightening labor market and strengthening economy. The Fed aims to keep prices rising by 2 percent a year; it is on pace to undershoot that goal for the sixth straight year, and Fed officials on Wednesday predicted a seventh consecutive failure in 2018.

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But the Fed’s outlook is also politically convenient, even if some analysts described it as overly optimistic. Republicans argue that the tax cuts will deliver a lasting boost to economic growth by encouraging investment. They do not want the Fed to get in the way by raising rates.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, described the Fed’s forecast as “hopelessly unrealistic.” He noted that the Fed was predicting that growth would be stronger than it expected, and unemployment would decline further, but without any increase in inflation.

“In short, the Fed forecasts an endless expansion, with minimal inflation pressure,” he said.

It would be relatively easy for the Fed to respond if inflation does begin to climb. A thornier problem is the concern voiced by a minority of Fed officials that the central bank is already raising rates too quickly.

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Two Fed officials voted against Wednesday’s rate increase: Charles L. Evans, president of the Federal Reserve Bank of Chicago, and Neel Kashkari, president of the Federal Reserve Bank of Minneapolis. Mr. Evans has argued that the Fed may be holding down inflation by undermining public confidence that it will raise inflation back up to 2 percent.

The Fed’s rate increases have had little impact on financial markets, which have also shrugged off the Fed’s efforts to tighten borrowing conditions. Rates on many loans have declined since the Fed’s most recent rate increase, in June, and credit terms have loosened. Lee Ferridge, head of North American macro strategy for State Street Global Markets, said Wednesday’s decision was “a bit of a nonevent, quite honestly.”

Asset prices, which have climbed strongly this year even as the Fed has raised rates, were largely unchanged on Wednesday. The Standard Poor’s 500-stock index dropped 0.1 percent, closing at 2,662.85. The yield on the benchmark 10-year Treasury fell to 2.34 percent from 2.4 percent on Tuesday.

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Mr. Ferridge said the ongoing stimulus campaigns by other central banks, notably the European Central Bank and the Bank of Japan, were offsetting the effect of the Fed’s retreat.

“You’ve still got huge amounts of liquidity coming into the system, and that’s what’s driving markets,” he said. “You’ve got the Fed tightening, but you’ve got global policy loosening.”

Some economists see the lack of tightening in financial markets as a reason for the Fed to raise rates more quickly, to prevent the formation of bubbles that could cause economic disruptions.

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Ms. Yellen played down such concerns on Wednesday. She said the Fed saw little evidence that a fall in asset prices would cause broader pain. The use of borrowed money, for example, remains relatively modest by historical standards. “When we look at other indicators of financial stability risks, there’s nothing flashing red there or possibly even orange,” she said.

The Fed’s rate increases also haven’t had much impact on the domestic economy.

The average interest rate on a 30-year mortgage loan, at 3.94 percent last week, was lower than the 4.13 percent average rate at the same time last year, according to Freddie Mac.

But Ruben Gonzalez, an economist at Keller Williams, the real estate franchise based in Austin, Tex., said he expected mortgage rates to start rising gradually.

Mr. Gonzalez noted that housing prices were rising, and he said that higher mortgage rates could worsen affordability problems in some markets. “Any time rates are trending upward, and prices are growing at a rapid pace, affordability is going to be a big conversation,” he said.

The next round of monetary policy decisions will be made by a new group of leaders.

Ms. Yellen is scheduled to step down in early February, at the end of her four-year term. Mr. Trump has nominated Jerome H. Powell, a Fed governor, as the next chairman. He is awaiting Senate confirmation. Only one of the nine voting members of the monetary policy committee at the beginning of this year is expected to remain a voting member by the middle of 2018.

Ms. Yellen on Wednesday praised Mr. Powell as “somebody who understands the Federal Reserve very well and shares its values,” and she said she would work to ensure a smooth transition.

Asked about her own legacy, she described her time at the Fed as “immensely rewarding.”

“I feel good that the labor market is in a very much stronger place than it was eight years ago,” she said.

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Article source: https://www.nytimes.com/2017/12/13/business/economy/fed-interest-rates.html?partner=rss&emc=rss