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“With current monetary policy in the United States, there is a great risk of recession,” says economist Mohamed El-Erian.

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Havan sees its IPO cut in half due to political and corporate risks.

There is a high risk of a recession in the United States due to the monetary policy of the Federal Reserve System (FRS, central bank of the United States), since inflation is very high and on the supply side there are structural changes that are observed in macroeconomic models. capture is not very good. This is the opinion of economist Mohamed El-Erian, chief advisor to the Allianz group and president of Queens College, University of Cambridge, UK.

In an interview with Estadão / BroadcastEl-Erian argues that the Fed is aware of the situation and will reduce monetary stimulus for the US economy at the end of the year, when high inflation has not dropped to the target level of 2% and will remain in the range of 4-5%. He believes that the reduction of incentives will begin no earlier than December and should last from 10 to 12 months. “The Federal Reserve should have already started this process. It is almost impossible to point to the benefits of buying $ 120 billion in financial assets a month at this time, ”he says. “After that, there will be an increase in interest rates, and the first increase will happen in 2023, which I think will be too late.”

According to the economist, the Federal Reserve is “held hostage to the wrong framework for monetary policy,” which is based on past evidence of inflation. However, it would be more pertinent to listen to comments from companies that indicate that costs are rising due to three factors: transport bottlenecks, labor shortages, and a shortage of raw materials. “These difficulties of a few companies will soon disappear, but they have price power as demand is so high.” Read the key interview excerpts below.

How do you assess the conduct of the Federal Reserve’s monetary policy, especially the process of phasing out the monetary stimulus program?

Last week, Federal Reserve Chairman Jerome Powell advised the market to wait for a later announcement of a cut in stimulus. Ahead of Powell’s press conference at the end of the Fed’s July meeting, there was a consensus that the US central bank could announce some measures in August or September and put them into effect in November or December. After this Powell conference, that expectation changed: the announcement was made in November or December, and the process was to start in January or March 2022. The Federal Reserve should have already started this process. Today it is almost impossible to determine the benefits of buying $ 120 billion in financial assets a month. Even the real estate sector is very hot. And the Fed continues to buy $ 40 billion in mortgage-backed assets. Nobody understands why they do it. There are costs and risks. First, we have an evolving inflation problem. This is not inflation, which is recorded in Brazil, but rather a 3% to 5% rate for an economy that usually goes below 2%. There are unnecessary economic risks involved. Bubbles continue to form in financial markets, which means that there is a risk of financial instability that could have negative consequences for the economy. When I look at all this, I wonder why the Fed is taking such steps. And that has implications for countries like Brazil, because if the US sneezes, emerging markets get colds.

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Why do you think Jerome Powell waits too long to start reducing stimuli?

Inflation has been low in US history and Powell doesn’t want to look at it again. There is also a Covid-19 Delta variant that makes the economic scenario uncertain. Powell has reiterated that inflation is temporary, although he understands that inflation is getting higher and longer than he expected. Aside from the possible consequences of the Delta option, he is also concerned that a phenomenon similar to that recorded in the last quarter of 2018, when he tried to tighten monetary policy, but the financial market forced him to retreat, would occur. awkward.

In these circumstances, what are the chances that Jerome Powell will be re-appointed as Fed Chairman early next year by President Joe Biden?

He’s a favorite. Powell commanded a very strong response to last year’s pandemic-triggered economic crisis. The markets love you. And there is a risk that if the Fed changes its chairmanship, it could create excessive uncertainty in an environment fraught with doubt. But this is a political decision, and I do not know what it will be. On the other hand, I think its main vulnerability is that if it is not brought back quickly, say, in the next 2 or 3 months, high inflation could turn into a political problem that already exists, but it could become even bigger.

Are you skeptical that the rise in US inflation will not be temporary, as indicated by the Federal Reserve?

There was a problem. Macroeconomic models do not reflect structural change well. The US economy is undergoing a major structural shift on the supply side. The right thing to do right now is not to rely on macroeconomic models, but to listen to what companies are saying. I listen to companies every day and they point to three problems associated with increased production costs: one is transportation, the second is a shortage of workers, and the third is raw materials. The difficulties of a few companies will not end soon, but they have price power as demand is so high. We all know that these factors are causing inflation to rise. There are some elements of rising inflation that are temporary and reversible, such as the effects of statistical comparison on prices that fell sharply last year due to the pandemic, but even so inflation, as measured by the CPI (Consumer Price Index, in abbreviation in English) is 5.4% and the influence of statistical factors is less. And there is another inflation ahead, which has not yet entered the index. The claim that the lift is temporary does not match the facts that the companies describe. The Fed is changing the notion that inflation is temporary. For many, a temporary means a few months, but Powell pointed out last week that it could take 1-2 years. I don’t know how to estimate that inflation growth for 1-2 years is temporary. International Monetary Fund (IMF) forecasts show that US inflation will be above the 2% target over the next two years.

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What could be the next steps by the Fed to stimulate monetary policy and interest rates?

I don’t believe the Fed will announce any action before December. I believe that the process of reducing incentives will take 10 to 12 months. After that, interest rates will rise, and the first increase will occur in 2023, which I think will be too late. The Federal Reserve is dependent on a new monetary policy framework that was completed in 2019 and looks to the past. The Fed indicates that it will only act in response to signs of inflation. In the US, there is no problem with the efficiency of aggregate demand, as several sectors are experiencing significant growth. The government is investing trillions of dollars in the economy, families have additional savings equivalent to 10% of GDP, and the corporate sector is performing very well and has good cash levels. There are problems with the aggregate supply. I think the Fed is hostage to the wrong system of monetary policy.

What should be the correct structure?

Listening to companies, collecting microeconomic data and designing a scenario developed using information from the fundamentals of economics.

Are there any risks that inflationary expectations will start to rise steadily?

We will see that inflationary expectations for the next 5 years will rise, and after this period they will fall. There has never been an episode in history where the Fed slowly tightened monetary policy and did not act to drive the economy into recession. What market agents will start to appreciate is that inflation is high, the Fed will need to tighten its monetary policy brakes, and when that happens we will have a recession. I believe there is a great risk of a recession. The longer the Fed waits, the longer it will take to grasp this situation. The Fed will wake up when high inflation does not drop to 2% by the end of the year and remains between 4% and 5%.

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Do you think the US could be in recession in 2023 when the Fed raises interest rates again?

If we don’t have transient high inflation, but constant inflation, the Fed will need to accelerate the rate of decline next year. When this happens, markets will raise interest rate expectations and there is a real risk of a very rapid economic slowdown, which could occur between the second half of 2022 and early 2023.

How do you assess the fiscal stimulus adopted by the government of President Joe Biden to accelerate the recovery of the US economy?

Fiscal action fell prey to inadequate Fed policy. In recent months, the US economy has been growing, the fiscal accelerator has worked, as has the monetary policy accelerator. Now we are going downhill, the monetary accelerator is on, as is the financial accelerator, and there is no proper focus on financial stability. The US will have to decide which of the two pedals they use to slow down. If you reduce the fiscal accelerator, costs will rise in the future as the next round of fiscal policy will be based on physical infrastructure and then on human capital. The cash accelerator does not add anything to economic growth, only to the prices of financial assets. The right thing to do would be to slow down monetary policy, maintain the fiscal accelerator, and increase pressure on rules to ensure financial stability. If this continues, the monetary accelerator will have to abandon the financial accelerator, and this will be tragic for future years of growth.

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How Lula lost the first political round of his government

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How Lula lost the first political round of his government

Photo: Ricardo Stuckert

Serial advertising in support of the re-election of an MP Arthur Lyra (PP/AL) for the presidency of the Chamber show that Lula failed to achieve its first strategic goal after winning the election: have enough political support in the National Congress to regain executive powers.

Before the first round result, center party sources warned that Lula would try to use positions in the federal government to create a base that would allow him to influence elections to the House and get a more recovery-oriented leadership. protagonist Planalto. The victory of the Conservative parties sparked a yellow light, but their conquest on October 30 opened the door to a new window of negotiations with leaders who resisted declaring themselves in opposition.

However, without resorting to any political approach, the transition group, instead of seducing the allies, began its work by presenting the idea PEC asks for a lot of money, initiating negotiations he could not afford. The first person to notice the mistake was the senator. Renan Calleiros (MDB/AL), who classified this movement as shaving.

Looking back, the analysis is simple. Lula asked Congress for a fat check and even some of his newly won prerogatives. It gave rise to hopes among deputies and senators for places in the federal administration and … disappeared. His absence for two weeks (one for the international agenda and another for sick leave) without delegating political composition powers only served to discredit the vice president-elect. Geraldo Alkmin and make it clear that PT will play a central role in the most strategic areas of public policy.deconstructing the post-election wishful thinking, thinking that there will be a coalition government with a slight left bias.

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In addition, aggressive statements against the market contributed to the revival. negative memories of past PT experiences about how to manage the household, calling the technical leadership of the party in a personal conversation, which “It’s okay that Lula wanted to redeem his background in this government, but he also wanted to redeem the government. Dilma (Roussef) it was too much!”🇧🇷 Business circles and market representatives, who are part of the network of communicating vessels connecting deputies and senators, tried to sound the alarm, it could not be otherwise.

The fact is that the new government, wanting to actually exercise power without sitting down in a chair, got into a complex labyrinth. In order to approve the PEC, will it have to make concessions in order to accommodate non-aligned parties in the formation of a new government? Can Lula carve out seats in government that serve only her friends during the first and second hours, and even then get the budgetary and enforcement resources he asks for? At least one thing is certain. Lula will create his own ministry, which will have to solve more conflicts than he would like. and is seriously at risk of starting his term having already lost his first legislative battle.

The fact is that while Lula was on the road or defended himself, the centrist parties did not seek or receive proposals for effective participation in the next government. So, Lyra had an open path to secure his re-election more easily than one could imagine, so much so that Lula’s possible support for his name or not today, in terms of results, does not matter much.

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And the scenario could get even worse for Planalto. If Lira implements the idea of ​​a bloc with the main parties in the center, the PT will not chair any of the most important parliamentary committees in the House.

And, understanding the difficulty of approving PECs, PT MPs will defend behind the scenes the use of STFs to obtain over-the-ceiling resources to pay Bolsa Surname🇧🇷 Given the circumstances of the hostility between the political world and the judiciary, one can think of a more difficult inauguration of the government than one that, after losing the political battle, resorts to the STF in order to be able to count on the resources denied by the deputies. and senators?

Thus, advertising supporting the lira shows that Lula was unable to consolidate his position in the Legislative Assembly and even lost his positions.🇧🇷 This raises the question of how the future government will organize its base, based on such an unfavorable point (there are only 133 deputies in the left coalition).

There are two scenarios.

In the first, Lula decides to rule with a minority and begins to debate agenda after agenda, trying to attract detractors by practicing big retail in Congress and keeping her legislative agenda to the minimum possible. The other is to recognize an equal in the lyre, Just like Jair Bolsonaro did.by inviting him to take a leading role in the government’s agenda and participate (or his closest group) in the development of major decisions, continuing the semi-presidency that actually exists in Brazil today.

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Lebanon fails to elect new president for seventh time due to political impasse – Middle East Monitor

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Lebanon fails to elect new president for seventh time due to political impasse – Middle East Monitor

Lebanese lawmakers on Thursday failed to elect a new president for the seventh time as the country grapples with a deepening political and economic crisis, the Anadolu news agency reported.

110 MPs out of 128 MPs took part in the voting.

Michel Moawad, a candidate backed by the Lebanese Armed Forces, won 42 votes, well short of the number needed to win in the first round, while 50 MPs voted against.

Speaker Nabih Berry scheduled the next vote a week later, on 1 December.

A candidate needs two-thirds of the votes (86 MPs) in the 128-MP parliament to pass the first round, and an absolute majority is required in subsequent rounds.

LEI: Lebanon condemns new Israeli violations of naval and air forces

Former President Michel Aoun stepped down on October 31 after serving a six-year term and lawmakers failed to agree on a successor.

Since 2019, Lebanon has been experiencing a devastating economic crisis that, according to the World Bank, is one of the worst the world has seen in modern times.

The country has not had a fully functioning government since May, with Prime Minister Najib Mikati and his cabinet having limited powers in their current interim status.

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talking and political animal

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talking and political animal

There is Ludwig Wittgenstein: language is not only used to describe reality, we also use it to ask for favors, to give thanks, to curse, to greet, to pray…

And it is necessary to take into account the context, the situation, the use. “It’s raining” can state the fact that it’s really raining. But suppose that the mother in the morning, when the son is getting ready for school, says to him: “It is raining”, he at the same time knows that he must take an umbrella. If in a peasant family, after a long drought, as now, the wife opens the window and says to her husband: “It is raining,” then this speaks of contentment. But if you were expecting a pleasant walk and you say, “It’s raining,” you’re in for a disappointment.
Language performs three main functions: expressive, appellative and representative. These functions are related to the relationship established between sender, receiver and objects: there is someone (the sender) who addresses someone (the receiver) to tell him something, making reality real.

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