Yellen resists bailout: America is energy self-sufficient and facing falling fuel prices, says ALEX BRUMMER
Americans have long been optimistic about their currency’s impact on the rest of the world.
In 1972, when President Nixon was briefed on the turmoil in European foreign exchange markets, his response was: “Fuck the lira”.
About a decade later, Ronald Reagan was faced with questions about the disruptions arising from the strength of the dollar, and he had no idea.
Caution: US Treasury Secretary Janet Yellen has insisted that FX intervention should only be used in “rare” circumstances
Treasury Secretary James Baker cleared it up in the Plaza.
Now it’s the turn of current Treasury Secretary Janet Yellen.
A trip to Tokyo found that the war in Ukraine had caused the yen to weaken rapidly to a 24-year low.
In the interests of financial stability, the G7 should address the issue. Yellen insisted that FX market intervention should only be used in “rare” circumstances.
In recent weeks, much of the focus has been on the weakness of sterling, which is down 12 percent against the dollar this year. The drop is attributed to Brexit and the implosion of Boris Johnson’s government.
The dollar’s strength has also disrupted the euro, yen, Swiss franc and almost every currency in the world.
The Federal Reserve moved surprisingly robustly to fight inflation, raising interest rates by 0.75 percentage point at its June meeting. It could do the same this month, despite warnings not to engage in monetary masochism.
America is on the path to energy self-sufficiency and is among the first G7 countries to see fuel prices begin to fall.
The UK, Europe and much of the rest of the world are braced for a winter of rising prices and disrupted supplies.
Despite the lack of storage facilities, the UK is in a better place than much of the continent thanks to the Langeled pipeline that delivers Norwegian gas to these shores and the capacity to process LNG.
For a real idea of what the strong dollar means, look at The Economist’s Big Mac Index. It shows that if someone exchanges dollars for yen, a burger in Japan is currently 42 percent cheaper than in the US.
Yellen’s work with Japan’s finance ministry and central bank suggests currency differentials are rapidly moving up the global agenda.
The conflict in Ukraine is leading to a financial collapse that requires coordinated action.
Full control doesn’t seem very different from 84 percent state ownership.
But it’s hard to believe that the French government’s decision to buy out EDF’s minority stake and the departure of CEO Jean-Bernard Levy won’t mean big changes.
Paris signals it could pay up to £8billion for the outstanding shares. That’s given EDF stock a big boost, but it still trades at less than a third of float price.
EDF has been the key tool in ensuring that France’s household energy prices stay on track.
In response to the Ukraine, the country is planning a new fleet and the renovation of ailing existing systems.
Where is the UK? EDF has been given such a favorable deal by George Osborne over the future pricing of electricity from the supergenerator at Hinkley that it’s hard to imagine it pulling out of a £25billion project.
EDF is also the main commercial driver behind a second nuclear power plant at Sizewell. A decision on this is expected next week, but with the government in political disarray there could be further delays.
Will a nationalized EDF be keen on further investment in the UK? Economies of scale could mean that a new facility at Sizewell could reduce investment costs in France.
But state ownership overseas means the future of the UK rests with a government that comes first with France.
Here’s a thought for our friends Paul and Gordon Singer from activist Elliott.
Amid their ability to wreak havoc, they have shown leadership in introducing the book trade to retail, positively taking ownership of Waterstones in the UK and exporting this model to America, attempting to reverse the creaking Barnes & Noble chain .
Think of the praise if Elliott salvaged the former Whitbread – now Costa – Awards, cruelly snatched away by new owners Coke after half a century.
It could also work commercially.
ALEX BRUMMER: US Treasury Secretary Janet Yellen is opposed to a bailout
Source link ALEX BRUMMER: US Treasury Secretary Janet Yellen is opposed to a bailout