People seeking jobs wait in line to speak to over 60 employers at an employment fair May 3, 2012 in the Queens borough of New York. New claims for US unemployment benefits dropped more quickly than expected last week, but remained painfully high, the Labor Department reported May 3, 2012. New jobless claims stood at 365,000 for the week to April 28, compared to a revised 392,000 level the previous week. AFP PHOTO/Stan HONDA

 *** Local Caption ***  437741-01-08.jpg
Job hunters wait in line at an employment fair in New York. The US jobless rate is about 7.7 per cent. Stan Honda / AFP

Follow the US Federal Reserve, Europe



On December 12, the Federal Reserve chairman Ben Bernanke announced that America's central bank will keep interest rates at close to zero until the unemployment rate falls to 6.5 per cent, provided inflation expectations remain subdued.

While the Fed's governing statutes, unlike those of the European Central Bank, explicitly include a mandate to support employment, the announcement marked the first time that the Fed had tied its interest-rate policy to a numerical employment target. It is a welcome breakthrough, and one that should be emulated by others - not least the ECB.

Central banks' statutes differ in terms of the objectives that they set for monetary policy. All include price stability. Many add a reference to general economic conditions, including growth and employment or financial stability. Some give the central bank the authority to set an inflation target unilaterally.

There is no recent example, however, of a major central bank setting a numerical employment target. This should change, as the size of the employment challenge facing the advanced economies becomes more apparent.

Weak labour markets, low inflation, and debt overhang suggest that a fundamental reordering of priorities is in order.

In Japan, Shinzo Abe, the incoming prime minister, is signalling the same set of concerns, although he seems to be proposing a "minimum" inflation target for the Bank of Japan, rather than a link to growth or employment.

The spread of global value-chains that integrate hundreds of millions of developing-country workers into the global economy, as well as new labour-saving technologies, imply little chance of cost-push wage inflation.

Likewise, the market for long-term bonds indicates extremely low inflation expectations (of course, interest rates are higher in cases of perceived sovereign default or re-denomination risk, such as in southern Europe.

Moreover, the deleveraging under way since the 2008 financial implosion could be easier if inflation were moderately higher for a few years, a debate the IMF encouraged a year ago.

Together with these considerations, policymakers should take into account the tremendous human and economic costs of high unemployment, ranging from the millions of shattered lives, skills erosion, and disappearance of opportunities for an entire generation, to the deadweight loss of idle human resources.

Is the failure to ensure that millions of young people acquire the skills required to participate in the economy not as great a liability for a society as a large stock of public debt?

Nowhere is this reordering of priorities more needed than in the euro zone. Yet, strangely, it is the Fed, not the ECB, that has set an unemployment target.

The unemployment rate in the United States has declined to about 7.7 per cent and the current-account deficit is close to US$500 billion (Dh1.83 trillion), while euro-zone unemployment is at a record high, near 12 per cent, and the current account shows a surplus approaching $100bn.

If the ECB's inflation target were 3 per cent, rather than close to but below 2 per cent, and Germany, with the world's largest current-account surplus, encouraged 6 per cent wage growth and tolerated 4 per cent inflation - implying modest real-wage growth in excess of expected productivity gains - the euro-zone adjustment process would become less politically and economically costly.

Indeed, the policy calculus in northern Europe greatly underestimates the economic losses due to the disruptions imposed on southern Europe by excessive austerity and wage deflation. The resulting high levels of youth unemployment, health problems, and idle production capacity also all have a substantial impact on demand for imports from the north.

Contrary to conventional wisdom, the ECB's legal mandate would allow such a reordering of priorities, as, with reference to the ECB, the Treaty on the Functioning of the European Union states that "The primary [emphasis added] objective of the European System of Central Banks … shall be to maintain price stability," and there is another part of the treaty dealing with general euro-zone economic policies that emphasises employment. This would seem not to preclude a temporary complementary employment objective for the ECB at a time of exceptional challenge.

Moreover, the ECB has the authority to set the euro-zone-wide inflation target, and could set it higher for two or three years, without any treaty violation. The real problem is the current political attitude in Germany. Somehow, the memory of hyperinflation in the early 1920s seems scarier than that of massive unemployment in the early 1930s, although it was the latter that fuelled the rise of Nazism.

In a more global context, none of this is to dismiss the longer-term dangers of inflation. In most countries, at most times, inflation should be kept very low - and central banks should anchor inflation expectations with a stable long-term target, although the alternative of targeting nominal GDP deserves to be discussed.

Moreover, monetary policy cannot be a long-term substitute for structural reforms and sustainable budgets. Long periods of zero real interest rates carry the danger of asset bubbles, misallocation of resources, and unintended effects on income inequality, as recent history - not least in the US and Japan - demonstrates.

For the coming two to three years, however, particularly in Europe, the need for deleveraging, the costs of widespread joblessness, and the risk of social collapse make the kind of temporary unemployment target announced by the Fed highly desirable.

Kemal Dervi, a former minister of economy in Turkey, is the vice president of the Brookings Institution in Washington

* Project Syndicate

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Transmission: Touchtronic III eight-speed automatic

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COMPANY PROFILE

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Founders: Venkat Reddy, Mohammed Al Bulooki, Bilal Merchant, Asif Ahmed, Ovais Merchant

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PSL FINAL

Multan Sultans v Peshawar Zalmi
8pm, Thursday
Zayed Cricket Stadium, Abu Dhabi

Company Profile

Name: Direct Debit System
Started: Sept 2017
Based: UAE with a subsidiary in the UK
Industry: FinTech
Funding: Undisclosed
Investors: Elaine Jones
Number of employees: 8

Dates for the diary

To mark Bodytree’s 10th anniversary, the coming season will be filled with celebratory activities:

  • September 21 Anyone interested in becoming a certified yoga instructor can sign up for a 250-hour course in Yoga Teacher Training with Jacquelene Sadek. It begins on September 21 and will take place over the course of six weekends.
  • October 18 to 21 International yoga instructor, Yogi Nora, will be visiting Bodytree and offering classes.
  • October 26 to November 4 International pilates instructor Courtney Miller will be on hand at the studio, offering classes.
  • November 9 Bodytree is hosting a party to celebrate turning 10, and everyone is invited. Expect a day full of free classes on the grounds of the studio.
  • December 11 Yogeswari, an advanced certified Jivamukti teacher, will be visiting the studio.
  • February 2, 2018 Bodytree will host its 4th annual yoga market.
'Fantastic Beasts: The Secrets of Dumbledore'

Rating: 3/5

Directed by: David Yates

Starring: Mads Mikkelson, Eddie Redmayne, Ezra Miller, Jude Law

Turning waste into fuel

Average amount of biofuel produced at DIC factory every month: Approximately 106,000 litres

Amount of biofuel produced from 1 litre of used cooking oil: 920ml (92%)

Time required for one full cycle of production from used cooking oil to biofuel: One day

Energy requirements for one cycle of production from 1,000 litres of used cooking oil:
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▪ Water- 31 litres
▪ Diesel – 26.275 litres

Women’s T20 World Cup Qualifier

UAE fixtures

25 April – Ireland v UAE*
27 April – UAE v Zimbabwe**
29 April – Netherlands v UAE*
3 May – UAE v Vanuatu*
5 May – Semi-finals
7 May – Final
UAE squad: Esha Oza (captain), Al Maseera Jahangir, Avanee Patel, Heena Hotchandani, Indhuja Nandakumar, Kavisha Kumari, Khushi Sharma, Lavanya Keny, Mehak Thakur, Rinitha Rajith, Samaira Dharnidharka, Siya Gokhale, Suraksha Kotte, Theertha Satish, Vaishnave Mahesh.

*Zayed Cricket Stadium

**Tolerance Oval

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Kill

Director: Nikhil Nagesh Bhat

Starring: Lakshya, Tanya Maniktala, Ashish Vidyarthi, Harsh Chhaya, Raghav Juyal

Rating: 4.5/5

Profile

Company name: Marefa Digital

Based: Dubai Multi Commodities Centre

Number of employees: seven

Sector: e-learning

Funding stage: Pre-seed funding of Dh1.5m in 2017 and an initial seed round of Dh2m in 2019

Investors: Friends and family 

The Facility’s Versatility

Between the start of the 2020 IPL on September 20, and the end of the Pakistan Super League this coming Thursday, the Zayed Cricket Stadium has had an unprecedented amount of traffic.
Never before has a ground in this country – or perhaps anywhere in the world – had such a volume of major-match cricket.
And yet scoring has remained high, and Abu Dhabi has seen some classic encounters in every format of the game.
 
October 18, IPL, Kolkata Knight Riders tied with Sunrisers Hyderabad
The two playoff-chasing sides put on 163 apiece, before Kolkata went on to win the Super Over
 
January 8, ODI, UAE beat Ireland by six wickets
A century by CP Rizwan underpinned one of UAE’s greatest ever wins, as they chased 270 to win with an over to spare
 
February 6, T10, Northern Warriors beat Delhi Bulls by eight wickets
The final of the T10 was chiefly memorable for a ferocious over of fast bowling from Fidel Edwards to Nicholas Pooran
 
March 14, Test, Afghanistan beat Zimbabwe by six wickets
Eleven wickets for Rashid Khan, 1,305 runs scored in five days, and a last session finish
 
June 17, PSL, Islamabad United beat Peshawar Zalmi by 15 runs
Usman Khawaja scored a hundred as Islamabad posted the highest score ever by a Pakistan team in T20 cricket

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