05-24-2018  2:54 pm      •     
The Skanner Report
  • 1
  • 2
  • 3
  • 4

NEWS BRIEFS

Attorney General Forms Hate Crime Task Force

The task force will study hate-motivated crimes and review existing legal protections for victims ...

Portland Art Museum Celebrates Art Museum Day with Free Admission on May 25

Portland Art Museum joins art museums across North America, with great works of art and public programs ...

June Key Delta Community Center Hosts May Week ’18 Health Fair May 26

Event includes vision, glucose screenings, medication disposal and car seat installation ...

Mississippi Avenue Giving Tuesday

On Tuesday, May 22, 10 percent of proceeds from participating Mississippi Ave. businesses will go to SEI ...

Amazon: Echo device sent conversation to family's contact

SEATTLE (AP) — Amazon says an "unlikely" string of events prompted its Echo personal assistant device to record a Portland, Oregon, family's private conversation and then send the recording to an acquaintance in Seattle.The woman told KIRO-TV that two weeks ago an employee of her husband...

Attorney general issues ballot title for assault weapons ban

PORTLAND, Ore. (AP) — Oregon's attorney general has released a certified ballot title for an initiative that would restrict the sale of assault weapons and high-capacity magazines in the state.The title released Wednesday revises the draft caption following comments from the public and the...

Power outages temporarily halt flights at Sea-Tac Airport

SEATTLE (AP) — Officials say scattered power outages halted some flights on the south side of Seattle-Tacoma International Airport.KOMO-TV reports airport spokesman Perry Cooper said after 12:30 p.m. Thursday that flights were slowly resuming.Airport officials said on Twitter that all power...

Amazon: Echo device sent conversation to family's contact

SEATTLE (AP) — Amazon says an "unlikely" string of events prompted its Echo personal assistant device to record a Portland, Oregon, family's private conversation and then send the recording to an acquaintance in Seattle.The woman told KIRO-TV that two weeks ago an employee of her husband...

OPINION

Racism After Graduation May Just Be What's on the Menu

Dr. Julianne Malveaux says that for our young millennials, racism is inevitable ...

Prime Minister Netanyahu Shows Limits of Israel’s Democracy

Bill Fletcher, Jr. on racial politics in Israel and Prime Minister Benjamin Netanyahu’s uneven treatment of African immigrants ...

Golfing While Black Is Not a Crime

Grandview Golf Club asks five Black women to leave for golfing too slow ...

Discovering the Best of Black America in 2018

Dr. Benjamin F. Chavis discusses the DTU Journalism Fellowship & Scholarship Program ...

AFRICAN AMERICANS IN THE NEWS

MLK daughter: No, Bannon, my dad wouldn't be proud of Trump

ATLANTA (AP) — The Rev. Martin Luther King's daughter blasted Steve Bannon's claim that her father would be proud of President Donald Trump."#SteveBannon has dangerously and erroneously co-opted my father's name, work and words," the Rev. Bernice King wrote just before midnight Wednesday in...

NFL's policy could mean a new playbook on protests this fall

PHILADELPHIA (AP) — Now that the NFL is drawing the line against players kneeling during the national anthem, athletes protesting police brutality and racial inequality may need to find a new playbook.The question is whether they intend to escalate their protests in some way."The owners can...

Court: School can let trans students use bathroom of choice

PHILADELPHIA (AP) — A Pennsylvania school district can allow transgender students to continue using bathrooms and locker rooms that correspond with their sexual identity, a federal appeals court panel ruled Thursday.A three-judge panel heard extended arguments in the case before conferring...

ENTERTAINMENT

Scenes cut from 'Show Dogs' over resemblance to sexual abuse

LOS ANGELES (AP) — Two scenes are being cut from the family movie "Show Dogs" after complaints that they resemble real-life sexual abuse, the movie's distributor has announced.In the movie, a police dog goes undercover at a dog show to catch animal smugglers.In one scene, the dog is told to...

Stoner comedy pioneer Tommy Chong still toking, joking at 80

LOS ANGELES (AP) — Yeah man, Tommy Chong says he always knew he'd live to see the day marijuana legalization would be sweeping America.He knew when he and partner Cheech Marin pioneered stoner comedy 50 years ago, a time when taunting the establishment with constant reminders that they...

Paltrow: Brad Pitt threatened Harvey Weinstein

NEW YORK (AP) — Gwyneth Paltrow says ex-boyfriend Brad Pitt threatened producer Harvey Weinstein after an alleged incident of sexual misconduct.The 45-year-old actress told "The Howard Stern Show" on Wednesday she was "blindsided." Paltrow claimed she was 22 when Weinstein placed his hands...

U.S. & WORLD NEWS

MLB panel says baseballs getting extra lift, cause unknown

NEW YORK (AP) — Baseballs really have been getting extra lift since 2015, and it's not from the exaggerated...

Body camera video is latest setback for Milwaukee police

MILWAUKEE (AP) — Body camera video showing police using a stun gun on an NBA player over a parking...

Bus driver charged in crash that killed student, teacher

A school bus driver with a history of driver's license suspensions caused a fatal crash on a New Jersey highway...

Israel defense chief plans 2,500 new West Bank settler homes

JERUSALEM (AP) — Israel's defense minister said Thursday he will seek approval next week to fast-track...

Cyclone Mekunu pounds Yemen island on its path to Oman

SALALAH, Oman (AP) — Cyclone Mekunu roared over the Yemeni island of Socotra in the Arabian Sea on its way...

Saudi Arabia releases 3 women as other activists still held

DUBAI, United Arab Emirates (AP) — Saudi authorities have released three prominent women's rights...

Matthew Craft, AP Business Writer

Federal Reserve Chairman Janet Yellen, center, arrives at the office of CONNECT, a coalition of local organizations that provides employment services in Chelsea, Mass., escorted by Executive Director of The Neighborhood Developers Ann Houston, left, and Marissa Guananja, right, and followed by President and CEO of the Federal Reserve Bank of Boston Eric Rosengren. second from right, Thursday, Oct. 16, 2014. (AP Photo/Michael Dwyer)

NEW YORK (AP) — Soaring inflation. A collapsing dollar. Bubbles in financial markets that would soon pop. One presidential candidate even suggested that the Federal Reserve chairman should be roughed up.

Over the past five years, as the Fed has pumped ever-more money into the financial system, critics have warned that it would lead to all kinds of disasters. Yet the central bank kept extending its bond-buying program, known by the wonky name of quantitative easing, or QE. It was an unprecedented effort aimed at lowering borrowing costs, encouraging spending and reviving a dormant economy before it could slip back into recession.

Now, $4 trillion later, QE is drawing to a close, so the question is: Did it work?

Economists have plenty of quibbles, but many agree that the Fed accomplished the bulk of its goals.

"Look at us now," says Anthony Chan, chief economist for Chase Private Client in New York. All of the jobs lost during the financial crisis have been recovered. The stock market has more than doubled, and inflation has remained tame.

"I have to say it was a pretty impressive success," Chan says. "But other people define success differently."

At the tail end of 2008, the Fed cut its benchmark short-term lending rate to a record low to spur growth, then made an historic move. It began the first round of QE, buying $100 billion in bonds backed by mortgages every month. The Bush administration had already hatched a number of rescue programs aimed at patching up the banking system, and so the Fed's initial step met little resistance.

Liz Ann Sonders, the chief investment strategist at Charles Schwab, compared the Fed's action to a famous scene in the movie "Pulp Fiction" when Vincent, played by John Travolta, revives a woman near death.

"It was like Travolta slamming the needle into her heart," Sonders says. "It was clearly the right thing to do."

The Fed's second round of quantitative easing, dubbed QE2, received a hostile reception.

In late August 2010, the economy had slowed to a crawl, and the big worry was deflation — a dangerous spiral of falling prices and wages. During a speech that month in Jackson Hole, Wyoming, Fed Chairman Ben Bernanke outlined a turnaround plan.

The Fed began buying $600 billion in U.S. government bonds that November to loud protests.

QE3 followed the next year, and the heated rhetoric increased.

John Boehner, the speaker of the House, argued that the Fed risked creating "hard-to-control" inflation, a weak U.S. dollar and market bubbles. After entering the presidential campaign in 2011, Texas Gov. Rick Perry said that it would be "almost treasonous" if Bernanke "prints more money" ahead of the election. Perry told an Iowa crowd "we would treat him pretty ugly down in Texas."

Here's what has actually happened since Bernanke made the case for the Fed's expanded effort in August 2010:

— The unemployment rate has fallen to 5.9 percent, the lowest level since July 2008. Back in August 2010, it was 9.6 percent.

— The stock market has soared. The Standard & Poor's 500 index has returned 101 percent, powered by a stronger economy, higher spending and record corporate profits.

— The dollar has held up against most major currencies. One widely used measure, the dollar index, is 3 percent higher.

— Inflation has remained tame, despite all the warnings. Over the past year, overall prices have climbed a modest 1.7 percent, still below the 2 percent annual increase that the Fed targets.

To be sure, the Fed's efforts merely contributed to all the good things listed above. But none of the predicted disasters came true. So how did the loudest critics get it so wrong?

A common warning was that the policies would erode the dollar's value and cause investors to look for a replacement, like gold or the Swiss franc.

Chan says a flaw in this thinking was that it failed to consider that other countries would struggle, too. When investors worried that Greece's debt troubles could tear apart Europe, for instance, they rushed to buy dollars and U.S. Treasury bonds, still considered the world's haven.

Long-term interest rates in the U.S. may be low, but sluggish growth across the industrialized world means government bond rates in Japan and Germany are even lower. As a result, foreign banks and investors keep buying U.S. bonds, stoking demand for dollars.

"How fast is your country growing, and what are its interest rates relative to the rest of the world? Those are the key things that determine a currency's strength," Chan says. "Guess what? We're now growing faster than Europe. Our success means our dollar should get stronger."

Y-Money-fullPHOTO: An employee counts British pounds and Euro notes at a currency exchange office in downtown Rome, Tuesday, Oct. 28, 2014. Economists have plenty of quibbles, but many agree that the Federal Reserve accomplished the bulk of its goals with its bond-buying program, known as quantitative easing, or QE. The dollar has actually held up against most major currencies, as the euro and Japanese yen have slumped. (AP Photo/Gregorio Borgia)

Critics also predicted that the Fed would create runaway inflation, a result of pumping so much money into circulation. It was a popular idea, based on the common-sense notion that a flood of dollars would make the greenback cheap.

In reality, much of the money never saw daylight. When the Fed bought bonds from big banks, it gave them an electronic credit on their accounts at the Fed. Starting in the financial crisis, the central bank paid interest on those reserves, so big banks could just sit on the money. Excess bank reserves soared from $800 billion at the start of 2009 to $2.7 trillion today.

"The criticisms of QE were clearly overblown," says Dean Baker, co-director of the Center for Economic and Policy Research, a liberal think tank based in Washington. "The flip side is that the benefits were exaggerated, too."

The Fed has been scaling back its bond buying this year. It said at its September meeting that it plans to shut down the program after buying a final $15 billion in securities this month — as long the economy keeps improving. Even if the central bank goes ahead and announces the end of the purchases on Wednesday, it will be left with a $4.5 trillion balance sheet that will keep putting pressure on long-term rates.

At the moment, the Fed has said it plans to maintain its holdings at that level. When it does begin to reduce its portfolio, it will do so in a "gradual and predictable manner" by ceasing to re-invest maturing bonds. However, it has left many questions about how it will unwind its balance sheet unanswered.

It is also keeping markets guessing about another big question: When exactly will it start hiking its benchmark lending rate? That move is expected at some point next year.

Many on Wall Street have faith that the central bank will raise interest rates slowly enough to not derail the recovery.

"I'm less worried because I see all the progress," Chan says. "Could the economy lose momentum? Sure. It's like when you get off crutches. You're a little uneasy at first."

But some economists still worry that the economy won't be ready when the Fed decides to start raising rates. "The logic of a rate hike is that employment is taking off and the Fed needs to cool the economy down," says Baker. "We're so far from that."

Even some optimists expect more market turbulence as the Fed moves closer to its first interest rate hike since 2006.

Schwab's Sonders notes that economists and market strategists can usually find similar situations in the past and use them to guide projections. But history offers little guidance for the months ahead. The Fed has never wrapped up a $4 trillion stimulus program and has no experience raising rates from zero.

"Usually you can ask, 'When's the last time the Fed did this?'" Sonders says. "But, no, there is no last time."

 

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Carpentry Professionals
Calendar

Photo Gallery

Photos and slide shows of local events

The Skanner Report

repulsing the monkey