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Are independent central banks going out of style?



President Donald Trump’s decision to nominate economist Judy Shelton for one of the vacant positions on the Federal Reserve Board has put the future of central bank independence back on the agenda.

Shelton has cast doubt on the desirability of, and legal basis for, Fed independence, saying last year, “I don’t see any reference to independence in the legislation that has defined the role of the Federal Reserve.”

And she has argued for “a more coordinated relationship with both Congress and the President.” If Fed policy were “coordinated” with Trump, then it is fairly clear who would be calling the shots.

Of course, one new Fed governor could not upturn decades of practice. But there are suggestions that if appointed, Shelton might replace Jay Powell when his term comes up for renewal in 2022, leaving a fox in charge of the chicken coop.

It is not only in the US that central-bank independence is under threat. In Turkey, President Recep Tayyip Erdoğan fired his governor last year, saying that “we told him several times to cut interest rates,” but he did not oblige.

In India, the government asked the Reserve Bank to hand over some of its reserves, and Governor Urjit Patel resigned “for personal reasons”, and his key deputy followed soon after with a broadside directed at Prime Minister Narendra Modi’s administration: “Governments that do not respect central bank independence will sooner or later incur the wrath of the financial markets.”

Central banks around the world are worried by these straws in the wind. Otmar Issing, the first chief economist of the European Central Bank, has written of the “the uncertain future of central bank independence.” The ECB’s then-president, Mario Draghi, was moved to issue a firm defense of the concept before he left his post.

The Bank for International Settlements has noted “the extraordinary burden placed on central banking since the [2008 global financial] crisis,” and warned that central banks cannot deliver on the expectations people have. Joachim Fels of Pimco has concluded that “the heyday of central bank independence now lies behind us.”

Are these prophets of doom correct? Will we soon see control of interest rates back in the self-interested hands of finance ministries? In the words of the song, was central bank independence just a silly phase we were going through?

I think not. The most recent global survey, by the economists Nergiz Dincer and Barry Eichengreen, though admittedly conducted in 2014, shows that there is still a “steady movement in the direction of greater transparency and independence over time (and) little indication these trends are being rethought.”

One might have some grounds for scepticism about the measures of independence they use — according to their model, Kyrgyzstan boasts the world’s most independent central bank — but they can find no cases where changes to legislation bringing the central bank back under political control have been implemented.

In the West, while Trump has huffed and puffed, he appointed Powell, a man with conventional instincts and a backbone. British Prime Minister Boris Johnson resisted the temptation to appoint a Brexit supporter to the Bank of England and named a veteran BOE insider, Andrew Bailey, who has independence in his bones.

In the eurozone, a similarly neutral choice emerged as Draghi’s successor, and a change in the ECB’s status would require a new European Union treaty. The chances of that are vanishingly small. EU leaders show no indication of taking the risk of opening up the constitution to further referenda, as would be necessary in some countries.

Furthermore, some of the political pressure for action has diminished. Trust in the ECB fell sharply after the eurozone crisis nearly a decade ago, but has recovered in most countries in the last couple of years. Even in Greece, the ECB is trusted more than the national government.

There has, it is true, been a change in political rhetoric. After a long period in which governments resisted any commentary on interest-rate decisions, some have now become more vocal.

Jacob Rees-Mogg, the Conservative Leader of the House of Commons, dubbed Mark Carney, the outgoing BOE governor, a “second-tier Canadian politician” who failed to get a job at home, after Carney disagreed with Rees-Mogg’s economic judgment on the costs of Brexit. And Trump has characteristically weighed in with tweeted criticism of the Fed.

Should central banks regard this renewed disputatiousness as a bad and dangerous thing? They may, if they wish, but I suspect they are pushing water uphill. We have moved into a less respectful age, which is not surprising, given the mistakes made by central banks (and others) in the run-up to the 2008 crisis.

Instead of bemoaning the surge of comment and challenge, central banks need to raise their game, enhance their transparency, and get better at explaining and justifying their actions and decisions.

Andy Haldane, the BOE’s chief economist, has shown that much of what central bankers say is incomprehensible to all but a small proportion of the population. Only 2% of the population can readily understand the minutes of the Fed’s Open Market Committee, which sets interest rates, while 70% can understand a Trump campaign speech.

That gap needs to be closed, and central banks should make their work more accessible to the public. Maybe a collective trip to Kyrgyzstan is in order to observe best practice in action.

Howard Davies, the first chair of the United Kingdom’s Financial Services Authority (1997-2003), is chair of the Royal Bank of Scotland. He was Director of the London School of Economics (2003-11) and served as Deputy Governor of the Bank of England and Director-General of the Confederation of British Industry

Copyright: Project Syndicate, 2020

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source – Smithers Interior News




The CFL has sent Canadian Heritage Minister Steven Guilbeault a revised financial request.

A CFL source said Friday the league is seeking roughly $42.5 million in aid. In April, it asked the federal government for up to $150 million in financial assistance in the event of a cancelled 2020 season due to the COVID-19 pandemic.

At the time, CFL commissioner Randy Ambrosie said the league was anxious “to be accountable to taxpayers,’ and would attempt to repay a portion of government assistance through ”community programs, tourism promotion, the Grey Cup, our digital channels.”

The source added the new request is to cover operating costs and player salaries for a shortened 2020 season. The proposal also includes a letter of support from the CFL Players’ Association.

The source spoke on the condition of anonymity because neither the government nor CFL have confirmed the request.

Last month, the CFL and CFLPA began talks to amend the current collective bargaining agreement to allow for an abbreviated season. The two sides must sign off on any changes for any games to be played.

But prior to the start of negotiations, the CFL presented the union with a memo outlining the conditions it wanted and a completion deadline of July 23.

When asked about the revised financial request, the CFL said, “We continue discussions with the federal government including discussions on our possible return to play.”

While the revision is for substantially less money, the CFL’s situation hasn’t changed much. It still requires financial assistance with revenues having dropped drastically due to the COVID-19 pandemic and expenses expected to continue to rise if it tries to play a season with no fans

The CFL’s initial request of Ottawa consisted of three tiers: It called for $30 million immediately to manage the impact the outbreak has had on league business; additional assistance for an abbreviated regular season; and up to another $120 million in the event of a lost 2020 campaign.

When Ambrosie spoke to a federal standing committee on finance in May, he was roundly criticized for failing to stipulate where the funds would go and not involving the CFLPA in the process. But the source said the revised proposal mirrors an authentic financial offer and contains more specific details than the original one did.

The earliest an abbreviated ‘20 season will begin is September, but Ambrosie has stated a cancelled campaign also remains possible.

If the CFL holds a shortened season, it’s expected to do so in a hub city. Winnipeg has been mentioned as a strong hub candidate, but the source said Regina also is under consideration.

Dan Ralph, The Canadian Press

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AM Best Affirms Credit Ratings of Fairfax Financial Holdings Limited and Its Core Subsidiaries




OLDWICK, N.J.–()–AM Best has affirmed the Long-Term Issuer Credit Rating (Long-Term ICR) of “bbb” and the various Long-Term Issue Credit Ratings (Long-Term IR) on the unsecured debt and preferred equity of Fairfax Financial Holdings Limited (Fairfax) (Toronto, Canada). AM Best also has affirmed the Financial Strength Rating (FSR) of A (Excellent) and the Long-Term ICRs of “a+” of the subsidiaries of Odyssey Group Holdings, Inc. (Odyssey Group). Concurrently, AM Best has affirmed the FSR of A (Excellent) and the Long-Term ICRs of “a” of the members of the Crum & Forster Insurance Group (C&F), the members of the Zenith National Insurance Group (Zenith Group), the members of Northbridge Financial Corporation (Northbridge) (Toronto, Canada) and Wentworth Insurance Company Limited (Wentworth) (Barbados). In addition, AM Best has affirmed the Long-Term ICRs of “bbb” and the Long-Term IRs of Zenith National Insurance Corp. (headquartered in Woodland Hills, CA) and Fairfax (US) Inc. (Delaware), both of which are indirectly, wholly owned downstream holding companies of Fairfax. The outlook of all of these Credit Ratings (ratings) is stable. (See link below for a detailed listing of the companies and ratings.)

The ratings of Odyssey Group reflect its balance sheet strength, which AM Best categorizes as strongest, as well as its strong operating performance, neutral business profile and appropriate enterprise risk management (ERM). The ratings also reflect group member Odyssey Reinsurance Company’s (Odyssey Re) ranking among AM Best’s top global reinsurers, supported by the group’s diversified global geographic footprint, which includes reinsurance and specialty primary insurance, large-line capacity and broad product offerings. Somewhat offsetting these strengths is Odyssey Re’s challenging operating environment, with the uncertainty brought by the current COVID-19 pandemic developments.

The ratings of C&F reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. The ratings also reflect the benefits the group derives from its role within the larger Fairfax enterprise. C&F also benefits from its diversified and growing product portfolio and distribution networks. Management continues to focus on growth in its specialty business at appropriate rates, terms and conditions. Partially offsetting these positive rating factors are the competitive market conditions that persist in the commercial lines sector and relatively unfavorable expense levels.

The ratings of the Zenith Group reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, neutral business profile and appropriate ERM. The ratings also are enhanced by the benefits the group derives from its position in the Fairfax enterprise. Furthermore, the ratings reflect management’s expertise and commitment to maintaining underwriting discipline throughout market cycles. Zenith’s underwriting performance over many years has outperformed the workers compensation market. Somewhat offsetting these positive rating factors is Zenith’s concentration of written premium in California and Florida, as well as the job market impact caused by the COVID-19 reducing payrolls.

The ratings of Northbridge reflect the group’s balance sheet strength, which AM Best categorizes as strongest, as well as its adequate operating performance, neutral business profile and appropriate ERM. The ratings of Northbridge also acknowledge the group’s position within Canada’s commercial insurance market, diversified commercial lines franchise and strong broker distribution network. The group continues to benefit from improved and strong underwriting performance within its small to mid-market commercial segment. Partially offsetting these positive rating factors are competitive market conditions that persist in Canada’s commercial and personal lines segments, and the group’s relatively unfavorable expense levels.

The ratings of Wentworth reflect its balance sheet strength, which AM Best categorizes as very strong, as well as its adequate operating performance, limited business profile and appropriate ERM. The ratings also are enhanced by the benefits it derives from its position in the Fairfax enterprise. In addition, the ratings of Wentworth are supported by its historically profitable underwriting performance and loss reserve position. The company benefits from its investment portfolio, which includes a significant allocation of cash and short-term securities. Partially offsetting these positive rating factors is the company’s concentration of property catastrophe exposure within its book of business, which subjects it to a substantial degree of volatility as evidenced over the past few years.

A complete listing of Fairfax Financial Holdings Limited and its subsidiaries’ FSRs, Long-Term ICRs and Long-Term IRs also is available.

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and AM Best press releases, please view Guide for Media – Proper Use of Best’s Credit Ratings and AM Best Rating Action Press Releases.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in New York, London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit

Copyright © 2020 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

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Billionaire Musk’s net worth zooms past Warren Buffett’s




(Reuters) – Elon Musk’s net worth soared past Warren Buffett on Friday as the chief executive officer of Tesla Inc <TSLA.O> became the seventh richest person in the world, according to the Bloomberg Billionaires Index.

Musk’s fortune rose by $6.07 billion on Friday, Bloomberg News said, following a 10.8% jump in the electric carmaker’s stock.

Buffett’s net worth dropped earlier this week when he donated $2.9 billion in Berkshire Hathaway <BRKa.N> stock to charity, the report added.

Tesla’s shares have surged 500% over the past year as the company increased sales of its Model 3 sedan.

The blistering rally also puts Musk in reach of a payday potentially worth $1.8 billion, his second jackpot from the electric car maker in about two months.

The stock is up about 38% since the close on July 1, a day before the company reported its quarterly delivery numbers.

Tesla’s solid delivery numbers heightened expectations of a profitable second quarter, which would mark the first time in its history that it would report four consecutive quarters of profit.

(Reporting by Shubham Kalia in Bengaluru; Editing by Raju Gopalakrishnan)

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