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Money matters

Snap Shots

Heart to Heart with Hillary

A Female Perspective


Money matters: A broader look at monetary policy

Graham Macdonald
MBMG International Ltd.

Last week we looked at the FOMC, now we’ll take a broader look at monetary policy. This term refers to the actions undertaken by a central bank, such as the Federal Reserve, to influence the availability and cost of money and credit as a means of helping to promote national economic goals. The Federal Reserve implements monetary policy using three major tools:
Open market operations. The buying and selling of U.S. Treasury and federal agency securities in the open market discount window lending. Lending to depository institutions directly from their Federal Reserve Bank’s lending facility (the discount window), at rates set by the Reserve Banks and approved by the Board of Governors Reserve requirements. (Requirements regarding the amount of funds that depository institutions must hold in reserve against deposits made by their customers.)
Using these tools, the Federal Reserve influences the demand for and supply of balances that depository institutions hold on deposit at Federal Reserve Banks (the key component of reserves) and thus the federal funds rate - the interest rate charged by one depository institution on an overnight sale of balances at the Federal Reserve to another depository institution. Changes in the federal funds rate trigger a chain of events that affect other short-term interest rates, foreign exchange rates, long-term interest rates, the amount of money and credit in the economy, and, ultimately, a range of economic variables, including employment, output, and the prices of goods and services.
The federal funds rate is the rate charged by one depository institution on an overnight sale of immediately available funds (balances at the Federal Reserve) to another depository institution; the rate may vary from depository institution to depository institution and from day to day. The target federal funds rate is set by the Federal Open Market Committee (FOMC). By setting a target federal funds rate and using the tools of monetary policy - open market operations, discount window lending, and reserve requirements - to achieve that target rate, the Federal Reserve and the FOMC seek “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates,” as required by the Federal Reserve Act.
At each of its meetings, the FOMC examines a number of indicators of current and prospective economic developments. Then, cognizant that its actions affect economic activity with a lag, it must decide whether to alter its target for the federal funds rate. An actual decline in the rate stimulates economic growth, but an excessively high level of economic activity can cause inflation pressures to build to a point that ultimately undermines the sustainability of an economic expansion.
An actual rise in the rate curbs economic growth and helps contain inflation pressures, and thus can promote the sustainability of an economic expansion; too great a rise, however, can retard economic growth too much. The FOMC’s actions on the target federal funds rate are undertaken to achieve the maximum rate of economic growth consistent with price stability and moderate long-term interest rates.
The Federal Reserve’s objective in using the tools of monetary policy may be a desired quantity of reserves or a desired price of reserves - the federal funds rate. During the 1980s, under Paul Volker’s stewardship, the approach gradually changed from seeking a desired quantity of reserves toward attaining a specified level of the federal funds rate, a process that was largely complete by the end of the decade. In 1995, the FOMC began announcing its target level for the federal funds rate.
Generally, the money stock consists of currency held by the public; transaction, savings, and time deposits held by the public at depository institutions; the assets of money market mutual funds; and certain other depository institution liabilities. The Federal Reserve affects the money stock chiefly by its influence over interest rates. When the Federal Open Market Committee lowers the target federal funds rate, the rate at which depository institutions purchase and sell overnight funds to one another in the market falls, and so do other short-term interest rates.
Lower short-term market interest rates increase the attractiveness of the rates paid on deposits at commercial banks and other depository institutions because changes in these rates tend to lag changes in market rates. Consequently, the public tends to purchase the assets included in the money stock, and money growth increases.
Conversely, when the FOMC raises the target federal funds rate, the federal funds rate increases, as do other short-term interest rates. The rates paid on assets included in the money stock become less attractive, and money growth slows. The discount rate is the interest rate that an eligible depository institution is charged to borrow funds, typically for a short period, directly from a Federal Reserve Bank.
By law, the board of directors of each Reserve Bank sets the discount rate independently every fourteen days subject to the approval of the Board of Governors. As we’ve noted, originally, each Reserve Bank set its discount rate to reflect the banking and credit conditions in its own district. Over the years, the transition from regional credit markets to a national credit market has gradually produced a national discount rate.
Using the monetary policy tools at its disposal, the Federal Reserve can promote an environment of price stability and reasonably damped fluctuations in overall economic activity that helps foster the health and stability of financial institutions and markets. The Federal Reserve also helps foster financial stability through the supervision and regulation of several types of banking organizations to ensure their safety and soundness. In addition, the Federal Reserve operates certain key payment mechanisms and oversees the operation of the payment system more generally, with the goal of strengthening and stabilizing the system.
The Federal Reserve engages in all these activities on a routine basis, but the stabilization activities of a central bank are especially evident and critical during periods of financial stress, such as those that occurred following the stock market decline of October 1987, the international debt crisis in the fall of 1998, and the terrorist attacks in September 2001. In these instances, the Federal Reserve promoted financial system stability by providing ample liquidity (balances at the Federal Reserve) through large open market purchases of securities (using short-term repurchase agreements) and by extending discount window loans to depository institutions. In unusual and exigent circumstances, the Federal Reserve has the authority to lend to individuals, partnerships, and corporations, but it has never done so.

The above data and research was compiled from sources believed to be reliable. However, neither MBMG International Ltd nor its officers can accept any liability for any errors or omissions in the above article nor bear any responsibility for any losses achieved as a result of any actions taken or not taken as a consequence of reading the above article. For more information please contact Graham Macdonald on [email protected]



Snap Shots: Film is dead! X-Rays prove it!

by Harry Flashman

A few weeks ago, I postulated that “film” as we know it, was dead. Digital photography had taken over. Even in the financial pages of one of the major dailies, the message from Japan and America was the same. Film is dead. Conventional camera manufacturers were turning away from film, and in the case of Konica-Minolta had dropped their camera line altogether and had sold its digital assets to Sony Corporation. Even Nikon has stopped producing seven in its line-up of nine film cameras. Kodak is now the third largest digital camera manufacturer in the world – and that is the company that brought film cameras to the reach of the masses. It is also highly significant that the ‘new’ line of camera manufacturers emanate from the high-tech digital world – Sony, Panasonic and Samsung.
What has to be understood is that the camera, as an instrument to record images, is basically the same, film or digital. It is a black, light-tight box with a piece of expensive glass in the front, which allows a measured amount of light to fall on a sensitized plate in the back of the camera. Initially we exposed the image on to glass plates covered with silver chemicals, then we developed the film canister, and now we have CCD’s, (Charge Coupled Devices) which accept the different degrees of light and can record this to allow down-loading later. In other words, there is not much difference at all, other than one is “instant”, while the other requires messy developing and printing.
Where digital has also moved in is in medical image technology. We are all conversant with the X-Ray film, where a sensitized plate (in a metal cassette) is placed under the patient, and is exposed to radiation which goes through the body and strikes the film in the cassette. From there, the X-Ray film is developed (just like a negative), dried and sent to the radiologist to be read. This takes a few minutes, and eventually the bulky X-Ray films are attached to the patient’s file, and eventually stored in a warehouse, along with millions of other X-Ray plates.
That too is dead! Enter the PACS, otherwise known as the Picture Archiving and Communication System, the digital revolution in medical radiology technology. Like the old camera film, X-Ray films have been superseded by a digital way of recording the primary X-Ray image. The radiation remains the same, with the rays passing through the body, it is just the image capture in the cassette that is different.
Now, inside the cassette is a plate which is similar to the memory stick in your digital camera. To read the memory stick, it goes in a reader, which converts the information into a usable digital form. This is the same basic principle with the X-Ray cassette which contains a large ‘memory stick’ which goes into a reader and the image is then stored in digital form, rather than a sheet of film. There is also another method which exposes a digitized plate cassette which can be read directly into the image storage system, without the need for a reader as an intermediate stage.
This technology has been refined to cover images from various modalities, such as ultrasonography, magnetic resonance imaging (MRI), positron emission tomography (PET), computed tomography (CT), mammography and radiography (plain X-rays).
This digital revolution has much to offer both doctors and patients as advantages over film. PACS replaces hard-copy based means of managing medical images, such as film archives. It expands on the possibilities of such conventional systems by providing capabilities of off-site viewing and reporting (distance education, tele-diagnosis). Additionally, it enables practitioners at various physical locations to peruse the same information simultaneously (teleradiology). With the decreasing price of digital storage, PACS systems provide a growing cost and space advantage over film archival. “The dusty old film library is dead,” said a radiologist in Australia whom I consulted when writing this article.
Nobody is mourning the death of film in the medical world, and I believe that we should be the same in the photographic world. By all means keep the memory of film alive, but let us as photographers move into today with an eye on tomorrow.
(With thanks to the radiologists at the Bangkok Pattaya Hospital who were kind enough to demonstrate the PACS system for me.)


Heart to Heart with Hillary

Dear Hillary,
I never realized I was smart until I came to Thailand 2 years ago. Let me explain why. I have always used my common senses back home and here in Thailand and I never had any problems but to many farangs (foreigners), they just can’t help themselves. Every year, Thailand receives the world’s biggest jackasses and fools and every week I see or hear about some farangs who gets into some problems with bar girls or Thais and complains and cries about everything and everybody. However, Farangs do things here that they would normally never would do back home and expect to get away with it and I’m tired of these fools and jackasses bad mouthing Thailand because of their stupidity and ignorance. If they don’t like it here GO HOME and stay out of Thailand so that rest of farangs can enjoy our lives with Thais.
Happy Camper
Dear Happy Camper,
Hillary always likes to hear of people who are happy, especially with their lives here in Thailand; however, I think you may be a little hard on some of the foreigners that come here in search of a better life, my Petal. These are often the ones who have been rejected in their own country, and when they arrive here cannot believe how warm and friendly some of the local girls can be. Quite unlike the rather emancipated ladies they are used to. A small dusky maiden has captured many a heart, more than just the painter Gaugin’s.
Some of the longer stay expats do try to warn the ‘newbies’ and one passed over his “Rules for Engagement – It’s a War Zone here”, for me to see, and many of his pointers have a decided truth about them. He sends these rules to friends coming to visit and it starts with “Do not fall in love with the first girl you meet, there will always be one better in the next bar.” Another item runs “Try not to take out different girls from the same bar, they are a jealous lot and may cut your penis off.” This is followed by “If you do get your penis cut off, try to get hold of it before the street dogs eat it.” Whilst these may sound as jokes, they are all founded on fact. The “Cut it off and feed it to the ducks” story has a sound basis in Thai village culture.
The final two items also have a very true foundation, where he says, “Remember if you leave your brain at the airport, you will leave your money and your heart in Pattaya.” And finally, “Don’t look down on these girls for working in bars, they are only trying to make a living in a hard world.”
So, my Petal, I think you should try and remember that and perhaps be a little more charitable towards your brothers. Like this expat has done, try and educate your countrymen before they get here. Then there will be even more happy campers like yourself.
Dear Hillary,
I am a young man, single and considered to be not bad looking. My problem comes from one of the girls I have met recently. She rang me at work the other day and asked if I could come over and see her at the new bar she was working in. I did remember her from her previous bar but was embarrassed as I could be overheard by my workmates when I was talking to her, so I just kind of fobbed her off. How can I tell her it isn’t a good idea to ring me at work in a crowded office? Any suggestions?
The Mobile Man
Dear Mobile Man,
I think you had better get on your bike and pedal out of there, my Petal. However, it is easy to see where the problem began, and when you understand that, you will see how to get round the problem. How did she find out your phone number in the first place? Did she just try several random numbers and fluke getting yours? Of course not! You gave her your number, probably on your business card I would imagine. It’s quite simple, if you don’t want a girl to ring you at work, then don’t give her your business card! If you feel the need to chat her up on the phone just give her your mobile and tell her what hours to ring you between. The girl isn’t silly, she’ll comply. But will you? That’s the question.
Dear Hillary,
Some days when I read your column you really can be terribly bitchy. Why are you like this? These people are only asking for help. I think you should remember this.
Charles
Dear Charles,
Hillary get bitchy? What a terrible thing to say, Charlie boy! But I suppose I have to agree that I do get bitchy when I have to answer ridiculous obvious questions like yours. I agree though, you certainly do need help, but I doubt if you’d like the rubber room and the funny sleeveless tight jacket. Best to steer clear of me till next week.


A Female Perspective: A Female Pioneer

with Sharona Watson

I think any piece of writing about England has to start with a comment on the weather. Call me ungrateful if you want but I’ve been dragged here ‘on holiday’ again by my husband. I seem to have exchanged the wonderful sun and ‘Sanuk’ of Songkran in Thailand for grey clouds, constant rain and the freezing cold of Gloucestershire. And I mean freezing cold. Yesterday it snowed. I was told it wasn’t meant to snow but the weather didn’t want to listen. And it turns out that Andy’s not really here on holiday at all. He’s spent most of the time out filming for his new series “Beyond the Beach” and I’m stuck inside, shivering in front of a fire. At least it’s a real fire.

Dr. Christine Colley – taking time to talk.

Then, just as I was getting fed up, I read a really interesting article in “The Observer” asking, “Are ‘elite women’ killing feminism?” which my friend had saved for me. The basic argument is that the rise of a culture of ‘go-getting’ women, who want high-powered, well-paid jobs, has diverted talent away from ‘caring’ professions such as teaching. It has, argues the author Alison Wolf, a professor at Kings College, damaged the concept of ‘female altruism’ and has put women off having children. It is ‘the death of sisterhood’, writes Wolf.
Well, would you believe it but the very next day I was in a tea room in Cheltenham and I started talking to a woman who turned the ideas that firstly, the culture of ‘go-getting’ women is new and secondly that they don’t go into ‘caring’ professions, on their head.
Dr Christine Colley worked for forty years as a family planning doctor on the mean streets of South East London. At the same time, she was bringing up a family of four boys. So that’s five, including her husband. “That was a formative experience,” revealed Christine. “There were a great many shirts and socks to wash! I think the best definition of a boy I’ve ever heard is ‘a noise with dirt on it’!”
Professionally, surely Christine encountered discrimination? “Actually, I can’t say that personally I experienced it very much. In fact, rather the opposite but I think I was fortunate. I went into a branch of medicine [family planning] which dealt largely with the treatment of women and there wasn’t much discrimination in that specialty. I think it was quite different for a woman who wanted to be say, a surgeon, which was a very male-dominated area and still is.”
Christine continued, “We were obviously discriminated against (or did we discriminate against ourselves?) at the age when we became medical students. There were only ten girls in my year and a hundred boys. Outnumbered by ten to one. The situation today is absolutely completely different! Sixty percent of medical students are girls!”
So are girls brighter than boys? “Well, they’re as bright. They always were. But there was obviously something operating at that time, whether they weren’t getting such good secondary education or whether they were discriminated against at the point of entry. It was probably also that women had lower expectations and didn’t even try to do medicine. In practice it has changed quite dramatically.”
Forty years service to the National Health Service and four boys. How did she do it? “By juggling my time,” Christine responded immediately. Yet, she had her first boy at the age of twenty-five, after two years work (since qualifying), then had another eighteen months after the first. Not much time to juggle!
This was the sixties. Was it accepted that a woman would go to work in an established profession and have a family at the same time? “It was becoming pretty common really, (I was surprised by this) amongst women who had a profession”. (That made more sense)
But what, I pressed, were the attitudes towards her as a woman professional? “Well, I think that women were slightly disadvantaged in some respects. For instance, there weren’t many women who reached ‘consultant status’ in the medical profession.”
Why was that? I asked. “Because of the difficulties in having to take time off in order to have children. As a result you sort of missed out on the ‘climbing up the ladder’ and that’s still a difficulty, I think, although there’s much more help with childcare than there used to be and more flexibility in the profession. There’s also tax recognition if you’re unable to work, which didn’t exist in my day. The main difficulty was getting adequate childcare that you could trust, sufficiently cheaply to make it worthwhile going out to work. That was a constant anxiety.”
Four boys. The idea was still swimming around my mind. Why did she persist? “Well I can’t tell you why I always had boys! A good question might be, ‘Why did I persist in having children having had boys! (We laugh) I always wanted four children and so did my husband.” A husband of forty four years. What has kept them together all this time? “A helpful division of labour. Partnership. I don’t know who you would say was ‘The Boss’ though. If we are travelling in the car, for instance, he drives – dangerously! He wouldn’t want to be driven be me.”
Did her boys answer her expectations of them? “I don’t think I had any particular expectations. If anybody asks me, ‘How are your boys doing?’ I always say, well a) they’re all alive and b) they’ve all got four intact limbs. What more can you ask for? I think young men in particular are very vulnerable and I have more than one friend who’s lost a child in adult life which is a most terrible thing. So I’m not primarily concerned about other aspects of them. I’m very pleased that they’re alive and well and appear to be happily settled.”
Well, allow me (at Easter time) to say, “Hallelujah” to that. Just one more thing about Christine. Having failed to net any daughters herself, her four boys have so far produced five granddaughters for her – and no grandsons!
A Very Happy Songkran to everybody!
Next week: The Pianist
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