Thursday, December 10, 2015

Interest rates in America

Interest rates in America

Buckle up

The first of three pieces on the Federal Reserve’s imminent interest-rate decision looks at whether America is ready for lift-off

SINCE interest rates hit rock-bottom in 2009, the Federal Reserve has repeatedly made optimistic forecasts about when they would start rising, only to delay the big day again and again. If the Fed has been a bullish coach, the markets have been trusting fans, continually believing that an increase is imminent, only to have their expectations dashed. At last, however, the moment seems to have arrived. On December 16th, when the Fed’s rate-setting committee meets, it seems all but certain to raise rates.
For that, thank the strength of the labour market. Unemployment, at 5%, is as low as most analysts reckon it can sustainably fall. During the recession, America lost 8.7m jobs. It has since gained 13m. In 2010 there were six unemployed workers for every job opening; today there are 1.5.

Wages, long stagnant, finally appear to be growing again, too. In September, when the Fed toyed with raising rates, average hourly pay had just grown by 2%, on an annualised basis, over the prior three months. Now that has risen to 2.8% (see chart). By one measure, wages grew by fully 4% in the third quarter of the year. Accelerating pay suggests that slack in the labour market has almost gone.

The pick-up in wages could peter out, however. Since the recession hordes of workers have left the labour force altogether: labour-force participation among 25- to 54-year-olds in the third quarter of the year was lower than at any time since 1984. If some can be tempted back to work, wages will be held down.
Moreover, the Fed’s preferred inflation measure stands at just 0.2%, well below its 2% target. Cheap oil bears much of the blame. But core inflation, which excludes volatile energy and food prices—and so is a better indicator of underlying price pressures—is only 1.3%.
Janet Yellen (pictured), the Fed’s chair, chalks up some of the shortfall to a strong dollar making imports cheap (the greenback is up by 19% since mid-2014). That effect should dissipate if the dollar’s ascent stops. There is also less scope for the oil price to plunge, having already fallen by almost two-thirds over the past year. This suggests inflation may pick up in 2016. That, in turn, argues for a rate rise soon, since monetary policy is thought to have only a delayed impact on the economy.
The Fed is in a jam, though, because it faces asymmetric risks. If it raises rates too soon, its scope to cut them, should the economy then sour, is limited by the fact rates cannot fall far below zero. If it waits until inflation is stronger, it has unlimited capacity to raise rates to tame it.
Getting this balance right will be tricky. Ms Yellen likes to emphasise that starting early keeps the journey smooth; abrupt rises later might rattle markets. Yet the Fed’s forecast for rates is steeper than what the market predicts. The Fed’s median rate-setter expects interest rates to rise to around 1.5% by the end of 2016; by contrast, traders expect rates of only 0.85% in a year’s time.
Two roads in a wood
Who is right depends on how the economy reacts to the first rise. That is hard to predict, because the channels through which monetary policy works are mysterious. Take consumption, which has driven America’s recent growth. The impact of rates on consumer spending is muted by the fact that, unlike in much of Europe, most American mortgages come with fixed interest rates, shielding many Americans from swings in monetary policy. The first rate rise will nudge up the cost of borrowing, but only very slightly.
Nor is a rate rise likely to slow investment much. The evidence for the responsiveness of investment to rates is mixed; business confidence is probably more important. If—as some think—a rate rise is a signal from the Fed that America’s economy is healthy, investment could even rise.
That leaves exports. If rising rates cause the dollar to appreciate further, American goods will become still more expensive abroad. America’s embattled manufacturers will not welcome that (a recent survey suggests manufacturing output shrank in November for the first time in three years). But another surge in the dollar is unlikely, since a rate rise in December is now widely expected.
If the Fed follows through on its forecasts, though, and raises rates faster than markets expect in 2016, the dollar may well rise further, dampening inflation quickly. Stanley Fischer, the Fed’s vice-chair, recently estimated that a 10% rise in the dollar reduces core inflation by half a percentage point within six months. For all her horizon-gazing, Ms Yellen is unlikely to persist with rapid rate rises if they push inflation too far below target in the short term.
Further falls in commodity prices could also keep the brakes on. This would drag down inflation directly, but could also reduce it indirectly by pushing up the greenback. Much of the dollar’s recent appreciation, on a trade-weighted basis, derives from weakness in the Mexican peso and the Canadian dollar. Those currencies weaken when commodity prices fall, argues Paul Ashworth of Capital Economics.
Most uncertain of all is where interest rates will end up. That depends on the so-called “natural” rate of interest; the sweet-spot which balances demand and supply. This is tricky to pin down, but it is commonly thought to be falling, in part due to systemically slower growth since the crisis. One estimate—based on work by John Williams, a rate-setter himself—puts the inflation-adjusted natural rate of interest at -0.1%, down from 3.1% in 2000. Given an inflation target of 2%, that points to rates eventually settling at just under 2%. That is worryingly low; in 2007, before the crisis, the Fed had leeway to cut rates by over 5 percentage points.
The last time monetary policy changed in a comparable way was in 1947, when the Fed started raising rates from a lowly three-eights of a percent, where they had sat for five years. This time, the wait for another stint near zero may not be nearly so long.

Nam June Paik & Eric Kroll


The Korean TV artist who inspired fetish photography

Eric Kroll showcases unseen art and video that traces his collaborative work, including a Playboy Bunny and a humanoid robot, with visual artist and sculptor Nam June Paik


... culturally appreciate

How to culturally appreciate and not culturally appropriate

It’s a minefield out there – here’s a guide to knowing whether you’re respecting or you’re ripping off



If you’ve been on the internet – like, ever – you’re bound to have heard the term ‘cultural appropriation’. You might ‘like’ tweets in agreement with someone calling out someone else’s bullshit, or you might brush it off as hyper-sensitivity and carry on scrolling through the #whitegirlsreclaimthebindi hashtag. Whichever way you play it, it’s a topic that's hard to ignore. Everyone fucks it up – fashion brands, pop stars, regular Joes.
Cultural appropriation is defined as a “sociological concept which views the adoption or use of elements of one culture by members of a different culture as a largely negative phenomenon”. Or, as I say, it’s picking and choosing which parts of a culture you want to participate in, often reducing significant cultural wear or styles to fashion statements. It’s wearing a hijab and bindi in a selfie without having to deal with the micro-aggressions many of us face while sporting the same attire. Especially with Islamophobia being pretty rampant right now, many hijabis face violent consequences for wearing things inherent to their culture, whereas someone posing in one is unlikely to suffer the same injustice.
Although it seems like a fairly easy concept to grasp, many people still argue that being able ‘express’ themselves in imitation dreadlocks and eBay-purchased bindis is more important than the consideration of the culture they‘re jacking from. It’s pretty comical to see the same people who once complained about wearing band t-shirts if you’re not a real fan of the band brush off the concept as over-dramatic.

Cultural appropriation’s toxicity is hard to fully comprehend if you don’t have an understanding of white supremacy. Picture this: you tweet a hilarious, well-thought-out joke and get zero likes or retweets. People might even call it lame or mock you for posting it. Someone with a lot of followers, who’s viewed favourably, copies your exact tweet and it goes viral. It ends up on large news platforms, screenshots of the joke repeatedly shoved in your face as you log on to Instagram, reminding you that someone who has a bigger presence on the internet has received recognition, credit and profit for something you created.
Black hairstyles (locs, cornrows, twists) are stigmatised and deemed unprofessional by many businesses and corporations, pegging a natural hairstyle as unkempt. There are countless articles about black people unable to get jobs because of these looks. The thought of a black woman with beautifully maintained locs sitting on a couch after being refused a job, watching a white singer sport ‘dreads’ on a VMAs stage is understandably unsettling. It’s hard to stomach watching a race that enjoys legal and financial superiority adopting parts of oppressed cultures while actual members of said cultures are demonised.
Admittedly, there is a fine line between appropriation and appreciation, and many grow frustrated trying to differentiate. The first questions to ask yourself before you pick up at that dashiki or book your henna appointment are: “Am I reducing this to a fashion statement? Are people of this culture the ones who are profiting off of this? Am I in an environment where this is appropriate?” Let’s have a look at some instances of moments when you should check yourself for cultural appropriation.


... the Best Advice

10 Leaders Share the Best Advice They Ever Received

As we approach the end of the year and look to 2016, think about the advice these leaders say helped guide and shape them.

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What's the best advice you ever received? Sometimes, it takes just a small tidbit to motivate you or help you see a clear path to success. These leaders have shared the best advice that helped them through a tough period or to jumpstart their careers.

1. Don't lose sight.

"'People who used to run car companies were really into cars. People who ran hotel chains loved hospitality. Now, everything is run by accountants, and you feel it as a consumer.' This slightly grumpy rant from one of my mentors, the famed mad man Martin Puris, inspires me to stay focused on the purity and passion of a business pursuit."  --Andrew Deitchman, co-founder of  The New Stand

2. You get only what you settle for.

"The best business advice I ever got came from my dear old Dad. It's quite simple and immeasurably powerful. It goes like this: 'You, and only you, should set the value of your talents, ideas, services, and/or product. Don't ever expect anyone to pay or give you more than they have to.' As an entrepreneur, you have to get used to the fact that, quite often, you'll be faced with an offer that seems less than the value of your talent, ideas, services, or product. That's business. You are the sole arbiter of what you, your ideas, services, or product is worth. Therefore, what you get is what you are willing to settle for. You have to fight for what you feel you're worth. Not that settling is necessarily a bad thing, but where you end up is what you settle for. Sage advice." --Neil Powell, fine artist and co-founder of Mugnacious

3. Be clear and transparent.

"I learned many things while working for Steve Jobs in the '90s, including what not to do. While Steve was arguably the greatest marketer of our generation and gave some of the most inspirational speeches of our time, he wasn't the best communicator when it came to individuals. Steve didn't set defined expectations for me or other employees: he simply knew it when he saw it. Watching him operate made me recognize the importance of clarity and transparency with my team, and how imperative it is to set expectations and effectively communicate with them. The more transparent I am about where I want to take the company, the clearer my team is about how to get there. Making sure everyone is on board before you make business decisions will help ensure you won't alienate people (sometimes your best ones) in the process." --James Green, serial entrepreneur and CEO of technology company  Magnetic

4. Forget "having it all."

"These days, there's an ongoing debate about whether women can 'have it all,' and I've often been asked that question. I'm a person who likes to give 100 percent to everything I do. I want to be the best at my job and as a mother. But I realize I can only give 100 percent in the moment. If I'm at work, am I giving 100 percent to my kids? No. If I'm at home, am I giving 100 percent to my work? No. It's a balancing act, but worthwhile as long as we don't kid ourselves that we're superwomen."  --from the book Getting Real by Gretchen Carlson, host of The Real Story with Gretchen Carlson on Fox News, used by permission

5. Don't get caught in analysis paralysis.

"Business will only get faster for us and our customer base in 2016. Which means, often times, we need to make decisions quickly without having all of the information and time we may need. And when you don't have the perfect information and time, you have to be thoughtful about your process and diligent in your analysis. From there, then make the decision quickly. Don't get caught up in what I call the 'analysis paralysis.'" --Don Smithmier, founder and CEO of  The Big Know

6. Listening is very different from hearing.

"The best piece of advice ever imparted to me comes from my mom, who is fond of saying 'What you say matters less than what people hear and understand.'  As a teacher, she was a brilliant listener, and she used what she heard to build a bridge between what she needed to teach and how the student needed to learn. From that, she taught me to focus my efforts on helping people understand rather than on what I wanted to tell them. She taught me how to hear, and it is the single most important skill in my professional success." --Courtney Buechert, founder and CEO of creative marketing agency  Eleven, Inc.

7. Put your weirdness into your work.

"These words were spoken to me by famed voice-over and recording artist Ken Nordine. This was many years ago, and I've carried these words with me ever since. He recognized that we all get a little weird from time to time, but it's how we choose to channel our weirdness that's key. To offset my very ordinary life, I infuse every project I touch with experimental and fluid creations. It's what's led to my best work and most successful endeavors. With weirdness and imaginative thinking embedded in all facets of your work, you are free to spend the rest of your time enjoying the little things in life, a balance that is delicate yet so profound." --David Slayden, founder and executive director of designer-founder accelerator BDW

8. Action creates opportunity.

"There's a variety of advice that has had lasting impact, but this is the one that I continue to return to on a weekly basis. It's a quote from my former CEO. This phrase remains valuable in the big and small, in the tactical and the strategic. We are in an industry that requires the creation and fostering of constant change. We have to invent new ideas, create new services and capabilities, all while increasing the quality of our craft. So while we can all spend an endless amount of time contemplating and planning, there is one force that cannot be denied. Take action, as it will surely create and open up new opportunities." --Ed Brojerdi, CEO of  KBS New York and co-founder of Spies & Assassins

9. No cohesion, no team.

"In creative industries especially, teams are central to the work. They are integral to collaborative cultures and, far more often than not, essential to innovation. What too many people fail to recognize, however, is that two or more people working together doesn't automatically constitute a 'team.' These people may be partners and co-workers, but that's not enough to effect the magic that genuine teamwork can produce. When I was running the brand-strategy practice for consultancy FutureBrand, we assembled teams to take on each assignment and were careful to include a diversity of skills and backgrounds in each. I couldn't help but notice, though, that certain teams were far more effective than others. In a management meeting, we discussed the issue and then we each went off to gather more data. When we reconvened, the lesson became clear: No cohesion, no team. It turned out that the highest performing teams simply liked each other more. They would break for dinners. Go bowling. Share their weekend plans and recaps. They genuinely cared about one another. And that led to a level of performance that far outstripped anything that less cohesive teams could hope to achieve. I keep that lesson in mind, not just when I'm putting teams together but also when I'm hiring. However brilliant or accomplished a prospect is, I don't want to hire that person if he or she can't play well with others. I look for the right mix of skills and mindset, of course, but beyond that I want to know that the person will be worthy of colleagues' trust and a positive presence within the company. If not, I'd prefer that person play on someone else's team." --Andrew Benett, Global CEO of Havas Worldwide and Havas Creative Group

10. See the spaces, not the trees.

"This is a snowboarding reference. It can be daunting, standing at the top of the mountain readying yourself for the trip down, and seeing all the trees in your path. But the key is to see the space between the trees. This sort of mindset, seeing the opportunity and not the obstacles, is important as you start out on your next life chapter, both personally and professionally. When you're deep into your work or facing a personal challenge, it's easier to see the barriers, but don't let them stop you from pursuing the opportunity that exists around them. Remember the business of your business. Many companies get caught up in the service they provide versus what actually drives their business. For example, Twitter is a micro-blogging service. But at the end of the day, what pays the bills is selling ads and sponsored tweets on the platform. Don't lose sight of the actual economics of your business; it's what keeps the lights on.
You Join a Company, but Leave a Boss.
"Most of us say we want to work for a company, whether it's Google, GE, Facebook, or IBM. Let's say you score the interview and land the job--congrats. But once you're there, you'll see that you don't actually work for the company; you work for your manager. Through actions and management, your boss is the one who has a direct impact on your experience at the company. That relationship is incredibly important to your future, both inside the company and for your next job. It's the team and people you surround yourself with that matters every day. When people leave a company, it's usually their manager or the leadership that they're really leaving, so when choosing your next adventure, select equally on leader and logo." --David Gaspar, managing director at innovation consultancy firm DDG
The opinions expressed here by columnists are their own, not those of

... Number26, German Banking Start-Up

Number26, German Banking Start-Up, Expands Across Europe

Would you trust a start-up to look after your money?
That’s the question a new generation of banking-focused tech companies is asking potential customers, as they hope to steal people away from traditional banks.
The latest fledging company to try its luck in this crowded market is Number26, a Berlin-based start-up whose backers include Peter Thiel’s Valar Ventures and Axel Springer, the German publisher.
On Thursday, Number26 announced it had expanded its mobile-only banking service to six European countries, including France and Spain, adding to its current offerings in Germany and Austria, where the company has a combined 80,000 users.
“All these markets have one thing in common,” said Valentin Stalf, 30, the start-up’s co-founder. “They are some of the most-outdated banking markets in the world.”
Like financial start-ups such as GoBank and Moven in the United States, which have focused on providing services through smartphone applications and often do not have banking branches, Number26 has targeted younger customers who have grown up surfing the web and do not have decades-long ties with traditional banks.
Number26 uses tools such as providing push notifications on smartphones when banking transactions are completed, guaranteeing free cash withdrawals anywhere in the world and teaming with retailers in Germany to let customers withdraw and deposit cash. A similar service will be introduced next year in the company’s new markets.
To comply with Europe’s tough banking rules, the start-up has also teamed with a traditional financial service provider, Wirecard Bank, so that customers’ deposits are protected, up to a limit.
“We see ourselves as a Europe-wide company,” said Mr. Stalf, who plans to roll out more sophisticated banking services, like overdraft facilities and savings products, next year. “For 18- to 35-year-olds, it’s normal to do everything on their mobiles.”
Still, banking experts say it has proved difficult for these banking start-ups to win over skeptical customers, who, despite widespread anger aimed at traditional banks, have yet to move over in big numbers to these often unproven tech companies.
That reluctance is particularly apparent in Europe, where traditional banks like Barclays of Britain and Deutsche Bank of Germany have weathered scandals to remain people’s primary banking options.
In Britain, 7.9 percent of individuals switched their bank accounts to new start-ups and other traditional players last year, up just slightly from 7.2 percent in 2013, according to industry statistics.
Tech start-ups also face growing competition from traditional banks that are slowly waking up to the threat from fledging companies. Last year, BBVA, the Spanish bank with a reputation for tech innovation, bought Simple, the American banking start-up, for $177 million, in part to harvest the company’s technology.
And last week, BBVA signed a similar deal in the United Kingdom, acquiring roughly a one-third stake in local mobile-only Atom Bank that valued the start-up at $228 million.
These responses, combined with new financial services from tech companies like Alphabet’s Google and Apple, could prove the undoing of banking-focused start-ups that might not have the deep pockets to keep pace with the traditional banking industry and new offerings from Silicon Valley’s elite.