U.S. Fed Launches 3rd Round of Asset Purchases
The U.S. Federal Reserve announced today its third round of asset purchases designed to inject cash into the economy and boost growth, so-called “quantitative easing” (QE). The Fed said it will buy $85 billion of longer-term assets per month, including $40 billion of securities backed by mortgages, until the economy solidifies. The Fed also said that the federal funds rate will stay near zero “at least through mid-2015,” six months longer than initially stated. Although the Fed has already expanded its balance sheet by over $2 trillion since 2008, this is the strongest action the central bank has taken to revive the job market and kickstart the economy. It is understood by many as the equivalent of the Fed saying “we will do everything it takes.” Fed Chairman Ben Bernanke is hoping the $40 billion in mortgage-backed securities will help increase the value of homes, which in turn should raise confidence and consumption. While stock markets rallied to a five-year high in response to the announcement, Congress Republicans say it will not help the economy, but rather weaken the dollar, stoke inflation, and even create more speculative bubbles. U.S. Republican Presidential Candidate Mitt Romney said he would not reappoint Bernanke at the end of his term in 2014. U.S. House Representative Ron Paul said ”the Fed’s announcement today shows a disastrous detachment from reality on the part of our central bank.” Other conservatives have expressed concern that QE3 will help reelect President Barack Obama. Supporters of the Fed’s action say the announcement alone has already helped improve the outlook, and therefore confidence.
Anti-Muslim Film Fuels More Protests Across Middle East
Two days after a U.S.-produced anti-Muslim film sparked protests in Egypt and Libya, violent demonstrations took place in Yemen, as well as Morocco, Tunisia, Sudan, the Gaza Strip, Iraq, and Iran. In Yemen’s capital Sana’a, protesters climbed the embassy wall, replaced the American flag with their banner, and set fire to a building and vehicles. In Iran’s capital Tehran, they surrounded the Swiss embassy, which represents American interests as there isn’t a formal diplomatic relation between the U.S. and the Islamic nation. Unrest in Iraq took over both Baghdad and the southern city of Basra. Meanwhile in Libya, where U.S. Ambassador Chris Stevens and three American staffers lost their lives in a fire at the U.S. consulate of Benghazi, Interior Minister Waris Sharif announced arrests were made in relation with the deaths. Riots continued in Cairo as the Muslim Brotherhood, the movement for which new Egyptian President Mohamed Morsi ran as candidate, called for more protests. Compared to Libya’s rapid and decisive move to condemn the violence, Egypt’s response appeared slow and mild, causing U.S. officials to worry about Morsi’s willingness to cooperate with Americans.
Spain’s Region Catalonia Wants Both Bailout and Independence
Catalonia, the Spanish region that asked for a €5 billion ($6.47 billion) bailout package from the central government last month, now also wants its independence. Catalonia may be the most indebted of Spain’s 17 autonomous communities, but it’s also the one with the largest gross domestic product (though it ranks fourth in income per capita). Its economy led the country as a whole with a mix of financial services, industry and innovation, and tourism. The region has its own language, Catalan, as well as its own history and culture. As the crisis progressed, separatists tendencies have flared. Austerity measures imposed by Spanish Prime Minister Mariano Rajoy have done little to endear him to regions, and although Catalonia badly managed its finances, Catalans believe they would do better without the central government. For now, Catalan politicians have asked to keep some of the taxes paid to Spain, a step toward fiscal autonomy. So far, Rajoy has chosen to ignore this, calling instead for national unity.
U.N. Nuclear Agency Expresses “Serious Concern” Over Iran’s Uranium Enrichment Program
The board of the International Atomic Energy Agency, of the United Nations, approved today a resolution that criticizes Iran for refusing to stop its uranium enrichment program. The resolution, passed by a large majority, including Russia and China, also serves as a message to Israel in an attempt to dissuade Prime Minister Benjamin Netanyahu from attacking the Islamic nation. The text of the resolution states there is “serious concern that Iran continues to defy” other resolutions passed by the U.N. Security Council that asked Iran to suspend its nuclear program. Iran says that this program is meant to develop a sustainable source of energy for the country, but worry has been mounting as it now has enough uranium to fuel five to six bombs. This, combined with Iranian President Mahmoud Ahmadinejad’s hostility towards Israel, has prompted Netanyahu to demand that the U.S. draw a “red line” for Tehran to end its program. Both the European Union and the U.S. have also imposed sanctions that have hurt Iran’s economy by slowing its oil exports, and the EU said last weekend it will be considering more sanctions.
Chicago Teachers Union Says Strike-Ending Deal Is Near
The teachers strike in Chicago could end soon as the Chicago Teachers Union (CTU) said it was close to an agreement with the city’s public schools. Still, students won’t have classes tomorrow. Around 350,000 students were affected as 29,000 union members took to the streets. The strike began on Monday over education reforms Mayor Rahm Emanuel started to implement. Teachers say these measures will funnel public money towards privately run school. The reforms would also affect how teachers are evaluated, focusing on the results of standardized tests for students. Teachers also asked for better benefits and wage increases. Union President Karen Lewis said today some progress was made on a couple of the key issues, relating specifically to evaluation and school principals’ ability to hire and fire teachers.