Fed Signals Growth Return Insufficient to End Monetary Stimulus

By Scott Lanman

Sept. 24 (Bloomberg) -- The Federal Reserve signaled that the U.S. economy’s return to growth is insufficient to withdraw stimulus as officials seek to reduce the highest unemployment rate in a quarter century.

While the economy has “picked up,” the central bank’s planned asset purchases will help ensure a “gradual return to higher levels of resource utilization,” the Fed’s Open Market Committee said yesterday. Policy makers committed to complete their $1.25 trillion in purchases of mortgage securities and extended the end-date of the program to March from December.

“They’re going to be in that accommodative phase for a while,” said Vincent Reinhart, a former Fed monetary-affairs director who’s now a resident scholar at the American Enterprise Institute in Washington. The Fed’s “tactical goal isn’t just to get to the rate of growth of potential,” he said. “It’s to work down the level of slack.”

The FOMC statement, while offering the most favorable economic outlook since Lehman Brothers Holdings Inc. failed a year ago, means Chairman Ben S. Bernanke may delay raising interest rates and shrinking the Fed’s $2.1 trillion balance sheet until he secures a recovery.

Policy makers, as part of a unanimous decision, kept the main interest rate in a range of zero to 0.25 percent and reiterated that rates will stay low for an “extended period.”

The central bank pledged to purchase “a total of” $1.25 trillion of mortgage debt, changing prior language saying it will buy “up to” that amount.

Traders yesterday marked down expectations for Fed interest-rate increases next year, based on futures contracts on the Chicago Board of Trade.

Stocks, Treasuries

Treasuries rose yesterday, pushing the yield on the benchmark 10-year note down three basis points to 3.42 percent in New York, according to BGCantor Market Data. The Standard & Poor’s 500 Index lost 10.79, or 1 percent, to 1060.87, paring its gain this year to 17 percent.

The FOMC said the economy showed signs of “substantial resource slack.” The unemployment rate rose to 9.7 percent last month, the highest since June 1983, when it reached 10.1 percent. Employers eliminated 216,000 jobs in August, the 20th straight month of losses, and the Fed acknowledged yesterday that businesses are “still cutting back on fixed investment and staffing, though at a slower pace.”

Capacity utilization, the proportion of industrial volume in use, rose in August to 69.6 percent from 68.3 percent in June, its lowest level since record-keeping began in 1967. The figure averaged about 81 percent from 2005 to 2007.

‘Cost Pressures’

“Slack is important to their thinking about inflation and inflation expectations,” said Mark Spindel, chief investment officer at Potomac River Capital LLC in Washington, a hedge fund with about $100 million under management.

“They are sending a clear message that rates will stay low for longer,” said Spindel, a former deputy treasurer at the World Bank’s International Finance Corp.

The weakness in the economy is “likely to continue to dampen cost pressures” and keep inflation “subdued for some time,” policy makers said yesterday. Public expectations for price trends are “stable,” they said.

At the same time, housing market has started to stabilize. Home prices rose 0.3 percent in July from the previous month, the Federal Housing Finance Agency said this week. Housing starts rose in August to the highest level in nine months.

“Activity in the housing sector has increased,” the central bank said.

‘More Optimistic’

“They have gotten progressively more optimistic over the last several statements, and this is the most optimistic since the financial crisis intensified last September,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York.

“The economic data will be improving quite sharply over the next few quarters,” said Maki, a former Fed researcher.

Yesterday’s affirmation that the Fed would buy the full amount of mortgage backed securities eased concerns that any reduction of the program might undermine a recovery in the housing market. The Fed’s purchases of the securities have pushed down mortgage rates, helping spur demand for homes.

“They probably recognize exiting is much more difficult than entering into the program,” said Torsten Slok, senior economist at Deutsche Bank AG in New York. “They’re very worried about what the reaction will be when it fades, so they’re pushing it into 2010,” he said. “For now, that’s pushed the problem ahead of them.”

The average rate on a 30-year mortgage dropped to 5.04 percent in the week ending Sept. 17 from 5.07 percent the week before, according to mortgage buyer Freddie Mac.

The Fed has announced $861.9 billion of mortgage-backed securities purchases and completed $685.1 billion. It’s bought $125.2 billion of agency debt and $289.2 billion of the planned purchases of $300 billion in Treasuries, which will end next month.

The tapering in housing debt purchases will begin today, the New York Fed said in a separate statement after the meeting.

[Source: http://www.bloomberg.com/apps/news?pid=20601103&sid=a7PUzPYyvn7M ]

Lord Sun defeats Rahu after being eaten

[This article was composed on July 22, 2009, But could not be published due to internet issues]

Well, had we been living in the age old era, the headlines of the newspapers would have been similar to the one above. But, this is not the truer side of the story. Yes, I am talking about one of the rare celestial phenomena which occurred today. I am talking about the solar eclipse.

Since past few days a lot of things were being discussed and written in news channels and print dailies. The astronomers predicted that this is going to be the longest duration total eclipse of the century, with the totality lasting up to 6 minutes and 44 seconds. The next eclipse which will pass this duration will occur in 2134. Therefore this event was a must watch as it was a once in a life time opportunity.A number of channels had organized a discussion on the causes and effects of eclipse, involving scientists and astrologers. While, astrologers believe that such celestial incidents have positive and negative effects on life of individuals and may even bring severe calamities. However scientists obviously denied the claim as there is no direct scientific evidence for the same. However, there are a number of astrologers (Jyotishi) who advice people of the ill effects of the phenomena. Generally, people are advised not to be asleep and eat anything during the period of eclipse. Pregnent women are advised to stay indoors and not to see the eclipse. They prescribe various pujas and other instruments to ward off evil spirits. A news channel aired a senior Jyotishacharya, who rubbished such claims and prescriptions as being made by (Ponga pundits) and said that these people do not really have knowledge of Jyotish and are misguiding people because they want them to be there customers.

Reasons for occurrences:
Scientific reason: Earth rotates around sun and moon rotates around moon. Sun's light illuminates both earth and moon. However when all three comes in a straight line, with moon being in between sun and earth, the moon blocks rays of sun and prevents them in reaching to earth. This is what we call eclipse.
Mythological reason: This is a bit interesting. According to Hindu mythology, Gods and demons were involved in Sagar Manthan (Sea churning), when a pot filled with nectar came out every body started fighting for drinking it, as one who drinks it would become immortal. Lord Vishnu thought that demons cause trouble to everyone, and if they become immortal, they will cause destruction of the world. So, he took the form of a beautiful woman and said everyone that everyone should sit in a que and then she will distribute it. However, Lord Vishnu served nectar only to Gods. Sensing the cheating a demon named Rahu-Ketu changed into dress of Gods and sat among them, and had the nectar. However soon Lord Sun and Moon identified, because of which Rahu-Ketu started running. Then Lord Vishnu cut his head using his Sudarshana Chakra. Thus the head was called Rahu and the remaining part as Ketu, the same is believed to be eating Sun and Moon every now and then because of his animosity with two deities.

The total eclipse was to be seen at a strip passing covering Gujarat, Madhya Pradesh, Parts of UP, Bihar, and north east in India. the remaining parts of India were to see the partial eclipse. Excited by a lot of media attention, I had also prepared myself to watch the eclipse in the morning. I took out my camera and charged the battery so that I may be able to take the picture. The timing of eclipse was from 5:21 AM to 7:30 AM.My room mate set an alarm of 5:15 AM. in the morning both of us got up together just to find out that the alarm had not went off as expected, but we had not lost much time as it was only 5:45 AM. Unfortunately, Hyderabad had been witnessing rains for past few days, and the weather was heavily clouded, so we had no chance to see the eclipse. Then we switched on TV, to enjoy at least there. First news. Surat which was supposed to be the first city to witness it was raining. Then news came in that there are clouds in almost all of Gujarat, MP, UP and Bihar. Then news came that Bhopal is also raining. Luckily in Varanasi the eclipse was visible as the cluods were very thin there. A small village in Bihar, Taregna was the center of all news till today morning as NASA had declared it the best spot to view the eclipse, however the clouds spoiled the party here too. A host of VIPs including state chief minister, MLAs, scientists, media person had camped here just to be disappointed.

The TV showed total eclipse at three locations, Varanasi, Tawang and a place in China. At approximately 6:21 AM, the moon covered the sun completely and all of a sudden Varanasi witnessed complete dark for about 4 minutes. In the end there was a beautiful diamond ring. Though the eclipse in Tawang (Arunachal Pradesh) and China were clear, but they were not as spectacular as at Varanasi. Other places in Central and Western India could not see the eclipse, because of cloud cover, but these places also witnessed the complete dark during the period of total eclipse.

I have downloaded a few photographs of today's total solar eclipse at Varanasi from the internet (Source: TimesofIndia.Com), which I am showing here.

The end of second season of DLF IPL

Well, this was what happened when the DLF IPL's second season came to and end in South Africa yesterday night. In the nail biting final match the Deccan Chargers beat Royal Challengers by 6 runs. It was followed by firework shows not only the official one in South Africa but also unofficially by a number of fans in Hyderabad. The first I witnessed on TV courtesy Sony Max and the later live in Hyderabad itself.

Well I have been supporting the Team Hyderabad right from the start of the first season, but unfortunately it lost most of its matches in the first season to finish at the last spot. The first season was also not very good for this year's runner up RC, who finished at 7th spot last year just a place better than the Hyderabad.

This year IPL was moved to South Africa, because of security issues due to the general elections in India. But the organization teams' commitment ensured the tournament was no less successful at the new location.

Lets hope that the tournament gains more popularity in future and the Hyderabad Deccan Chargers retain the trophy the year after year.

Incendio lecture series

Incendio is the newly formed activity group in Vinod Gupta School of Management (VGSoM) at IIT Kharagpur. Led by the class of 2009, it organized recently a lecture series cum seminar by so called reknowned management thinker Partha S Ghosh. The programme ran over three and half days and came to an end on Sunday, 17th Feb. The workshop was aimed at covering primarily three areas: Leadership, Globalization and Strategy.

A lot of students, who were made to attend the workshop (because of compulsory attendence requirement) felt quite bored with the programme. A few students who were listening to the lectures said that Mr Ghosh was a bit egoistic in his talks and he seemd to be defending his thoughts at times, when students counter argued the points made by him.  
For eg. there was an assignment designed by him, to judge one's 
personality and to judge if the person is a good leader or not. This involved two dimensions connectivity and perspective. At first he said that a person should be high on both dimensions and explained how his figure is higher in both of these. However when one student raised the argued that some of the questions for connectivity dimensions are such that they clearly indicate that one needs to have low score in it to be a good leader, Mr Ghosh started defending his arguement by saying that one need not be high or low on any of these dimensions to be a good leader, however these can be just used to identify the comfort zone of the person.

The views of the faculty were a bit different. May be because they could not say anything against the famous management thinker in public, because it was the question of the image of the b-school. Prof. Gautam Sinha, compared Mr Ghosh with Lord Krishna (Since Partha is Arjun in Mahabharta and his Sarthi i.e. the chariot driver was Krishna in the great war of Mahabharata, Partha Sarthi is hence Lord Krishna). So should we assume that Lord Krishna was in IIT Kharagpur for three and half days to give away the valuable gyan of Shree MadBhagvat Gita??? and we should feel great that we were lucky ones who heard holy words from the mouth of the prophet himself.

Mr Ghosh also stressed the importance of nationalism or I would say patriotism, I would say. He said that if he would have say in the government, he would form a ministry of ethics. He also stressed on the importance of the national anthem and said that it should be played in cinema halls during each show, so that people remember it and give it the due respect. However it was a mere pity that when the national anthem was being sung at the end of programme, Mr Ghosh forgot the fact that if one wants to give proper respect to the anthem, he should stand in attention with his hands completely straight and facing down beside the body, however his arms were folded since he was carrying a shawl/ cloth with IIT buildings made on it given to him as momento. The rules also says that you should sing the natinal anthem when it is being played or sung by others, but Mr Ghosh didnt seem to be singing it. Surprisingly he lives in the United States and he doesnt care for his ex-motherland any more.

I would like to end with a rather funny quote from another faculty Dr. R P Pradhan that leadership and econometrics are similar. Leadership says that you should work towards finding the best possible path in your life, and in econometrics we analyze data sets to find the best possible path/ relation among them.

The guy called Nishank

I was just wondering I haven't updated my blog for months. There are two reasons one I am not getting enough time and the second I can't think of any topic on which I can write something meaningful. Suddenly the idea came to my mind.. why dont I write about myself.

Well, Gwalior was the city, and 0300 hrs IST was the time on 27th January 1983 (as per Janam kundali) where a child was launched into this world. Well, no prizes for guessing that the child was me.

The kid started his education journey from a small village called Hanumana in the Rewa District of Madhya Pradesh. As told by his parents, the kid was too fond of schools, and thus his parents started sending him to school at the age of 2-2.5 years, though without officially enrolling him. This was a government run village school so it was not a big problem. But the kid looked to be promising to the teachers (I could recall names of teachers as Ojhaji, Ramayan sir, Radheshyam sir) and the parents were requested to officially enroll him. Here was the problem. Unlike shehri schools culture, the local school didn't have the kindergarten and the school started from the first standard. So the admission was taken in first standard itself. But the parents didn't want to put pressure of studies on the boy, so he had to repeat class I for 2-3 times (exactly याद नही).

The family moved to district headquarter Rewa city. The admission was taken into govt run PK School (named after local princess Praveen Kumari) in the third standard, and subsequently to Saraswati Shishu Mandir (Nehru Nagar) from fifth standard onwards. the progress was good so far, and the boy always stood first in his class.

The family then moved to Guna (another place in MP), and the school was again Saraswati Shishu Mandir, and the standard was seventh. The boy topped his school again in the VIII standard in the MP board exams. The problem of further schooling appeared, as the school was upto VIII standard only, and there were no good hindi medium school in the town. So the boy moved to an english-medium school named Christ H S School which was under CBSE board in IX standard. The parents moved to Nimach (Dist. Mandsaur, north-western tip of MP) which is famous for growing of opium plants. The school was Carmel Convent School (CBSE board).

Being ambitious to become an engineer, the boy moved to Bansal Classes, Kota which is/ was the IIT-JEE coaching institutions. Besides the coaching the studies of XI and XII were done in St Johns Sr Sec School.

The hard labor of two years brought the luck as the boy was ranked 1834 in IIT-JEE 2000. Subsequent to the conselling held at IIT Bombay, Mumbai the admission was finally taken to the four year B. Tech. course in the department of Civil Engineering at IIT Kanpur, Kanpur. The new environment proved to be too struggeling as the first year ended with a CPI (Cumulative Performance Index) of 5.5 on a 10 point scale with one F in the infamous Mechanics of Solids (fondly called MOS). The course was taken by Dr C V R Murthy and about 30% of the class was handed over the F grade. The course was repeated by the boy in the subsequent summers. From then onwards the boy had understood the secrate of success at IIT, and henceforth the performance was getting better and better. Finally on 28th May 2004, the boy received the Bachelor of Technology degree in Civil Engineering from Prof. S G Dhande the director of IIT Kanpur with a final CPI of 8.0.

The boy entered into the corporate world from July onwards, when he joined an Indian multinational company Larsen & toubro Ltd. - ECC division as GET (Graduate Engineer Trainee). The company credited with landmark structures and projects in India and abroad eg. Lotus temple, Delhi Metro, bridge in the movie 'The bridge on the river Kwai' etc. Firsty posting was made in the hills of Meghalaya. The company was executing the contract of 300-bed hospital named as NEIGRIHMS (North East Indira Gandhi Regional Institute of Health & Medical Sciences). This went on for next one and half months. Till this time the new rank of Senior Engineer (Civil) was obtained by the boy. Mr A Dutta and Mr P K Soni were the instrumental persons who helped him gain the valuable experience.

The next movement was made towards Kolkata regional office of the company in Jan 2007. Mr Soni continued to guide the boy here also. After working there for six months the boy finally put in the papers to join the MBA course at Vinod Gupta School of Management (VGSOM) at IIT Kharagpur. The tough preparations of four months (Aug-Nov) amid a 12-13 hour working hours had broght the good results finally.

And now after one year of the course the Hmm, the boy is currently doing summer internship cum dissertation project in Futures First Info Services Pvt Ltd at Kolkata, and writting this blog entry.

Hmm, though this is in too brief, but if tommorow I need to write an autobiography, this would certaily be of huge help.

Veggie Suicides...

Recently I received a newsletter from Greenpeace India. Among various activities of Greenpeace, one demonstration by its India chapter attracted my immediate attention. The demonstration or protest was prompted by the recent decision of government to approve large scale open air field trials for Genetically Modified food crops, which could include tomatoes, potatoes, corn, brinjals, etc. The show went like this. A host of vegetables were seen hanging from a thread in Bangalore, as they had committed mass suicide in protest of this decision. A suicide note beside one of the dead potatoes said that potato wished to die in honourable manner rather than living as half potato and half scorpion.

The report said that this was followed by a funeral, where dead body of a martyr corn was taken by fellow vegetables on MG Road.

"The imminent approval of the field trials would mean that our food is one step closer to being dangerously unsafe. The health of citizens and the environment of this country is at risk" said Divya Raghunandan, GE campaigner from Greenpeace. (This paragraph has been taken verbatim from the Greenpeace report)

Please visit http://www.greenpeace.org/india/press/releases/veggie-suicides-are-pointing-t for more details.

Water water every where ....

So, its monsoon time in Kolkata. The city and its neigboring areas are receiving continuous rainfall since Monday night. Many parts of Kolkata, known for its poor drainage system remained waterlogged for several hours after rain stopped to give respite for a few hours. However, when the water started receding, Indra- the rain God was back in action.

The weather office has recorded more than 174 mm of rainfall wednesday in addition to 189 mm rainfall recorded on tuesday. The immense rains are caused by the formation of a low pressure area formed over the North-East Bay of Bengal. If met bureau is to be believed, there is prediction of heavy rainfall in the entire Gangetic West Bengal in next 24 hours.

Courtsey: Telegraphindia.com

According to Newspaper reports, the age old drainage system of Kolkata built by Britishers is capable of handling just 4 mm rain per hour, however it rained closed to 153 mm in just about five hours.

The water clogging threw city out of gear, as surface transport services were disrupted. Trams remained out of service for the second consecutive day on wednesday. Number of buses plying on routes were also very less, a huge rush in each of them could be seen. Auto Rickshaws, charged exorbitant fee for small distances. Lifeline of City- Metro rail had to be discontinued for some time on tuesday after a small fire was discovered in two of the carriage which occured due to water seeping in carriage machinery.

Train services on both Eastern and South Eastern Railways in Sealdah and Howrah stations continued to be affected due to waterlogged railway tracks, forcing many cancelations or short-termination. A friend coming from Orissa had to wait for about three hours in train when his train was stopped about 3 km short of Howrah station. Another friend coming from Ranchi had to get off at Santragachi station, around 10 kms from Howrah because of short termination, and a taxy charged him Rs 600 upto Howrah against a normal fare of around Rs 100-150/-

Many schools and colleges were shut and many exams had to be postponed.

According to some sources, the city has received around 30% of rainfall it receives during monsoon season.