The danger now is that, just as Greece was once a trailblazer in linking a democratic transition to the European project, so it may become an emblem of a new and dangerous process: the disintegration of the EU. The current crisis could easily lead to the country leaving the euro and eventually the union itself. That would undermine the fundamental EU proposition: that joining the European club is the best guarantee of future prosperity and stability.

Even if an angry and impoverished Greece ultimately remains inside the tent, the link between the EU and prosperity will have been ruptured. For the horrible truth is dawning that it is not just that the EU has failed to deliver on its promises of prosperity and unity. By locking Greece and other EU countries into a failed economic experiment ”” the euro ”” it is now actively destroying wealth, stability and European solidarity.

The dangers of that process are all the more pronounced because Greece is in a highly strategic location. To the south lies the chaos and bloodshed of Libya; to the north lies the instability of the Balkans; to the east, an angry and resurgent Russia.

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What is in Fed officials’ control is what they do today and tomorrow and in their policy meeting Sept. 16 and 17. So by deciding to raise rates then (or deciding not to), they are sending a more powerful signal than any speech or written statement that they believe it is time to start winding down the era of easy money.

The thing is, Ms. Yellen and her colleagues know this, and that comments like those she made Wednesday won’t do much to change it. The best they can do is try to manage expectations so that people don’t assume that a quarter-percentage point rise in the Fed’s interest rate target in September automatically translates to much higher rates in a year or two.

In other words, Ms. Yellen may be an economist, but she is well aware that her tools for managing the economy work via financial markets. So how bond traders interpret the Fed’s words and actions matter a great deal.

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US regulators are increasingly concerned about the threat that cyber attacks pose to financial stability after assaults on Sony Pictures and Target highlighted the proliferating range of techniques used by digital raiders.

In a new report on risks to the financial system, regulators also sounded the alarm on risk-taking by institutions searching for higher investment yields, as well as the threat of rising interest rates triggering market volatility.

On cyber security, the annual report from the Financial Stability Oversight Council said “the prospect of a more destructive incident that could impair financial sector operations” was even more concerning than recent breaches that have compromised financial information.

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Mario Draghi said the euro area was better equipped than it had been in the past to deal with a new Greek crisis but warned of “uncharted waters” if the situation were to deteriorate badly.

The European Central Bank president called for the resumption of detailed discussions aimed at resolving the country’s debt woes and urged the Greek authorities to bring forward proposals that ensured fairness, growth, fiscal stability, financial stability.

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Raghuram Rajan got it started. On Jan. 15, the governor of the Reserve Bank of India jolted traders on Mumbai’s Dalal Street by cutting interest rates. The surprise was the timing of the announcement: Rajan wasn’t supposed to deliver a policy statement for another 19 days.

The weirdness continued that same day””in Switzerland, of all places. For three years, the Swiss National Bank had steadily bought euros on currency markets to keep the country’s franc from surging in value relative to the euro, and thereby choking off growth. Unorthodox, yes; but global financial markets had grown accustomed to the regular renewal of the bank’s stance. Without warning, however, the Swiss cut the franc’s tether. Swiss National Bank chairman Thomas Jordan also set the benchmark Swiss lending rate at negative 0.75%. In theory, a lower rate should put downward pressure on the franc; not enough in this case, as the franc’s value shot up by 18% in the days that followed. Many hedge funds bled red.

And on it went. The Danes cut interest rates four times in the span of a few weeks. As this issue of the magazine neared deadline, China’s central bank cut rates by a quarter of a percentage point and Poland slashed them by a half point. In the first 60 days of 2015, some 20 central banks had executed stimulus measures.

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Rarely have investors lavished so much attention on a single word. After a two-day meeting, the Federal Reserve dropped the word “patient” from its monetary-policy statement. Why the fuss over this single word?

“Patient”, in Fed-speak, indicates that it will hold off increasing interest rates for at least two meetings. Now the word has been ditched, at subsequent meetings (most probably in June) we could see rates move off from rock-bottom for the first time since 2008.

The last rate-tightening cycle began over a decade ago. The Fed feels comfortable, it seems, with raising interest rates now that unemployment has moved towards 5.5%. The latest forecasts from the Fed show that it expects the economy to expand by 2.3%-2.7%, a slight fall from the projections in December but still one of the strongest in the OECD, a club of mostly rich countries.

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…look where Greece has ended up after five years of crisis resolution. It has had one of the worst performances in economic history; yet we have just concluded an extension of the same policy.

Can this be sustainable? The pragmatists in Europe’s chancelleries say they can roll over loans indefinitely at very low interest rates. Economically, this is the equivalent of a debt writedown; yet politically it is easier to deliver because you do not need to recognise losses. The equivalent statement in a military conflict would be: if you renew a ceasefire often enough, you end up with peace.

This type of argument is not only immoral and dishonest. It also does not work. While you play this game of ex­tend-and-pretend, the real economy implodes: austerity has caused a meltdown in income and employment. Monetary policy mistakes caused a fall in eurozone-wide inflation rates that made it impossible for Greece and other periphery countries to improve the competitiveness they lost in the early years of monetary union.

If the EU deals with Ukraine in the same way it dealt with Greece, you can expect to see a parallel development in a few years.

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China’s central bank cut interest rates on Saturday, just days before the annual meeting of the country’s parliament, in the latest effort to support the world’s second-largest economy as its momentum slows and deflation risks rise.

The central bank said the 25 basis point cut in the benchmark interest rate to 5.35 per cent – its second cut in just over three months – and a 25 basis point cut in the benchmark saving rate to 2.5 per cent would be effective from Sunday.

“The focus of the interest rate cut is to keep real interest rate levels suitable for fundamental trends in economic growth, prices and employment,” the People’s Bank of China (PBOC) said in a statement on its website.

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At first, Eva Christiansen barely noticed the number. Her bank called to say that Ms. Christiansen, a 36-year-old entrepreneur here, had been approved for a small business loan. She whooped. She danced. A friend took pictures.

“I think I was so happy I got the loan, I didn’t hear everything he said,” she recalled.

And then she was told again about her interest rate. It was -0.0172 percent ”” less than zero. While there would be fees to pay, the bank would also pay interest to her. It was just a little over $1 a month. But still.

These are strange times for European borrowers, as if a wormhole has opened up to a parallel universe where the usual rules of financial gravity are suspended.

Read it all from the NYTimes Dealbook.

The Obama administration is pushing eurozone leaders to compromise more with Athens as fears grow that a protracted stand-off could damage the global economy, say senior EU and US officials.

The US lobbying comes amid mounting concern in Brussels and Washington about the hardline stand taken by some eurozone governments, particularly Germany, that Greece must press on with budget-cutting commitments made under its existing €172bn bailout regardless of last month’s election, which brought anti-austerity party Syriza to power .

“This is a conversation we’re having with people,” said a senior US official involved in the talks.

“There isn’t a special initiative. I don’t think our attitude has changed but what’s changed is that suddenly the situation in Greece is looking more problematic.”

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It is easy to see why Syriza put debt repudiation at the heart of its electoral campaign. John Paul Getty once opined that “if you owe the bank $100, that’s your problem; if you owe the bank $100m, that’s the bank’s problem”. Greece’s predicament may ultimately force creditors to the negotiating table. To service its debt burden would require Greece to operate as a quasi slave economy, running a primary surplus of 5 per cent of GDP for years, purely for the benefit of its foreign creditors. Even the IMF has dropped hints in favour of some debt forgiveness.

But Greece’s EU creditors have equally strong reasons for refusing. Caving to Syriza’s demands would come at a high political cost, particularly for Germany’s Angela Merkel, who is harried by the eurosceptic AfD on her right. Other struggling countries would find their own radical parties emboldened by Syriza’s success. No country deserves to live beyond its means indefinitely.

Back in 2011, Greece posed an existential threat to the eurozone. Today, Berlin and Frankfurt are no longer as frightened by the prospect of Greece leaving the single currency. Yet for the Greek people this would be a catastrophe: a giant economic step backwards and a blow to living standards just as severe as any endured under austerity.

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The leader of the left-wing Syriza party Alexis Tsipras has said Greece is “leaving behind disastrous austerity”, after his party claimed victory in the country’s general election.

And the 40-year-old told jubilant supporters the “Troika” of the country’s lenders “is finished”.

He was speaking after the Greek Prime Minister Antonis Samaras, who heads the conservative New Democracy party, conceded defeat to Mr Tsipras.

Partial election results suggest Syriza has secured 36.5% of the vote, compared to 27.7% for the New Democracy party.

Read it all from Sky news.

The SNB was not forced to act by a speculative run. No financial crisis forced its hand, and, in theory, the SNB’s directorate could have held the exchange rate and bought foreign assets indefinitely. But domestic criticism of the SNB’s large buildup of exchange-rate reserves (euro assets) was mounting.

In particular, Swiss conservatives disliked the risk to which the SNB was exposed. Fearing that eurozone government bonds were unsafe, they agitated to require the SNB to acquire gold reserves instead, even forcing a referendum on the matter. Though the initiative to require a fixed share of gold reserves failed, the prospect of large-scale quantitative easing by the European Central Bank, together with the euro’s recent slide against the dollar, intensified the political pressure to abandon the peg.

Whereas economists have modeled financial attacks well, there has been little study of just when political pressure becomes unbearable and a central bank gives in. The SNB, for example, had proclaimed loyalty to the peg just days before ending it. As a result, markets will now hesitate to believe central banks’ statements about future policy, and forward guidance (a major post-crisis instrument) will be much more difficult.

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As 2015 begins, the global economy remains weak. The United States may be seeing signs of a strengthening recovery, but the eurozone risks following Japan into recession, and emerging markets worry that their export-led growth strategies have left them vulnerable to stagnation abroad. With few signs that this year will bring any improvement, policymakers would be wise to understand the factors underlying the global economy’s anemic performance ”“ and the implications of continued feebleness.

In the words of Christine Lagarde, the International Monetary Fund’s managing director, we are experiencing the “new mediocre.” The implication is that growth is unacceptably low relative to potential and that more can be done to lift it, especially given that some major economies are flirting with deflation.

Conventional policy advice urges innovative monetary interventions bearing an ever expanding array of acronyms, even as governments are admonished to spend on “obvious” needs such as infrastructure. The need for structural reforms is acknowledged, but they are typically deemed painful, and possibly growth-reducing in the short run. So the focus remains on monetary and fiscal stimulus ”“ and as much of it as possible, given the deadening effects of debt overhang.

And yet, the efficacy of such policy advice remains to be seen.

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The Swiss National Bank’s shock move today to stop intervening in the foreign exchange market all but guarantees the European Central Bank will finally introduce quantitative easing when it meets Jan. 22. Switzerland is surrendering before a wave of post-QE money fleeing the euro threatens to make a mockery of its currency policy. It’s also capitulating as slumping oil brings global deflation ever closer.

t’s an astonishing U-turn. Just two days ago SNB Vice President Jean-Pierre Danthine told Swiss broadcaster RTS that “we’re convinced that the cap on the franc must remain the pillar of our monetary policy.” He added, though, that it was “very possible” that QE would make defending the threshold more difficult. It seems highly probable that the ECB has winked about its policy intentions to its Swiss counterparts.

The ensuing whipsaw in the currency market is unprecedented. The franc immediately appreciated almost 30 percent against the currencies of the Group of Ten industrialized nations, and surged to a record against the euro…:

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The ruble meltdown and accompanying economic slump marks the collapse of Putin’s oil-fueled economic system of the past 15 years, said an executive at Gazprombank, the lender affiliated to Russia’s state gas exporter. He asked not to be identified because of the sensitivity of the issue.

The higher interest rate will crush lending to households and businesses and deepen Russia’s looming recession, according to Neil Shearing, chief emerging-markets economist at London-based Capital Economics Ltd.

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Russia is in the middle of a currency crisis. On December 15th its currency lost 10% of its value, having already lost about 40% this year. The central bank increased interest rates sharply, but instead of calming the market the hike was seen as a sign of desperation. The following day the rouble was at one point down a further 20% (and ended the day 10% lower). The central bank reckons that GDP could fall by 5% in 2015. Inflation is currently at 10% but is expected to accelerate rapidly. Russians are panic-buying; banks are running out of dollars. What’s gone wrong with Russia’s economy?

The problems were long in the making. Russia is highly dependent on oil revenues (hydrocarbons contribute over half the federal budget and two-thirds of exports) and over the past decade it has failed to diversify its economy. It is horribly corrupt, has weak institutions and no real property rights. The Kremlin distributes oil money via state banks to firms and projects which it selects on the basis of their political importance and their pro-Putin stance, rather than trusting the market to allocate capital to the most efficient firms. If you look at wealth, Russia is the world’s second-most unequal country. Its working-age population is shrinking fast.

Western sanctions imposed in response to Russia’s meddling in Ukraine have dealt a blow to the economy. But the proximate cause of the turmoil of the last few days is concern about Russia’s corporate sector. During 2015 Russia’s firms must repay $100 billion-worth of foreign debt. But as the rouble falls, paying back dollars becomes more difficult.

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Russia has lost control of its economy and may be forced to impose Soviet-style exchange controls after “shock and awe” action by the central bank failed to stem the collapse of the rouble.

“The situation is critical,” said the central bank’s vice-chairman, Sergei Shvetsov. “What is happening is a nightmare that we could not even have imagined a year ago….”

Lars Christensen, from Danske Bank, said the Kremlin’s actions have led to the “absolutely worst possible outcome” since the botched move is enough to do grave damage, without solving anything. “They should have let the currency go rather than killing the economy. Investment is in freefall, and I fear this shock is going to be even bigger than in 2008-2009. Nothing suggests that oil is going to rebound quickly this time,” he said.

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The much heralded asset-backed securities purchase programme will only yield about €250bn-€450bn in assets over the next two years. More LTRO (or the newer targeted LTRO) will prove a challenge as sovereign bond yields in Europe are so low that a large balance sheet expansion through this means seems impractical. Perhaps there is another €500bn-€750bn to do over the next year or two. Outright purchases of sovereign debt would prove politically difficult, as many would interpret such purchases as violating the ECB’s mandate and the matter would probably end up in the European courts.

The bottom line is that none of the tools currently on the table will get the job done. There are not enough assets to purchase or finance and the timetable to get anything done is too long. Policy makers do not have the luxury of a year or two to figure this out. The ECB balance sheet shrinks virtually daily and as it shrinks, the monetary base of Europe is contracting and putting downward pressure on prices. Europe is clearly in danger of falling into the liquidity trap, if it is not already there. The likelihood of a “lost decade” like that experienced in Japan is rapidly increasing. The ECB must act and act quickly.

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The world economy is not in good shape. The news from America and Britain has been reasonably positive, but Japan’s economy is struggling and China’s growth is now slower than at any time since 2009. Unpredictable dangers abound, particularly from the Ebola epidemic, which has killed thousands in West Africa and jangled nerves far beyond. But the biggest economic threat, by far, comes from continental Europe.

Now that German growth has stumbled, the euro area is on the verge of tipping into its third recession in six years. Its leaders have squandered two years of respite, granted by the pledge of Mario Draghi, the European Central Bank’s president, to do “whatever it takes” to save the single currency. The French and the Italians have dodged structural reforms, while the Germans have insisted on too much austerity. Prices are falling in eight European countries. The zone’s overall inflation rate has slipped to 0.3% and may well go into outright decline next year. A region that makes up almost a fifth of world output is marching towards stagnation and deflation.

Optimists, both inside and outside Europe, often cite the example of Japan. It fell into deflation in the late-1990s, with unpleasant but not apocalyptic consequences for both itself and the world economy. But the euro zone poses far greater risks. Unlike Japan, the euro zone is not an isolated case: from China to America inflation is worryingly low, and slipping.

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The court, now entering its second decade under Mr Justice Brian McGovern, has shone a light into some dark recesses of Ireland’s financial and business world, exposing greed and human misery on a grand scale alongside some shoddy and dubious, accounting, auditing, banking, business, legal, regulatory and stockbroking practices.

It has heard of property and other deals involving misappropriation, forged signatures, deceit, lies and secret profits; suspect property and money transfers aimed at avoiding repayment; exorbitant expenses for senior bankers; and slipshod and questionable loans, investments and valuations.

It has also shown existing laws provide limited opportunity to penalise some of these practices and revealed gaps in legislation on corporate crime, including the absence of an offence of reckless lending.

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The Federal Reserve took two steps toward winding down the historic easy-money policies that have defined its response to the financial crisis, but stopped short of the move markets are awaiting most: signaling when interest rates will start to rise.

With the economy gradually improving, U.S. central-bank officials plan to end the bond-buying program known as quantitative easing after October, hoping to finally stop expanding a six-year experiment in monetary policy that has left the Fed holding more than $4 trillion of Treasury and mortgage bonds.

The Fed on Wednesday also detailed a new technical plan for how it will raise short-term interest rates, something most officials currently don’t intend to do until next year. The central bank has kept the federal-funds rate near zero since December 2008 and offered assurances along the way about rates remaining low, another part of its varied efforts to boost the post-financial-crisis economy.

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In the Edinburgh rain, a striking number of voters have recently changed their minds. Michael Constantine says he and his parents all switched sides.

“My dad, he was a ‘no,’ ” says Constantine, 25. “In the past two months, he’s become a ‘yes.’ And then my mum was a ‘no’ initially. She became a ‘yes.’ ”

All three of them used to support keeping the U.K. intact. Now, they plan to vote for Scottish independence. Constantine says he wasn’t so much drawn to the ‘yes’ campaign; it’s more that unity drove him away.

“The ‘no’ campaign, the scaremongering and the fear they’re putting into people, really upset me,” Constantine says.

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At the heart of the nationalist campaign is the claim that Scotland would be a more prosperous and more equal country if it went solo. It is rich in oil and inherently decent, say the nationalists, but impoverished by a government in Westminster that has also imposed callous policies. They blame successive British governments for almost every ill that has befallen Scotland, from the decline of manufacturing industry to ill-health to the high price of sending parcels in the Highlands. Alex Salmond, Scotland’s nationalist leader, is broad in his recrimination: Labour and the Tories are of a piece, he suggests, in their disregard for Scotland.

But Scotland’s relative economic decline is the result not of southern neglect but of the shift of manufacturing and shipping to Asia. If Westminster has not reversed all the deleterious effects of globalisation and technology, that is because to do so is impossible. The nationalists know this, which is why, sotto voce, they would continue many of Westminster’s policies. Instead they make much of minor adjustments, such as abolishing the “bedroom tax”, a recent measure designed to nudge people out of too-large social housing. To break up a country over such small, recent annoyances would be nuts.

The nationalists’ economics are also flawed. Scotland would not, in fact, be richer alone. The taxes that would flow to it from the North Sea would roughly compensate for the extra cost of its lavish state, which would no longer be funded by Westminster (last year spending was some £1,300 per person higher in Scotland than elsewhere in Britain). But oil revenues are erratic.

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The 307-year-old union between England and Scotland has been one of history’s most successful, but a possible split has investors and lawmakers fearing the potential aftershocks.

A “no” vote against Scottish independence was once a foregone conclusion for the Sept. 18 referendum, but a recent narrowing of polls ”” with some putting “yes” in the lead ”” has made the United Kingdom’s biggest constitutional change since the Irish Free State’s creation in 1922 a distinct possibility.

Secession could throw a wrench into the U.K.’s economic recovery, which has been among Europe’s strongest. Scotland’s share of U.K. gross domestic product is around 9.2%, or 148 billion pounds ($238.3 billion). Its 5.3 million residents comprise 8.3% of the total population.

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Clemens Fuest, from the Mannheim-based organization best known for its widely-watched economic sentiment index – told German business daily Handelsblatt that the euro zone region could be at a “turning point.”

“I’ve got a bad feeling about this…I am concerned by the danger that the ECB is producing new bubbles with its policy of cheap money,” he told the newspaper.

“We have all the ingredients of a bubble: The prices of real estate and stock markets continue to rise, and on the bond markets, yields are falling despite high risks.”

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The European Central Bank cut its deposit rate below zero and said it would announce further measures later today as policy makers try to counter the prospect of deflation in the world’s second-largest economy.

ECB President Mario Draghi reduced the deposit rate to minus 0.10 percent from zero, making the institution the world’s first major central bank to use a negative rate. Policy makers also lowered the benchmark rate to 0.15 percent from 0.25 percent.

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The Church Commissioners’ total return on its investment in 2013 was 15.9 per cent. This means that the Church Commissioners fund has exceeded its target return of RPI + 5 percentage points over the past one year, three years, ten years and twenty years. It has also has performed better than similar funds over the same periods. Details have been published today in their full Annual Report and Account (link below) for 2013.

The Commissioners’ fund is a closed fund, taking in no new money, and has performed better than its target return of RPI +5.0% p.a. and its comparator group over the past, one, three, 10 and 20 years.* The results confirm the fund’s strong long term performance

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The euro zone’s economy expanded at a weak pace last quarter despite a strong recovery in Germany, putting added pressure on the European Central Bank to enact fresh easing measures to prevent the region from sliding into a lengthy period of low inflation and economic stagnation.

Gross domestic product grew 0.2% in the euro zone during the first quarter compared with the final three months of 2013, the European Union’s statistics agency Eurostat said Thursday, well short of the 0.4% quarterly gain expected by economists.

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The man responsible for the Church of England’s £6bn endowment has defended plans to increase its investment in hedge funds, arguing that not all of the industry has “devil’s horns”.

Andreas Whittam Smith, First Church Estates Commissioner, told the Financial Times that the Church’s own ethical watchdog sanctioned short selling, providing it was done in a responsible way.

He added that the group “does not have ethical concerns about short selling per se as an investment practice,” and “did not make an ethical distinction between seeking to profit from a rise in the value of a security as against seeking to profit from a fall.”

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