To understand how interest rates influence inflation, we need to understand how inflation works. Inflation is the result of too much money chasing too few goods. Over the last several months, this has occurred amid a surge in demand and supply chain disruptions worsened by Russia’s invasion of Ukraine.
In an effort to combat inflation, central banks will raise their policy rate. This is the rate they charge commercial banks for loans or pay commercial banks for deposits. Commercial banks pass on a portion of these higher rates to their customers, which reduces the purchasing power of businesses and consumers. For example, it becomes more expensive to borrow money for a house or car.
Ultimately, interest rate hikes act to slow spending and encourage saving. This motivates companies to increase prices at a slower rate, or lower prices, to stimulate demand.
Louisiana Treasurer John Schroder is divesting $794 million worth of state funds from BlackRock because the world’s largest asset manager’s “blatantly anti-fossil fuel policies would destroy Louisiana’s economy.”
The divestment is in response to BlackRock’s sustainable investing philosophy, and for the firm calling on other companies to embrace net zero investment strategies that would harm the fossil fuel industry, which Schroder notes is a “vital part” of Louisiana’s economy.
“This divestment is necessary to protect Louisiana from actions and policies that would actively seek to hamstring our fossil fuel sector,” Schroder said in a letter to BlackRock CEO Larry Fink. “I refuse to invest a penny of our state’s funds with a company that would take food off tables, money out of pockets and jobs away from hardworking Louisianans.”
When asked to comment, a BlackRock spokesperson said the firm’s view is captured by a line in its Sept. 7 response to a letter it received from a group of 19 Republican state attorneys general saying environmental, social, and governance investments weaken America’s national security.
Ark Invest founder and CEO Cathie Wood is drawing snarky comments on and off Twitter after posting an open letter to the Federal Reserve challenging the central bank’s aggressive interest-rate hikes.
Wood published the letter on her firm’s website Monday as her ARK Innovation ETF (ARKK) sustained more blows in a year that has seen its returns slide more than 60%. Bloomberg reported Tuesday that the fund, which has fallen more than double the S&P 500′s decline, was down about 11% over three days.
Wood voiced concern the Fed is making a policy error that will lead to deflation and said it seemed to be basing its decisions on two lagging indicators: employment and headline inflation from official reports such as the Consumer Price Index. These variables “have been sending conflicting signals and should be calling into question the Fed’s unanimous call for higher interest rates,” she wrote.
The plan covered 1,649 participants in the sheet metal trade. About 850 of them saw their benefits cut an average of 24% in May 2020 under the terms of the Multiemployer Pension Reforms Act of 2014. SFA will pay $28.8 million to make up the shortfall.
The MPRA allowed trustees of multiemployer plans to submit an application to the Treasury Department to reduce pension payouts if such a reduction is necessary to prevent the fund from running out of money.
The DeFi ecosystem has been expanding rapidly in the past few years, growing from less than USD $1 billion in 2020 to USD $61.6 billion as of June 2022 as measured by Total Value Locked (TVL), the amount of crypto asset deposited in the DeFi protocols.
With continuous innovation in product design and delivery, the potential of DeFi adoption is massive. However, the rise of DeFi is marred by security issues. Nearly 200 blockchain hacking incidents have taken place in 2021 with approximately USD $7 billion in stolen funds (Cointelegraph, 2021). These hacking events have a wide range of causes including, but not limited to, the following:
Smart contract vulnerabilities exploited by hackers to steal funds
Manipulation of oracles to cause price feed deviation
Attack on governance where a small group of individuals took over the protocol’s governance decisionmaking mechanism
The vast majority of Americans of all ages, races, generations and backgrounds say the US has a mental health crisis.
Nine in 10 Americans in a new survey from CNN and the Kaiser Family Foundation say the country as a whole is facing a crisis on this front and about half of adults say they’ve experienced a severe mental health crisis in their family.
CNN published a series of stories this week based on the poll in conjunction with KFF. Read the main report here. And read this from CNN’s polling team about how the survey was conducted.
CNN Chief Medical Correspondent Dr. Sanjay Gupta and senior producer Amanda Sealy went to Durham, North Carolina, to look at how cities are changing the way they respond to 911 calls and utilizing mental health professionals.
There’s also 988 – the three-digit number anyone in crisis can call, but which the survey found few people know about.
Today, State Surgeon General Dr. Joseph A. Ladapo has announced new guidance regarding mRNA vaccines. The Florida Department of Health (Department) conducted an analysis through a self-controlled case series, which is a technique originally developed to evaluate vaccine safety.
This analysis found that there is an 84% increase in the relative incidence of cardiac-related death among males 18-39 years old within 28 days following mRNA vaccination. With a high level of global immunity to COVID-19, the benefit of vaccination is likely outweighed by this abnormally high risk of cardiac-related death among men in this age group. Non-mRNA vaccines were not found to have these increased risks.
As such, the State Surgeon General recommends against males aged 18 to 39 from receiving mRNA COVID-19 vaccines. Those with preexisting cardiac conditions, such as myocarditis and pericarditis, should take particular caution when making this decision.
The main concern of managers was that their assessors were, like the rest of the population, limited in terms of what they could do to unwind or use to escape due to lockdown restrictions and limited freedom. This contrasted with usual routines.
We asked about the impact of these concerns on the health of claims professionals. Absenteeism within claims teams varied across the companies and while sick leave increased slightly there did not appear to be any significant or concerning trends (Figure 6).
COVID-19 had a huge mortality impact in the US in 2020 and accounted for most of the overall reduction in 2020 life expectancy at birth. There were also extensive racial/ethnic disparities in the mortality impact of COVID-19 in 2020, with the Black and Latino populations experiencing reductions in life expectancy at birth over twice as large as that of the White population. Despite continued vulnerability of these populations, the hope was that widespread distribution of effective vaccines would mitigate the overall mortality impact and reduce racial/ethnic disparities in 2021. In this study, we quantify the mortality impact of the COVID-19 pandemic on 2021 US period life expectancy by race and ethnicity and compare these impacts to those estimated for 2020. Our estimates indicate that racial/ethnic disparities have persisted, and that the US population experienced a decline in life expectancy at birth in 2021 of 2.2 years from 2019, 0.6 years more than estimated for 2020. The corresponding reductions estimated for the Black and Latino populations are slightly below twice that for Whites, suggesting smaller disparities than those in 2020. However, all groups experienced additional reductions in life expectancy at birth relative to 2020, and this apparent narrowing of disparities is primarily the result of Whites experiencing proportionately greater increases in mortality in 2021 compared with the corresponding increases in mortality for the Black and Latino populations in 2021. Estimated declines in life expectancy at age 65 increased slightly for Whites between 2020 and 2021 but decreased for both the Black and Latino populations, resulting in the same overall reduction (0.8 years) estimated for 2020 and 2021.
Author(s): Theresa Andrasfay, Noreen Goldman
Publication Date: 31 Aug 2022
Publication Site: PLOS ONE
Citation: Andrasfay T, Goldman N. Reductions in US life expectancy during the COVID-19 pandemic by race and ethnicity: Is 2021 a repetition of 2020? PLoS One. 2022 Aug 31;17(8):e0272973. doi: 10.1371/journal.pone.0272973. PMID: 36044413; PMCID: PMC9432732.
LDI strategies enable DB pension funds to use leverage (i.e. to borrow) to increase their exposure to long-term gilts, while also holding riskier and higher-yielding assets such as equities in order to boost their returns. The LDI funds maintain a cushion between the value of their assets and liabilities, intended to absorb any losses on the gilts. If losses exceed this cushion, the DB pension fund investor is asked to provide additional funds to increase it, a process known as rebalancing. This can be a more difficult process for pooled LDI funds, in part because they manage investment from a large number of small and medium sized DB pension funds.
Diagram 1 gives a stylised example of how the gilt market dynamics last week could have affected a DB pension fund that was investing in an LDI fund. In this illustrative and simplified example, the left hand side of the diagram shows that the scheme is underfunded (in deficit) before any change in gilt yields, with the value of its assets lower than the value of its liabilities. More than 20% of UK DB pension funds were in deficit in August 2022 and more than 40% were a year earlier. In this example, the fund is holding growth assets to boost returns and has also invested in an LDI fund to increase holdings of longterm gilts, funded by repo borrowing at 2 times leverage (i.e. half of the holding of gilts in the LDI fund is funded by borrowing). The cushion (labelled ‘capital’) is half the size of the gilt holdings.
The right hand side of the diagram shows what would happen should gilt yields rise (and gilt prices fall). The value of the gilts that are held in the LDI fund falls, in this example by around 30%. This severely erodes the cushion in the LDI fund. If gilt prices fell further, it would risk eroding the entire cushion, leaving the LDI fund with zero net asset value and leading to default on the repo borrowing. This would mean the bank counterparty would take ownership of the gilts. It should be noted that in this example, the DB pension fund might be better off overall as a result of the increase in gilt yields. This is because the market value of its equity and shorter-term bond holdings (‘other assets’) would not fall by as much as the present value of its pension liabilities, as the latter are more sensitive to long-term market interest rates. The erosion of the cushion of the LDI fund would lead the LDI fund either to sell gilts to reduce its leverage or to ask the DB pension fund investors to provide additional funds.
In practice, the move in gilt yields last week threatened to exceed the size of the cushion for many LDI funds, requiring them to either sell gilts into a falling market or to ask DB pension plan trustees to raise funds to provide more capital.
Author(s): Sir John Cunliffe, Deputy Governor, Financial Stability
