Source: © National Weather Service, screenshot taken from Rain Alarm app
Unbelievably, it has been five years since Hurricane Sandy and twelve years since Katrina wreaked havoc in the US. This week Hurricane Harvey left destruction in its wake, only to be followed by Irma a few days later, which made landfall in Florida over the weekend. If that was not bad enough, there are two more hurricanes gathering strength in Jose and Katia. Lives were undoubtedly lost in this tragic series of events, which has yet to see an end.
In the face of these disasters the US has a capitalist system that is flexible enough to allow resources to be shifted and directed toward recovery, even if the timing is particularly inopportune. With debts of $20 trillion the US government is running out of money again and has afforded Donald Trump an opportunity to show that he is a better deal maker than he is politician.
A deal was quickly reached with both Republicans and Democrats to provide funding for the US government by granting a temporary increase to the debt ceiling and provide hurricane related aid. The three month extension gives President Trump until the middle of December to agree and pass a budget, or else face the potential of a federal government shutdown.
Another deal on Trump’s agenda is who will he pick to be the next chair at the Federal Reserve? There are six names on his short list according to media reports, with varying levels of central bank experience, which makes it important that a quantitative policy tightening strategy is put in place sooner rather than later. Add to the mix that Trump will be able to appoint five members to the Fed board next year, then putting in place a long-term strategy for monetary policy seems more important than ever at the next meeting of the Federal Reserve.
Further north, the Bank of Canada has taken up the baton temporarily dropped by the Fed and has hiked interest rates from 0.75% to 1.00%. The decision was supported by above-trend growth and data that suggested the Canadian economy has strong momentum and is self-sustaining. What made this particularly interesting was this rise was in the face of below target inflation, which is running at about 0.5% below its target, which is something central banks normally obsess about.