The minutes from the last Federal Open Market Committee meeting, responsible for setting interest rate policy in US, were released on Wednesday night. Understandably considering the current level of uncertainty in the world, the consensus remained vague on when they consider might be the right time to start raising rates. Aside from the ongoing uncertainty within Europe, the continued mixed picture economic data presents on the state of the US economy, add the recent slump in Chinese equity prices to concerns.
Chinese equities have fallen sharply in the past month, despite the introduction of measures to stabalise the situation. This fall in our opinion is no mare than the bursting of a large bubble, probably created by excess speculation. The fall in Chinese equity prices has prompted the Bank of China to cut rates, banning certain types of share sales and coming in to buy blue chip equities. Despite a fall of approximately 30%, the Shanghai composite is still higher than where it started the year.
At 9pm on Thursday evening the BBC reported that the Greek government has agreed a reform program and has submitted its proposals in the hope of securing a third bailout. The new proposals look to be a serious attempt by the Greek government to meet Europe in many of its demands.
Should these proposals be accepted the European Union, the focus must turn to stimulating the Greek economy, helping the people of Greece get back to work. The European Union should be assisting to ensure that supplies are available, proper medical care and access to public services. The rest of Europe should be looking to help raise living standards, thus helping the Greek people to get the economy back on a solid footing. The ECB should be encouraging the rest of Europe to invest in Greece. In the same way post the Second World War the Marshall plan was introduced to help Europe get back on its feet. Something similar needs to be considered by the rest of Europe for the Greek people.
Slightly worryingly the consensus view is that a deal will be cobbled together, so far the consensus has failed to get it right, as so often is the case with a consensual view. Assuming a deal is agreed the issue with the debt should be put onto the back burner until the Greek economy and the Greek people are back on their feet again. The handling of this situation reflects very poorly on the rest of Europe.