By Richard Agnew
Tackling the US budget deficit will prove a challenge for the new Fed chairman. As the man charged with filling the boots of the legendary United States’ Federal Reserve chairman, Alan Greenspan, steps up to the plate in the New Year, he’ll have many uncertainties to contend with. Ben Bernanke, who takes over the world’s most powerful economic institution in January, comes to the job with impeccable qualifications — and he will need every one of them if to deal with the challenges that lie ahead.
|~||~||~|Tackling the US budget deficit will prove a challenge for the new Fed chairman.
As the man charged with filling the boots of the legendary United States’ Federal Reserve chairman, Alan Greenspan, steps up to the plate in the New Year, he’ll have many uncertainties to contend with. Ben Bernanke, who takes over the world’s most powerful economic institution in January, comes to the job with impeccable qualifications — and he will need every one of them if to deal with the challenges that lie ahead.
As helmsman of the mighty US economy, the reverberations of the decisions he makes can be felt all over the world. Mere comments can shift global markets. Greenspan, 79, steps down after more than 18 years as chairman of the Federal Reserve. Under his stewardship, the Fed has raised rates from 1% to 4% over the past 17months and economists expect two more increases before his departure. Bernanke is known to back stated inflation targets, as opposed to Greenspan who opposed them. However, he told the US Senate last week he would not rush to openly state inflation goals. As a White House adviser, Bernanke has always strongly supported George W. Bush, and backed making the president’s tax cuts permanent. But it is tackling the hefty US budget deficit that will provide the biggest test of his loyalty.
The US deficit has fallen slightly in 2005 after topping US$400 billion in 2004. However, experts believe it will soon rise again as government spending on post-Hurricane Katrina reconstruction takes effect. Many economists, including Greenspan, have warned that the US economy — and by definition the world economy — will be damaged unless the government brings its spending under control. Bush recently got Senate approval for a package that would reduce government spending in all areas apart from defence and national security between 2006 and 2010. It would cut US$16 billion from education and healthcare programmes. Yet critics fear the act would be invalidated by separate Republican tax-cutting proposals adding US$70 billion to the deficit. Whatever he does, the new Fed chairman is walking into a minefield. And the future of the world economy hangs on every move he makes.||**||Ikea shows the way ahead|~||~||~|The massive property boom, taking place across the Middle East can be evidenced in many ways. Thousands and thousands of people will be looking to set up home in the region in the next few years, and Swedish furniture giant Ikea is looking to cash in, in a big way.
The firm from the snowy north clearly has big plans for Arabia’s arid deserts. Ikea plans to open 10 new warehouse outlets across the Middle East over the five years. Considering that some of their stores measure in at more than 25,000 square metres — more than four football pitches in floor space — that’s an awful lot of tables and chairs. The company’s plans for the Gulf include more stores in the United Arab Emirates, Saudi Arabia and Kuwait, as well as kick-starting its presence in Qatar. The Swedish group’s decision represents nothing less than a massive vote of confidence in the region, and its economic prospects for the future.
Watch this space for news of the next big-name global chain to announce massive expansion plans in this part of the world.
||**||Branson’s price dilemma|~||~||~|It has long been expected that once Virgin Atlantic launched direct flights between London and Dubai, we would see a fierce price war. But as we report this week, that is now unlikely.
During his visit to Dubai last week, Sir Richard Branson was unsurprisingly cagey on the subject of pricing. But he made it clear that in his view, to announce airfares lower than Emirates Airline and British Airways, would spark an immediate price war. It would lead to travel agents trying to out do each other with cheap deals. And it would, of course, mean a much better deal for the customers.
So why not? Virgin Atlantic is back in profit, and Emirates Airline is the world's most profitable airline. Both can afford to cut prices. It is what the industry needs, and what the customers deserve. And most of all, it is what we would expect from one of the world's greatest businessmen.||**||