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Fed Quarles pushes for rate hikes, review of crisis bank regulations



Fed Governor Randal Quarles said in a speech Thursday that inflation running a little below target shouldn’t stand in the way of future rate increases.

With the central bank expected to hike at least three times this year, the newest Fed member said he supports a continual gradual pace of increases. The Fed shoots for a 2 percent inflation rate that it believes represents an equilibrium growth level.

The personal consumption expenditures index, which is the Fed’s preferred inflation gauge, ran at 1.7 percent in 2017 including food and energy and 1.5 percent otherwise.

“After assessing the recent data, my take is that the current shortfall in inflation from target as most likely due to transitory factors that will fade through 2018, pushing inflation back up to target,” Quarles said at the 26th International Financial Symposium sponsored by the Institute for International Monetary Affairs.

“Suffice to say, a deviation from our target of a few tenths of 1 percentage point, especially one I expect to fade, does not cause me great concern,” he added.

The event was held in Tokyo, and Quarles spoke in the afternoon Thursday local time.

His comments came at time when the market expects the next rate increase to come at the March meeting of the Federal Open Market Committee. Minutes released Wednesday of the January meeting indicated that officials are optimistic about economic growth and expect that inflation will continue to progress toward the 2 percent target.

Markets have been on edge lately over whether the Fed might decide that the economy is running too hot and in need of more aggressive monetary policy tightening. Traders in the fed funds futures market current have three rate increases pretty well priced in, though there’s a 30 percent chance of a fourth hike, according to the CME’s FedWatch tracking tool.

Quarles did emphasize that the Fed should be patient and condition future increases on continued progress in inflation and employment.

“Against this economic backdrop, with a strong labor market and likely only temporary softness in inflation, I view it as appropriate that monetary policy should continue to be gradually normalized,” he said.

In addition to discussing monetary policy, Quarles mentioned bank regulation as part of a speech commemorating the 10th anniversary of the financial crisis that paralyzed the world economy in 2008.

His comments indicated a desire to review the effectiveness of regulations put in place after the crisis. The Fed, other regulators and Congress clamped down on banks, requiring higher capital levels and less risk-taking.

“At this point, we have completed the bulk of the work of post-crisis regulation,” Quarles said. “As such, now is an eminently natural and expected time to step back and assess those efforts. It is our responsibility to ensure that they are working as intended, and — given the breadth and complexity of this new body of regulation — it is inevitable that we will be able to improve them, especially with the benefit of experience and hindsight.”

Quarles is President Donald Trump‘s first successful appointment to the Fed board of governors, which still has four vacancies. Trump also nominated Carnegie Mellon economist Marvin Goodfriend, but he has yet to be confirmed.

WATCH: Market experts weigh in on the Fed’s future.

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The world is running out of a crucial commodity



Dozens of trucks dump hundreds of thousands of tons of sand on Miami Beach as part of U.S. government measures to protect Florida’s tourist destinations against the effects of climate change.


LONDON — An insatiable global appetite for sand, one of the world’s most important but least appreciated commodities, is unlikely to let up anytime soon. The problem, however, is that this resource is slipping away.

Our entire society is built on sand. It is the world’s most consumed raw material after water and an essential ingredient to our everyday lives.

Sand is the primary substance used in the construction of roads, bridges, high-speed trains and even land regeneration projects. Sand, gravel and rock crushed together are melted down to make the glass used in every window, computer screen and smart phone. Even the production of silicon chips uses sand.

Yet, the world is facing a shortage — and climate scientists say it constitutes one of the greatest sustainability challenges of the 21st century.

“Is it time for panicking? Well, that will certainly not help, but it is time to take a look and change our perception about sand,” Pascal Peduzzi, a climate scientist with the United Nations Environment Programme, said during a webinar hosted by think tank Chatham House.

We never thought we would run out of sand, but it is starting in some places.

Pascal Peduzzi

Director of GRID-Geneva

Peduzzi, who is the director of UNEP’s Global Resource Information Database in Geneva, Switzerland, described the global governance of sand resources as “the elephant in the room.”

“We just think that sand is everywhere. We never thought we would run out of sand, but it is starting in some places. It is about anticipating what can happen in the next decade or so because if we don’t look forward, if we don’t anticipate, we will have massive problems about sand supply but also about land planning,” he added.

A sand-fueled construction boom

At present, it is not possible to accurately monitor global sand use. However, Peduzzi said it could be measured indirectly, citing a “very, very good” correlation between the use of sand and cement.

The UN estimates that 4.1 billion tons of cement is produced every year, driven primarily by China, which constitutes 58% of today’s sand-fueled construction boom.

It takes 10 tons of sand to produce every ton of cement. This means that, for construction alone, the world consumes roughly 40 to 50 billion tons of sand on an annual basis. That’s enough to build a wall of 27 meters high by 27 meters wide that wraps around the planet every year.

Sand dunes in the Sahara desert.

Getty Images

The global rate of sand use — which has tripled over the last two decades partially as a result of surging urbanization — far exceeds the natural rate at which sand is being replenished by the weathering of rocks by wind and water.

Sand can be found on almost every country on Earth, blanketing deserts and lining coastlines around the world. But that is not to say that all sand is useful. Desert sand grains, eroded by the wind rather than water, is too smooth and rounded to bind together for construction purposes.

The sand that is highly sought after is more angular and can lock together. It is typically sourced and extracted from seabeds, coastlines, quarries and rivers around the world.

‘A grain of change’

Louise Gallagher, environmental governance lead at the UNEP/GRID-Geneva’s Global Sand Observatory Initiative, said the issues around sand had become a “diffuse” and “complex” problem to resolve.

For instance, she said the banning of river sand extraction would inevitably have a knock-on effect for the people and communities who rely on this practice to earn a living.

China and India top the list of areas where sand extraction impacts on rivers, lakes and on coastlines, largely as a result of soaring infrastructure and construction demand.

UNEP has previously warned of thriving “sand mafias,” with groups comprising of builders, dealers and businessmen known to be operating in countries such as Cambodia, Vietnam, Kenya and Sierra Leone. Activists working to shine a light on their activities, UNEP said, are being threatened and even killed.

Construction cranes and vehicles cover the A10 highway between Paris and Bordeaux with sand on November 6, 2019 near Monts, central France.


Sand is “perceived as cheap, available and infinite and that is partly because the environmental and social costs are pretty priced in,” Gallagher said on Tuesday during the same webinar.

“It seems like we believe the highest use value for this material right now is to extract it from the natural environment rather than keeping it in the system for the other types of benefits we get from it like say, for example, climate resilience in coastal areas,” she continued.

“We need to think about putting a little order on the chaos of that crazy fragmented picture — and that’s happening. That’s the good news. We are not ignoring, I think, this problem any further. It is not as invisible as it used to be.”

Gallagher identified five priorities for sand resource governance over the next two years: cooperation on global standards across all sectors, cost-effective and viable alternatives to river and marine sand, updating environmental, social and corporate governance frameworks in the financial sector to include sand, bringing in ground-level voices and setting regional, national and global goals on sand use at the right scale.

‘No-one is even talking about this issue’

An excavator and a bulldozer are working on the grounds of the gravel plant and the concrete mixing plant of the Max Bögl group of companies.

Soeren Stache | picture alliance | Getty Images

Unfortunately, Peduzzi told CNBC that the challenge has still not been adequately addressed on the global stage.

“It is still very much new. In many of the development policies, there is no-one even talking about this issue of sand, where it is coming from, the social impacts or the environmental impacts, so there is a lot of things to be done,” he continued.

“Yet, no big plans, no standard on how it should be extracted, no land planning on where you should extract and where you should not extract, no monitoring to where it is coming from in most of the places (and) no enforcement of laws because countries are pondering between development needs and the protection of the environment.”

Looking ahead, industrialization, population growth and urbanization are all trends likely to fuel explosive growth in the demand for sand.

“It’s time to wake up,” Peduzzi said.

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China to boost R&D spending in push for tech breakthroughs



Integrated circuits on a circuit board.

filonmar | E+ | Getty Images

Li said China’s research and development spending will increase by more than 7% per year between 2021 and 2025. R&D will account for a higher percentage of gross domestic product (GDP) than in the previous 5 years. He did not give details on how much the government would spend in absolute terms.

China’s spending on R&D climbed 10.3% to 2.44 trillion Chinese yuan ($378 billion) and accounted for 2.4% of GDP in 2020, according to official statistics.

Meanwhile, central government expenditures on basic research will increase by 10.6%, Li said.

The Two Sessions this year marks the start of China’s 14th five-year development plan which lays out priorities and goals over the coming years. The current plan runs from 2021 to 2025.

In the past, the annual gathering of delegates has overseen major changes including President Xi Jinping‘s abolition of term limits in 2018.

In his report, Li laid out China’s vision for the next five years.

“To improve China’s innovation system, we will work faster to enhance our strategic scientific and technological capability underpinned by the development of national laboratories, strive to make major breakthroughs in core technologies in key fields, and formulate and implement a ten-year action plan for basic research,” he said.

China is going to focus on developing a number of technology areas including semiconductors, health care, quantum computing and cloud computing, according to a draft of its five-year plan.

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China proposes changes to Hong Kong’s electoral system



The flag of Hong Kong flies from a ferry boat on July 2, 1997, a day after the former British colony returned to Chinese rule.

Romeo Gacad | AFP | Getty Images

Beijing on Friday proposed changes to “improve” Hong Kong’s electoral system as Chinese Premier Li Keqiang said China will “resolutely guard against and deter external forces’ interference” in the city.

The announcement was made at the start of China’s annual “Two Sessions” parliamentary meeting.

The Chinese government had earlier hinted at potential changes to Hong Kong’s electoral system, which critics said could hold back the city’s pro-democracy politicians.

Last week, Xia Baolong, director of the Hong Kong and Macao Affairs Office of China’s State Council, said in a Mandarin-language statement translated by CNBC that “legal loopholes” in Hong Kong’s electoral system should be closed so that the city is governed only by “patriots.”

Hong Kong is a former British colony that returned to Chinese rule in 1997. The city is governed under a “one country, two systems” principle that gives it greater autonomy than other mainland Chinese cities, including limited election rights.

Beijing has been criticized internationally — by countries including the U.S. and the U.K. — for undermining Hong Kong’s autonomy that was promised under the “one country, two systems” framework.

Last year, Beijing bypassed Hong Kong’s legislation to enact a controversial national security law. The move followed months of pro-democracy protests in the city that sometimes turned violent.

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