7 August 2019 FT — Articles to Read

7 August 2019


Question: According to MSN: Money, what are the most expensive places to live in Maryland and Virginia?


Green eyed: US faces dollar conundrum – Pg. 1

  • After the Federal Reserve cut its interest rate for the first time since the financial crsisis last week, the dollar soared


US Treasury has limited tools to weaken the dollar – Pg. 3

  • On Monday, Mr Mnuchin was allowed to speak freely, declaring that China manipulates its currency to create an unfair competitive advantage, with the implication that the greenback is over-valued against the renminbi. The US Treasury is no longer bound by the verbal rules of the strong-dollar policy
  • Declaring China a currency manipulator came after Beijing’s decision to allow the renminbi to depreciate to below seven to the dollar
  • The broad real trade-weighted dollar – an index created by the Fed to track the dollar’s value against a wide range of trading partners, including China – moved higher in late 2014 and early 2015, as the ECB and the BoJ eased policy while the Federal Reserve went in the opposite direction and signaled that it was ready to tighten. After peaking in December 2016, it has remained elevated


Asia turmoil hits hotel bookings – Pg. 11

  • InterContinental Hotels Group, the world’s third-largest hotel group by room numbers, has said the US-China trade dispute and political unrest in Hong Kong are hitting demand
  • The owner of Holiday Inn and Kimpton Hotels said that revenue per available room – revpar, the industry’s favoured performance metric – fell 0.3% in the six months to the end of June in Greater China and was down 1% in the mainland
  • Revpar across the US hotel sector increased 1.1% in the second quarter, its slowest rate since 2010


US credit card interest rates hit 25-year high – Pg. 12

  • US consumers are paying higher interest rates on their credit cards balances than they have in more than a quarter of a century, and the Federal Reserve’s rate cuts are no guarantee they will receive much relief
  • The average rate on interest-bearing card accounts topped 17% in May, …, the highest in the 25 years that the central bank has been making the calculation
  • Card rates rose from long-term lows as the Fed gradually increased its benchmark interst rate between late 2015 and the end of last year. But card issuers pushed up rates faster than the Fed, with the result that the spread between the Fed benchmark and what card borrowers pay, at just under 15%, has been wider only once: in the third quarter of 2009, with rates on the floor
  • The CARD Act of 2009, a US law designed to protect cardholders from exploitation, puts limits on banks’ ability to raise interest rates on existing balances. The card issuers “can’t reprice you once they sell you a card – so they have to price [more risks] in”, …
  • …customers were not focused on what rates they would pay but instead on what perk, from cashback to airline miles, their cards brought
  • Since the crisis, card rates are often set by adding a premium to a fluctuating index – most often the prime rate, the lowest rate banks make available to non-bank customers. The prime rate in turn is directly related to the fed funds rate that is set by the Federal Reserve
  • Card companies have also found other ways to increase what card customers pay, for example by using annual fees, foreign transaction fees, and fees on balance transfers,…
  • For banks, the wide spread between the cost of money and what they can charge borrowers has made the card business especially profitable relative to other kinds of lending, especially given that default rates remain very low by historical standards
  • There is about $850bn in US credit card debt outstanding….that is a record dollar amount, although as a proportion of GDP, the figure declined from 6 to 4% over the past decade


US cord-cutting increases sharply – Pg. 13

  • A fifth of US households will have abandoned cable television by the end of next year, ..
  • More and more Americans are rejecting cable’s hefty monthly costs and commercial breaks as they decide on-demand streaming services such as Netflix, YouTube and Amazon Prime can satisfy their viewing desires


Answer: Maryland (Calvert County; Cost of living/mo: $4,665); Virginia(Fairfax County; Cost of living/mo: $4,754)