Monday, July 2, 2018

North Korea’s Kim Jong Un asked China’s Xi Jinping to help lift sanctions – report - Hong Kong Free Press

North Korea’s Kim Jong Un asked China’s Xi Jinping to help lift sanctions – report
2 July 2018 08:00 AFP2 min read

North Korean leader Kim Jong Un has appealed to China’s Xi Jinping to help end sanctions against Pyongyang following his landmark summit with US President Donald Trump, a Japanese newspaper reported Sunday, citing multiple unnamed sources in the two countries.

Kim made the request during his third meeting with Xi in Beijing last month, and the Chinese president promised to do his “utmost” to satisfy it, the Yomiuri Shimbun newspaper said.

Xi Jinping
Chinese President Xi Jinping. File photo: S.Korean Gov’t.

“We are feeling great pain due to economic sanctions. Now that we have concluded the US-North Korea summit in success, I want (China) to work toward early lifting of the sanctions,” Kim reportedly told Xi, according to the newspaper.

In recent months the Cold War-era allies have sought to repair ties strained by Pyongyang’s nuclear tests and Beijing’s support of subsequent UN sanctions.

Kim chose Beijing — his main economic patron and diplomatic protector — for his first official foreign trip in March and met Xi again in May in the northeastern port city of Dalian.

Kim asked Xi to help ease the sanctions that have crippled North Korea’s economy, and urged China to back Pyongyang in its denuclearisation talks with Washington, the report said.

Kim Jong-un
North Korean leader Kim Jong-un. File photo: S.Korean Gov’t.

Xi in turn told Kim he “actively supports North Korea’s reform and opening-up and will proactively cooperate with issues associated with the efforts”, according to the Yomiuri.

He also urged North Korea to “continue (its) consultations with China” as it negotiates with the United States, the report said.

China indicated last year that the UN Security Council could consider easing the punitive measures against Pyongyang.

Kim’s third official visit to China was seen as a move to reassure Beijing that Pyongyang would not neglect its interests after the historic summit with Trump in Singapore.

China and the US both hope to see the Korean peninsula free of nuclear weapons.

But Beijing is concerned Washington and Pyongyang might move closer at its expense, a possibility that China sees as threatening to its economic and security interests in the region.

Angela Merkel's government is on the brink of collapse - Independent

July, 2, 2018

Angela Merkel's government is on the brink of collapse – and we should all worry about what might happen then
Germany is in no position to 'lead' Europe, and has little desire to. That is bad news for everyone

Sean O'Grady
@_seanogrady

To borrow a phrase, when Germany catches a cold, Europe gets pneumonia, and right now the political situation in Berlin is looking distinctly peaky.

If Angela Merkel’s rickety government does collapse – whether or not it’s in the orderly fashion ordained by the federal republic’s constitution – everyone in Europe should be very afraid of what life after “Mutti” would be like.

You could argue she’s had it coming, ever since her brave and principled decision to allow around a million asylum seekers, including from the war in Syria, into Germany. No matter; a weak, divided Germany, with a succession of wobbly governments based on a kaleidoscope of shifting allegiances, and a growing parliamentary presence for parties on the extreme right… well, I hope I am not being too alarmist.

We should remember too that Germany remains the continent’s only economic and industrial power of truly global stature. It is great force for good; but perhaps we have taken its benign stability for granted for too long.

If Merkel does go, and out of some bitter arguments comes a stronger AFD, a noxiously nationalistic party, three things will inevitably flow.

First, an unwillingness to honour what she has been able to achieve in the way of a European “deal” on migration. That, in effect, is what a fresh election would be a referendum on.

Second, a refusal frankly backed by its financial impossibility: to bail out Italy. That country’s banks and the state itself are virtually insolvent. Now, in a country itself seized by the far right, the Italians are threatening to print their own version of the euro currency – mini Italian Treasury bonds with a face value as low as 10 euros that can be used a legal tender and to fund bank accounts – a clear dodge to evade European central bank disciplines.

Italy is the third largest economy in the Eurozone; to prop it up is beyond the means even of the Germans and even if they wanted to, which they don’t. Sooner or later, Italy will leave the euro because Italy is too big to save, unlike little Greece; and because Italy has a government, and is a country, full of people who actually wish that to happen. It could bring the entire single currency down with it.

Ian Bremmer describes starbursts exchange between Donald Trump and Angela Merkel: 'don't say I never give you anything'
Third; there will be a generally more sceptical German attitude to further European integration along the lines advocated by President Macron of France, and, thus, a weakening of the spine of the European Union, the Paris-Berlin axis. The European Union, probably with the calculating connivance of the French (Macron too needs to watch his political flank), the ready assistance of the east Europeans, Dutch, Austrians and Scandinavians – and to the ecstatic delight of the Italians – would be moving towards a looser, less cohesive force. If and when that happens, freedom of movement will be ditched, and the Schengen accord on free borders would see fundamental reform. Brexit would be a sideshow compared to a Eurosceptic Germany.

The irony would be that a reform of the EU to suit British tastes would be arriving at just the moment the UK would be heading out of the door.

It is sometimes reported that the threat by the leader of the Christian Social Union Party (CSU) and federal interior minister Horst Seehofer to resign from the Merkel government is a routine bit of argy-bargy between coalition partners, like the rows Nick Clegg and David Cameron used to have, very occasionally. This crisis is, however, much more than that, and more important and potentially seismic than just the fall of the Merkel government and the end of the Chancellor’s long political career, momentous as that would be.

For the CSU is the “sister” party of Merkel’s CDU, which in fact understates the sibling bond. They are more like twins, if not conjoined twins. The CSU, though technically separate, has, for most of the period of its existence since the Second World War, acted as a sort of regional variant of the CDU, operating in Bavaria, whereas the CDU operates elsewhere in Germany. They have always worked in close concert at the federal level.

The CSU hasn’t managed to win the federal chancellorship, but it has put candidates up on behalf of the CDU-CSU “union”, and always provided political heavyweights to CDU-CSU administrations. The two wings of German Christian Democracy have usually agreed, broadly, on the notion of a “social market economy”, though the CSU is more culturally “Catholic” and socially conservative (it has been stressing this lately), and represents what is one of the wealthiest regions of Germany, or the world for that matter.

It is also true that Bavaria has been on the “front line” during the migration crisis and the flow of people from the south. The rich Bavarians – whose area is home to BMW, Audi, Infineon and Puma, as well as some fine breweries – resent paying vast sums to rescue places like Greece. Bavarian regional interests are diverging more markedly from federal German ones. Hence the schism.

This is all part of a fracturing of the Germany party system, with Greens, Free Democrats (nowadays a roughly Thatcherite group and socially liberal) and former Communists (“the Left”) finding representation in a Bundestag once monopolised by the CDU/CSU and the Social Democrats, with the FPD providing a handy and usually cooperative coalition partner for one or the other. The German electoral system was not designed for such a crowded field as today’s, and it is showing the strain of the resulting paralysis. Germany is in no position to “lead” Europe, and has little desire to. That is bad.

What is happening in Germany has been happening across Europe for years, masked by the victory of Emmanuel Macron in France and Angela Merkel hanging on to power in Germany. The far right, or populist right, or neo-Nazi right, or conservative right, or fruitcake right, in varying national flavours, are in government, either alone or in coalition, in Slovenia (the latest), Austria, Italy, Hungary, Poland, the Czech Republic and Bulgaria. They are too close for comfort to the levers of power in the Netherlands, Denmark, Finland and France; they are slowly pushing up their support in Germany and Sweden. Only in Slovakia do they seem to have been beaten back. In Greece and Spain, it is the populist far-left who have taken the bet advantage of the atmosphere of crisis.

All across Europe, then, social democracy has been dying a slow and pitiful death. Now Christian democracy – what the British would recognise as moderate conservatism – is suffering the same fate.

Too many conservatives see their easiest path to power in forming accommodations and coalitions with the far right, rather than centrist groups of “grand coalitions” with social democrats. It is a frightening trend, and one in which Brexit, the Conservative-DUP deal and the rise of Corbynism are the British counterparts to the wider story.

With America disengaging from European defence, an expansionist and aggressive Russia, trade wars and a floundering European “project” – and most of all a politically powerless and introverted Germany – the 2020s promise to be stormy years for our continent. The clouds are gathering, if we dare to look. 

Meet the Serve America Movement, or SAM, which wants to take on the two biggest political parties. - Bloomberg


Meet the Serve America Movement, or SAM, which wants to take on the two biggest political parties.

By  and
July 2, 2018, 8:00 PM GMT+10

Eric Grossman doesn’t look like he would want to do anything drastic. The top lawyer at Morgan Stanley is a 51-year-old homeowner in the New York suburbs with twin sons and a seat on the firm’s management committee. He’s another man in a power suit in a midtown Manhattan bank.

He also wants to topple America’s two-party system.

Eric Grossman, the top lawyer at Morgan Stanley.
Photographer: Wireimage via Getty Images
Grossman is trying to build a new party—called the Serve America Movement, or SAM—even though third wheels in American politics tend to have the lasting power of the Free Soilers and the Anti-Masons. His quixotic goal hasn’t deterred donors that include fellow members of Morgan Stanley’s operating committee, the bank’s head of government relations, its top independent board member, and the last chief executive officer, John Mack.

Don’t expect this crusade for unity to turn into the next Women’s March, Tea Party, or even a semi-memorable hashtag. At least so far, this is what resistance to President Donald Trump looks like on Wall Street. Even though tax cuts and reduced regulation have made big banks and corporations some of this era’s big winners, many of their executives squirm when the president abandons global agreements and threatens trade wars. These people also tend to resent and even dread the Democratic Party’s progressive wing, as if it’s out to get them personally. That opens a space for SAM’s unlikely, ambitious and well-moneyed cry for something else.

“Perhaps it’s a fear of arrogance that people are like, ‘Wow you can’t say that, you can’t say you’re going to be a party,’” said Richard Bennett, a partner at investment firm B-FORE Capital who contributed $140,000 to SAM. “I’m like, why not? What else are we going to do? That’s the only thing that’s going to fix it.”

SAM  stands against divisiveness, but what it stands for isn't obvious. One Morgan Stanley executive who donated admitted he doesn’t know anything about it, he just wanted to help a friend’s pet cause.

SAM’s upbeat website, with no specifics on immigration, reproductive rights, or the health-care system, can’t clear up big questions. The principles are so broad and cheerful—“applying America’s innovative spirit,” “a strong, clear-eyed, values-based leader,” and “the vitality of local communities”—that they have the ring of taglines for a Silicon Valley startup that hasn’t put out a product yet.

This inoffensive flavor makes sense for a political project backed by executives from Morgan Stanley, a big bank with a particularly understated political style. At JPMorgan Chase & Co., by contrast, CEO Jamie Dimon devoted pages of this year’s annual letter to praising Trump’s tax cuts while warning against isolationism. And Goldman Sachs Group Inc. has perfected a pipeline to Washington, sending executives Gary Cohn and Dina Powell for stints in Trump’s White House.

“Let’s have civil dialogue.”

The financial types backing SAM have taken stock of the American landscape and decided the overarching crisis isn’t guns, opioids, climate change or the treatment of immigrants—it’s divisiveness. SAM thinks it has a shot at winning by preaching unity, and it is in vogue to make public pleas for politeness. Some elected officials have had more to say about White House press secretary Sarah Huckabee Sanders being asked to leave a Virginia restaurant than the poisoned water in Flint, Michigan.

“Let’s have civil dialogue,” said Stephanie Miner, a former Syracuse mayor and once a top New York Democrat. SAM announced plans for her to run under its banner in the race for governor, with a longtime Republican lieutenant. The favorite is Democratic incumbent Andrew Cuomo, already a darling of the establishment center.

In some ways, SAM’s timing for its understated arrival on the political scene has been excellent. The Trump immigration policy separating thousands of children from families who crossed the border illegally caused top GOP strategist Steve Schmidt to dump the party. Across the aisle, in New York, 28-year-old Democratic socialist Alexandria Ocasio-Cortez just toppled congressional powerhouse Joe Crowley, the kind of primary upset that threatens finance-friendly moderates.

Grossman, who wouldn’t comment for this story, has well-heeled friends at the bank who like what he’s doing. Even Vice Chairman Tom Nides, a top bundler for Hillary Clinton, borrowed SAM’s peppy vibe: “I support Democrat candidates, period. That said, I think it’s great when people get involved in the political process, even if I disagree with them.” Grossman and his professional peers have sent more than $1.3 million to SAM, according to filings. Donations so far include $50,000 from investment-management head Dan Simkowitz and $10,000 each from Mack, director Tom Glocer, and former litigation co-head Jim Cusick.

That’s pocket change compared with the cash corporations can unleash but a remarkable sum for a political project with no track record. And contributions have popped up from outside Morgan Stanley. The biggest amount, more than $900,000, came from former tobacco executive Charles Wall.

SAM wants to be more than a party backed by bankers and lawyers, so its officials don’t like to emphasize New York roots. The group did its first big voter survey in Kansas, and says it has cash coming in from small donors across the U.S. The headquarters, with a handful of staffers, is located inside a co-working space in Denver.

“Major donors are probably going to be finance or lawyers or Hollywood.”

SAM CEO Sarah Lenti argued that the early infusion of Wall Street money doesn’t mean anything. “Major donors are probably going to be finance or lawyers or Hollywood,” said Lenti, who was a spokesperson for John McCain and a research consultant to Mitt Romney. “You have to be financed somehow.”

SAM is far from the first attempt to find a sweet spot in the middle of the U.S. political spectrum. Other groups insisting on centrism include Third Way and No Labels. Michael R. Bloomberg, the owner of this news service, has pledged to spend $80 million in the upcoming midterm elections, mostly in support of Democratic congressional candidates, according to a report in the New York Times.

Grossman is the kind of big-time bank attorney who made it into the club of Wall Street lawyers that flew to the Trianon Palace Versailles hotel outside Paris in 2016 to talk shop. He isn’t enrolled in a party, and he's donated about $28,000 outside of SAM, money that tended to go to moderate Democrats and Morgan Stanley’s Republican-leaning political action committee. He played rugby at Hamilton College, got his law degree at Fordham University, and spent a few years moonlighting as an agent for baseball star Darryl Strawberry. At Morgan Stanley, he’s lately been seen around the office wearing SAM cufflinks.

He decided to do something on the day after Trump won the White House, according to SAM’s website. Grossman started by rallying friends including Scott Muller, once general counsel at the Central Intelligence Agency and now SAM’s chairman. Deep-pocketed people were ready to give it a try. “They told me all of the things they thought it was going to cost,” said Wall, who was vice chairman of Philip Morris International Inc. until 2010. “And I said, ‘I’m in. And here’s the amount I’m in for.’”

He had an even better message for them: “Come back to me when you need some more.”




— With assistance by Bill Allison

Michael Cohen says 'first loyalty' is to 'family and country' – not Trump - Guardian

Michael Cohen says 'first loyalty' is to 'family and country' – not Trump
Trump’s longtime fixer tells Good Morning America ‘I will not be a punching bag as part of anyone’s defense strategy’

Martin Pengelly in New York

 @MartinPengelly
Mon 2 Jul 2018 21.44 AEST Last modified on Mon 2 Jul 2018 21.45 AEST

 Michael Cohen on Friday. His home and offices were raided by FBI agents in April.

Michael Cohen, Donald Trump’s former personal attorney, will put “family and country first” as investigations continue into his work for the president, including a payment to an adult film star who claims to have had an affair with Trump.

Is Trump really winning? The truth about the president's popularity
 Read more
Cohen’s remarks, in an off-camera interview with ABC’s Good Morning America, will intensify speculation that he may be prepared to “flip” and co-operate with federal prosecutors in New York and investigators looking into Russian election interference and alleged collusion between Trump aides and Moscow.

“My wife, my daughter and my son have my first loyalty and always will,” Cohen told George Stephanopoulos in the interview, which was conducted on Saturday at a hotel in New York. “I put family and country first.”

In answer to the question of whether he expected Trump to turn on him, he said: “I will not be a punching bag as part of anyone’s defense strategy. I am not a villain of this story, and I will not allow others to try to depict me that way.”

Cohen’s home and offices were raided by FBI agents in April, after a referral from Robert Mueller, the special counsel investigating matters related to Russia.

Cohen has not been charged with any crime. He told ABC: “Once I understand what charges might be filed against me, if any at all, I will defer to my new counsel, Guy Petrillo, for guidance.”

Good Morning America

@GMA
 In @GStephanopoulos' exclusive interview with Pres. Trump's former personal attorney Michael Cohen, Cohen stays mum on commitment to his longtime client: “To be crystal clear, my wife, my daughter and my son, and this country have my first loyalty.” http://gma.abc/2tNmERT

9:17 PM - Jul 2, 2018

Petrillo is a former federal prosecutor who was once head of the criminal division of the US Attorney’s Office in Manhattan.

In April, Trump tweeted that though “most people will flip if the government lets them out of trouble, even if it means lying or making up stories”, he did not “see Michael doing that”. He also called Cohen a “fine person with a wonderful family”.

Trump denies collusion with Russia. He has denied Stormy Daniels’ claims of an affair. But in May his current lawyer, Rudy Giuliani, admitted that Trump reimbursed Cohen for a payment of $130,000 which Daniels claims was made shortly before the 2016 election in order to keep her quiet. Filings by Trump showed payments of $250,000 to Cohen in 2017.

Cohen did not discuss the Daniels payment with ABC. “I want to answer,” he said. “One day I will answer. But for now, I can’t comment further on advice of my counsel.”

Regarding Trump’s repeated claim that the Mueller investigation is a “witch-hunt”, Cohen said: “I don’t like the term witch hunt. As an American, I repudiate Russia’s or any other foreign government’s attempt to interfere or meddle in our democratic process, and I would call on all Americans to do the same.”

 I am not a villain of this story, and I will not allow others to try to depict me that way
Michael Cohen
Trump last week tweeted that Russia “continues to say they had nothing to do with Meddling in our Election!” The president will meet Vladimir Putin in Helsinki later this month. He told reporters on Friday he would press the Russian president about election interference.

Cohen said: “Simply accepting the denial of Mr Putin is unsustainable.”

Cohen told ABC he thought Mueller would not find evidence he colluded with Russians himself. An infamous meeting at Trump Tower in June 2016 between Donald Trump Jr, Jared Kushner, then campaign chair Paul Manafort and a group of Russians promising dirt on Hillary Clinton was, he said, ““a mistake” and “an example of poor judgment”.

Another former Trump confidante, former White House strategist Steve Bannon, famously called the meeting “treasonous”. Trump’s role in drafting a misleading statement about the meeting is one instance under investigation by Mueller as he seeks to determine if the president sought to obstruct justice.

Trump Tower meeting with Russians 'treasonous', Bannon says in explosive book
 Read more
Asked if he thought Donald Trump had known of that meeting in advance, Cohen said he could not comment, under the advice of his counsel.

Manafort is one of four former Trump aides to have been indicted by Mueller. He denies financial charges against him and is currently in jail, over alleged witness tampering, while awaiting trial. Manafort’s deputy Rick Gates, former foreign policy adviser George Papadopoulos and former national security adviser Michael Flynn are all co-operating with investigators.

In his ABC interview, Cohen concluded: “I want to regain my name and my reputation and my life back.”

Republican Sen. Susan Collins Won't Support a Supreme Court Nominee Who Would Overturn Roe v. Wade - TIME

Republican Sen. Susan Collins Won't Support a Supreme Court Nominee Who Would Overturn Roe v. Wade

By MARK NIQUETTE AND CHRISTOPHER CONDON July 1, 2018
President Donald Trump shouldn’t pick someone for the Supreme Court who doesn’t respect legal precedent, including the “settled” 1973 decision that legalized abortion, Republican Senator Susan Collins of Maine said.

“A candidate for this important position who would overturn Roe v. Wade would not be acceptable to me, because that would indicate an activist agenda that I don’t want to see a judge have,” Collins said Sunday in an interview on ABC’s “This Week.”

Collins said she urged Trump during a meeting last week to broaden the list of 25 possible justices he released during the campaign, and that the White House subsequently told her five more people had been added to it.

“I got the feeling that he was still deliberating and had not yet reached a decision, and that this was genuine outreach on his part,” Collins said. “There are people on that list whom I could not support.”


Collins is among small group of U.S. senators whose support is seen as crucial to securing the confirmation of a new Supreme Court Justice following the retirement announcement of Justice Anthony Kennedy.

The Maine senator has said previously that she wouldn’t support someone who pledges to overturn Roe v. Wade, the Supreme Court ruling that legalized abortion in the U.S. It’s settled law, and justices must respect legal precedent, she said.

Graham’s View
Republican Senator Lindsey Graham of South Carolina said on NBC’s “Meet the Press” on Sunday that he wouldn’t vote for a nominee who promises to overturn a case before the facts are presented. Graham said he also supports the concept of stare decisis, meaning a respect for legal precedent.

“That means you don’t overturn precedent unless there’s a good reason,” Graham said. “And I would tell my pro-life friends you can be pro-life and conservative, but you can also believe in stare decisis.”

Leonard Leo, a former vice president of the Federalist Society who has advised Trump on judicial nominations, also expressed support for the idea of a justice upholding precedent in an interview on “Fox News Sunday.”

“I don’t think at the end of the day it’s about Roe v. Wade,” Leo said. “It’s about having judges on the court who are going to interpret the constitution the way it’s written, and part of interpreting the constitution is taking into account major precedents, and that’s going to happen.”

Not That Specific
Trump said on Fox News’s “Sunday Morning Futures” that he “probably” wouldn’t ask his potential nominees about how they would vote on the abortion law. He said he’s been told he shouldn’t be that specific in his questions, though he will be putting a conservative on the court.


Senator Richard Durbin, Democrat of Illinois, said he thinks Trump is looking for a justice who will overturn the abortion law, as well as rule that protections under President Barack Obama’s health-care overhaul against denying insurance to those with pre-existing conditions are unconstitutional.

“Donald Trump is looking for a justice who’s going to rule in his favor,” Durbin said on “Fox News Sunday.”

Meeting with Senators
White House Press Secretary Sarah Huckabee Sanders said in a tweet Thursday that Trump had met with Collins and fellow Republicans Chuck Grassley of Iowa, chairman of the Senate’s Judiciary Committee, and Lisa Murkowski of Alaska, as well as Democrats Heidi Heitkamp of North Dakota, Joe Donnelly of Indiana and Joe Manchin of West Virginia.

Manchin, Donnelly and Heitkamp are Democrats from states Trump won in 2016. He has targeted them for defeat in November’s midterm elections. That makes them more likely than other senators in their party to support his nominee for the court.


With Republicans controlling the Senate 51 to 49, Democrats must prevent any defections and win over at least one Republican if they hope to block a nominee.

Trump said Friday he had narrowed his search to about five finalists, including two women, and will announce his pick on July 9. Trump said that he may interview one or two candidates this weekend at his resort in Bedminster, New Jersey.

A person familiar with the process said White House officials are focused primarily on five federal appeals court judges — Brett Kavanaugh, Amy Coney Barrett, Thomas Hardiman, Raymond Kethledge and Amul Thapar.

Here’s a Rule to Help Powell Manage the Fed’s Uncertainty Problem - Bloomberg

Here’s a Rule to Help Powell Manage the Fed’s Uncertainty Problem
By Christopher Condon
July 2, 2018, 7:00 PM GMT+10
 Fed chair questions theoretical concepts and looks to the data
 Williams’ ‘first-difference’ rule could offer guidance

Federal Reserve Chairman Jerome Powell hasn’t been shy about drawing attention to the limits of the central bank’s knowledge.

In a June 13 press conference he was remarkably frank in doubting the Fed’s ability to answer the most important conceptual questions in monetary policy: At what level would interest rates have a neutral impact on the economy, and how low can unemployment fall before it begins to provoke problematic inflation?

Jerome Powell on June 13.Photographer: Andrew Harrer/Bloomberg
“We can’t be too attached to these unobserved variables,” said Powell, who took the Fed’s helm in February. “You shouldn’t try to speak about it with a lot of precision or confidence,” he added. “We’re estimating these things.”

The real emphasis, he said, should be on monitoring changes in the hard data.

That may be refreshing for Fed watchers weary of theoretical economic models. The new chairman’s “plain-English” approach and his humility in the face of uncertainty is proving popular among those working in financial markets. But it doesn’t say much about what the Fed will do when the data arrives.

Estimates about the neutral interest rate and the so-called natural level of unemployment, however flawed, are useful because they provide guideposts for policy. And when Fed officials make their estimates public, they lend predictability to how they will react when the economy changes.

Williams Paper
If only there were a guide for setting rates that accommodates Powell’s uneasiness with “unobserved variables” and his preference for hard data. As it happens, there is just such a road map, and one of Powell’s most senior colleagues, New York Fed President John Williams, helped draw it up.

In 2002 when Williams was an economist at the San Francisco Fed, he co-authored a paper confronting the unreliability of estimating the neutral rate of interest and the natural rate of unemployment, and the problem that presented in setting interest rates.

The solution they offered was something called the “first-difference” rule.

There are many monetary policy rules that will recommend a level of rates for different economic conditions. The Fed doesn’t strictly follow any of them, but consults several. The first-difference rule is distinct for not relying on any of the unobserved variables that vex Powell, making it, as Williams and Athanasios Orphanides wrote, “immune to likely misperceptions in these concepts.”

Simple Formula
Instead, it counsels policy makers -- in the form of a simple formula -- to respond to actual changes in unemployment and inflation, thus fitting snugly with Powell’s description of how he believes the Fed should proceed.

Taking the crudest version of the rule and plugging in median forecasts from Fed officials for unemployment and inflation at the end of 2019 and 2020, the first difference rule would prescribe a federal funds rate of 2.3 percent for both points in time. That’s just two hikes higher than where the rate is now and well below the 3.1 percent and 3.4 percent projected by those same officials.

Matthew Luzzetti, a senior economist at Deutsche Bank, who wrote about the first-difference rule in a recent note to clients, argued for caution. Powell’s views do appear to align with Williams’ paper, and Williams is clearly an influential figure inside the Fed. But neither Powell nor Williams is going to follow any policy rule mechanically, he said.

Moreover, there are different versions of the rule. A more complex one that appears in the Fed’s semi-annual report to Congress puts the rate much closer to the Fed’s projections, according to Luzzetti.

“The Fed is likely to look at these rules as a guide,” he said, “but I don’t think you can really infer what the reaction of the Fed will be.”