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Union Bank of India
16 сентября 2013, 18:20

Anniversary Present for Wall Street Banks: A Financial Speculation Tax

Dean Baker Al Jazeera English, September 16, 2013 See article on original website As we mark the fifth anniversary of the Wall Street bailouts, it is clear that little has changed in the way they do business. They are still engaging in the same sorts of market manipulation and tax gaming as they did before the crisis. The weak conditions on the bailout money had no lasting effect in areas such as executive compensation. The industry itself is more concentrated than ever as the big banks used the crisis to merge with other banks, making themselves even bigger. And the Dodd-Frank reforms have been watered down to the extent that many are now pointless. It’s clear that Wall Street won that round. Their greed and incompetence would have put most, if not all, of the big Wall Street players out of business in the 2008 crisis. Thanks to their power with top figures in both political parties, they were able to count on government handouts to get out of the mess they had themselves created. And, thanks to Wall Street’s ability to influence reporting on financial issues, most people reading about the anniversary of the bailouts will be told that we are lucky things turned out as they did. After all, we didn’t get a Second Great Depression. Avoiding a Second Great Depression, like avoiding the Black Plague, is not much grounds for celebration. We usually don’t expect either. No one should be thanking anyone connected with Wall Street for avoiding a horrible event that never even should have been a possibility. This brings us back to the problem of dealing with an out-of-control financial sector. The efforts to do finely focused fixes in Dodd-Frank largely went nowhere. This calls for a different approach: regulating the industry with a sledge hammer known as a financial speculation tax. The idea is simple and old. We can place a small tax on financial transactions to discourage rapid turnover.  Eleven countries in the European Union are planning to impose a tax of 0.1 percent on stock trades and 0.01 percent on most derivative transactions. Senator Tom Harkin and Representative Peter DeFazio have proposed a tax of 0.03 percent on both types of transactions. Representative Keith Ellison has proposed a somewhat higher tax. Such taxes can raise large amounts of revenue, which would come almost exclusively out of the hides of the Wall Street gang. The Joint Tax Committee of Congress estimated that the Harkin-DeFazio tax would raise close to $40 billion a year. While much of the tax itself would be largely passed on in higher transactions costs, there is considerable research showing that investors and other end users respond to higher trading costs by cutting their transactions in roughly equal proportions. In other words, the research shows that if it costs twice as much to trade a share of stock, most investors will engage in roughly half as much trading. In that case, the amount that investors spend on trading each year will be little changed, even if they pay more per trade. The same story applies to other end users in financial markets. For examples, farmers are likely to buy and sell somewhat fewer futures contracts on their crops. And airlines will buy and sell fewer options on jet fuel. The trades themselves end up a wash since every trade that has a winner also has a loser. The real losers from the reduction in trading volume that would result from a financial transactions tax are the banks. They would both see fewer trades and likely be able to pocket less money on each trade as a result of the tax. This is really a horror story for them. This is why they are pumping out nonsense at record paces, arguing that the world will end if we impose financial transactions taxes. They claim that investors will see enormous increases in costs, because somewhere they will decide to trade more than ever so that they can pay the tax hundreds of times a year. (Seriously, that is what these folks say and business reporters repeat.) They claim that everyone will just move their trades to places like Hong Kong, China, India, and Singapore. They never mention that all these markets already have financial transactions taxes. In fact they somehow forget that the London stock exchange has been taxing stock trades at the rate of 0.5 percent. This tax dates back more than three centuries and raises the equivalent (relative to GDP) of $40 billion a year in the United States. The financial industry guys even claim that trade agreements make the imposition of effective financial transactions taxes illegal. This is an interesting argument. Does anyone remember the politicians pointing out that their trade deals would make it impossible to tax financial transactions in the same way we tax shoes, cars, and nearly everything else we consume? Did the media report this at the time? If trade deals actually do prohibit financial transaction taxes then that would be a great item to amend in current trade negotiations. And we should immediately fire lots of trade reporters and editors for being so ungodly incompetent that they neglected to mention this fact in their coverage of past trade deals. But the reality is that there is no good reason not to tax the Wall Street folks who gave us this crisis. The only reason financial speculation taxes are not front and center on the national agenda is the power of the financial industry. Just as was the case five years ago, they are using this power to get ever richer at the expense of the rest of us.

07 сентября 2013, 23:51

Who Is Going To Buy The US Debt If This War Causes China, Russia And The Rest Of The World To Turn On Us?

Yesterday we implied a difficult question when we illustrated the huge size of US Treasury bond holdings that China and Russia have between them - accounting for 25% of all foreign held debt - implicitly funding US standards of living (along with the Federal Reserve). The difficult question is "Can the U.S. really afford to greatly anger the rest of the world when they are the ones that are paying our bills?" What is going to happen if China, Russia and many other large nations stop buying our debt and start rapidly dumping U.S. debt that they already own? If the United States is not very careful, it is going to pay a tremendous economic price for taking military action in Syria.   Via Michael Snyder of The Economic Collapse blog, At this point, survey after survey has shown that the American people are overwhelmingly against an attack on Syria, people around the globe are overwhelmingly against an attack on Syria, and it looks like the U.S. Congress is even going to reject it.  But Barack Obama is not backing down.  In fact, ABC News is reporting that plans are now being made for a "significantly larger" strike on Syria than most experts had expected. If Obama insists on going forward with this, it will be the greatest foreign policy disaster in modern American history. Right now, both Russia and China are strongly warning Obama not to attack Syria.  And Russia is not just warning Obama with words.  According to Bloomberg, Russia has sent quite a collection of warships into the region... Russia is sending three more ships to the eastern Mediterranean to bolster its fleet there as a U.S. Senate panel will consider President Barack Obama’s request for authority to conduct a military strike on Syria. Russia is sending two destroyers, including the Nastoichivy, the flagship of the Baltic Fleet, and the Moskva missile cruiser to the region, Interfax reported today, citing an unidentified Navy official. That follows last week’s dispatch of a reconnaissance ship to the eastern Mediterranean, four days after the deployment of an anti-submarine ship and a missile cruiser to the area, which were reported by Interfax. Syria hosts Russia’s only military facility outside the former Soviet Union, at the port of Tartus. China is also letting it be known that they absolutely do not want Obama to hit Syria.  On Friday, China issued a warning about what military conflict in the Middle East could do to "the global economy"... "Military action would have a negative impact on the global economy, especially on the oil price – it will cause a hike in the oil price." And according to Debka, China has also deployed "a number of warships" to the region... Western naval sources reported Friday that a Chinese landing craft, the Jinggangshan, with a 1,000-strong marine battalion had reached the Red Sea en route for the Mediterranean off Syria.  According to DEBKAfile, Beijing has already deployed a number of warships opposite Syria in secret. If the latest report is confirmed, this will be the largest Chinese deployment in the Middle East in its naval history. If the U.S. attacks Syria, Russia and China probably will not take immediate military action against us. But they could choose to hit us where it really hurts. According to the U.S. Treasury, foreigners now hold approximately 5.6 trillion dollars of our debt.  Over the past couple of decades, the proportion of our debt owned by foreigners has grown tremendously, and today we very heavily depend on nations such as China to buy our debt. At this point, China owns approximately 1.275 trillion dollars of our debt, and Russia owns approximately 138 billion dollars of our debt. So what would happen if China, Russia and other foreign buyers of our debt all of a sudden quit purchasing our debt and instead started dumping the debt that they already own back on to the market? In a word, it would be disastrous. As I have written about previously, the U.S. government will borrow about 4 trillion dollars this year. Close to a trillion of that is new borrowing, and about three trillion of that is rolling over existing debt. If China and other big foreign lenders quit buying our debt and started dumping what they already hold, that would send yields on U.S. Treasuries absolutely soaring. And we have already seen bond yields rise dramatically in recent weeks.  In fact, on Thursday the yield on 10 year U.S. Treasuries briefly broke the 3 percent barrier. So what is going to happen if the yield on 10 year U.S. Treasuries continues to go up?  The following are a few consequences of rising bond yields that I have discussed in previous articles... -It will cost the federal government more to borrow money. -It will cost state and local governments more to borrow money. -As bond yields go up, bond values go down.  In the end, rising bond yields could end up costing bond investors trillions of dollars. -Rising bond yields will cause mortgage rates to skyrocket.  In fact, we are already starting to see this happen.  This week the average rate on a 30 year mortgage hit 4.57 percent. -Higher interest rates will mean a slowdown in economic activity at a time when we definitely cannot afford it. -As economic activity slows down, that will be very bad for stocks.  When the next great stock market crash happens (and it is coming), equity investors could end up losing trillions of dollars of wealth. -Of course the biggest threat of all is the 441 trillion dollar interest rate derivatives time bomb that is sitting out there.  Rapidly rising interest rates could potentially bring down several of our "too big to fail" banks in rapid succession and throw us into the greatest financial crisis the nation has ever seen. Are you starting to get the picture? And the 3 percent mark is just the beginning.  Brent Schutte, a market strategist for BMO Private Bank, told CNBC that he expects the yield on 10 year U.S. Treasuries to eventually go up to 6 or 7 percent... "4 percent (on 10-year Treasurys) somewhere around the end of the year to early next year would be a good intermediate-term level. And if you look over the longer term, I don't think that 6 or 7 percent is out of the question." If that happens, we will experience a full blown financial meltdown. Of course it would greatly help if Obama would back down and not attack Syria.  As Vladimir Putin noted at the G20 summit, large nations such as India, Brazil, South Africa and Indonesia are all strongly against the U.S. taking military action... In reply to the question what other country in the world may theoretically be subjected to aggression similar to that Syria is facing, Putin said, “I do not want to think that any other country will be subjected to any external aggression.”   A military action against Syria will have a highly deplorable impact on international security at large, Putin emphasized.   He said he was surprised to see that ever more participants in the summit, including the leader of India, Brazil, the South African Republic, and Indonesia were speaking vehemently against a possible military operation in Syria.   Putin cited the words of the South African President, Jacob Zuma, who said many countries were feeling unprotected against such actions undertaken by stronger countries.   “Given the conditions as they, how would you convince the North Koreans, for example, to give up their nuclear program,” he said. “Just tell them to put everything into storage today and they’ll be pulled to bits tomorrow.”   He underlined the presence of only one method for maintaining stability - “an unconditional observance of international law norms.” Can we really afford to have most of the international community turn on us and quit buying our debt? Of course not. Sadly, as I noted the other day, Obama appears to be locked into doing the bidding of Arab countries such as Saudi Arabia and Qatar. In fact, as the Washington Post reported the other day, Secretary of State John Kerry has even admitted that they are even willing to pay all of the costs of a U.S. military campaign that would overthrow Assad... Secretary of State John Kerry said at Wednesday’s hearing that Arab counties have offered to pay for the entirety of unseating President Bashar al-Assad if the United States took the lead militarily.   "With respect to Arab countries offering to bear costs and to assess, the answer is profoundly yes," Kerry said. "They have. That offer is on the table."   Asked by Rep. Ileana Ros-Lehtinen (R-Fla.) about how much those countries would contribute, Kerry said they have offered to pay for all of a full invasion.   "In fact, some of them have said that if the United States is prepared to go do the whole thing the way we’ve done it previously in other places, they’ll carry that cost," Kerry said. "That’s how dedicated they are at this. That’s not in the cards, and nobody’s talking about it, but they’re talking in serious ways about getting this done." Why aren't we hearing more about this in the news? Fortunately, despite the relentless propaganda coming from the mainstream media, a lot of members of Congress are choosing to take a stand against this war.  For example, U.S. Representative Tom Marino recently shared the following about why he is voting against military action in Syria... Secretary Hagel could not tell lawmakers who the U.S. could trust among the Syrian opposition, stating "that’s not my business to trust."  Like many Americans, I believe it is our duty as decision makers to be informed and confident when making choices – especially in those choices that could result in sending U.S. troops or money abroad.  It is no wonder Secretary Hagel isn’t in the business to trust when more players are added daily to the growing list of ‘Syrian opposition’—many of them jihadist, terrorists, known Al Qaeda affiliates, members of the Muslim Brotherhood and enemies of the U.S. and our allies.  To simplify, the Secretary of Defense was unable to tell us, after nearly three years of the Syrian Civil War, who the good guys are or if there are any at all. And Marino is very right.  There are no "good guys" in Syria.  The "rebels" are murderous jihadist psychotics that would be even worse than Assad if they took power. For much more on what the mainstream media is not telling you about the war in Syria, check out a stunning video report from investigative reporter Ben Swann that you can find right here. The picture above comes from the official Facebook page of one of the "rebel groups" in Syria. I am sure that you do not need me to point out that the White House is burning in the background of the picture. These are the people that Obama wants to help? According to NBC News, the rebels are also displaying images of the black flag of al-Qaeda on Facebook too... The image is one of eight photos posted on the official Facebook page of the “Al-Aqsa Islamic Brigades,”  a small armed Sunni rebel faction fighting with the Free Syrian Army, the main umbrella military organization of the opposition forces. Two other photos posted on the group’s page feature the widely recognized black flag of the al Qaeda in Iraq terrorist group, which operates freely in Syria. Let's assume for a moment that Obama is successful in Syria and that Assad is overthrown. That would hand Syria over to al-Qaeda. Once in power, the "rebels" would slaughter or force the conversion of millions of Christians, Jews and non-Sunni Muslims that have been living peacefully in Syria for centuries. To those that would support this war, I would ask you this question... Is that what you want? Do you want the blood of millions of Christians, Jews and non-Sunni Muslims on your hands? If you are a Christian that is supporting Obama on this, I would ask you to consider an excerpt from a letter from Christian nuns in Azeir, Syria that I have posted below... We look at the people around us, our day workers who are all here as if suspended, stunned: “They’ve decided to attack us.” Today we went to Tartous…we felt the anger, the helplessness, the inability to formulate a sense to all this: the people trying their best to work and to live normally. You see the farmers watering their land, parents buying notebooks for the schools that are about to begin, unknowing children asking for a toy or an ice cream…you see the poor, so many of them, trying to scrape together a few coins. The streets are full of the “inner” refugees of Syria, who have come from all over to the only area left that is still relatively liveable…. You see the beauty of these hills, the smile on people’s faces, the good-natured gaze of a boy who is about to join the army and gives us the two or three peanuts he has in his pocket as a token of “togetherness”…. And then you remember that they have decided to bomb us tomorrow. … Just like that. Because “it’s time to do something,” as it is worded in the statements of the important men, who will be sipping their tea tomorrow as they watch TV to see how effective their humanitarian intervention will be…. You can read the rest of that letter right here. Also consider the following shocking video of Senator John McCain being confronted by a very emotional woman that says that her 18-year-old cousin in Syria was just killed by rebels loyal to al-Qaeda...   Any American that supports this war is aiding al-Qaeda. Any American that supports this war is choosing to ally themselves with radical jihadist Christian killers that want to conquer the entire Middle East in the name of Sunni Islam. If Congress votes to approve this war, then we should do what one site has suggested and send those that vote yes to Syria. They don't even have to fight.  We'll just drop them off in the middle of the "rebel forces" and entrust them into the gentle hands of the al-Nusra Front. But of course they would never go.  The ones that will be endangered will be the precious sons and daughters of other Americans. This is not a war that has a good outcome for America.  Conservative voices and liberal voices all over the country are joining together to speak out against this war. Hopefully Barack Obama will listen and cooler heads will prevail.  If not, things could spin wildly out of control very rapidly.    

05 сентября 2013, 15:41

G20 summit: Osborne to hail Britain's accelerating economy

Chancellor to paint picture of UK breaking away from eurozone and catching up with US during global meetingGeorge Osborne is due to tell G20 leaders that the recovering UK economy may move Britain from the slow lane of ailing European economies to being ranked alongside the US in terms of performance.But he has accepted there is a long way to go before the recovery can be bedded in and warned that external events such as shocks in emerging markets could still see progress held back.Osborne was speaking on the way to the G20 summit in St Petersburg, where he is likely to lead efforts to fend off Latin American calls to allow protectionism to creep back into the world economy.The British influence may have been reduced by the House of Commons veto British involvement in any attack on Syria, but Osborne is keen to present the UK as a showcase of how an economy can address its deep-rooted flaws.Speaking in the wake of a flurry of positive economic news and forecasts, he said: "We are still in the early stages of recovery. We still have great economic challenges. I arrive at this summit as the finance minister with pretty much the highest budget deficit around the table, even though it has come down by a third."Let's be clear: the British economy suffered an enormous shock in 2008. The governor [of the Bank of England] described that in his recent speech as the 'Great Recession'."So we have a long way to make up for what happened. We are still in the early stages of that journey … I don't think anyone should get ahead of themselves: unemployment is too high, the deficit is still too high. Yes we have had better economic news and yes confidence is improving, but as we have seen many times, events can overwhelm and shake that confidence."British officials stressed that household debt was falling, and a rebalancing in household economies was taking place. Osborne added: "I think the British people are realistic that Britain is on the mend but that it is going to take a long time."The G20 summit is primarily an economic summit, as well as being a relatively new forum, but finance ministers such as Osborne have accepted that, in media terms, the two-day meeting will be dominated by Syria, pushing issues such as trade, emerging markets and tax transparency out of the media glare.Britain is still hopeful that Russia's president, Vladimir Putin, will want to run an efficient summit focusing on the world economy, and will not be taken up by rhetorical assaults on US plans to attack Syria.One British official said: "We have moved from being a country in the broader European Union bucket to a country whose performance is now ranked alongside the United States."When we first attended the G20, in Toronto, we were new to office and we had to set out to the international community what the economic challenges were in Britain – a very high budget deficit, the problems in the banking system and the challenges ahead – and for us to come three years later and be able to report that the British economy is moving into recovery and we have some encouraging data will be a good moment for us and more importantly for the country."The economic agenda at the summit is likely to focus for the first time less on the eurozone and more on the growing problems in some emerging economies such as India. The International Monetary Fund, in a note for the G20, has been one of a large number of economic bodies to revise its view that the emerging markets could be the driver of growth across the world economy. The shift to higher interest rates in advanced economies and the slowdown in emerging markets is leading to fears of a unbalanced world recovery.A British official said: "Some of the changes in monetary policy have thrown a spotlight on some emerging economies and whether they have really made the structural changes required. Because of US monetary policies, a lot of money flowed into these emerging countries. Now the Federal Reserve is setting out its future monetary policy, and this had led people to question some of their investment in the emerging economies and whether they have made the structural reforms".Britain is pleased that the tax and transparency agenda launched by David Cameron at the G8 in Northern Ireland in the summer has been picked up by the new hosts. An elaborate work programme – likely to take two years – is under way to rewrite international tax rules, in order to hinder individual and corporate tax evasion.G20Economic growth (GDP)EconomicsEconomic policyGeorge OsborneRussiaEuropeUS economyPatrick Wintourtheguardian.com © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

05 сентября 2013, 02:47

Saxo Bank CEO Slams Merkel: "The Verdict Is Out, Need To Re-Evaluate The EU"

Authored by Lars Seier Christensen, CEO Saxo Bank; via his blog at TradingFloor.com, Merkel's Lack of Vision Is The Achilles Heel Of Europe I have met a number of politicians over the years, but lately it has dawned on me that very few of them are seriously prepared to stand up for their beliefs, if indeed they have any. I can just about recall a time long ago when things seemed slightly different; nowadays, politics is all about solving day-to-day problems and following opinion polls on what voters are prepared to tolerate, rather than leadership and fundamental personal integrity. Ideologies and courage have been consigned to the past and, as I see it, Europe’s Achilles’ heel is the German Chancellor Angela Merkel, the de facto leader of the EU, and her lack of vision for the single-currency bloc. Her lack of vision stands as a striking contrast to the emotional feelings that dominated much of post-war European political thinking. I, for one, believe a more rational approach could have saved us from the mess we are in, but declaring that the EU should be winning the global economic race, which is one reason why Germany wants to keep Britain in the EU, is not a vision. It’s a rational goal I support, but one we won’t reach unless we come up with a new, realistic vision for Europe in the 21st century. When Saxo Bank opened its new office in Prague in May 2009, my staff requested a private meeting with then president Václav Klaus. Our application was granted and, a few months later, we sat in a car en route to the beautiful presidential palace with its air of faded grandeur. Since the fall of the Iron Curtain – and even long before that and under particularly difficult circumstances – Václav Klaus has been a beacon for freedom and for confronting state abuse and injustice. President Klaus is a man well worth meeting if you believe in liberalism and capitalism, as I do. During our meeting, we discussed the Eurozone sovereign debt crisis that was well under way, although few had noticed it at that point. We agreed that the biggest practical challenge facing the EU beyond any comparison – the problem at the root of all other problems and the reason why the EU is moving in the direction of economic disaster and increasingly seems to be neglecting the democratic process – is the common currency: the euro. When president Klaus last year published his English edition of Europe – The Shattering of Illusions about his frustrations with the current situation in Europe, I did not hesitate to publish it in Danish and promote it wherever I could. The book discusses the institutional developments in Europe from the Second World War to the Eurozone debt crisis and it assesses the current phase of instability, which he calls “the interim phase”. It is essential reading for anyone who cares for Europe, as I do. President Klaus’ main point is that if Europe wants to restart its economic development, it has to undertake a fundamental transformation and for that to happen, we need a bold new vision for our continent. The idea of a common currency in Europe goes way back, even before the European Economic Community (EEC). It was discussed before the Second World War by the League of Nations, the predecessor of the United Nations. Back then, it was just a grandiose vision. The Werner Report in 1970 finally put it on the agenda of the EEC. Even though the euro is the root of most of the EU’s problems, the idea of a common currency to any seemed impressive, ambitious and logical. If you could create a comprehensive economic and monetary union with a population bigger than that of the US, then that would also be reflected by the international political power. One should not underestimate the fact that more political influence had been a dream for European politicians for decades. As in many other aspects of the EU, large parts of the common currency project were driven by European politicians’ feeling of inferiority compared with the US and Russia and later, the real or potential superpowers like China, India and the Middle East. The central problem, however, is that the majority of European citizens do not have any desire to create a political union, which must be the foundation for a monetary union. The citizens of wealthy countries did not want to give up their national identity and they did not want to see their economic achievements become part of a collective pool. In this construction, solidarity with poorer countries cemented their position as permanent contributors. Personally, I side with the independent trait displayed by proud citizens of strong individual nation states linked together by free trade and economic prosperity rather than by a monstrously strong and increasingly undemocratic bureaucracy in Brussels. Not surprisingly, the greatest enthusiasm for the original Euro proposition has been expressed by economically weaker countries. They saw considerable advantages in such a system, but without being ready to throw their national states or traditional policies overboard. But the EU is not a horn of plenty from which all the wealth just keeps coming without the need to demonstrate one deserves to be on the receiving end. The European politicians knew well enough that a foundation in the shape of a political and financial union was a necessary precondition for a well-functioning common currency. There was no shortage of warning voices in the final days of the creation of the EMU. But even if it was obvious for some, the European heads of state and government chose to get the project started with a foundation as weak as a sandcastle at the edge of the beach. They did this, expecting to be covered by an extra appropriation bill, or – as it turned out later – with a hidden agenda, by creating this foundation piece by piece, without caring much to ask the European populations. That process is also being continued relentlessly in countries like Denmark, which are not even members of the Eurozone. But politicians just want a more wide-ranging integration than many citizens are ready for. To be loyal towards the rulers in Brussels and disloyal towards your own population often equals a great job and plenty of distinctions and stars, along with the illusion of political significance among your friends. But what is the true problem with a common currency when it sounds so practical and meaningful to avoid exchange expenses and rate risks, and when it created a strong central bank that could play an international role? By joining a common currency, countries waive some of the important tools that their national central banks normally would have at their disposal. The most obvious tool is the option to adjust currency rates either through devaluation or revaluation or to leave the rates to the financial markets, which is the norm for most other asset classes. The second important tool is the option to adjust economic trends by short-term interest rates. Both these adjustment triggers are critically important and their absence carries the seed of potential disaster for any area or country if there is no agreement that the occurrence of inequalities can be regulated in a different way. This could be common bonds, fiscal transfers and so on – just think of what happens within national states. Lolland for example, one of the islands in Denmark, would be in dire straits if it had to find financing for projects in international markets. But as a fully integrated part of Denmark and with national money transfers, its problems are being resolved smoothly. If you imagine a Europe constructed as a national state, many of the problems would be resolved – although the overall economy hardly would be something to brag about. But it requires former independent national states to accept the same role as a little Danish island, while the more prosperous areas in Europe must be willing to take on the same responsibility as Denmark with a weaker area in its national state. We are far from having achieved this situation. In addition, the movement of products, services and labour cannot be compared with how this is done within the borders of a national state. Language, education, culture and geographical distances make it a much more difficult task in a European context. Merkel’s mentor, Helmut Kohl, the great re-unification chancellor, believed one could draw a political line under Europe’s fractured history, with economics playing a much lesser role. “Das Mädchen”, as Kohl used to call her, fortunately lacks this naïve approach to the EU. She is definitely not a girl any more, but has developed a very pragmatic approach to the EU and for that reason socialistic, France calls her “Madame Non”. Merkel has said “nein” to centralised EU economic governance, “nein” to a permanent bailout mechanism and “nein” to the idea of euro bonds, which she called “economically wrong and counterproductive”. Her handling of the euro crisis explains the French disenchantment with Europe, which was revealed in a Gallup and Pew Research Center poll in May 2013. When former European Commission president Jacques Delors, who presided over the creation of the euro, regaled a Socialist gathering the following month, he attacked what he called a “punitive and alienating” Europe. Merkel’s Europe is not punitive and alienating. It’s fair. She wants the EU member states to follow rules and ensure Europe becomes more competitive. She is a problem-solver and there’s nothing wrong with solving concrete problems. However, politics is also about declaring new ideas and visions. It’s about setting an agenda instead of following a popular sentiment. Merkel has yet to do that. Germans are in no mood for change, the polls show. Merkel is likely to win the election on September 22. She will then stay the de facto leader of the EU and its future and disaster currency will be determined by this former research chemist. As I see it, the research is done. The verdict is out. We have to re-evaluate the EU.    

05 сентября 2013, 02:30

Saxo Bank CEO Slams Merkel: "The Verdict Is Out, Need To Re-Evaluate The EU"

Authored by Lars Seier Christensen, CEO Saxo Bank; via his blog at TradingFloor.com, Merkel's Lack of Vision Is The Achilles Heel Of Europe I have met a number of politicians over the years, but lately it has dawned on me that very few of them are seriously prepared to stand up for their beliefs, if indeed they have any. I can just about recall a time long ago when things seemed slightly different; nowadays, politics is all about solving day-to-day problems and following opinion polls on what voters are prepared to tolerate, rather than leadership and fundamental personal integrity. Ideologies and courage have been consigned to the past and, as I see it, Europe’s Achilles’ heel is the German Chancellor Angela Merkel, the de facto leader of the EU, and her lack of vision for the single-currency bloc. Her lack of vision stands as a striking contrast to the emotional feelings that dominated much of post-war European political thinking. I, for one, believe a more rational approach could have saved us from the mess we are in, but declaring that the EU should be winning the global economic race, which is one reason why Germany wants to keep Britain in the EU, is not a vision. It’s a rational goal I support, but one we won’t reach unless we come up with a new, realistic vision for Europe in the 21st century. When Saxo Bank opened its new office in Prague in May 2009, my staff requested a private meeting with then president Václav Klaus. Our application was granted and, a few months later, we sat in a car en route to the beautiful presidential palace with its air of faded grandeur. Since the fall of the Iron Curtain – and even long before that and under particularly difficult circumstances – Václav Klaus has been a beacon for freedom and for confronting state abuse and injustice. President Klaus is a man well worth meeting if you believe in liberalism and capitalism, as I do. During our meeting, we discussed the Eurozone sovereign debt crisis that was well under way, although few had noticed it at that point. We agreed that the biggest practical challenge facing the EU beyond any comparison – the problem at the root of all other problems and the reason why the EU is moving in the direction of economic disaster and increasingly seems to be neglecting the democratic process – is the common currency: the euro. When president Klaus last year published his English edition of Europe – The Shattering of Illusions about his frustrations with the current situation in Europe, I did not hesitate to publish it in Danish and promote it wherever I could. The book discusses the institutional developments in Europe from the Second World War to the Eurozone debt crisis and it assesses the current phase of instability, which he calls “the interim phase”. It is essential reading for anyone who cares for Europe, as I do. President Klaus’ main point is that if Europe wants to restart its economic development, it has to undertake a fundamental transformation and for that to happen, we need a bold new vision for our continent. The idea of a common currency in Europe goes way back, even before the European Economic Community (EEC). It was discussed before the Second World War by the League of Nations, the predecessor of the United Nations. Back then, it was just a grandiose vision. The Werner Report in 1970 finally put it on the agenda of the EEC. Even though the euro is the root of most of the EU’s problems, the idea of a common currency to any seemed impressive, ambitious and logical. If you could create a comprehensive economic and monetary union with a population bigger than that of the US, then that would also be reflected by the international political power. One should not underestimate the fact that more political influence had been a dream for European politicians for decades. As in many other aspects of the EU, large parts of the common currency project were driven by European politicians’ feeling of inferiority compared with the US and Russia and later, the real or potential superpowers like China, India and the Middle East. The central problem, however, is that the majority of European citizens do not have any desire to create a political union, which must be the foundation for a monetary union. The citizens of wealthy countries did not want to give up their national identity and they did not want to see their economic achievements become part of a collective pool. In this construction, solidarity with poorer countries cemented their position as permanent contributors. Personally, I side with the independent trait displayed by proud citizens of strong individual nation states linked together by free trade and economic prosperity rather than by a monstrously strong and increasingly undemocratic bureaucracy in Brussels. Not surprisingly, the greatest enthusiasm for the original Euro proposition has been expressed by economically weaker countries. They saw considerable advantages in such a system, but without being ready to throw their national states or traditional policies overboard. But the EU is not a horn of plenty from which all the wealth just keeps coming without the need to demonstrate one deserves to be on the receiving end. The European politicians knew well enough that a foundation in the shape of a political and financial union was a necessary precondition for a well-functioning common currency. There was no shortage of warning voices in the final days of the creation of the EMU. But even if it was obvious for some, the European heads of state and government chose to get the project started with a foundation as weak as a sandcastle at the edge of the beach. They did this, expecting to be covered by an extra appropriation bill, or – as it turned out later – with a hidden agenda, by creating this foundation piece by piece, without caring much to ask the European populations. That process is also being continued relentlessly in countries like Denmark, which are not even members of the Eurozone. But politicians just want a more wide-ranging integration than many citizens are ready for. To be loyal towards the rulers in Brussels and disloyal towards your own population often equals a great job and plenty of distinctions and stars, along with the illusion of political significance among your friends. But what is the true problem with a common currency when it sounds so practical and meaningful to avoid exchange expenses and rate risks, and when it created a strong central bank that could play an international role? By joining a common currency, countries waive some of the important tools that their national central banks normally would have at their disposal. The most obvious tool is the option to adjust currency rates either through devaluation or revaluation or to leave the rates to the financial markets, which is the norm for most other asset classes. The second important tool is the option to adjust economic trends by short-term interest rates. Both these adjustment triggers are critically important and their absence carries the seed of potential disaster for any area or country if there is no agreement that the occurrence of inequalities can be regulated in a different way. This could be common bonds, fiscal transfers and so on – just think of what happens within national states. Lolland for example, one of the islands in Denmark, would be in dire straits if it had to find financing for projects in international markets. But as a fully integrated part of Denmark and with national money transfers, its problems are being resolved smoothly. If you imagine a Europe constructed as a national state, many of the problems would be resolved – although the overall economy hardly would be something to brag about. But it requires former independent national states to accept the same role as a little Danish island, while the more prosperous areas in Europe must be willing to take on the same responsibility as Denmark with a weaker area in its national state. We are far from having achieved this situation. In addition, the movement of products, services and labour cannot be compared with how this is done within the borders of a national state. Language, education, culture and geographical distances make it a much more difficult task in a European context. Merkel’s mentor, Helmut Kohl, the great re-unification chancellor, believed one could draw a political line under Europe’s fractured history, with economics playing a much lesser role. “Das Mädchen”, as Kohl used to call her, fortunately lacks this naïve approach to the EU. She is definitely not a girl any more, but has developed a very pragmatic approach to the EU and for that reason socialistic, France calls her “Madame Non”. Merkel has said “nein” to centralised EU economic governance, “nein” to a permanent bailout mechanism and “nein” to the idea of euro bonds, which she called “economically wrong and counterproductive”. Her handling of the euro crisis explains the French disenchantment with Europe, which was revealed in a Gallup and Pew Research Center poll in May 2013. When former European Commission president Jacques Delors, who presided over the creation of the euro, regaled a Socialist gathering the following month, he attacked what he called a “punitive and alienating” Europe. Merkel’s Europe is not punitive and alienating. It’s fair. She wants the EU member states to follow rules and ensure Europe becomes more competitive. She is a problem-solver and there’s nothing wrong with solving concrete problems. However, politics is also about declaring new ideas and visions. It’s about setting an agenda instead of following a popular sentiment. Merkel has yet to do that. Germans are in no mood for change, the polls show. Merkel is likely to win the election on September 22. She will then stay the de facto leader of the EU and its future and disaster currency will be determined by this former research chemist. As I see it, the research is done. The verdict is out. We have to re-evaluate the EU.    

26 июня 2013, 12:50

RuPay Progresses Ahead & Forays Into Handling e-Commerce Transactions

India’s answer to global payment processing companies has arrived on the e-Commerce scene. RuPay is now equipped to handle payment transactions on virtual storefronts. RuPay is an indigenous card payment network was launched last year & is supported by State Bank of India (SBI), Bank of India (BoI), Union Bank of India (UBI), Bank of [...]Looking For A Social Media Agency?? - Contact WATConsult - India's Leading Social Media Agency

28 марта 2013, 16:44

New BRICS Development Bank Announced

image sourceStephen LendmanActivist Post In September 2006, four original BRIC nations met in New York. On May 16, 2008, Yekaterinburg, Russia hosted a full-scale diplomatic meeting. In June 2009, Brazil, Russia, India and China again met in Yekaterinburg. Early steps were taken to end dollar supremacy. Eventual plans may replace it with a global currency or basket of major ones. In 2010, South Africa joined the BRIC alliance. It was formally invited to do so. The group was renamed BRICS. Annual summits are held. On March 26 and 27, Durban, South Africa hosted the group's fifth one. More on that below.Their "mechanism aims to achieve peace, security, development and cooperation. It also seeks to contribute significantly to the development of humanity and establish a more equitable and fair world." America's economic supremacy is declining. BRICS countries are some of the world's fastest growing. They comprise a significant economic and political block. They account for over 20% of world GDP. They're on three continents. They cover more than one-fourth of the world's land mass. Their population exceeds 2.8 billion. It's 40% of the world total. By 2020 or earlier, China may become the world's largest economy. By mid-century or sooner, India's predicted to be number three, Brazil number five and Russia number six. google_ad_client = "pub-1897954795849722"; /* 468x60, created 6/30/10 */ google_ad_slot = "8230781418"; google_ad_width = 468; google_ad_height = 60; Between 2000 and 2008, BRICS contributed about half of global growth. In the late 1990s, Russia's debt default and Brazil's currency crisis rocked world economies. Today they have vast foreign exchange reserves. BRICS have more global trade than America. China's the world's largest exporter. India's an information technology powerhouse. Brazil's a dominant agricultural exporter. It's highly competitive. It has vast amounts of fertile land. It's known as "the world's biggest farm." Russia is oil and gas rich. South Africa holds resources worth an estimated $2.5 trillion. It's rich in gold, platinum, uranium, chrome and manganese ore, zirconium, vanadium, and titanium. Two key institutions emerged from Durban's summit. A BRICS Joint Business Council (JBC) and Development Bank were announced. JBC formerly functioned as a forum. It encourages free trade and investment. Two meetings will be held annually. Rotating chairmen will head them.Each BRICS country chose five top business executives to represent them. They'll coordinate relations between member states and private sector players. Separately, China and Brazil agreed to a bilateral currency swap line. It permits them to trade up to $30 billion annually in their own currencies. Doing so moves almost half their trade out of US dollars. It suggests other BRICS partners will make similar moves. They endorsed plans to create a joint foreign exchange reserves pool. Initially it'll include $100 billion. It's called a self-managed contingent reserve arrangement (CRA). It's a safety net precaution. It's to strengthen financial stability. It's an additional line of defense. They agreed to establish a new Development Bank. The idea was proposed last year in New Delhi. "It's done," said South African Finance Minister Pravin Gordhan. BRICS leaders "will announce the details," he added. South African President Jacob Zuma said:We have agreed to establish the new development bank. The initial capital contribution to the bank should be substantial and sufficient for the bank to be effective in financing infrastructure.Ahead of the summit, officials said each country may contribute $10 billion for starters. Its aim is to fund infrastructure and other development projects. It'll operate separately from Western international lending agencies. It'll challenge their global dominance. It'll test how they do business. They prioritize neoliberal harshness. It includes privatizing state enterprises, selling them at a fraction of their worth, mass layoffs, deregulation, deep social spending cuts, wage freezes or cuts, unrestricted market access for Western corporations, business-friendly tax cuts, trade unionism marginalized or crushed, and harsh recrimination against non-believers. It strip mines nations for profit. It shifts wealth from public to private hands. It destroys middle class societies. It turns workers into serfs. It substitutes debt peonage for freedom. A race to the bottom follows. An elite few benefit at the expense of most others. It sacrifices economic growth for private gain. It's the worst of all possible worlds. Nations are transformed into dystopian backwaters. BRICS have other ideas in mind. They seek a multipolar world. Much work remains to be done. Agreement on details must be finalized. It'll take time to begin operations. It'll be a second alternative to Western debt bondage. In December 2006, Hugo Chavez proposed a Bank of the South (Banco del Sur).A November 2007 summit launched it. In September 2009, it was established. Its members include Venezuela, Brazil, Argentina, Ecuador, Bolivia, Uruguay and Paraguay. Plans are to increase initial capitalization. Member countries pledge to contribute. Full operations are expected to begin later this year. At issue is representing the needs of the South. It'll contribute to its development. It'll do so free from debt bondage. BRICS Development Bank intends no one country to dominate. Voting rights will reflect equality. Economic growth matters most. India's Minister of Commerce, Industry and Textiles, Anand Sharma, said:Our countries are making their own statement that we are proactively engaged in balancing the global economy. We are creating new axis of global development. The global economic order created several decades ago is now undergoing change and we believe for the better to make it more representative.BRICS trade today exceeds $360 billion. By 2015, it should reach $500 billion. Continued long-term growth is expected. Mutual cooperation helps sustain it. Each member country benefits. It remains to be seen how plans unfold. Hopefully global changes for the better will follow. They're long overdue. Dominant emerging economies will play leading roles. They're laying the groundwork to do so.Stephen Lendman lives in Chicago and can be reached at [email protected] new book is titled How Wall Street Fleeces America: Privatized Banking, Government Collusion and Class War. Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. 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13 марта 2013, 03:50

Want to Reduce the Debt? Cut the Billions a Year In Nuclear Subsidies

We’ve previously documented that even top nuclear executives admit that nuclear energy is expensive, and only survives due to massive government subsidies. Time noted in 2008: Lovins [a veteran energy expert and chairman of the Rocky Mountain Institute] notes that the U.S. nuclear industry has received $100 billion in government subsidies over the past half-century, and that federal subsidies now worth up to $13 billion a plant — roughly how much it now costs to build one — still haven’t encouraged private industry to back the atomic revival. At the same time, the price of building a plant — all that concrete and steel — has risen dramatically in recent years, while the nuclear workforce has aged and shrunk. Nuclear supporters like Moore who argue that atomic plants are much cheaper than renewables tend to forget the sky-high capital costs, not to mention the huge liability risk of an accident …. The conservative Cato Institute reported in 2003: With federal government spending through the roof and projected deficits setting new records every day, it is perhaps surprising that the Bush administration and Congress want to use billions of taxpayer dollars to single-handedly resurrect the moribund nuclear industry. Old habits, however, die hard. The federal government has always maintained a unique public-private partnership with the nuclear industry, wherein the costs of nuclear power are shared by the public but the profits are enjoyed privately. [crony capitalism, anyone?]   ***   A recent report by Scully Capital Services, an investment banking and financial services firm, commissioned by the Department of Energy (DOE), highlighted three federal subsidies and regulations — termed “show stoppers” — without which the industry would grind to a halt. These “show stoppers” include the Price Anderson Act, which limits the liability of the nuclear industry in case of a serious nuclear accident — leaving taxpayers on the hook for potentially hundreds of billions in compensation costs; federal disposal of nuclear waste in a permanent repository, which will save the industry billions at taxpayer expense; and licensing regulations, wherein the report recommends that the Nuclear Regulatory Commission further grease the skids of its quasi-judicial licensing process to preclude successful interventions from opponents. But even these long-standing subsidies are not enough to convince investors, who for decades have treated nuclear power as the pariah of the energy industry.   ***   The most egregious proposal in the energy bill has the federal government providing loan guarantees covering 50 percent of the cost of building 8,400 Megawatts of new nuclear power, the equivalent of six or seven new power plants. The Congressional Research Service estimated that these loan guarantees alone would cost taxpayers $14 to $16 billion. The Congressional Budget Office believes “the risk of default on such a loan guarantee to be very high — well above 50 percent. The key factor accounting for the risk is that we expect that the plant would be uneconomic to operate because of its high construction costs, relative to other electricity generation sources.” But that’s not all. The bill also authorizes the federal government to enter into power purchase agreements wherein the federal government would buy back power from the newly built plants — potentially at above market rates.   Keeping this provision in the energy bill will result in a double taxation: once to build the plants and then to buy back the power from the newly built plants. This would be like paying for your kids’ education and then agreeing to pay them a salary once they graduate. The Union of Concerned Scientists pointed out in 2010: The nuclear power industry is seeking tens of billions in new subsidies and other incentives in federal climate and energy legislation that would shift massive construction, financing, operating and regulatory costs and risks from the industry and its financial backers to U.S. taxpayers.  Congress should reject these overly generous subsidies to this mature industry whose history of skyrocketing costs and construction overruns already has resulted in two costly bailouts by taxpayers and captive ratepayers—once in the 1970s and 1980s when utilities cancelled or abandoned more than 100 plants, and again in the 1990s when plant owners offloaded their “stranded costs.” [The "stranded costs" totaled more than the entire Saving and Loan scandal.] Too late … Beyond Nuclear reports: In 2005, the Energy Policy Act provided another $13 billion of subsidies, tax incentives and other support for the nuclear power industry. It also created the energy loan guarantee program.   In December 2007, Congress and George W. Bush approved $20.5 billion in nuclear loan guarantees under this program ($18.5 billion for new atomic reactors, $2 billion for new uranium enrichment facilities).   During the week of May 25, 2009, the US House approved a “Clean Energy Bank” that would include nuclear power loans, loan guarantees, and other subsidies. Physicians for Social Responsibility – which won the Nobel Peace Price – noted that – as of 2010 – nuclear companies received tens of billions of dollars in new subsidies, including: Research and Development Generation IV program to develop new reactor designs Research and development of radioactive waste reprocessing and transmutation technologies Investment in human resources and infrastructure in the nuclear sciences and engineering fields through fellowships and visiting scientist programs; student training programs; collaborative research with industry, national laboratories, and universities; upgrading and sharing of research reactors; and technical assistance Licensing Nuclear Power 2010, a taxpayer-industry cost-share program to fund Nuclear Regulatory Commission licensing of new reactors, as well as the certification of Generation 3.5 reactor designs One-step construction and operation license application process that limits public participation Construction subsidies ~ $3.25 billion + $18.5 billion in loan guarantees $18.5 billion in loan guarantees for new reactors. According to the Congressional Budget Office, the default rate is “very high – well above 50 percent.” Authorization of $2 billion in “risk insurance” to pay the industry for any delays in construction and operation licensing for 6 new reactors, including delays due to the Nuclear Regulatory Commission or litigation. The payments would include interest on loans and the difference between the market price and the contractual price of power. Authorization of more than $1.25 billion for a nuclear reactor in Idaho to generate hydrogen fuel Operating subsidies ~ $5.7 billion + Limited Liability Reauthorization of the Price-Anderson Act, extending the industry’s liability cap to cover new nuclear power plants built in the next 20 years Incentives for “modular” reactor designs (such as the pebble bed reactor, which has never been built anywhere in the world) by allowing a combination of smaller reactors to be considered one unit, thus lowering the amount that the nuclear operator is responsible to pay under Price-Anderson Production tax credits of 1.8-cent for each kilowatt-hour up to 6,000 megawatts of nuclear-generated electricity from new reactors during the first 8 years of operation, costing $5.7 billion in revenue losses to the U.S. Treasury through 2025 Radioactive waste subsidies ~ $22 billion thus far + guaranteed waste removal DOE-utility contracts guaranteeing that the nuclear waste will be removed from the site within 10 year of shutdown or the US taxpayer pays for spend fuel storage costs One mil (one-tenth of one cent) per kilowatt-hour paid by ratepayers receiving electricity from nuclear reactors to pay for a geologic repository for the spent fuel; the Nuclear Waste Fund currently has $22 billion Shut-down subsidies ~ $1.3 billion Changes the rules for nuclear decommissioning funds that are to be used to clean up closed nuclear plant sites by repealing the cost of service requirement for contributions to a fund and allowing the transfer of pre-1984 decommissioning costs to a qualified fund, costing taxpayers $1.3 billion The government has paid out substantial sums in new subsidies – including loan guarantees – for expensive new reactors at Vogtle.  The reactors are already way over budget … and are plagued by Solyndra-like issues of cronyism, secretive non-disclosure, and mismanagement. Moreover, the American government has been wholly subsidizing the nuclear industry for decades through its concerted campaign to hide the dangers of radiation …  and to cover up the number and scope of accidents.  That’s a subsidy worth … as much as all nuclear profits ever.  In other words, trillions. And politicians – including Obama – are also subsidizing the American nuclear industry by lobbying foreign countries like India to impose American-style government insurance for their reactors. And perhaps the biggest taxpayer subsidy of all is that nation our nation could spend trillions – or go bankrupt – in the likely event of a major nuclear accident (and see this.) The bottom line is that if we want to reduce the debt, we should stop all nuclear subsidies. Important Note:  Claims that nuclear is good for the environment and reduces climate change are entirely false claims pushed by the nuclear lobby.

19 февраля 2013, 20:00

The False Promise of Free Capital Flows

The economic orthodoxy that swept the world in the 1990s and 2000s attests to the terrifying power of ideas. Economists built "general equilibrium" models that, underneath all the fancy math, just assumed markets are stable and optimal. The models concluded — in a sort of "divine coincidence," as the MIT economist Olivier Blanchard and a colleague quipped — that if central banks merely maintained steady, low inflation, they would achieve economic stability and the best growth possible. Washington and London espoused this orthodoxy. The Treaty on European Union practically inscribed it in law.In the Wake of the Crisis: Leading Economists Reassess Economic Policy collects essays by economists who are, indeed, leading — and are reassessing that orthodoxy. Never quite a true believer in it, Blanchard, now chief economist of the International Monetary Fund (IMF), acknowledges the terrible damage it caused. The macroeconomist David Romer concedes that the performance of pre-crisis state-of-the art models — some of which he developed — was "dismal." The editors frankly admit they have no clear idea how to replace them. However, major Asian and Latin American nations offer pragmatic financial and economic guidance. Policymakers there deferred to orthodoxy in their words but not in their deeds — and avoided crisis. None of those nations' principal banks got in trouble, and growth there suffered far less than in the advanced nations. In fact, it wasn't a global financial crisis; it was a North Atlantic financial crisis. Global financial flows had for several decades helped drive cycles of boom and bust in the developing world. Whenever central banks lowered interest rates in advanced nations, capital ran to higher returns in emerging economies, Rakesh Mohan, former deputy governor of the Reserve Bank of India, writes in the book. Borrowing in those nations surged, economies boomed, government coffers swelled. Until the crash and the flight of money. Local politicians were not quite innocent, either. The same ones who lambasted finance as it headed for the borders during crises had often hailed plata dulce, "sweet silver" as the Argentines call it, when it had poured in fueling the good times. This picture looks remarkably like the 2000s in the advanced nations, as torrents of money from China and elsewhere inflated the U.S. housing bubble, and torrents of money from core Europe inflated housing bubbles and wasteful public spending in peripheral Europe. We too loved plata dulce, until we hated it. If footloose finance is the problem, Mohan and several other authors recommend using "capital controls," albeit cautiously, to limit its flows. The 1944 Bretton Woods treaty establishing the IMF gave nations the right to use such controls — and still does. The House of Lords would have killed the treaty had John Maynard Keynes not promised that Britain could manage its own economy "without interference from the ebb and flow of international capital movement or flights of hot money." As market orthodoxy began gaining credence in the 1980s, "capital controls" became a dirty phrase in the IMF lexicon. Policymakers were supposed to control inflation and let capital markets work their magic. A move in the 1990s to ban capital controls failed when the conflagration of the Asia Crisis cast a lurid glow on it. Last November, the IMF officially retreated from blanket condemnation of capital controls. The orthodox view was that free capital flows allowed a more efficient allocation of resources, as finance flowed into investment-starved developing nations to pay for plant and equipment. In fact, finance generally did just the opposite in the 1990s and 2000s, flowing from those nations to credit-hungry U.S. consumers. Mohan reports that fewer than a quarter of all studies on opening financial flows find that it raises growth, and those few find small benefits. Another argument against capital controls is that they're evaded — a little like arguing that shoplifting should be legalized because people shoplift. But José Antonio Ocampo, former finance minister of Colombia, writes that the major studies, notably a 2000 IMF study, find that capital controls can limit short-term flows and help manage interest rates, as Keynes promised. (Nobody wants to limit long-term investment in plant and equipment.) Ocampo concedes that controls are "speed bumps rather than permanent restrictions because market agents learn how to avoid them." His conclusion is not to drop them but to dynamically close loopholes to keep them effective — just as with any other financial regulation. A final argument against capital controls is that if only the financial sector were more developed, they would be unnecessary. The United States provides the obvious rebuttal: finance pouring into the most financially sophisticated economy in the world helped inflate the housing bubble. Y. V. Reddy, former governor of the Reserve Bank of India, argues that a moderate level of financial development enables "growth with stability," but an oversophisticated sector just inflates consumption. Alongside exercising some management over financial flows, developing-nation policymakers also instituted "prudential" financial regulations that had become unpopular in advanced nations, such as prohibiting excessive bank leverage. The Reserve Bank of India even adapted standard drug-regulation procedures to the financial sector: "If the [financial] innovation's benefits do not convince the regulator of its safety, then it will not be permitted or permitted only with conditions," writes Reddy. Likewise, contrary to the orthodox injunction to just focus on inflation and let financial markets be, and contrary to what Mexico was often said to be doing, former Mexican Finance Minister Guillermo Ortiz notes that developing nations piled up foreign reserves to help cushion capital flows. He says they intervened to avert violent swings in the value of their currencies "before, during, and after the crisis." And their reserves did help cushion capital flight after Lehman Brothers' collapse, adds Mohan. Because of free capital flows in the Eurozone, when Spain boosted government spending in 2009 to counter recession, it just racked up debt. But with ability to moderate capital flows, Indonesian Finance Minister Sri Mulyani Indrawati says fiscal expansion (a policy supported by Romer) was "critical" in helping soften the crisis. Indonesia's 2009 budget even allowed spending increases if the crisis deteriorated unexpectedly. These suggestions are just that. Regulators must recognize their limitations. The state of the art offers no guarantees. Alas, advanced nations may not have learned their lesson. Mohan quotes an appalling piece of hubris from the usually more sensible Fed Chairman Ben Bernanke. Admitting that financial flows can cause "devastating results." he still urges not limiting them: "The ultimate objective should be to be able to manage even very large flows of domestic and international capital." Please, Professor Bernanke, don't try that idea in practice. Make it a research project on your return to Princeton.

15 февраля 2013, 08:14

Platinum & Palladium's Breakout Year

Via Sprott Physical Bullion Trusts, Hard assets are gaining momentum once again as market participants digest the potential impact of central bank printing initiatives. After last year's record level of central bank intervention, 2013 is gearing up to be an even more prolific year on the money-printing front. Japanese Prime Minister Shinzo Abe recently unveiled Japan's tenth Quantitative Easing program to follow the country's current $224 billion stimulus announced on January 11th. The US Federal Reserve is steadily printing US$85 billion a month under its QE3 & QE4 programs, and reports indicate that the European Central Bank is close to launching its much-awaited Open Market Transaction (OMT) program to purchase European sovereign debt. It's a money-printing party and everyone's invited. Even the new Bank of England head, Mark Carney, has hinted of plans to launch more monetary stimulus. Professional investors have noticed and are expressing concern over the consequences of concerted currency devaluation and the continuation of zero-percent interest rates. PIMCO's Bill Gross, aka "The Bond King", is now regularly touting gold and hard assets as a prudent investment in 2013. While his advice appears to have fallen on deaf ears, interest in inflation protection is once again on the rise. We continue to believe that precious metals remain the place to be invested in this environment and are always interested in different avenues with which to participate in the sector's inevitable rise. Despite being long-time precious metals enthusiasts and active investors in gold and silver, we did not focus on "the other precious metals", platinum or palladium, until very recently. Our interest in the space was ignited by a client's request to assess investment opportunities in the debt and equity of Platinum Group Metal (PGM) mining companies - an exercise that came up almost completely dry. As long-time resource equity investors, we are familiar with the mining industry's supply/demand cyclicality and the impact it has on commodity prices. Looking more closely at the PGM miners, the platinum and palladium industry reminds us of the uranium industry back in 2003. Like uranium, platinum and palladium are crucial to a number of important industrial applications where demand for them is relatively inelastic to price. And like uranium in 2003, palladium is also marked by an opaque, but rapidly diminishing foreign supply stockpile, which had previously balanced out the market and effectively capped the price. Investors will remember that uranium proceeded to perform extremely well from 2003 onwards based on the fundamental supply/demand imbalances that ensued. Our assessment of the PGM industry has led us to believe that platinum and palladium have the potential to do the same. The one difference being, however, that whereas in uranium, where we chose to build our exposure primarily through uranium mining equities, platinum and palladium exposure appears to be best gained through the metals themselves… hence the launch of the Sprott Physical Platinum & Palladium Trust this past December (NYSE Arca: SPPP, TSX: PPT.U). PLATINUM On January 15th, the world's largest platinum producer, Anglo American Platinum Ltd. (Amplats), announced plans to shut down several of its mines, resulting in the layoff of 14,000 mine workers and the reduction of approximately 400,000 ounces of annual platinum production. Given that global platinum mine production has averaged approximately 6.2 million ounces per year, the Amplats announcement is equivalent to almost 6% of global annual mine production in 2012, representing a substantial shortfall to the metal's supply/demand balance. The platinum spot price appreciated by over $30/oz following this announcement out of South Africa. Our desire to launch the Sprott Physical Platinum & Palladium Trust was partly based on an expectation of further supply disruptions out of South Africa, which produces close to 75% of the world's annual platinum supply and 37% of the world's palladium. Union-led labour strife has become a growing concern in the country, where some 46 people were killed this past summer in violent strikes at Lonmin's platinum mine in Marikana. The labour unrest has come at a time when the industry is already suffering from persistent operating challenges and declining profit margins (see Figure A). The geological nature and depth of many of the country's platinum mines requires large amounts of manual labour, and South African mine workers have become increasingly politicized in their struggle for higher wages. At today's platinum price, however, most platinum miners are unprofitable after netting out the costs of labour, electricity and equipment required to produce the metal. Many are cash flow negative and cannot meet the workers' request for higher wages without sustaining further losses. Roger Baxter, senior executive at the Chamber of Mines of South Africa, recently stated that at least 50% of the country's platinum industry is marginal or in a loss-making position today. In addition, many of the mining operations are suffering from declining ore grades, further lowering mine output. The result has been a 25% decline in annual South African platinum production since 2006. As the Amplats decision plainly underscored, at today's prices, platinum mining in South Africa is simply no longer a profitable affair. FIGURE A: PRODUCTION MARGIN AND BASKET PRICE   Source: CIBC World Markets Equity Research 2012, PGM Basket consists of Platinum (~60%), Palladium (~30%) and Rhodium (~10%) FIGURE BSource: Johnson Matthey Platinum 2012 Interim Review   The impact of South Africa's mining woes has completely shifted the platinum market's supply fundamentals over the past year, moving it from a state of oversupply in 2011 to a net supply deficit in 2012 (see Figure B). The recent developments in South Africa strongly suggest platinum's supply deficit will continue into 2013, supporting the platinum spot price and potentially moving it to much higher levels. In fact, some industry estimates have suggested the platinum market will experience a deficit as high as 760,000 ounces in 2013. Platinum miners will not be able to increase production unless the platinum price rises to a level capable of incentivizing further development.  On the demand side, platinum has benefitted from a steady demand for auto catalysts, which constitutes the metal's primary industrial usage. Platinum and palladium both possess chemical properties that help reduce pollutants produced by gasoline and diesel engines, significantly lowering the air pollution produced by automobiles. Just as we believe the platinum price must go up to incentivize new mine production out of South Africa, the platinum price is further supported by the fact that it CAN go up, because of the relative inelasticity of the demand for its catalytic utility. The average automobile (worldwide) carries a mere $212 worth of platinum group metals per vehicle, making the impact of any platinum price increase on the total wholesale cost of an automobile relatively marginal. In China, for example, where pollution is a critical problem, air pollution levels of 300 or above regularly prompt the US embassy to issue warnings to minimize outdoor or strenuous activity. Air particulate levels in Beijing have often been above 500 recently, sometimes crossing over 700. In response, Beijing has recently tightened emissions standards for new cars to meet European Union Standards, or Euro V, starting February 1st. Increasing the platinum/palladium loadings per catalytic converter is one feasible way of directly addressing this growing problem, as the demand for automobiles in China is expected to grow steadily over the next five years. Platinum has also benefitted from increasing demand for its usage in jewelry, particularly in China, where it is considered to be superior to gold. According to refiner Johnson Matthey, China is expected to have consumed 1.92 million ounces of platinum in 2012, representing 70% of the overall global platinum jewellery consumption of 2.73 million ounces. That total is likely to increase as demand rises in other countries as well. In India, for example, platinum demand is estimated to have increased by 25% this past year, representing a new high of 100,000 ounces. As emerging markets growth continues, we expect platinum jewellery demand to increase along with it. PALLADIUM The palladium story is similar to that for platinum from a demand perspective, but has a different supply picture that makes it more compelling in our view. Palladium generally occurs with platinum and other PGM metals and is usually associated with nickel and copper. Like platinum, palladium's main industrial usage is in catalytic converters, most notably in gasoline engines. It is also used in jewellery, watchmaking, dentistry, surgical instruments and electrical contacts. Almost 40% of the world's annual palladium mine supply comes from Russia, primarily through operations at Norilsk. Russia, naturally, does not provide much information on its palladium stockpiles, but various reporting agencies are able to piece together reliable estimates for annual supply and demand. The palladium market is tight, and appears to be getting tighter. It has gone from a 1.26 million ounce surplus in 2011 to a 915,000 ounce deficit in 2012. This represents a swing of over 2 million ounces this year due to contracting supply, increasing gross demand and diminished recycling, resulting in a supply decrease of 790,000 ounces (see Figure E). If you factor in the ~200,000 ounces we purchased in our Trust, the deficit for 2012 increases to 1.15 million oz. As bullish as we are on the supply dynamics of platinum, it is palladium that appears to be poised to move higher in the short-term. The palladium market is now in supply deficit globally and will experience a residual deficit in 2013 even after existing stockpile sales are taken into account. Russia has historically maintained a sizeable palladium stockpile which has represented a key source of supply over the past two decades. 2012 reports suggested that that stockpile was nearing depletion, with sales expected to fall below 100,000 ounces in 2013, versus the 250,000 ounces that are believed to have been sold last year. Those numbers were also supported by Swiss PGM data, where the most recent 2012 numbers show Russian palladium shipments running 72% lower than the same period in 2011. All of this was recently confirmed by Norilsk itself, when an executive conceded in an interview on November 29th (and later confirmed by industry watchers like GFMS this past January) that the supply overhang from Russian stockpiles is officially close to being depleted. If this proves to be true, it will represent a significant shift in supply, since those stockpiles were a main contributor in balancing the palladium market for the last ten years. FIGURE ESource: Johnson Matthey Platinum 2012 Interim Review One other bullish palladium supply factor relates to the Norilsk mines themselves, which produce more palladium than the next four largest palladium producers combined. Norilsk's 2012 palladium production is expected to account for 42% of global supply. Despite higher prices, Norilsk is not expected to expand its annual palladium production for at least 10 years, because that's how long it will take to develop the new mines it requires to increase production. In addition, the existing operations are reported to be having difficulty maintaining their average 2.7 million ounces of annual production due to diminishing ore grades at depth within the ore bodies Norilsk is mining. With Russian state supplies dwindling, and Norilsk's palladium production flat at best, the supply picture in 2013 has a very high probability of tightening further. This is especially likely if South Africa's 1.5 million ounces of palladium production is also impacted by further strikes and mine shutdowns. Palladium demand has been robust, having risen by 15% year-over-year in 2012 to 9.73 million ounces. The growth has been primarily driven by increased use in autocatalysts, the demand for which alone is forecasted to increase by 7% in 2013. Given the probability of tightening supply in the years ahead, we could potentially see a hoarding reaction by industry users as supply constraints become more pronounced. In year 2000, a similar reaction by industry users led palladium to trade over $1,000/ ounce. It is also interesting to note that palladium has the second highest amount of short positions in the futures market in relation to total annual production - second only to that for silver. The reversal of those short contracts may represent a significant source of investment demand as prices continue to rise. SUMMARY The timing of the launch of the Sprott Physical Platinum & Palladium Trust has been favourable thus far. Supply problems out of South Africa will be the driving force behind platinum's price appreciation, while palladium will benefit from the depletion of Russian stockpiles and flat production from Norilsk. Both metals have the potential to see significant demand increases as the autocatalyst market benefits from growing global auto sales, which reached a record 80 million units sold in 2012. As at February 2013, the Sprott Physical Platinum & Palladium Trust now holds 81,486 ounces of platinum and 186,098 ounces of palladium in bullion form. The Trust is structured similar to our existing Sprott Physical Gold Trust (NYSE Arca: PHYS, TSX: PHY.U) and Sprott Physical Silver Trust (NYCE Arca: PSLV, TSX PHS.U), but differs in that it initially holds approximately equal dollar amounts of platinum and palladium. We aim to publish more updates in the coming months to analyze developments in the markets for both metals. Although platinum and palladium share gold and silver's "precious metal" categorization, they represent significantly smaller markets in terms of physical production, making them much more responsive to the supply constraints and demand increases that we foresee for both. It is also worth noting that relatively little of the total annual platinum and palladium supply actually makes it to "market" - with the vast majority sold directly to fabricators. Our Trust's December purchases represent 1.3% of 2012's platinum mine supply and almost 3% of palladium supply. If investment demand for platinum/palladium were to grow in an environment where supply is further constrained, it could indeed have a large impact on the spot price for both metals going forward. Precious metal investors are encouraged to review platinum and palladium's unique supply/demand dynamics. We believe 2013 will be an exciting year for both metals, and that's without even considering what could happen to the precious metals sector as a whole.

14 февраля 2013, 07:54

Sahara firms' bank accounts frozen

Bank accounts of two firms of Sahara, one of India's biggest business houses, are frozen for failing to refund money to millions of investors.

14 февраля 2013, 07:54

Sahara firms' bank accounts frozen

Bank accounts of two firms of Sahara, one of India's biggest business houses, are frozen for failing to refund money to millions of investors.

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12 февраля 2013, 22:59

India looks to strengthen banking sector

The Reserve Bank of India intends to give out new banking licences soon, to inject more competition into the sector, Henny Sender says

11 февраля 2013, 16:06

OECD-World Bank Conference on financial education in India and Asia

This conference, taking place on 4-5 March 2013 in New Delhi, India, will address specific issues relating to financial literacy in India and the Asia region. It will present the output of the Russia/OECD/World Bank Trust Fund on Financial Literacy and Education.