The great interest rate rip off part 1

interestrateripoff · July 18, 2010

http://www.nytimes.com/2010/07/17/business/economy/17consumers.html?_r=1&src=me&ref=business

The economic recovery has been helped in large part by the spending of the most affluent. Now, even the rich appear to be tightening their belts.

Late last year, the highest-income households started spending more confidently, while other consumers held back. But their confidence has since ebbed, according to retail sales reports and some economic analysis.

“One of the reasons that the recovery has lost momentum is that high-end consumers have become more jittery and more cautious,” said Mark Zandi, chief economist for Moody’s Analytics.

That cautious attitude stems in part from concerns about global instability, especially in Europe, and in part from the volatility of the stock market in recent months. Major stock indexes fell sharply on Friday, after several big companies announced disappointing earnings. Bank stocks were the biggest losers as investors wrestled with the twin issues of lower trading profits from Citibank and Bank of America and the prospect that new financial regulation would further crimp their businesses.

Though stock performance has a bigger psychological and financial impact on high-income households, consumers of all income levels are fretting more about their financial future, perhaps bracing for the possibility of another economic contraction. Consumer confidence slumped in July to its lowest point since August 2009 in the Thomson Reuters/University of Michigan index released on Friday.

The Dow Jones industrial average slipped 261.41 points to 10,097.9 on Friday, for a loss of 2.52 percent. For the year, broad-based stock indexes in the United States all show losses of more than 3 percent.

Even Federal Reserve policy makers have acknowledged that the recovery is losing steam and suggested that should conditions worsen further, additional stimulus may be needed, according to minutes of their last meeting, released on Wednesday.

Especially at this stage of a recovery, businesses and economists want to see people of all incomes spending more, because the demand for goods and services would in turn encourage companies to hire workers. The American consumer accounts for an estimated 60 percent of the country’s economic activity.

Looks like the spendless recovery is gathering momentum.

Still I'm sure it's a temporary blip in the global recovery and a bit more stimulus is bound to fix it all.

interestrateripoff · July 18, 2010

JP Morgan UK future at risk - Telegraph

JP Morgan has raised serious concerns about its commitment to its new £1.5bn European headquarters at Canary Wharf because of anger within the bank at the lack of support for the financial sector in the UK.

Jamie Dimon, chief executive of the American bank, is understood to have doubts about investing so heavily in London when there is uncertainty about future costs that could be imposed on banks. Some sources said the bank was

"on the verge" of quitting the development.

Any move by JP Morgan to scrap the twin skyscraper project in the Docklands would be a major blow for the UK and George Osborne's claims that Britain is "open for business".

High-level talks are understood to have taken place between JP Morgan, officials from the Mayor of London's office and Canary Wharf Group (CWG) over the future of the headquarters, although no decision has been reached.

Boris Johnson, the London Mayor, has met representatives of JP Morgan and has been told of their concerns about the future of London as a financial centre.

The bank has made it clear that it now sees expansion being in Asia rather than in London.

It has also been made clear to Mr Johnson that as the decision on building a new headquarters in Canary Wharf is one "for the next 20 years" it is now at serious risk, said one person with knowledge of the discussions.. "They are finding that decision very difficult in the present climate because of concerns about what is ahead."

JP Morgan has listed a number of factors in their decision to review building a new headquarters in London. The atmosphere of "banker bashing" from politicians that is still apparent even after the election, new plans for an "activity tax" on banking operations in the UK, the new levy on balance sheets, the ending of tax relief on pensions for higher rate earners and the 50pc higher rate income tax have all been raised.

Mr Dimon is understood to have warned Alistair Darling, the previous chancellor, in a phone call last year that the bank could scrap the plans for its headquarters. His mood does not appear to have been improved by a change in government, and last Thursday JP Morgan revealed it had paid £328m to the Treasury for the one-off UK bonus tax.

When the bank paid CWG £237m in November 2008 for the headquarters' site, it was perceived as a major vote of confidence in the UK, with space for 20,000 staff in the proposed new building.

More threats from our banker friends, perhaps the taxpayer should offer to build it for them and let them work from it rent free for 50 years?

Or is it JP are a bit worried about the global economy and don't want to commit to the folly of building a £1.5bn white elephant in Canary Wharf?

interestrateripoff · July 18, 2010

Goldman Sachs sets aside $9bn for pay as revenues drop - Telegraph

Goldman Sachs is set to pay as much as 45pc of its 2010 revenues to its staff in a move that is likely to reignite political anger with the investment bank just days after it settled a high-profile fraud case with American regulators.

Analysts expect Goldman to say that its closely-watched compensation ratio, which indicates the intended level of staff pay as a proportion of its revenues, is between 40pc and 45pc when it announces its second quarter results this week.

Goldman's results will also show for the first time a $600m (£392m) hit for the UK's bonus tax.

The bank is estimated to have set aside just over $9bn in pay for its staff in the first half of 2010, working out at an average payout of $235,429 for each of its 38,500 employees for the last six months of work. Goldman bankers are on track to be paid nearly $500,000 each at full year, with senior bankers being paid far more.

Goldman will argue that weaker trading conditions will result in lower total pay packages, despite the higher compensation ratio. The bank will be keen to avoid further political scrutiny following its record fine of $550m to America's Securities and Exchange Commission for making a mistake in marketing one of its investment products to clients.

Over the past year, Goldman reduced its compensation ratio to 36pc of revenues in the face of a storm of protest that was sparked by the bank's results exactly a year ago. In its second quarter results last year, Goldman allocated $6.65bn for staff compensation on profits of just $3.4bn.

Although compensation is not paid out until the end of the year, the plans angered investors and politicians. Goldman admitted in a regulatory filing that several investors had demanded an investigation into "alleged excessive compensation" from top earning bankers.

Still it's all been earned and these hard working bankers have helped to create the modern economy.

interestrateripoff · July 18, 2010

Bank stress tests will fall flat if they fail to cheer Asian investors - Telegraph

The eurozone is second only to the United States in terms of size. It's also the UK's biggest export destination, of course. So are we now seeing signs of economic life on the Continent? Could the single currency area be on the road to recovery?

Figures just released show the strong bounce-back in eurozone output continuing for the third month in a row. Industrial production across the region rose 9.4pc in May on an annual basis, with manufacturing PMI data pointing to healthy future expansion.

New trade numbers signal that, in the same month, eurozone imports rose 4.2pc as domestic demand strengthened despite a weak currency pushing up the price of foreign goods.

Germany cut its 2010 budget deficit forecast last week from 5.5pc to 4.5pc of GDP and even the most cash-strapped eurozone governments are showing a semblance of fiscal normality. Spain, for instance, just raised almost €3bn of funding, selling 15-year sovereign paper in an auction that saw relatively strong demand.

Most fundamentally, perhaps, the European Central Bank's government bond purchases have slowed sharply – proof, some say, that the eurozone has turned the corner. During the second week of July, the ECB bought only €1bn of bonds, compared to €4bn in each of the previous three weeks.

When the controversial programme began in May, with the ECB entering the secondary market to enhance liquidity amidst concerns over spiralling government debts, weekly bond purchases were unprecedented – exceeding €15bn.

Eurozone bulls argue this latest data is evidence the ECB's fiscal life-support machine is being wound down, with the worst of the eurozone crisis now over. To top it all, the optimists say, having stooped to a four-year low against the dollar in June, the single currency has just hit a three-month high.

It seems to me, though, despite my naturally positive disposition, that each of these arguments falls apart upon even the most cursory examination. For starters, while the latest output numbers for the eurozone as a whole look reasonable, the weakest countries on the region's periphery are still suffering badly.

German industrial production was up 13.1pc year-on-year in May, the Teutonic export machine benefiting from a broader global recovery. But Spanish and Portuguese output barely grew. Greek production is still contracting on an annual basis, even after last year's plunge.

While imports were up quite a lot in May, exports from the Eurozone as a whole rose a paltry 1.6pc. This was despite significant depreciation and the strong German showing. Again, the Club-Med countries' export performance was abysmal.

With the region's trade balance slipping into deficit, the eurozone's growth prospects aren't good. Domestic demand is in line to suffer as the unavoidable fiscal squeeze takes hold. So an export drive is crucial if the area is to generate sustained economic expansion any time soon. Yet, overall, exports are anaemic.

The weakest aspect of the euro-bulls' case is the trajectory of the euro itself. The single currency surged last week only because the dollar fell – in light of the Federal Reserve's verdict that the US remains some way from recovery given "significant downside risks".

Zero interest rates, massive "quantitative easing" and an almighty fiscal stimulus have failed to pull America out of its slump – which is hardly surprising, in my view, seeing as such policies are deeply counter-productive. Predictably, though, the markets reacted to the Fed's words by foreseeing more US money-printing and a much later hike in rates.

Little wonder, then, that the dollar fell – and, in turn, the single currency rose. Does that mean the eurozone is getting stronger? I don't think so. Will the dollar take back these gains, with the euro ultimately heading back towards parity? In my view, absolutely.

The reason I think that is because, despite some flickering of the economic dials, the eurozone's sovereign debt crisis remains very much in swing. Global markets can only focus on one major issue at a time. Last week that issue was the fact that, as the "sugar rush" of Obama's fiscal stimulus fades, the US recovery will fade with it. Flabby Keynesian pump-priming isn't all it's lately been cracked up to be. The only thing it is good for is shielding weak politicians and driving governments ever deeper into debt.

It won't be long, though, before market attention returns to Europe. Spain's recent debt auction, for instance, was far from a resounding success. It was fully subscribed only because the Chinese government, which has no interest at all in a eurozone meltdown, bid for €1bn of Spanish bonds.

Talking of China, the reason ECB bond-buying has slowed recently isn't because the eurozone's sovereign debt problems have gone away, or because all is now bright on Europe's sunlight economic uplands. If only. The reality is that the ECB is keeping its powder dry, buying time before the results of the eurozone's US-style stress tests are made known later this week.

What has that got to do with China? Well, for a long time, eurozone governments resisted the idea of subjecting the region's banks to a decent external audit, highlighting which would fail in the event of an even deeper economic slowdown. Then, at a G20 meeting last month, those same governments changed their tune and said such tests would take place after all.

The current situation - where banks are hiding their losses, with the resulting lack of interbank lending hindering credit creation – is a major impediment to economic growth. While far from the "full disclosure" regime this column has pressed for ever since the "sub-prime" fiasco began with the Bear Stearns collapse in March 2008, European governments deserve credit for taking this stress-test step.

Except they don't. The U-turn happened not because eurozone officials suddenly understood the benefits of courage, leadership and banking transparency. It happened because deep-pocketed Asian investors, who are basically keeping Western government finances afloat at this point, finally put their foot down.

Such investors don't plan to sell their existing stock of Eurozone sovereign bonds. But the word is that China et al threatened to cut, or even halt, future government bond purchases unless serious steps were taken to allay fears about Europe's banks. Quite an illustration of where the power really resides.

The upcoming publication of the Eurozone's stress test results is a big moment. The likelihood is that a number of banks in Greece, Spain and Italy will be shown to be extremely vulnerable - to say nothing of some deeply indebted German Landesbanken.

If they don't, the tests will be dismissed as a whitewash – and the markets will fear the worst, assuming even more serious problems lurk on bank balance sheets. But if the tests do pull the rug from under a few significant banks, that could provoke wider systemic concerns. It is an extremely difficult balancing act for the European authorities to pull off – and one that is almost certain to be met with considerable market volatility.

The real point of these stress tests, though, isn't to reveal the state of the eurozone's banks. It is, instead, to demonstrate once again, just in case there is any doubt, that eurozone governments are indeed prepared to dig deeper, and to attempt to borrow even more, to support the Continent's moribund financial services sector.

In that sense, this week could see not so much the end of the eurozone's banking difficulties but, instead, the next chapter in its crisis of sovereign debt.

Another interesting article from Halligan.

The bank stress test pose an almighty problem for the elite, if all the banks pass the test is seen as a farce and there will be panic. If a number of banks fail and there is panic you end up with a banking crisis. If they go with the banks are fine but need larger capital in case of further problems then where is the capital going to come from?

Still I'm sure the highly paid experts we've got running the show know what they are doing and it will all be contained.

interestrateripoff · July 18, 2010

US stocks brace for earnings tsunami - Yahoo! Finance

US stocks brace for earnings tsunami

18:58, Saturday 17 July 2010

After a rough start to earnings season, US stocks face a tidal wave of corporate results next week amid growing worries the US economic recovery is slowing.

Stocks fell off a cliff Friday after a sagging consumer confidence index and mixed earnings spooked investors.

"What was looking like a nice week turned into a huge sell-off," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research.

Detrick noted that the unfortunate combination of disappointing earnings and troublesome economic data "was all it took for the bears to take control."

Still I'm sure it's a blip.

It's all contained take solace in that thought.

interestrateripoff · July 18, 2010

China Financial Markets The capital tsunami is a bigger threat than the nuclear option

In fact the real threat to the US economy is not the dumping of USG bonds. On the contrary, in the next two years the US markets are likely to be swamped by a tsunami of foreign capital, and this will have deleterious effects on the US trade deficit, debt levels, and employment. Investors and policymakers should be far more worried that China and other capital exporting countries are trying their hardest to maintain and even increase their capital exports, while the capital importing countries are either going to see capital imports collapse, or are trying desperately to bring them down.

interestrateripoff · July 18, 2010

Staff at nuclear decommissioning quango see bonus pots increase to £5m | Business | The Guardian

Bonuses at taxpayer-funded quango the Nuclear Decommissioning Authority rose by almost a third last year even though it faces a £4bn budget shortfall by 2015.

Staff were awarded £5m, according to an answer to a Freedom of Information request tabled by the Guardian, compared with just under £3.8m the previous year. The NDA, which employs about 300 people, will publish its annual report by the end of the month when it will outline how much it paid to directors for the last financial year. The TaxPayers' Alliance said that the pay-outs would be hard to justify at a time of public sector spending cuts.

The NDA's chairman Stephen Henwood recently admitted there were "shortcomings" in the way the bonus scheme worked, and it has since been tightened up. He has also promised to cut a third of its staff and its £800m annual running costs by a fifth within three years. Staff costs went up by over 40% in two years, according to the NDA's most recent published annual reports.

A spokesman for the NDA said that senior managers received between £15,000 and £20,000 in bonuses last year and that the average bonus was about £12,000. According to its annual report, executive directors were awarded £65,000 each.

The NDA is responsible for decommissioning the UK's old reactors, estimated at costing £73bn. It is supposed to fund about half its annual clean-up budget through its commercial activities, such as operating the remaining Magnox reactors and reprocessing spent fuel. The rest is paid for by the taxpayer, via the energy department. But recently, lower income and higher decommissioning costs mean funding the NDA takes up two thirds of the energy department's annual budget.

During the year corresponding to last year's pay-outs – 2008/2009 – the NDA increased its income by over £500m largely as a result of higher electricity prices. It also said that it achieved £183m of efficiency savings. An NDA spokesman said: "In order to attract and retain the calibre of people necessary to deliver the NDA's required performance, NDA staff have the contractual opportunity to achieve an annual bonus dependent on the achievement of strict performance targets."

Excellent so to keep people who managed to lower incomes and increase costs we pay them more money. This performance clearly deserves to be rewarded with higher pay.

interestrateripoff · July 18, 2010

Breaking news:

City's banks put aside £5bn to pay staff bonuses

Size of payout revealed as senior banking figures seek clarity from new minster Mark Hoban over regulations 6 comments
Buncefield companies fined £5.35m

Safety breaches by five firms including Total were responsible for blast that injured 43
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[*] RBS could sue Goldman over $800m loss

State-owned bank could take legal action against US firm fined $550m by regulators for its role in sale of mortgage-backed security
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[*] Ocado insists £1bn float is on track

Online supermarket said to have held successful meetings with potential US backers
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[*] Staff at nuclear quango paid £5m

Chairman Stephen Henwood admits to 'shortcomings' in bonus structure as rewards increase by a third 14 comments
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[*] Reinvigorating Greece is an Olympian task for prime minister Papandreou

The irony of a socialist dismantling the state is not lost on the Greek politician

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interestrateripoff · July 18, 2010

Irish may halt budget reform early--govt party | Business | guardian.co.uk

Ireland may not have the political will to bring its budget deficit in line with EU rules as planned by 2014, the chairman of the smaller governing coalition member Green Party was quoted as saying on Sunday.
Investors and European leaders have praised Ireland for austerity measures culminating in 4 billion euros ($5.2 billion) of spending cuts imposed in last December's budget for 2010.

Green Party Chairman Dan Boyle told the Sunday Tribune it was "probably a heresy" for a government party to question whether the deficit could be cut to 3 percent of gross domestic product by 2014 from more than 14 percent in 2009.

"It is certainly doable if you want to be draconian every year," Boyle was quoted by the newspaper as saying. "But is it politically feasible and is it socially possible?"

Boyle said he still expected the cabinet to deliver the 3 billion euros of savings planned for the 2011 budget in December and then the government could "take stock".

"I do not see the public appetite continuing," Boyle said. "It could be that we have neutral budgets for a period."

The Green Party last year debated quitting the alliance with Prime Minister Brian Cowen's Fianna Fail party due to the strains of the fiscal tightening and bank rescue programme, but its members ultimately decided to stay on board.

Cowen and Finance Minister Brian Lenihan, the main architect of the reforms and also from Fianna Fail, are adamant Dublin must stick to austerity measures for the next four years.

If Ireland loosened its budget discipline, it could cause a flight of investors who already demand a hefty premium for holding Irish sovereign bonds.

Perhaps someone should point out that what you think is not feasibly socially or politically may be forced on you by the bond markets?

Also perhaps the Irish are getting a bit miffed that they are cutting whilst the Greeks get a bailout (possibly) and there's talk of a Spanish bailout whilst they get nothing.

interestrateripoff · July 18, 2010

Hungary risks markets' goodwill with IMF/EU failure | Business | guardian.co.uk

* Forint seen easing, yields rising on Monday
* Hungary will need to reach deal with lenders-analysts

* Cbank to hold rate meeting on Mon, seen wary of market

By Krisztina Than

BUDAPEST, July 18 (Reuters) - Hungary faces a fall in its currency and a surge in financing costs due to a failure to agree with lenders on its economic plans and it will need to reach a deal to retain the trust of investors.

Talks with the International Monetary Fund (IMF) and the EU ended prematurely on Saturday without a conclusion of the country's programme review, which means Hungary will not have access to remaining funds in its 20 billion euro ($26 billion) loan secured in 2008 until a deal is reached.

This is a risky path for a country which has a poor budget track record and which runs central Europe's highest public debt at about 80 percent of gross domestic product, analysts said.

Although Hungary does not face an immediate pressure on state finances as its 2010 financing seems to be secure thanks to unused loans and cash reserves, it needs the lenders' safety cushion as an external anchor of credibility.

A lack of agreement on the current programme also excludes the possibility of a new precautionary deal for 2011 and 2012, which the country needs as a safety net, analysts said.

This will likely force the new centre-right government, which took office in May after winning April parliamentary elections, to come to an agreement with the IMF and EU, but the timing of this is uncertain, they said.

"This is fairly bad news and a mistake from the government ... the market impact will be negative with a likely over 1 percent or possibly bigger currency fall and a jump in yields," said Zoltan Torok, analyst at Raiffeisen.

"I'm sure there will be an agreement, as they (the cabinet) simply will be forced to do it, but I don't know when and the later it comes the worse."

Hungary, which had to resort to a rescue loan from the IMF/EU in October 2008 to avert meltdown, has since stabilised its finances but its heavy reliance on foreign funding makes the country vulnerable to negative shifts in market sentiment.

This showed in early June when the government made confusing comments comparing its fiscal problems with the Greek debt crisis, which led to sharp market falls and seriously damaged the government's policy credibility.

Then the cabinet committed to this year's budget deficit target of 3.8 percent of gross domestic product (GDP) in an attempt of damage control to reassure investors.

But lenders said on Saturday further steps were needed to achieve the deficit targets this year and in 2011, and the government needs to work out durable measures and spending cuts to reduce the deficit and ensure sustainability.

Still I'm sure it's all contained.

Hungary isn't really a problem and the experts are on the case....

interestrateripoff · July 18, 2010

'Water poverty' loans to utilities set to hit €4bn

The EU plans to raise loans to the UK's 10 biggest water utilities by 60 per cent to €4bn (£3.4bn) as they try to reduce the number of customers who cannot pay their bills.

Margareta Pagano: Was I right about the Ocado listing? I was – and how

When is a float not a float? When it's a rights issue by an outfit whose founding investors are fleeing

interestrateripoff · July 18, 2010

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Banks warned Ocado over small investors

Ocado directors were warned by their own bankers that offering shares to retail customers was a mistake that could undermine the IPO.

JP Morgan UK future at risk

Bank now sees expansion in Asia not London as a priority, as the £1.5bn Canary Wharf development is under threat.

Waitrose plans sixfold increase in food stores

The upmarket supermarket chain is preparing for a sixfold increase in branches over the next five years.

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Prince Maximilian says the principality is no longer a safe haven for tax avoiders.

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Goldtrail failure hits travel sector

KPMG says nuclear power 'won't happen'

Prudential bid prompts disgruntled investors to shun banks

Ocado has its issues but remains compelling

Bank stress tests will fall flat if they fail to cheer Asian investors

Overhaul of retirement regime is long overdue

Millions of pensioners are missing out on vital Council Tax help

US markets slump on double-dip fears

Kenneth Clarke to slash Legal Aid budget

House prices 'to crash 20pc by 2012' as Budget bites

House prices to fall again?

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interestrateripoff · July 18, 2010

IMF and EU suspend talks with Hungary

BUDAPEST (Reuters) - The IMF and EU suspended on Saturday a review of Hungary's funding programme, set up in 2008 to save the country from financial meltdown, saying it must take tough action to meet targets for cutting its budget deficit.

Recovery at risk if banks don't lend - Cable

LONDON (Reuters) - The nation's economic recovery is at risk of being undermined by the lack of bank lending to businesses, Business Secretary Vince Cable said.

9:36am BST

UK's first listed debt infrastructure fund to debut

By Greg Roumeliotis, European Infrastructure Correspondent

10:57am BST

Dreamliner makes first overseas landing

FARNBOROUGH, England (Reuters) - Boeing Co's new 787 Dreamliner touched down in Britain on Sunday on its first trip outside the United States, thrilling hordes of eager planespotters who came out to see the breakthrough carbon-composite plane.

12:24pm BST

Government may cut BBC license fee in austerity drive

LONDON (Reuters) - The television licence fee levied by the BBC could be cut as part of the government's austerity drive, Culture Minister Jeremy Hunt said.

UK, 17 Jul 2010

Spain's cajas face no stress test shocks - association

MADRID (Reuters) - Spain's banks or cajas will get no nasty surprises with the release of stress tests later this week, the director general of the Spanish Confederation of Savings Banks (CECA) said in a newspaper interview on Sunday.

12:16pm BST

EADS frustrated by delay in WTO ruling

FARNBOROUGH, England (Reuters) - EADS Chief Executive Louis Gallois said he was "enormously frustrated" about another delay by the World Trade Organisation in ruling on the European Union's case against the United States over alleged illegal subsidies to the company's arch-rival, Boeing Co .

6:40am BST

China's Wen - "relatively fast" growth needed

BEIJING (Reuters) - Premier Wen Jiabao said China's economy was responding appropriately to its stable policies, adding "relatively fast" growth would help create jobs and boost domestic demand, the Xinhua news agency reported on Sunday.

11:50am BST

Austerity hurts consumers in Europe - Nielsen

LONDON (Reuters) - A drop in consumer confidence in Europe amid worries about the region's debt crisis is holding back a recovery in global consumer sentiment and weighing on the broader economic outlook, a survey showed on Sunday.

1:04am BST

Bank's Sentance repeats call for rise in interest rates

LONDON (Reuters) - The Bank of England should start to gradually raise interest rates from their "exceptionally low level" as the economy has begun to recover and inflation is higher than expected, policymaker Andrew Sentance said.

interestrateripoff · July 18, 2010

The Men Who Ended Goldman’s War

By LOUISE STORY

For Robert Khuzami of the S.E.C. and Gregory Palm of Goldman Sachs, it was one of the cases that can define a career. Each side is claiming a victory.

Chris Kleponis/Bloomberg News; Susan Walsh/Associated Press

Robert Khuzami at the S.E.C., left, negotiated for months with Gregory Palm at Goldman Sachs to settle a case that could define both of their careers.

A Factory Defies Stereotypes, but Can It Thrive?

By STEVEN GREENHOUSE

An American-owned apparel factory in the Dominican Republic has committed to pay a living wage — three times the average for the industry there.

Insurers Push Plans Limiting Patient Choice of Doctors

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As the White House begins to enact the new national health care law, the biggest insurers are promoting plans with lower premiums that allow fewer doctors and hospitals.

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You Want My Personal Data? Reward Me for It

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Bynamite, a start-up company, says consumers should get more of a benefit from the information marketers collect from them online.

As Facebook Users Die, Ghosts Reach Out

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The world’s biggest social network has had trouble figuring out when one of its 500 million users has died.

Post a Comment

Amid Tests, BP Sees No Signs of Damage to Well

By HENRY FOUNTAIN

Officials extended a test of BP’s blown-out well for an additional 24 hours, after two days of testing showed no signs of damage in the hole in the Gulf of Mexico.

Novelties

Bye-Bye Batteries: Radio Waves as a Low-Power Source

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Researchers are developing electronic systems that consume so little energy that it can be drawn from ambient radio waves.

Frustration and Despair as Job Search Drags On

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An estimated 2.1 million are waiting for an end to a Senate impasse over whether to extend jobless benefits.

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Practical Traveler

Delayed? They’ll Put You Up

By SUSAN STELLIN

When flights are delayed or canceled, the European Union requires airlines to pay for passengers’ hotel rooms and meals.

Post a Comment

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interestrateripoff · July 18, 2010

18 July 2010 Last updated at 14:17

Dreamliner lands at Farnborough

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interestrateripoff · July 18, 2010

Pittsburgh Port Authority: $7 suburban fares possible

The Pittsburgh Post-Gazette reports Port Authority: $7 suburban fares possible

Fares on suburban commuter routes could rise to $7 or more and service could be slashed 25 percent or more as the Port Authority tries to dig out of its latest financial hole.

The authority faces a $50.6 million deficit for the fiscal year that begins July 1 despite three years of financial reforms that have produced $52 million in annual savings, CEO Steve Bland said.

State aid, which makes up about half of the authority's income, has not increased in four years and is scheduled to decrease by $25 million, to about $159 million, in the coming year because of the failure of the Legislature's Act 44 transportation funding law.

Enacted in 2007, it relied heavily on generating new toll revenue from Interstate 80. That plan was nixed by the Federal Highway Administration this spring, leaving the state with a giant deficit in its highway, bridge and transit budgets.

With no growth in revenue, Port Authority faces rising salary, health care, pension and fuel expenses, all of which are largely beyond its short-term control.

Its drivers are among the nation's highest-paid at $24.74 an hour and are under contract through June 2012. The contract, hammered out in December 2008 after acrimonious negotiations, provided 11 percent in raises over four years. The authority's salary expenditures are expected to increase by $5 million in the coming year.

Mish's Global Economic Trend Analysis: Transit Union Plays Nuclear Terrorist Card

interestrateripoff · July 18, 2010

Vince Cable: 'We must get credit flowing – or face another crunch' - Business Analysis & Features, Business - The Independent

The man who became Britain's poster boy of the credit crunch for his prescience and wit, Vince Cable, is now warning us about the next disaster.
In his first major interview since taking office, the new Business Secretary says that his greatest fear is that Britain could be heading for another crunch because the banks are not lending enough to the real economy. "We could have a second credit crunch if we don't get credit flowing; there is a real danger that growth in the economy could be undermined," he says. "It's what I hear most from the businessmen and women I speak to, that the flow of credit and lending to business is still weak. Demand is already depressed, and the danger is that the lack of lending could depress it still further."

Banks have never been Cable's favourite institutions, and it was the way he so brilliantly skewered them from the opposition benches for taking such feckless risks, while paying themselves bumper bonuses, that endeared him to Joe Public as much as to Jeremy Paxman. Clearly it's easier being a Cassandra when you are in opposition, but being at the centre of the new government has not dimmed Cable's knack for shooting from the hip. Getting to know the banks better in his new role doesn't seem to have improved his respect for them either.

Now, he says, banks are "misleading" us by claiming that they are meeting some 80 per cent of the loan requests they receive, defending themselves by arguing that if they met all requests they would not be making money on the loans. "This is misleading," says Cable. "I think they are raising the hurdle. All the evidence from business, from the Institute of Directors and other bodies, is that banks are not lending as much as is needed."

More at the link.

interestrateripoff · July 19, 2010

Markets braced for turmoil after IMF and EU withdraw £17bn Hungary financing deal - Telegraph

European equity and credit markets are braced for a volatile day of trading after the International Monetary Fund (IMF) and the European Union dramatically withdrew a €20bn (£17bn) financing deal for Hungary over the weekend.

The move, which was described by economists as “very rare”, means that Hungary will not have access to standby funds that were secured as part of a 2008 loan deal. The credit line was suspended on Saturday after the European Commission voiced concerns over the newly-elected Hungarian government’s budget plans.

The stark move by the IMF and EU will reignite fears in global stock and money markets about the state of Europe’s sovereign debt. It could also derail the fragile confidence that has been returning to markets after moves to resolve the economic crisis in Eastern Europe.

Hungary’s woes come amid fears of a broader bear market developing as investors adjust to signs of a global slowdown led by the US and China. The weekend’s events will only add to market jitters.

Economists have argued that the return of confidence to Europe is partly based on the assumption that the IMF and the EU will automatically step in as sugar daddies to save failing economies. The suspension of the review of Hungary’s credit line at the weekend will send out an international warning and shows such views to be naïve, observers said last night.

Peter Attard Montalto, economist at Nomura Securities, described the IMF and EU’s action as “a very rare event”.

“Countries usually go out of their way to satisfy these missions,” he said.

Hungary has Europe’s highest public debt at 80pc of GDP.

Will today prove interesting or has this been priced in?

interestrateripoff · July 19, 2010

Stress-testing Europe's banks won't stave off a deflationary vortex - Telegraph

Euroland's authorities are inflicting a triple shock of fiscal, monetary, and currency tightening on a broken economy. They are doing so in a region where industrial output is still 14pc below its peak, where growth barely scraped above zero over the winter "recovery", and where youth unemployment is at 40pc in Spain, 35pc in Slovakia, 29pc in Italy, and 26pc in Ireland.

They seem unaware that China is slowing and the US is tipping into a second leg of the Long Slump. Last week's collapse in America's ECRI leading indicator to -9.8 marks the end of the V-shaped rebound. If this means what it normally means - recession within three months - Europe must take immediate action to prevent being drawn into a deflationary vortex. Spiralling public debt precludes further Keynesian spending, so this must come from central bank stimulus. Tight fiscal policy offset by ultra-loose money is the only option for Europe, the US, and Japan.

No student of Milton Friedman is surprised by the US relapse. The Fed has allowed M3 money to contract at a 10pc pace for much of this year - the Great Depression rate. The economy has hit the wall with the usual lag. Textbook stuff. Never ignore the quantity theory of money.

The US Conference Board's indicator is not yet flashing a red alert, but that is because it gives weight to "yield curve inversion", where long rates fall below short rates. This indicator is meaningless in a Japan-style bust where policy rates are zero.

I suspect that Fed chair Ben Bernanke knows the economy buckled around the Ides of June, but is stymied by hawks at the regional Feds. All he can do for now is to talk down credit costs through hints of more quantitative easing, or QE2. In this he has succeeded. The yield on two-year Treasuries fell to an all-time low of 0.5765pc on Friday. It's Weimar, all right: circa 1931, not 1923.

So what is the European Central Bank doing to prevent southern Europe asphyxiating from debt-deflation, and knowing that M3 contracted in February (-0.3pc), March (-0.1pc), April (-0.2pc) and May (-0.2pc)? It is tightening, as it did in mid-2008 when the eurozone was already tanking.

Far from taking steps to offset Club Med austerity, it is winding down its €60bn (£50bn) purchase of government bonds - "sterilized" in any case to prevent net stimulus. It is draining liquidity fast. The ECB's loans to credit institutions fell from €870bn to €635bn in the two weeks to July 9.

"This is the equivalent in central banking of the Charge of the Light Brigade," said Tim Congdon from International Monetary Research. Cash reserves in the interbank market have fallen by a third in days. No wonder three-month Euribor (the stress gauge) has risen to an 11-month high of 0.86pc. The funding squeeze has turbo-charged the euro rally, pushing the currency to 8.67 Chinese yuan. German exporters can take the pain. It is the strappado for Spain and Latin Europe. They are smiling in Guangdong.

Perhaps the stress tests for Europe's banks will clear the air and unblock the credit system. But such tests worked in the US only because that was a banking crisis. Few questioned whether the US Treasury could stand behind the system, or whether the US would hold together as a political entity. In Europe, sovereign states are themselves the risk, and a dysfunctional EMU is the Achilles heel.

A memo from Germany's regulator BaFin earlier this year said the worry is contagion from "collective difficulties" in Club O'Med, not an isolated default. Once under way, the crisis might turn into a conflagration. Investors know this. It is why the simulation test by RBS adjusts for €400bn of losses in Spain and €1.3 trillion for the eurozone, and called for "overwhelming policy intervention" by the ECB to stop this happening. Will the EU carry out such tests? Of course not.

All now hangs on the credibility of the EU's €440bn rescue fund or Stability Facility (EFSF), itself subject to challenges in Germany's constitutional court. Will the EU stress test the "non-negligible" risk that the court will block it? No.

The EFSF is a bluff that Italy could provide its rescue share for Portugal, Spain, and Ireland, on top of Greece, in the context of a serious crisis without suffering its own debt run. Is this credible? Should any rating agency give this body a AAA grade given that 10 of the 16 states are rated lower, and knowing that Germany has refused to allow pre-funding so that it cannot raise money until matters are already out of hand?

Some interesting points although AEP still appears to want to try and print there way out of this mess.

It is quite a novel idea to get the indebted to borrow more money to save an indebted nation.

Still I'm sure these experts know what they are doing...

interestrateripoff · July 19, 2010

http://www.nytimes.com/2010/07/19/business/19training.html?_r=1&ref=business

In what was beginning to feel like a previous life, Israel Valle had earned $18 an hour as an executive assistant to a designer at a prominent fashion label. Now, he was jobless and struggling to find work. He decided to invest in upgrading his skills.

It was February 2009, and the city work force center in Downtown Brooklyn was jammed with hundreds of people hungry for paychecks. His caseworker urged him to take advantage of classes financed by the federal government, which had increased money for job training. Upgrade your skills, she counseled. Then she could arrange job interviews.

For six weeks, Mr. Valle, 49, absorbed instruction in spreadsheets and word processing. He tinkered with his résumé. But the interviews his caseworker eventually arranged were for low-wage jobs, and they were mobbed by desperate applicants. More than a year later, Mr. Valle remains among the record 6.8 million Americans who have been officially jobless for six months or longer. He recently applied for welfare benefits.

“Training was fruitless,” he said. “I’m not seeing the benefits. Training for what? No one’s hiring.”

Hundreds of thousands of Americans have enrolled in federally financed training programs in recent years, only to remain out of work. That has intensified skepticism about training as a cure for unemployment.

Even before the recession created the bleakest job market in more than a quarter-century, job training was already producing disappointing results. A study conducted for the Labor Department tracking the experience of 160,000 laid-off workers in 12 states from mid-2003 to mid-2005 — a time of economic expansion — found that those who went through training wound up earning little more than those who did not, even three and four years later. “Over all, it appears possible that ultimate gains from participation are small or nonexistent,” the study concluded.

In the last 18 months, the Obama administration has embraced more promising approaches to training focused on faster-growing areas like renewable energy and health care. But most money has been directed at the same sorts of programs that in past years have largely failed to steer laid-off workers toward new careers, say experts, and now the number of job openings is vastly outnumbered by people out of work.

Brilliant malinvestment from the govt here.

interestrateripoff · July 19, 2010

Instant Analysis - Moody's downgrades Ireland to Aa2 - Yahoo! Finance

Ratings agency Moody's said on Monday it had downgraded Ireland's government bond ratings rating to Aa2 from Aa1 with a stable outlook.

"The timing isn't great, given the bond auction tomorrow and certainly this will add to the premium that will need to be paid to raise money.

"Some of this is understandable in the sense of the crystallization of contingent liabilities from the banking system and obviously comments suggesting last week that the deficit could be almost 20 percent of GDP are not great.

"I think it's over-dramatic in terms of Ireland's weakened growth prospects. While some it may be justified I think some of it is over the top.

"The peripherals are going to suffer again as a result."

Are Moody's leading the pack with this or have the other rating agencies already cut Ireland's credit rating?

Also isn't this slightly contradictory if there is a stable outlook why cut the rating? Surely that's a oxymoron?

interestrateripoff · July 19, 2010

£3m cuts target children - The Star

CHILDREN and young people in Sheffield will bear the brunt of the massive £6.5 million in council cutbacks that must be made by the end of the financial year.

Sheffield Council's education budget will be slashed by £3.15 million - nearly half the savings that need to be made by April to cope with the Government's spending squeeze.

Other savings will be made by cutting £1.2m from the Local Enterprise Growth Initiative - designed to boost some of the most deprived areas of the city - and £90,000 from community cohesion programme Prevent.

Town Hall officers say they have also made "an early start" on working out how to cut 30 per cent of the council's budget - around £220 million - by 2014/15.

The savings are outlined in an interim budget report to be discussed by councillors in an emergency debate on Wednesday July 28.

Compulsory redundancies are expected to be a certainty for council staff and incremental pay rises also look set to be axed.

Around £70m of the four-year funding squeeze will fall on the council's education budget.

Sonia Sharp, executive director of children's services, admitted the situation was "grim".

Cuts this year will fall on dozens of youth schemes, including £400,000 from the Connexions careers programme, £200,000 from the council's teenage pregnancy project, and £180,000 from the Child and Adolescent Mental Health scheme.

Dr Sharp said: "A lot of grants allocated for this year will be going.

"Spending reductions must be made and we are looking at how we can deliver them.

"We will be seeking to protect frontline services but it is going to be very tough. At the moment we have our noses down coming up with suggestions.

"In the longer term there will inevitably be job losses as not everything can be achieved through savings."

The council boom appears to be over.

Some big cuts looming.

interestrateripoff · July 19, 2010

Breaking news:

Let Ireland's downgrading be a lesson to you, George Osborne told

Treasury dismisses fears that austerity measures could leave UK at risk of replicating Ireland's economic troubles Post your comment
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Visitors flock to see the aircraft at the Farnborough air show and it is announced that the Dreamliner's first UK customer will be Thomson Airways 22 comments
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Offer expected to be priced tomorrow at lower end of the range, valuing Ocado at £800m
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interestrateripoff · July 19, 2010

Stephen King: Western economies are still in danger of sinking under an ocean of self-created debt - Stephen King, Business Comment - The Independent

Does Ben Bernanke suffer nightmares? Does Jean-Claude Trichet have sleepless nights? Does Mervyn King wake up in a cold sweat, his pyjamas soaking wet? I wouldn't blame them if they did because after the biggest policy stimulus known to man, Western economies appear to have hit a brick wall.

Last week, the Federal Reserve revised down its projections for US economic growth in 2010, a response to an unexpected "soft spot" in the American economic recovery. European policymakers, meanwhile, worry about the impact of the sovereign debt crisis on the eurozone's recovery. And Mr King has, to date, managed only to pump up the volume of inflation: the underlying real economy remains very soggy.

None of this was supposed to happen. Western policymakers thought they knew how to solve serious economic problems. Their economic weapons were regarded as highly potent and, over the past three years, were used with maximum force. Yet the results have been disappointing. The hoped-for recovery has not materialised. Instead, Western economies are languishing at the bottom of a cliff. Having fallen a long way, the renewed ascent is proving to be remarkably taxing.

Not all have suffered the same fate. Although there are plenty of worries about the ongoing pace of China's economic expansion, Asian economies have rebounded with considerable ease over the past year or so. The same is broadly true of other emerging nations. How have they managed to pull off a trick which the magicians of Western policy making are still attempting to master? What sleight of hand have policymakers in the emerging world achieved? And why can't the same ploy be replicated in the West?

Let's go back to my cliff analogy. I'm reliably informed by those who go mountaineering that it's easier to climb up a rock face with a light, rather than a heavy, backpack. The emerging nations have learnt that lesson the hard way. In the 1980s and 1990s, over-burdened with debt, they would all-too-frequently lose their grip, weighed down by their profligacy. More recently, however, they have mostly behaved in conservative fashion, refusing to carry the debts of old. Like others, they succumbed to the global economic crisis. Unlike others, they were able to climb back up the cliff with relative ease. They didn't have to carry the burden of earlier excesses with them. Western nations are in a less fortunate position. Their backpacks are weighed down with both pre-crisis and now post-crisis debts. True, additional government borrowing prevented economies from completely falling onto the rocks of a Great Depression Mark II. Yet the costs have been substantial. Household and financial sector debt is still high but we now have to cope with excessive government debt too. These debts may be preventing a normal recovery from materialising.

This is all very disturbing. Back in 2002, Federal Reserve economists wrote a paper arguing that Japan's economic stagnation in the 1990s and beyond, was largely the result of a failure to loosen monetary policy sufficiently. Specifically, they argued that an additional 2 per cent reduction in Japanese interest rates at any time between 1992 and 1995 would have slain the deflationary beast, allowing room for Japan's economy to rebound relatively easily.

Put another way, the Japanese were stupid enough not to have recognised the deflationary pressures which were about to engulf their economy. As a consequence, they failed to take the medicine necessary to restore their economy to its earlier vigour. The Japanese got it wrong but the West, apparently, knows how to get it right. It's a view that has become part of popular (and convenient) opinion amongst the chattering financial classes and, of course, amongst policymakers who, frankly, should know better. The West just loves to patronise the rest.

Japan's problems ultimately stemmed from the excesses of the 1980s. Japan was a nation living beyond its means. A simple steak sandwich at Tokyo's Palace Hotel cost the equivalent of £35, a totally silly price, which those participating in the late-1980s boom were mad enough to pay. Japan's economy had taken leave of its senses, helped along by a stock market and real estate bubble which allowed access to ever more debt.

When the bubble burst and economic reality slowly dawned on a nation of fantasists, the great deleveraging began. Austerity wasn't forced on the Japanese. Instead, they chose austerity, recognising that the era of ever-rising wealth was over.

No amount of policy stimulus was likely to alter this perception, in large part because the perception was true. Interest rates did fall, and perhaps might have fallen further, but why would people borrow any more if they already were awash with debt?

To offset the private sector's caution, the Japanese government eventually chose to borrow more but, as it did so, companies merely accelerated their repayment of debt. For every stimulus measure, there was an off-setting leakage somewhere else. Keynesian policies didn't appear to be working. The lesson from Japan is surely that policymakers should stop bubbles, and their associated debts, from happening in the first place. In the West, that lesson wasn't heeded. During the late-1990s stock market bubble, policymakers were keen to declare the arrival of the so-called "New Economy". When that story went wrong, the stock market bubble was merely replaced with a housing bubble which, ultimately, proved to be far more damaging.

All the while, debts continued to rise as economies defied economic gravity. Western policymakers, with their fondness for continued economic expansion, flew too close to the economic sun and, like Icarus, have come crashing down to earth.

And now the Western economic patient is in big trouble, seemingly unable to respond to the pills and procedures administered by increasingly desperate policymakers. Indeed, the longer the crisis lasts, the more it's beginning to look like a repeat of the Japanese crisis of the 1990s, only on a much grander scale.

Western equities are in the tenth year of a bear market. The US housing market is in decline again, emulating the falls in Japanese land prices. Long-term interest rates on government debt are extraordinarily low, even though government borrowing is seemingly out of control. They're low because no one else is keen to borrow in a world suffering from the uncertainties associated with excessive debts. In the majority of Western nations, inflation is absent, threatening a repeat of Japan's deflationary despair. And money-supply growth has collapsed, even though central banks have pursued all manner of unconventional policies to kick-start the credit system.

The only exception to this deflationary misery is the UK which, remarkably enough, has managed to create inflationary angst instead. Two years ago, the Government and the Bank of England thought a rebalancing of the UK economy away from financial services towards manufacturing might be a rather good idea. As a result, a policy of benign neglect towards the exchange rate was adopted, with the unsurprising consequence that sterling dropped like a stone. Yet the result was not a pick-up in activity but a rise in prices.

As a mechanism to avoid a Japan-style deflation, sterling's earlier decline has, therefore, been rather too successful. But unless sterling carries on falling or, instead, the public's price expectations become dislodged, it's doubtful that higher inflation will be around for very long. As the UK's new Government delivers unprecedented austerity, the great deleveraging will affect the UK as much as everyone else, leaving us ultimately with too little, not too much, inflation. The Western economies are all in the same boat full of debt-induced holes. Maybe that's the real reason why Mervyn King's pyjamas are soaking wet.

Stephen King is managing director of economics at HSBC

The inflation is good argument, god help us.

Although the irony that all money is debt appears lost on him. Of course we are sinking under an ocean of self-created debt because that's how money is create in the first place.