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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (64780)	7/18/2010 3:58:44 AM
From: elmatador	Respond to of 217733

yes, Sarbannes-Oxley was implemented after 2001 Enron, WCOM debacle.

To: TobagoJack who wrote (64780)	7/18/2010 8:21:23 PM
From: carranza2	3 Recommendations Read Replies (2) \| Respond to of 217733

No more moolah spells disaster: prospectmagazine.co.uk The world is running out of cash TOM STREITHORST — 16TH JULY 2010 Get used to it The money supply is shrinking. That may well be the most ominous harbinger of continued economic slowdown. The supply measurement known as M3 or “broad money”—all the money there is on loan or in circulation—has been contracting at a rate of almost 10% annually in the US. The scary thing is, it should be going through the roof right now. Since the beginning of the credit crunch, central banks have been printing money at an unprecedented rate, desperately adding liquidity to a financial system about to freeze up. M0, the narrowest measure (piquantly called “high powered money”) is the only part of the money supply utterly controlled by central banks and it has gone off the charts since September 2008. It is this discrepancy between the narrow and broad money supply that bodes very badly for the future. Central banks control the money supply. That is one of the axioms of modern macroeconomics. Not with a printing press—currency is much too insignificant a proportion of the total money supply, the £20 note in your wallet trivial compared to the numbers on account in your bank). Instead, central banks create money by buying securities on the open market. Whenever they buy debt they inject money into the accounts of sellers (generally banks), which then have capital available to lend to deserving households and firms. These open market operations are the basic tool in the central bankers’ kit. By increasing deposits in member bank accounts, they stimulate lending and thus increase the money supply. The magic of fractional reserve banking (a bank doesn’t have to hold all its deposits, it can lend most of them, because depositors rarely want their money back all at the same time) means that £1 introduced into the money supply by the central bank can engender up to £20 more. That is why so many economists were certain inflation would take off. Quantitative easing, the massive purchase of debt instruments, and the spectacular expansion of central bank balance sheets caused the narrow measures of the money supply to rise to unheard-of levels. The anomaly this time is that the rise in narrow money hasn’t engendered a rise in the broader money supply. That is because banks aren’t lending, they are hoarding. Before he was the second most powerful man in the world, Ben Bernanke was a respected scholar of the Great Depression. His explanation of the spread of that calamity centered on the failure of bank intermediation. In the early 1930’s, as more and more banks failed, they took with them their particularised knowledge of their customers’ credit risk, which made lending riskier and thus less likely. It is again the unwillingness of banks to lend that may deepen the downturn. Banks are frightened. They would rather keep cash in their account than lend it to entrepreneurs. Businessmen are frightened. Overcapacity, low demand, and the instability of credit make them prefer to keep cash on hand rather than invest and expand. Households are frightened. Rising unemployment and the overhang of debt from the boom make most of us want to pay off our debts rather than incur new ones. Our animal spirits do not bode well for recovery. “Inflation is always and everywhere a monetary phenomenon.” So sayth Milton Freidman. John Maynard Keynes instead focused on entrepreneurs’ and banks’ expectations of the unknowable future. The rise of M0 and the fall of M3 suggest that from both a Monetarist and a Keynesian perspective, deflation is becoming likely. This makes Osborne’s deficit reducing measures even more pernicious. Fasten your seat belts—it’s going to be a bumpy ride.

To: TobagoJack who wrote (64780)	7/19/2010 6:13:30 AM
From: elmatador	Respond to of 217733

Europeans try reassuring markets: Prepares Bank Stress Tests Speculation Mounts As EU Prepares Bank Stress Tests First Published Monday, 19 July 2010 09:46 am - © 2010 Need to Know News --Results Of Stress Tests Of 91 EU Banks Due Friday 23 July --EU Sources Say Results Likely Published After Market Close By Emma Charlton BRUSSELS (MNI) - As European policymakers prepare to unveil the results of bank sector stress tests, speculation is mounting about which banks are likely to fail and whether the market will consider the tests stringent enough. The London-based Committee of Banking Supervisors, or CEBS, is currently testing 91 European Union banks, which together account for 65% of all EU banking assets. It is set to release the results July 23. But scant details about the methodology being used and the way in which the results will be released threaten to undermine the tests' credibility. Several EU sources said the lack of information was due to disagreement among governments over how much detail should be released, the haircut level that should be applied to the sovereign debt of different countries, and how long each of the failing banks should have to raise any capital that might be deemed necessary. The discount applied to sovereign debt is key to the process because Europe's banks have a large exposure to EU sovereign debt and many market participants fear a default in some high debt and deficit countries, particularly Greece. Late last week, the BBC reported London-based banking sources saying that the tests currently envisaged a writedown of around 17% on Greek government bonds, 10% to 11% on Spanish sovereign debt, 6% on French securities, and 4% to 5% on German paper. Other reports suggest that Greek debt could be written down by 23%, but whether this will satisfy the markets remains to be seen. In fact, the haircut details might not be released at all. The decision to publish the results of the tests, intended to ascertain whether Europe's biggest banks have enough capital in reserve to withstand a recession or more market turbulence, was taken last month as policymakers bowed to market pressure in a bid to restore confidence in EU banks. The final decision on how much information to publish and when to publish it will come after a teleconference of finance ministers, scheduled to take place on July 22, EU sources said. One EU official said the current plan is to release the test results after European markets close on July 23, in order to allow any issues raised to be digested over the weekend. The main problems - the same source said - are expected in Spain, Germany and Greece. Non-listed banks in Spain and Germany are likely to be the focus of the test results, since Spain's cajas and Germany's Landesbanks are thought to be short on capital. Greek banks are of concern because they have a lot of exposure to Greek sovereign debt, which is considered the riskiest. In advance of the test results, Europe's policymakers have lined up to reassure investors that their banks will pass the tests. Luxembourg Prime Minister Jean-Claude Juncker, who also heads the Eurogroup club of Euro-using nations, told an Austrian national newspaper that he didn't expect any "big catastrophes." Others are keen to spread a similar message. "My feeling is that things will go smoothly for the six Greek banks included in the sample," George Provopoulos, governor of the Bank of Greece, said in an interview published in Greek newspaper Imerisia over the weekend. Irish and UK policymakers have been quick to point out that their banks have already passed domestic stress tests more severe than the EU tests. In the lead up to Friday's announcement, there are still many unknowns, with some economists saying the tests will be enough to restore confidence and others saying they could backfire. "The assumptions behind the stress test appear increasingly credible and the remaining question concerns the recapitalisation funds that may need to be made available," economists at BNP Paribas said in a note to investors. But they warned that any market optimism could be short lived. "We believe that the euro's recent recovery is coming to an end as optimism regarding European rescue packages and stress tests starts to fade," they wrote.