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ECONOMY & FINANCE
by In Wales (inwales aaat eurotrib.com) on Thu Apr 2nd, 2009 at 03:24:30 PM EST
G20's $1tn package boosts world markets | Business | guardian.co.uk

World stockmarkets surged today as the G20's $1tn (£700bn) boost to the world economy added to optimism that the worst of the downturn may be over.

The FTSE 100 index jumped 4.3% to stand above 4,000 for the first time since February, while Wall Street's Dow Jones industrial average surged above 8,000, a rise of more than 3%.

The G20 plans, which include a banking clean-up and a $1tn dollar pledge for the International Monetary Fund and World Bank, triggered hopes of a quicker recovery from global economic woes.

Adrian Lowcock, senior investment adviser at Bestinvest, said: "The package is good news. However, the devil is in the detail - we are yet to find out how much is old news being rehashed. The agreement of a global package to deal with toxic debt and a consensus of dealing with the tax havens is good news for most people. Talk is cheap, although sometimes being heard to say the right thing could be just enough to bring back confidence. The markets clearly like what they've heard."

by In Wales (inwales aaat eurotrib.com) on Thu Apr 2nd, 2009 at 03:30:38 PM EST
[ Parent ]
FTSE 100 back over 4000 as global stockmarkets rally on G20 hopes | Business | guardian.co.uk

Global stockmarkets rallied today on hopes that world leaders gathered at the G20 summit in London will overcome most of their divisions on how to tackle the financial crisis.

The first rise in UK house prices since 2007 and improving credit conditions, alongside better-than-expected US car sales, fuelled optimism that the world economy is edging closer to a recovery. The news that the G20 will call for the International Monetary Fund's resources to be trebled to $750bn (£512bn) also bolstered confidence.

"Market participants are becoming more convinced of a global recovery and that is causing risk appetite to increase," said Toru Umemoto of Barclays Capital.

by In Wales (inwales aaat eurotrib.com) on Thu Apr 2nd, 2009 at 03:39:52 PM EST
[ Parent ]
G20: Bankers' pay to be linked to risk in regulatory overhaul | World news | guardian.co.uk

Bankers' pay will have to be closely linked to long-term performance under the tough new measures presented to G20 leaders at today's London Summit by the Financial Stability Forum (FSF), which is expected to be given the job of overseeing world markets as part of the post-credit crunch crackdown on regulation.

The FSF argues that excessive compensation was "one factor among many", which contributed to the financial turmoil that erupted in 2007, and international regulators must scrutinise pay policies at banks - an idea that would have been anathema to the United States and Britain before the crisis.

by In Wales (inwales aaat eurotrib.com) on Thu Apr 2nd, 2009 at 03:38:03 PM EST
[ Parent ]
EUobserver

EUOBSERVER / BRUSSELS - The European Central Bank on Thursday (2 April) cut the interest rate in the 16-member strong euro area by 25 basis points to 1.25 percent, with the institution's president, Jean-Claude Trichet, indicating further cuts are still possible.

"Today's decision takes into account the expectation that price pressures will remain subdued, reflecting the substantial past fall in commodity prices and the marked weakening of economic activity in the euro area and globally," Mr Trichet said at a press conference in Frankfurt.

by In Wales (inwales aaat eurotrib.com) on Thu Apr 2nd, 2009 at 03:51:37 PM EST
[ Parent ]
Virtual Leagues Fold, Forcing Gamers to Find Actual Jobs
By Ryan Goldberg, New York Times

Until recently, Emmanuel Rodriguez worked on a stage, under bright lights, amid intense competition and before cheering fans. He was a professional video-game player, and a world champion.

Now he works at the customer service desk of a Sam's Club in Dallas.

Rodriguez, a brash 23-year-old whose nickname in the gaming community is Master, dominated an international field in July in Dead or Alive 4, a popular fighting game, on the Microsoft Xbox 360. He picked up $5,000 and a trophy for the victory.

The competition, held in Los Angeles, was part of the world individual finals of the Championship Gaming Series, a league started two years earlier by News Corporation and DirecTV. And Rodriguez, given his success and his swagger, was a star. As a designated franchise player, he received a base salary of $30,000. During the regular season, he lost only one match, good enough to be named North American most valuable player.

For Rodriguez and others like him around the world, playing video games had become a career.

That, however, has changed for many players. Video games may be as popular as ever -- people in more than 65 percent of American households play, according to the Entertainment Software Association -- but the professional sport of gaming has nearly collapsed.

by Magnifico on Thu Apr 2nd, 2009 at 05:10:47 PM EST
[ Parent ]
Ok, EuroTribbers, I need your help.

Since I can only read two languages, I am only able to look at news about Obama and his trip to Europe in English and in Dutch.

This means I've been reading the US news, the BBC news website, and Dutch news regarding the G20.

Obviously, the next big event is the NATO summit.

Anyway, here's where I need your multilingual help:

Is it just me, or is the way the US news is covering Obama's trip (and his role in the G20 meetings) vastly different from how media in the EU is covering it?

Namely, it's all happy-happy-awesome-rah-rah-America-Obama vs., uh, reality?

Tell me I'm not imagining this.

I feel like I'm reading about two different G20s and two different presidents.  It's rah-rah-America versus skepticism, at least as far as I can tell.

Makes my head spin.

by Plutonium Page (page dot vlinders at gmail dot com) on Thu Apr 2nd, 2009 at 05:28:22 PM EST
[ Parent ]
You make me afraid I've weeded all of the variety out of my news consumption!  NPR, PBS, BBC, France 24, Deutsche Welle, RT all kind of have the same tone about it.  None of it very "happy-happy-awesome-rah-rah-America-Obama vs., uh, reality."  Most of it a combo of: real change never comes out of these things so we don't expect any/it could have gone off a lot worse, at least they seem to be getting along/interview with random protester/spot about how fashionable Michelle is.  Blah blah blah...

"Talking nonsense is the sole privilege mankind possesses over the other organisms." -Dostoevsky
by poemless on Thu Apr 2nd, 2009 at 05:43:16 PM EST
[ Parent ]
FOXNews.com - Chavez Seeks Arab Support for Oil-Backed Currency to Challenge U.S. Dollar - International News | News of the World | Middle East News | Europe News

DOHA, Qatar --  Venezuelan President Hugo Chavez sought Arab support Tuesday for a proposed oil-backed currency to challenge the U.S. dollar in his latest swipe at Washington's dominance in global financial affairs.

It's highly unlikely Chavez will gain any serious momentum for his "petro-currency" proposal at a summit of South American and Arab League leaders, but it represented another attempt to undercut the dollar's standing as the world's leading commercial currency.



"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Thu Apr 2nd, 2009 at 06:12:31 PM EST
[ Parent ]
I kinda wonder if elevating a consumable to a store of value is the most sustainable standard imaginable.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt ät gmail dotcom) on Fri Apr 3rd, 2009 at 03:52:03 AM EST
[ Parent ]
At least it has value in consumption.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Carrie (migeru at eurotrib dot com) on Fri Apr 3rd, 2009 at 04:10:45 AM EST
[ Parent ]
FHLB Chairman Disgusted With FDIC Accounting Alchemy, Quits

From Naked Capitlaism:  Submitted by Tyler Durden, publisher of Zero Hedge

When the man in charge of the second largest borrower in the U.S. is willing to lose his job due to his discomfort with the FASB's shift in accounting rules, you can bet that the tragic fallout of all the "market buoying" recent events is only a matter of time.

Somehow this noteworthy event, which happened over a week ago, passed substantially unnoticed until Zero Hedge friend Jonathan Weil at Bloomberg dug it up. Charles Bowsher, who was most recently Chairman of the Federal Home Loan Bank System's Office of Finance and previously served as U.S. comptroller general may be the only truly honorable man in the socialist nexus of politics and finance. The reason for his departure from this critical post - his discomfort in vouching for the banks' combined financial statements. And as Weil puts it succinctly: "Now the question for taxpayers is this: If Charles Bowsher can't get comfortable with these banks' financial statements, why should anybody else be?" Why indeed.

If Bowsher was merely involved with some marginal organization, this could be perceived as a hypocritical attempt to score populist brownie points. However, the FHLB is among the governmental entities at the heart of the current problem. Zero Hedge has written previously about the FHLB and its critical role in the ongoing housing crisis, but in a nutshell "The Office of Finance issues and services all the debt for the 12 regional Federal Home Loan Banks. That's a lot of debt -- $1.26 trillion as of Dec. 31, making the FHLBank System the largest U.S. borrower after the federal government. The government-chartered banks, which operate independently, in turn supply low-cost loans to their 8,100 member banks and finance companies. If any of the FHLBanks were to fail, taxpayers could be on the hook."

Local banks throughout the US have wound up their congressional representatives about "mark to market" accounting rules.  The head of the FASB was pummeled recently when testifying before a House committee.  Two days later he announced a change in the rules.  The formal announcement was April 2.


"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Apr 3rd, 2009 at 12:58:08 AM EST
[ Parent ]
FT.com | Willem Buiter's Maverecon | How the FASB aids and abets obfuscation by wonky zombie banks

The Financial Accounting Standards Board (FASB), at its meeting on April 2,  has once again relaxed mark-to-market accounting rules. This occurred after the House Financial Services Committee, a wholly owned subsidiary of the American Bankers Association, had, at hearings on March 12, 2009, effectively ordered the FASB to revise its guidance on fair value in inactive markets.  The HFSC used the threat that, if the FASB were not sufficiently accommodating, Congress would legislate on the matter off its own bat to give the zombie banks what they wanted.
...
Basically, the new guidance allows banks to shift a whole load of toxic and impaired securities from level 2 to level 3.  Up till now, a frequent source of level 2 information were prices achieved by competitors' asset sales to help determine the fair-market value of similar securities they hold on their own books. Banks are now allowed to ignore prices achieved in competitors'  asset sales when these transactions aren't "orderly".  This includes transactions in which the seller is near bankruptcy or needed to sell the asset to comply with regulatory requirements.  This is vague and broad enough to drive a coach and horses through fair-value accounting for most imperfectly liquid assets.



"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Fri Apr 3rd, 2009 at 09:26:32 AM EST
[ Parent ]
Melanchthon:
Basically, the new guidance allows banks to shift a whole load of toxic and impaired securities from level 2 to level 3.  Up till now, a frequent source of level 2 information were prices achieved by competitors' asset sales to help determine the fair-market value of similar securities they hold on their own books. Banks are now allowed to ignore prices achieved in competitors'  asset sales when these transactions aren't "orderly".  This includes transactions in which the seller is near bankruptcy or needed to sell the asset to comply with regulatory requirements.  This is vague and broad enough to drive a coach and horses through fair-value accounting for most imperfectly liquid assets.
This appears sensible. However, it would potentially allow people to ignore a lasting drop in stock prices caused by "unwinding" of positions by a hedge fund in distress, which is nonsense.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Carrie (migeru at eurotrib dot com) on Fri Apr 3rd, 2009 at 09:29:07 AM EST
[ Parent ]
...the socialist nexus of politics and finance.

Where do they get this garbage?


She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Sat Apr 4th, 2009 at 01:19:05 AM EST
[ Parent ]
He signs as "Tyler Durden"... He's probably young enough to be impressed by Atlas Shrugged.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Carrie (migeru at eurotrib dot com) on Sat Apr 4th, 2009 at 04:06:42 AM EST
[ Parent ]
Was this discussed earlier in the Salon?

FT.com / Companies / Banks - Bailed-out banks eye toxic asset buys (April 2 2009)

US banks that have received government aid, including Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase, are considering buying toxic assets to be sold by rivals under the Treasury's $1,000bn (£680bn) plan to revive the financial system.

The plans proved controversial, with critics charging that the government's public-private partnership - which provide generous loans to investors - are intended to help banks sell, rather than acquire, troubled securities and loans.

Spencer Bachus, the top Republican on the House financial services committee, vowed after being told of the plans by the FT to introduce legislation to stop financial institutions "gaming the system to reap taxpayer-subsidised windfalls".



Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Carrie (migeru at eurotrib dot com) on Fri Apr 3rd, 2009 at 05:23:29 AM EST
[ Parent ]
Geithner's Plan: Loopholes Galore - BusinessWeek
PORTFOLIO SWAPPING

For all the talk of toxic assets, some banks may want to hold on to their suspect loans in the belief that they will eventually pay off. The Treasury and the Fed, however, are breathing down the banks' necks to unload problem debts.

What to do? A bank could effectively swap its existing portfolio of junky loans for another one very similar--only this time limiting the downside by using government loans and guarantees. The bank would auction off its loans to a public-private partnership. Then, using a portion of the auction proceeds, it would set up a different public-private partnership that would of course have access to government loan guarantees and matching funds. The bank would use the new partnership to buy a portfolio of similar problem assets twice the size of its old portfolio. The bank would then split any gains from the new portfolio 50-50 with the feds--but risk no more than the sliver of equity it contributed to the deal. The Administration may seek to block such maneuvers.



"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Fri Apr 3rd, 2009 at 05:30:25 AM EST
[ Parent ]
Melanchthon:
The Administration may seek to block such maneuvers.
Good luck with that.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Carrie (migeru at eurotrib dot com) on Fri Apr 3rd, 2009 at 05:59:09 AM EST
[ Parent ]
Isn't that very possibility in fact the goal of Giethner's plan?  ALL LIABILITY TO THE TAXPAYER!

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Apr 3rd, 2009 at 01:00:10 PM EST
[ Parent ]
Obama may not know diddley squat about economics, but he's a decent lawyer. Can he not understand on a legal basis the petard Geithner is hoisting him on?

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Carrie (migeru at eurotrib dot com) on Sat Apr 4th, 2009 at 04:04:19 AM EST
[ Parent ]
One would think....Perhaps he fears that a politically premature move would doom his administration and give the country eight more years of Republicans.  While I don't want that, it might not make too much difference if political opportunity comes too late for the economy.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sat Apr 4th, 2009 at 12:17:16 PM EST
[ Parent ]
Naked Capitalism: Treasury Trying to Defend Bank Gaming of Public-Private Partnership
1. Despite bank and Administration smoke-blowing to the contrary, the problem with the so-called toxic assets on bank balance sheets is NOT that they cannot be priced, but that banks do not like the prices on offer from willing buyers. We have read anecdotes suggesting that the gap is as big as bank valuation 90-95 cents on the dollar versus market prices of 30 cents, but the typical example is bank holding price of 80 cents versus market of 30 cents.

So let us repeat, the purpose of this program is NOT price discovery, and any claim along those lines is a lie. The purpose is to keep the banks from recognizing losses that already exist, by reversing them via unloading the paper at a fictitious high price and dumping the loss on the taxpayer.


"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Fri Apr 3rd, 2009 at 05:35:35 AM EST
[ Parent ]
The Mark-to-Market Myth « The Baseline Scenario
Here's a thought. What if the function of these rule changes is to make it easier for banks to ignore the results of the PPIP auctions? For example, Bank A puts up a pool of loans for auction, but doesn't like the winning bid and rejects it; Bank A doesn't want to be forced to write down its loans to the amount of the winning bid. Or, alternatively, Bank B sells a security to a buyer, and Bank A holds the same security; Bank A doesn't want to be forced to write down the security to the price of Bank B's transaction.

The change to fair value accounting (Rule 157) may make it easier to claim that the sale by Bank B was a "distressed sale," meaning it can ignore it for valuation purposes.



"Dieu se rit des hommes qui se plaignent des conséquences alors qu'ils en chérissent les causes" Jacques-Bénigne Bossuet
by Melanchthon on Fri Apr 3rd, 2009 at 11:03:33 AM EST
[ Parent ]
gold to Deutshe Bank so that the latter could deliver on its illegal naked shorts of gold.

http://seekingalpha.com/article/129128-did-the-ecb-save-comex-from-gold-default

Hey, Grandma Moses started late!

by LEP on Fri Apr 3rd, 2009 at 08:35:49 AM EST
[ Parent ]
Well, there is the technical point that taking a short position in a futures contract is not an illegal short.

Seeking Alpha: Did the ECB Save COMEX from Gold Default?

On Tuesday morning, gold derivatives dealers, who had sold short in the face of a fast rising gold price, faced a serious predicament. Some 27,000 + contracts, representing about 15% of the April COMEX gold futures contracts remained open. Technically, short sellers are required to give "notice" of delivery to long buyers. However, in reality, buyers are the ones who control the amount of gold to be delivered. They "demand" delivery of physical gold by holding futures contracts past the expiration date. This time, long buyers were demanding in droves.

In normal times, very few people do this. Only about 1% or less of gold contracts must be delivered. The lack of delivery demand allows the casino-like world of paper gold futures contracts to operate. Very few short sellers actually expect or intend to deliver real gold. They are, mostly, merely playing with paper. It was amazing, therefore, when March 30, 2009 came and passed, and so many people stood for delivery, refusing to part with their long gold futures positions.

Wow. See Luis de Sousa's last diary London G-20 meeting: the last chance?
What could happen then if a new coordinated reserve currency fails to emerge? The answer is simple: the US dollar will stop being the world trading benchmark. A period will then unfold during which trading nations won't have a clear worldwide unit to value their goods, much less to store value for future trading. Possibly, some regional currencies might be tried on a geographically limited basis, and another alternative might emerge with a currency for which there isn't much policy to go about: gold. The consequences of such transition will be immense; an Hungarian mathematician called Antal Fekete, claims to already be getting signs in that sense, with gold futures entering backwardation late last year. This is a rather technical issue, way beyond the aims of this simple essay, but with or without backwardation, it is important to know what Fekete foresees [pdf!] in case the present system ceases to exist without a clear replacement
Let me now quote Fekete (PDF):
Tom says that he does not see things evolving in the same catastrophic manner as I do. For example, he believes that "there will always be willing buyers and sellers of gold in some quantity if the price is right." Buyers - si, sellers - no! That's just the whole point. The lack of credibility of irredeemable currency will be such that no one in his right mind will accept it in exchange for gold, the ultimate liquidator of debt. Previously, people were willing to trade their gold because they could always replenish their supply from Comex warehouses. That means, in other words, that the irredeemable dollar could still be used as a liquidator of debt (i.e., gold still has a competitor). But let them close the Comex gold warehouses. This is a quantum jump; it means that the irredeemable dollar can no longer be used to liquidate debt, e.g., debt incurred by those holding short positions in gold futures. It is essential not to belittle the import of this observation.
He's considering a hypothetical scenario in which COMEX ceases to operate.
Tom thinks that I am an alarmist in believing that the permanent closing of the gold window at the Comex will mean a cessation in gold mining, loss of segregated metal deposits, and institutionalized theft of ETF holdings.

...

I have nowhere said that the end of the fiat money system will follow the closing of the gold window at the Comex in a matter of days. Sure, finance ministers and central bankers will try to "muddle through". It is not possible to predict how long the death throes of fiat money will continue. Tom may be right in suggesting that it will take many years, and claims of an imminent monetary and economic collapse will again turn out to be wrong.



Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Carrie (migeru at eurotrib dot com) on Fri Apr 3rd, 2009 at 08:58:50 AM EST
[ Parent ]
Migeru:
taking a short position in a futures contract is not an illegal short
Oops, I was wrong...

Did the ECB Save COMEX from Gold Default? -- Seeking Alpha

It is quite important to determine whether or not Deutsche Bank was bailed out by the ECB because that will answer a lot of questions about allegations of naked short selling on the COMEX. If the ECB knew that its gold would be used as post ipso facto "cover" for uncovered shorting, staffers at the central bank might be co-conspirators. At any rate, if the German bank did sell short on futures contracts without having enough vaulted gold it sold a naked short. It also means that the ECB has facilitated a major rule violation in a jurisdiction (the USA) with which Europe is supposed to have extensive joint regulatory agreements, any number of which may have been violated by this action of the ECB. At the very least, naked short selling is a blatant violation of CFTC regulations, which require 90% cover of all deliverable metals contracts. If the delivered gold came directly, or indirectly, from the ECB, it means that Deutsche Bank's gold short contracts were "naked" at the time they were entered into.
(my emphasis)

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Carrie (migeru at eurotrib dot com) on Fri Apr 3rd, 2009 at 09:42:02 AM EST
[ Parent ]
Err...Who among our leaders were standing firm for tough international standards so recently?  This "intervention" by the ECB could possibly be justified on the grounds of preventing a COMEX fiasco and panic, but failure to proceed against Deutsche Bank on violations of law, if any, can only be seen as concern about "whose ox got gored."

On another point, this underlines warnings I have read about the dangers of trying to hedge one's savings by investing in gold via exchange traded funds vs owning the metal.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Fri Apr 3rd, 2009 at 01:09:59 PM EST
[ Parent ]
As I said elsewhere, one of things a futures market is does is naked short selling.

The writer got his facts wrong. The 90% provision was aimed to rein in scam artists selling "look-alike" contracts off-exchange to mug punters. It's an obsolete provison, because the scam artists have moved on to more lucrative techniques like CDS and CLOs....

There's nothing odd about big dealers like DB borrowing gold from central banks to make exchange deliveries either, although I grant you the size of this delivery is way out of the ordinary.

I wouldn't touch gold with a barge pole. It's been manipulated by the big dealers and Central Banks since for ever.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Fri Apr 3rd, 2009 at 09:48:33 PM EST
[ Parent ]
Good catch, LEP, that article does raise some important political questions about the ECB and about Deutsche Bank.

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith
by Carrie (migeru at eurotrib dot com) on Fri Apr 3rd, 2009 at 09:48:29 AM EST
[ Parent ]

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