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John Dolva

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Inequality led to poorest families taking on more debt, study finds


So now we know whose fault the recession is. Ours


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UK 'may never fully recover' if Greece exits euro


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Definition of 'Quantitative Easing'

A government monetary policy occasionally used to increase the money supply by buying government securities or other securities from the market. Quantitative easing increases the money supply by flooding financial institutions with capital, in an effort to promote increased lending and liquidity. icon_inv.png

Investopedia explains 'Quantitative Easing'

Central banks tend to use quantitative easing when interest rates have already been lowered to near 0% levels and have failed to produce the desired effect. The major risk of quantitative easing is that, although more money is floating around, there is still a fixed amount of goods for sale. This will eventually lead to higher prices or inflation.




Advanced Nations Should Skip Quantitative Easing, Kim Says

By Eunkyung Seo - May 16, 2012 1:54 PM GMT+0800

South Korea’s central bank governor urged developed nations to resist another round of quantitative easing even as a slide in global stocks underscored the concern that Greece may exit the euro, causing turmoil in markets.

“Additional quantitative easing will have more of an adverse effect than a positive effect,” Bank of Korea Governor Kim Choong Soo said in a speech prepared for a lecture at Hallym University, Chunchon, north of Seoul. “If liquidity remains ample for too long, it could lead to speculative activities.”

Asian stocks fell for a sixth day today and commodities dropped as talks to form a new Greek government failed. The U.S. Federal Reserve is likely to start a third round of stimulus in June, Goldman Sachs Group Inc.’s commodity research team, led by Jeffrey Currie in New York, wrote in a report May 9.

The MSCI Asia Pacific Index slid almost 3 percent at 2:48 p.m. in Tokyo, while Hong Kong’s Hang Seng Index (HSI) slumped by the most in six months and Standard & Poor’s 500 Index futures declined 0.2 percent. South Korea’s Kospi fell 3 percent and the won weakened 0.9 percent to 1163.95 per dollar.

Emergency Meeting

South Korean officials from the finance ministry, the central bank and financial regulators will hold an emergency meeting at 7:30 a.m. tomorrow in Seoul to discuss the European debt crisis and financial markets, according to a text message from the Finance Ministry.

The U.S. central bank bought $2.3 trillion of bonds in two rounds of so-called quantitative easing, or QE, from December 2008 to June 2011. The Fed is also replacing $400 billion of short-term Treasuries in its holdings with longer-term debt to keep borrowing costs down, under a program scheduled to end next month.

Meanwhile, South Korea’s export-dependent economy is recovering very slowly as most advanced countries are still struggling following the global financial crisis, Kim said. Gross domestic product expanded at the fastest pace in a year last quarter, mostly boosted by government spending and investments by semiconductor chipmakers.

To contact the reporter on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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Havana. June 1, 2012


Options for confronting the crisis

Mario Esquivel

THE Bank of the South, an initiative launched in December 2007 by seven South American countries, can be described today as a viable and real alternative to face the onslaughts of the international financial crisis.


The mission of the institution, designed as an alternative to multilaterals of the stature of the World Bank and the International Monetary Fund (IMF), is to promote activities to strengthen economic integration.

In this context, the ratification of the Bank of the South’s constitutional agreement by five of its members (Venezuela, Argentina, Bolivia, Ecuador and Uruguay), paved the way for its physical creation.

It is expected that a similar step will be taken by the Paraguayan and Brazilian Parliaments.

The first meeting of the Bank of the South’s Council of Ministers, the body responsible for moving forward the new financial entity’s operational activities, is planned to take place shortly.

With its headquarters in Caracas, Venezuela, the Bank of the South has two branch offices in Buenos Aires and La Paz, and an initial capital of seven billion dollars. This sum is to be contributed in accordance with economic strength; Argentina, Brazil and Venezuela are providing six billion dollars (two billion each). Ecuador and Uruguay are depositing $400 million each, while Paraguay and Bolivia will both add $100 million.

Experts say that the bank’s funds could reach $20 billion, taking into account its members’ potential and the strength of Brazil, among the world elite given its international hard currency reserves of $359 billion.

An innovative element in the constitution is that each member has the right to a vote, at a far remove from existing distortions in the World Bank, where – for example – one single country (the U.S.) holds 16.3% of the total votes, and in contrast, 24 African nations jointly hold 2.85%.

According to Nobel Economy Prize winner Joseph Stiglitz, the advantages of a project of this kind include the capacity of reflecting the perspectives of the South. The Bank of the South also provides the conditions to create a new regional financial architecture, capable of promoting development projects of a social nature in order to overcome poverty.

The activation of the Bank of the South is arriving at an opportune moment, given that Latin America and the Caribbean are faced with the possibility of a downturn in the region’s rate of economic expansion within an unfavorable scenario.

Uncertainty, volatility and deceleration are characteristic terms of forecasts for the current period, in which estimates point to an increase of 3.7% in the region’s GDP, as opposed to the 4.3% growth in 2011. The Economic Commission for Latin America and the Caribbean has stated that pressure on the world economy and turbulence in international financial markets will have an impact on the area’s development. (Taken from Orbe)


The Bank of the South is to operate with

a start up sum of $7 billion

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A different kind of "fiat" was created by this executive order.

WASHINGTON -- President Barack Obama eased enforcement of immigration laws Friday, offering a chance for hundreds of thousands of illegal immigrants to stay in the country and work. Immediately embraced by Hispanics, the step touched off an election-year confrontation with congressional Republicans.

"Let's be clear, this is not amnesty, this is not immunity, this is not a path to citizenship, this is not a permanent fix," he said. "This is the right thing to do."

The policy change will affect as many as 800,000 immigrants. It bypasses Congress and partially achieves the goals of the DREAM Act, which would establish a path toward citizenship for young people who illegally came to the U.S. but are in college or the military.

Under the administration plan, illegal immigrants will be immune from deportation if they were brought to the U.S. before they turned 16 and are younger than 30; have been in the country for at least five continuous years; have no criminal history; graduated from a U.S. high school or earned a GED or served in the military. They also can apply for a work permit that will be good for two years with no limits on how many times it can be renewed.

Obama said the change is effective immediately to "lift the shadow of deportation from these young people."

The move comes in an election year in which the Hispanic vote could be critical in swing states such as Colorado, Nevada and Florida. Although Obama enjoys support from a majority of Hispanic voters, Latino enthusiasm for the president has been tempered by the slow economic recovery, his inability to win congressional support for a broad overhaul of immigration laws and by his administration's aggressive deportation policy.

The step, to be carried out by the Department of Homeland Security, comes one week before Obama plans to address the National Association of Latino Elected and Appointed Officials' annual conference in Orlando. Republican presidential challenger Mitt Romney is to speak to the group Thursday.

The policy closely tracks a proposal being drafted by Republican Sen. Marco Rubio of Florida, a potential vice presidential running mate for Romney, as an alternative to the DREAM Act, formally the Development, Relief and Education of Alien Minors Act.

The change drew swift criticism from GOP lawmakers, who accused Obama of circumventing Congress in an effort to boost his political standing and of favoring illegal immigrants over unemployed U.S. citizens.

"President Obama and his administration once again have put partisan politics and illegal immigrants ahead of the rule of law and the American people," said Rep. Lamar Smith of Texas, GOP chairman of the House Judiciary Committee.

Republicans, including Romney, say they want tighter border security measures before they will consider changes in immigration law. Romney opposes offering legal status to illegal immigrants who attend college but has said he would do so for those who serve in the armed forces.


Edited by Greg Burnham
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How so?

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How so?

It is equivalent to granting amnesty by decree or fiat. Through an Executive Order, President Obama circumvented congress and the American People.

Now, it is possible that congress (representing its constituencies) may have passed something similar eventually, but the fact that it was done by an EO

undermines the process. I think that the issuing of executive orders is often appropriate, but not so much in this case. I know many people who agree

with Obama about this and I also know many who do not. I personally think that the spirit of his action is noble, while the timing is suspect...

[edit: John, sorry about being somewhat off topic. I was focusing on the word fiat--but not in relation to currency.]

Edited by Greg Burnham
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That's ok, Greg. Apology accepted and I think you make some important points there. I'd add a question about why? For example don't Puerto Ricans have citizenship, no voting rights but can join the military? What's up with that?

Anyway It's a bit of a stretch to see the president presiding over killing and terrorising people around the world acting out of good conscience and not for some other reason. Given the nature of Capitalism there is precious little mandated that does not have a profit motive so in a way it does have to (arguably, though I'd have to drag in class struggle here) to do with fiat money or faith in the nature (illusory) of currency which I don't think they have any faith in at all anyway but a deep commitment to ensuring debt slaves do so.

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You're right. Puerto Ricans are US citizens without the right to vote, but can serve in the military. There is considerable debate amongst them as to whether

or not to seek statehood. There is a referendum due this November on the subject.

I also agree with you that the "Obama did it out of the kindness of his heart" reason behind his EO is a huge stretch--and not very plausible. It seems timed

for the election.

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Barclays fined for attempts to manipulate key bank rates


Chief executive Bob Diamond will give up his bonus for this year - last year it was £2.7m

Barclays bank will pay penalties of £290m ($450m) for trying to rig the key interest rates at which banks lend money to each other.

The penalty from UK and US authorities followed "serious and widespread" misconduct, the Financial Services Authority said.

These interbank rates influence the costs of loans and mortgages.

Barclays chief executive Bob Diamond and three other executives have given up this year's bonus as a result.

Barclays admitted the actions of its staff, which lasted from 2005 to 2009, "fell well short of standards".

The misconduct relates to the daily setting of the London Interbank Offered Rate (Libor) and the Euro Interbank Offered Rate (Euribor).

Continue reading the main story

_53409471_peston-112x81.jpg Analysis Robert Peston Business editor

Barclays has admitted that a group of traders lied about what it was costing the bank to borrow.

Now, why does this matter?

It matters because lots and lots of deals involving clients of Barclays used the interest rate into which Barclays was feeding this information, about its own borrowing costs, to determine the profit and loss on their own deals.

It's quite hard to think of behaviour by a bank as shocking as this: not telling the truth about what it is costing you to borrow, that then becomes a benchmark for pricing other deals.

The statement from the US regulator, which levied a big chunk of the fine, talks about how Barclays was working with other banks to try to fix this interest rate.

This of course implies that Barclays is simply the first bank to settle and we will see fines and punishments against some of the other big banks of the world.

These are two of the most important interest rates in the global financial markets and directly influence the value of trillions of dollars of financial deals between banks and other institutions.

The FSA said: "The integrity of benchmark reference rates such as Libor and Euribor is of fundamental importance to both UK and international financial markets."

"Firms making submissions must not use those submissions as tools to promote their own interests," the regulator added.

'Wholly unacceptable'

Each day the British Bankers' Association and the European Banking Association publish the the Libor and Euribor rates by taking an average of the estimated rates submitted to them by leading banks.

Between 2005 and 2008, the Barclays staff who submitted estimates of their own interbank lending rates were frequently lobbied by its derivatives traders to put in figures which would benefit their trading positions, in order to produce a profit for the bank.

And between 2007 and 2009, during the height of the banking crisis, the staff put in artificially low figures, to avoid the suspicion that Barclays was under financial stress and thus having to borrow at noticeably higher rates than its competitors.

"Making submissions to try to benefit trading positions is wholly unacceptable," the FSA said.

"Barclays' behaviour threatened the integrity of the rates with the risk of serious harm to other market participants," it added.

One of the US authorities involved, the US Commodity Futures Trading Commission (CFTC) described the importance of the Libor rates.

"People taking out small business loans, student loans and mortgages, as well as big companies involved in complex transactions, all rely on the honesty of benchmark rates like Libor for the cost of their borrowings."

'Utmost regret'

Barclays said it had reached settlements with the FSA, the United States Department of Justice Fraud Section (DOJ), the CFTC and the other panel members to the bodies that set various interbank rates.

The resolution is part of an industry-wide investigation into the setting of interbank offered rates across a range of currencies between 2005 and 2009.

Chief executive Bob Diamond, who last year got a bonus of £2.7m, said activities "fell well short of the standards to which Barclays aspires in the conduct of its business".

"I am sorry that some people acted in a manner not consistent with our culture and values. To reflect our collective responsibility as leaders, Chris Lucas, Jerry del Missier, Rich Ricci and I have voluntarily agreed with the Board to forgo any consideration for an annual bonus this year," Mr Diamond added.

Barclays chairman, Marcus Agius, said: "The Board takes the issues underlying today's announcement extremely seriously and views them with the utmost regret."

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