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Wednesday, October 29, 2014

Reblogged: Federal Reserve ends quantitative easing (QE3) bond-buying program, Coca-Cola Ordered to Shut Down ,Rampant financial crime in City of London eroding public trust

Federal Reserve ends quantitative easing (QE3) bond-buying program

by Light Worker 29501
Finally! QE3 is over! I can almost hear the booming voice, "Step away from the money-printing machine!" Now  that QE3 is done, what's next? Is this a sign of better things to come? Look at all of the distractions we've had in the last couple of days...  -LW


Federal Reserve Chairman Janet L. Yellen. (AFP Photo/Darren McCollester)
Federal Reserve Chairman Janet L. Yellen. (AFP Photo/Darren McCollester)The Federal Reserve has officially announced an end to its quantitative easing bond-buying program, but economists are split over whether the central bank’s decision will help or hinder post-recession recovery.
As expected, the Fed said Wednesday afternoon that it’s third and most recent round of quantitative easing, QE3, would come to an end.
"The Committee judges that there has been a substantial improvement in the outlook for the labor market since the inception of its current asset purchase program. Moreover, the Committee continues to see sufficient underlying strength in the broader economy to support ongoing progress toward maximum employment in a context of price stability. Accordingly, the Committee decided to conclude its asset purchase program this month," reads part of a statement released by the Fed on Wednesday. "The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee's holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions."
The confirmation surprised few since the Fed was largely reported ahead of Wednesday’s decision to be considering making such an announcement. As far as what the result will be, however, is up for debate as economists weigh potential outcomes ranging from outright optimism to doom and gloom.
Combined, the three rounds of QE undertaken by the Fed since 2008 have generated trillions of dollars for the American economy through a process in which the central bank has perpetually pumped money into long-term government bonds and bonds backed by home mortgages. But David Wessel, the director of the Hutchins Center at the Brookings Institution, told NPR recently that the three-and-a-half-trillion dollars’ worth of bonds purchased during that six-year span has been “far more than anybody inside or outside the Fed expected when this all began.”
AFP Photo
AFP Photo

Indeed, the Fed has twice announced an end to its bond purchasing programs, only to soon after start again when it was realized that the desired effect failed to be achieved. Six years later, though, the end to QE3 might once and for all be the final nail in the program’s coffin.
In 2009, Ben Bernanke, then the chairman of the Fed, said that quantitative easing would only end “when credit markets and the economy have begun to recover,” at which point the central bank would resume business as usual.
“As the size of the balance sheet and the quantity of excess reserves in the system decline, the Federal Reserve will be able to return to its traditional means of making monetary policy--namely, by setting a target for the federal funds rate,” he said. “In considering whether to create or expand its programs, the Federal Reserve will carefully weigh the implications for the exit strategy. And we will take all necessary actions to ensure that the unwinding of our programs is accomplished smoothly and in a timely way, consistent with meeting our obligation to foster full employment and price stability.”
Today, the American economy is statistically sounder than six years ago: not only have three rounds of QE allowed faltering banks to get boost after boost from the government, but, partially as a result, jobless claims are down drastically from post-recession figures.
Nour Eldeen Al-Hammoury (Image from nourhammoury.com)
Nour Eldeen Al-Hammoury (Image from nourhammoury.com)

Nevertheless, optimism isn’t universal when it comes to what ending QE3 means for the world economy.
“Well there are some improvements, but we can’t say that it is recovering as everyone hoped,” Nour Eldeen Al-Hammoury, a chief market strategist at ADS securities in Abu Dhabi, told Euro News recently. “GDP is growing based on the inventories, which doesn’t mean that sales are increasing. The slack in the economy remains and so far there is no clear strategy on how this slack will be resolved. Moreover, the slowing down in Europe and Asia will be something to consider as the US economy is unlikely to grow on its own.”
According to Al-Hammoury, markets the world over may suffer as a result of ending QE3. “It is not the Middle East markets only, it is global markets and especially the emerging markets,” he said. “Let’s say, for example, Dubai — Dubai stock market was one of the best performers in the world. However, we will see some more declines at the end of the year. These markets are again sensitive to any events. However, these Middle East markets may benefit again from what’s happening in Europe. I mean the outflow that is happening in Europe and also don’t forget that this region has also opened its doors to foreign investors so with the Fed ending QE we might see some declines again, and if the global slowdown continues, global markets, including the Middle East, may continue with the current downside correction.”
Even in the west, that pessimism is present: Pedro Nicolaci da Costa wrote for The Wall Street Journal this week that the Fed may deploy another round of quantitative easing if the decision to end the third series proved to be unsuccessful, which, according to his report, may be the case.
“Many of the studies of large-scale asset purchases, known as quantitative easing or QE, agree they worked very well to prevent deflation and stabilize the financial system during the 2008 crisis, but disagree about how effective the programs have been in boosting growth since then,” da Costa wrote.
Although Bernanke has attributed QE with cutting unemployment, da Costa wrote, Fed researchers and academic economists have for years studied the practice and are split with regards to how successful the rounds have been, and what the eventual outcome will be when all is said and done.
"I do think they're overly optimistic," Barbara J. Cummings of the Boston Private Bank & Trust Company told CNBC this week. "The market and the Fed are definitely saying two different things. And the market is right. It usually is."
To some, the outcome is even drearier. “Without another dose of stimulus, the US will likely slide into recession,” Worth Wray, chief strategist at Mauldin Economics, predicted to Equities earlier this month.

Coca-Cola Ordered to Shut Down for Draining Water & Polluting

by Light Worker 29501
In 2012, Bolivia kicked Coca-Cola out of the country. Now, India is ordering them to shut-down. Who will be next to give Coke the boot? -LW   See More on this: Here   http://2012thebigpicture.wordpress.com/2014/10/29/coca-cola-ordered-to-shut-down-for-draining-water-polluting/




Rampant financial crime in City of London eroding public trust

by Light Worker 29501
Wow! The corrupt banking stories are starting to focus on the City of London--the heart of the central banking cartel. We must be getting close to the end of this chapter...  -LW

Published time: October 28, 2014 19:58
Edited time: October 29, 2014 00:05

The exterior of the headquarters of the Bank of England in London. (AFP Photo)
The exterior of the headquarters of the Bank of England in London. (AFP Photo)
In her first public address since adopting the position of BoE Deputy Governor, Nemet Minouche Shafik denounced the actions of UK traders in foreign exchange, currencies and bonds markets, warning financial misconduct in these sectors goes well beyond a few rogue financiers.A top Bank of England (BoE) official warns widespread financial crime in the City of London is eroding public trust. The BoE’s criticism surfaced as it launched a review to tackle market manipulation.
Referencing LIBOR riggers’ behavior as unacceptable, she suggested fines for such fraudulent activity were inadequate and signified “salt rubbed into the wounds to public confidence in financial markets.”
LIBOR (London Interbank Offered Rate) currently determines the cost of up to $350 trillion worth of global financial products. While the 21st century has been littered with financial scandals, Libor rigging by leading global banks has been dubbed the most flagrant in modern history.
Approximately £4 billion worth of fines have been issued for the manipulation of core benchmark rates to date, and the City is expecting further fines for the rigging of currency markets to be publicly announced in November.
(AFP Photo/DOMINIQUE FAGET)
(AFP Photo/DOMINIQUE FAGET)
(AFP Photo/DOMINIQUE FAGET)
Speaking at the London School of Economics (LSE) on Monday, Shafik warned Britain’s financial system is rigged and characterized by disproportionate rewards.
“When people read of malpractice in financial markets, of trading profits being claimed through manipulation, collusion or dishonesty, they naturally wonder if they are one of the people who have been wronged,” she said.
Joel Benjamin, a leading researcher and campaigner at UK ethical finance group Move Your Money is investigating the impact of LIBOR rigging on UK citizens and stakeholders. Benjamin warns such rate manipulation is anything but a victimless crime, and those who have suffered most in its wake remain largely uncompensated.
“The real victims of LIBOR are pension funds, SME's fraudulently mis-sold interest rate swaps, public authorities with cash investments in the banks, and LOBO loans and PFI contracts where interest repayments increased as LIBOR was rigged lower by the banks,” he told RT on Tuesday.

‘Fix the barrel - to get rid of the bad apples’

Shafik's address at LSE accompanied the launch of the BOE's long-awaited review of fixed income, foreign exchange and commodities markets, collectively termed FICC. The results of the Bank's review, first announced by Chancellor George Osborne in June, are expected to surface following the general election in May 2015.
Commenting on the implications of rate rigging, Osborne warned on Monday that financial integrity is a vital prerequisite for a thriving British economy.
But Benjamin argues Osborne has done little to help small businesses and local authorities that have suffered as a result of such financial crimes.
Britain's Chancellor of the Exchequor, George Osborne. (AFP Photo)
Britain's Chancellor of the Exchequor, George Osborne. (AFP Photo)
Britain's Chancellor of the Exchequor, George Osborne. (AFP Photo)
“Instead of investigating victims of LIBOR fraud and pursuing compensation, George Osborne has handed LIBOR fines to armed forces charities. LIBOR fines should be going to SMEs defrauded by the banks and to fund public services ravaged by austerity cuts borne of the bank bailouts,” he said.
Reflecting on questionable aspects of Britain's financial sector, the BoE’s deputy governor said the tired argument that financial misconduct relates to the behavior of a “few bad apples” is “no longer credible.” Shafik suggested UK financial regulation lacks efficacy and robustness, and a regulatory overhaul is needed to“fix the barrel and to get rid of the bad apples.”
Responding to the BoE Deputy Governor's comments, Benjamin told RT the Bank must drive and oversee a dramatic shift in Britain’s regulatory architecture.
“If the Bank of England are serious about changing the culture of British banking, that means ensuring bankers take responsibility for their actions, and that regulators hold criminal behavior to account,” he said.
Benjamin warns that “deferred prosecution agreements” currently deployed under UK law are particularly problematic. Such legislation facilitates banks in avoiding criminal penalties and keeping damning details of fraudulent activity from public knowledge, he argues.
LIBOR rigging is currently illegal under UK law. And the manipulation of currency and gold markets are set to be classified as criminal offences by the end of 2014.
But Benjamin warns political motivation to prosecute bankers responsible for rate rigging remains paltry at best.
“LIBOR was a clear conspiracy to defraud, and should be treated as such under UK law. But there is no political will to prosecute the bankers who provide over 50 percent of party political donations,” he said.
Benjamin argues that the City of London is characterized by a culture of impunity that reinforces the concept “that crime in the City by elites is tolerable and understandable, while crime on the streets is unacceptable – irrespective of personal circumstances and need.”