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1. U.S. Presidential Election 2012 – President Obama is eligible for a second and final term, looking like a strong contender for re-election thanks to overexposure of too many GOP Presidential candidates and despite voters concern about the economy, considering just 28% he has made progress on improving the economy. After winning barely Iowa’s caucuses, putting new caucus tally Rick Santorum ahead by 34 votes, mormon Mitt Romney celebrated a solid New Hamshire primary victory, endorsing Senator McCain the candidate regarded after the first two critical contests in the 2012 Presidential race as the actual GOP frontrunner, ending Michele Bachmann Republican Presidential race, quitting also Jon.M. Huntsman urging Republicans to support Mitt Romney, pulling out Rick Perry endorsing Newt Gingrich, winning resurgent Gingrich South Carolina primary, portraying Romney and Gingrich each other as politically vulnerable, delivering the first three stops in the GOP nominating contest three different winners. Blocking Republican hostility in an already unpopular Congress the President’s agenda, a final Republican nominee may challenge Obama that he failed to deliver on his promises. In his State of the Union address President Obama vows to create a fairer America, warning Republicans that rich must pay their ‘fair share’ of taxes.
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Elected House speaker Republican Boehner seeks changes in the health care and financial regulation legislations and fights to reduce budget deficit, voting the House to repeal healthcare law, rejecting Democratic-controlled Senate a bid to repeal. Budget deficit and size of U.S. debt is rising faster widening deficit for fiscal year 2011 probably to a postwar record of $1,645 Trillion/10,9% of GDP. The White House released a $3,73 Trillion budget for 2012, running actually an estimated deficit of $973 Billion, proposing to cut deficit by 2018 to 2,8% of GDP through spending cuts, tax increases and a reversal of tax breaks. U.S. Congress cleared spending bill keeping the Government funded for fiscal year 2012, voting also to extend payroll tax-cuts and unemployment benefits for 2 months, agreeing Congressional leaders to begin negotiations to extend both benefits through 2012. Averting default Congress approved a bill signed by President Obama into law raising U.S. debt limit of actually $14,294 Trillion by at least $2,1 Trillion meeting spending needs until after November 2012 elections and finding a compromise on deficit reductions of at least $2,4 Trillion or more over the next decade. However the debt deal achieves little in the short term as the bulk of spending cuts will take effect after the next elections opting the future Congress and President eventually to rewrite the plan and leaves risk of U.S. downgrade, reaffirming Fitch the U.S. triple-A rating, maintaining also Moody’s the AAA-rating for the U.S. adding a negative outlook on the grade, lowering Standard & Poor’s the AAA rating the U.S. held for 70 years to AA+ keeping the outlook at negative, saying the bipartisan debt agreement failed to ensure necessary reduction of record deficits. Topping U.S. public debt already $15,2249 Trillion/exceeding 100% of GDP at the end of 2011 ( producing the U.S. economy in 2011 about $14,285 Trillion worth of goods and services), the Congress’s ‘Debt Supercommittee’ failed to agree on budget cuts of $1,2 Trillion over 10 years, warning Moody’s and Fitch of consequences if the U.S. fails to meet savings goals, lowering Fitch the country’s ratings outlook to negative from stable. After the U.S. debt ceiling has been raised already by $400 Billion and then by $500 Billion to $15,194 Trillion, President Obama requested a final increase of $1,2 Trillion and debt ceiling could be automatically raised to $16,394 Trillion to cover financial needs for fiscal year 2012. The White House insisted that national debt can only be reduced by a combination of spending cuts and tax rises flatly opposed by Republicans, proposing the President a new plan to reduce massive Federal deficit by about $3,6 Trillion until 2021 with roughly half of the savings expected to come from higher taxes on the wealthy and big corporations. Obama’s ‘American Recovery and Reinvestment Bill of 2009′ established permanent middle-class tax cuts getting relief about 95% of taxpayers and included a ‘Buy American’ clause. After its final approval by Congress pushed by Democrats President Obama signed a landmark health care reform bill into law, a plan with an estimated cost of $940 Billion aimed to guarantee affordable health insurance for most Americans providing coverage to 32 Million people, who would be otherwise uninsured, cutting the Federal deficit by $138 Billion over the first 10 years. Thirteen states announced legal action to block the law and a Federal judge ruled that key part of health care bill violates Constitution, filing the U.S. Justice Department a petition asking the Supreme Court to consider the constitutionality of the Obama Administration health-care overhaul, announcing High Court hearings of health-care case beginning March 26, 2012 over three days, abandoning the White House a controversial part of the healthcare law dropping plans to implement a new program to provide Americans with longterm-care insurance seen as financially not viable. Congress repealed ‘don’t ask, don’t tell’, lifting a ban on gay men and lesbians serving openly in military, sending the bill to President Obama, who had campaigned in favor of this historic measure. The U.S. and Moscow put into force the new Strategic Arms Reduction Treaty/ START lasting 10 years, an important successor agreement replacing a key ‘Cold War’ – era nuclear disarmament treaty – reducing warheads on both sides by about 30%. Former Governor of Massachusetts Mitt Romney presented himself as Republican Presidential contender to face Obama, joining the list of GOP Presidential hopefuls Minnesota Representative and Tea Party favourite Michele Bachmann, Texas Governor Rick Perry, Ron Paul, U.S. Representative from the State of Texas, former Speaker of the House Newt Gingrich and Rick Santorum, former U.S. Senator from Pennsylvania. President Obama presented before a joint session of Congress his larger than previously indicated $447 Billion jobs plan through a mix of tax cuts, failing Democratic-controlled Senate to pass the bill, approving Congress long-awaited free trade agreements with strategic allies South Korea, Colombia and Panama, seen as a rare bipartisan achievment. The President announced that all U.S. troops will be withdrawn from Iraq at the end of 2011, declaring officially U.S. war in Iraq over, warning the U.S. implicitly neighbor Iran not to interfere in Iraq, and declared Asia as top priority, a shift popular with regional Governments wary of China’s accelerating rise.
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“Organizing for America”
Government web site tells you if eligible to refinance mortgage. The average rate on 30-year-fixed mortgages climbed to 3,98%:
President Obama is calling on all of us – United We Serve:
President Obama’s campaign promise of giving 95% of working Americans a tax cut – Recovery Act tax cuts and savings:
Standing with President Obama to pave the way for a clean energy future that: – Combats climate change, – creates a new economy powered by green jobs and – ends our dependence on foreign oil.
Take a look at the recap we put together — and share it with friends:
Stand with President Obama today – and support the passage of the Dream act, a step forward on immigration reform:
President Obama – Join our call for immigration reform now:
Real effects of the steps President Obama and Democrats have taken to rebuild our economy:
Charlotte, North Carolina, will host the 46th Democratic National Convention in 2012:
President Obama launches reelection campaign:
President Obama frustrated: Calling on Congress to take action on job:
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2. Economic Outlook 2012 – Stock markets ended a tumultuous year 2011 and may see also a volatile 2012, as the global economy faces another weak year with more turbulences. Debt levels remain high in developed nations with less growth. European leaders warn of a tough 2012. Due to the ongoing debt crisis the Euro continues to be exposed to more difficulties, slipping some nations of the Euro-area back into recession, slowing Chinese expansion caused by a short-term sluggish demand after three decades of high-speed economic growth. Regulators of key-economies will continue to impose stricter control on financial sector, assuming the G20 hopefully a more aggressive role as architect of a new world economic order. Structure and balance of political and economical power between North America, Europe and Asia are shifting fast, pushing BRIC countries as new economic powers and global players for more influence at the IMF and in the World Bank.
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The Federal Reserve worried about stock market turbulence, the fragility of economic recovery making it difficult to reduce unemployment signaled it will hold exceptionally low short-term interest rates between zero and 0,25% at least through late 2014, maintaining policy to reinvest principal payments from its security holdings, seeing inflation to moderate, urging political leaders to do more to ensure growth and control debt problems and in a new action to stimulate the economy initiated ‘Operation Twist’ to shift $400 Billion from short- to long-term Treasuries to push down long-term interest rates and to improve credit conditions. Jobless rate dropped to 8,5% in December 2011 from 8,6% in November, adding the U.S. economy 200.000 jobs, dropping weekly first time jobless claims to a near four year-low of 352.000. According to the Conference Board’s sentiment index consumer confidence rose in December 2011 to its highest level since April reaching 64,5 up from a revised 55,2 in November, continuing the housing market to weigh on the economy as high unemployment and weak job growth have deterred many would-be-buyers even so mortgage rates reached their lowest level in history, falling home prices in most major cities in October 2011 for a second straight month. U.S.- consumer spending, which accounts for about 70% of the U.S. gross domestic product, advanced 3,5% in 2010, growing disposable incomes by 3% and declining savings rate slightly to 5,8%, rising consumer spending modestly in October and November 2011 by just 0,1%, declining disposable personal incomes less than 0,1% in November 2011 in contrast to a 0,3% gain in October 2011, slowing savings rate to 3,5%, surging U.S. consumer borrowing 10% in November 2011 bringing level of consumer credit outstanding to $2,478 Trillion. The U.S. consumer price index/CPI remained flat in November 2011 after decreasing 0,1% in October 2011, rising the core index excluding volatile food and energy prices 0,2% after increasing 0,1% in October. U.S. manufacturing activity grew still faster in December 2011, growing new orders, production and employment, expanding the index of the Institute for Supply Management/ISM to 53,9% from 52,7% in November, while the index of the service sector, which employs 90% of the U.S. work force, dropped to 52,0% in November 2011 from a 52,9% in October. U.S. auto sales ended 2011 with strong gains, increasing year over year sales in December 2011 of Ford 9%, rising those of GM 5% and soaring sales of Chrysler 37%, reaching the industry an annual sales pace of estimated 12,778 Million or 10% more than in 2010 with 11,589 Million vehicles. China surpassed the U.S. in 2009 as the world’s largest auto market, surging production and sales in 2010 32% to 18 Million, slowing to 2,5% in 2011 reaching 18,5 Million units, trailing growth in the U.S. for the first time in at least 14 years. GM’s worldwide sales rose 7,6% to 9 Million vehicles in 2011, regaining the title of the world’s largest automaker, followed by Volkswagen/VW rising its worldwide sales 14,3% to 8,2 Million vehicles, surpassing Toyata with reported global car sales of 7,9 Million. U.S. retail-sales rose for the seventh straight month in December 2011, surging 0,1% from the previous month and 6,5% year-over-year, after November sales increased 0,4%. The U.S. annual inflation rate 2010 was 1,64%, surging in August 2011 to 3,77%, dropping to 3,39% in November from 3,53% in October, forecasting the Fed 2,3%/ 2,5% for 2011 and 1,5%/2% for 2012. U.S.-GDP rose 3% in 2010 expanding by 1,7% in 2011 after growing at an annualized rate of 2,8% in the fourth quarter, forecasting the Fed a growth of 2,7% for 2012. According to the IMF the world economy grew 5% in 2010, lowering growth forecast for 2011 to 4%, saying global expansion will slow to only 3,3% in 2012 citing a mild recession in Europe. The 27-nation European Union GDP expanded by 1,7% in 2010 targeting again 1,7% for 2011, making EU27 up about 30% of the world economy, growing the 17-nation Eurozone GDP by 1,7% in 2010, expected to increase by 1,5% in 2011 after shrinking 0,3% in the last quarter of 2011, predicting economists also a negative growth for the first quarter of 2012, saying the IMF Eurozone’s economy will contract by 0,5% in 2012. The annual inflation rate in the Eurozone eased slightly to 2,8% in December 2011, surpassing still ECB’s target of 2%, and the bloque’s average unemployment rate rose to 10,3% in November 2011. The European Central Bank/ECB kept its key rate steady at 1% in January 2012, promising to continue support for European banks, easing inflation as growth is slowing down. The average budget deficit in the Eurozone rose to 6,3% of GDP in 2010 proyected to drop to 4,3% in 2011, facing as main problem increasing long-term pension costs and other age related expenditure, while public debt levels of the monetary union may rise 2% in 2011 to 90,4%.
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Developing BRIC countries Brazil and Russia are commodity producers and beneficiaries of higher commodity prices, while India and China are both commodity consumers. Brazil’s economy expanded by 7,5% in 2010 and will grow according to forecasts 4,5% in 2011, replacing Britain as the world’s sixth largest economy, after the U.S., China, Japan, Germany and France. Russia, the energy giant, rising GDP by 4,4% in 2010 targeting an economic growth of 3,6% in 2011 and of 3,5% in 2012. India with an economic expansion of 10,4% in 2010 is projecting a growth of 7,8% for 2011, while China’s GDP expanded 10,4% in 2010 and 9,2% in 2011, slipping most likely to about 8,5% in 2012. The 4 BRIC countries account for 42% of the world’s population, 14,6% of the global GDP of about $60,7 Trillion, 12,8% of the global trade volume and more or less 40% of the world’s foreign exchange reserves, contributed decisively to global recovery and are as emerging markets drivers of economic growth. BRIC countries invited South Africa to join the group, including other possible newcomers to the bloc Indonesia, the world’s third largest democracy and the fourth most populous country with an expected annual growth rate exceeding 6% until 2015, Mexico, South Korea and Turkey.
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During the global financial crisis cash rich Sovereign Wealth Funds injected more than $80 Billion to recapitalize and rescue some of the world’s biggest financial institutions, while Lehman Brothers had to file for Chapter 11 bankruptcy protection and entered into liquidation owing more than $613 Billion to creditors in the U.S., Europe and Asia. Barclays Bank purchased Lehman’s core US-broker-dealer-operations in a $1,75 Billion deal, turning itself into a universal bank, and Japan’s largest brokerage Nomura acquired Lehman’s flagship operations in Asia including its equities operations and investment banking in Europe and the Middle East. Goldman Sachs repayed a $10 Billion Government aid after raising $7,5 Billion in public offers and receiving an investment from Berkshire Hathaway purchasing $5 Billion in preferred shares and getting warrants for another 5 Billion in common stock. The bank reported earnings of $8,35 Billion in 2010, buying back after receiving regulators’ permission the preferred shares it sold to Berkshire Hathaway paying $1,64 Billion for Warren Buffett’s help, falling its earnings 58% to $1 Billion or $1,84 per share in the fourth quarter of 2011, dropping net earnings for the year 2011 67% to $2,5 Billion on revenues of $28,8 Billion down 26% from a year ago. The S.E.C. sued Goldman Sachs for securities fraud, off-loading risk of subprime home loans and commercial mortgages misleading investors, who lost money as the mortgage market collapsed, agreeing the bank to pay a record $550 Million to settle charges, questioning investors Goldman Sachs risk taking. Morgan Stanley, actually perceived as the least creditworthy of the six largest U.S. banks, reported for the year 2010 a profit of $3,6 Billion on revenues of $31,6 Billion, posting for the full year 2011 an income of $4,2 Billion or $1,26 per diluted share from continuing operations on net revenues of $32,4 Billion, after showing a smaller than expected loss of $227 Million or 0,14 per diluted share in the fourth quarter of 2011. Morgan Stanley had suspended in 2008 discussions about increasing the participation of the China Investment Corp/CIC, a shareholder with a 9,9% stake, after Mitsubishi UFJ Financial Group offered to pay $9 Billion for a 21% stake in the US bank and $3,5 Billion to take over 100% of the Union Bank of California, merging the Japanese bank its security subsidiary with Morgan Stanley’s Japanese securities operations. Citigroup holds 49% in the Smith Barney brokerage joint venture with Morgan Stanley, interested to exercise its options purchasing Citigroup’s remaining stake as soon as possible. Reshaping its structure, isolating its money losing operations into a new unit called Citi Holdings, keeping its healthy key businesses in an unit called Citicorp, the financial giant sold its 64% stake in Japanese Nikko Asset Management to The Sumitomo Trust & Banking Corp for about $795 Million after it sold its Japanese brokerage business Nikko Cordial Securities and other parts of Nikko Citigroup’s Japans operations for about $5,76 Billion to Sumitomo Mitsui Financial Group/SMFG as well as its Japanese trust bank NikkoCiti Trust & Banking Corp for about $200,7 Million to Nomura Trust & Banking Corp, obtaining vital capital injections. Citigroup converted preferred shares and trust-preferred securities into new common stock, including $33 Billion from private holders and $25 Billion out of the $45 Billion invested by the Government, which left the U.S. with the largest ownership stake of about 27% or 7,7 Billion shares, repaying $20 Billion of the remaining Tarp funds, selling off Treasury the total of its 7,7 Billion common shares making a profit for taxpayers on the rescue of $12,3 Billion including share gain, dividends and proceeds from other securities. Citigroup, the nation’s third largest bank, reported for the fourth quarter of 2011 a net income of $1,16 Billion or 38 cents a share down 11% from a year earlier and for the full year of 2011 a net income of $11,3 Billion on revenues of $78,4 Billion compared to earnings of $10,6 Billion on revenues of $86,6 Billion in 2010. Wells Fargo, the largest U.S. home lender, closed a $15,8 Billion stock deal to buy all of Wachovia Corpration, returned $25 Billion TARP funds and posted a profit of $12,36 Billion in 2010, reporting for the fourth quarter of 2011 a profit of $4,1 Billion or 73 cents per diluted share up 20% from a year earlier, increasing for the full year of 2011 net income 28% to 15,9 Billion or 2,82 per share. Bank of America bought Merrill Lynch for about $50 Billion, making the U.S. bank which also purchased troubled mortgage giant Countrywide the second largest financial institution in the world. BofA, the biggest U.S. mortgage servicer, repaid all of its $45 Billion Government bailout funds, raising $18,8 Billion in fresh capital, revealing for the full year 2011 a net income to common shareholders of $85 Million or 1 cent a share compared to a loss of $2,23 Billion in 2010, after closing the fourth quarter of 2011 with a net income applicable to common shareholders of $1,58 Billion or 15 cents. Showing confidence in BofA billionaire Warren Buffett plans to buy through his investment company $5 Billion in preferred shares of the bank, which agreed to sell 23,5 Billion shares reducing its stake in China Contsruction Bank to 1%, gaining $5,1 Billion, using proceeds to raise capital of Bank of America Corp. BofA plans to cut $5 Billion in annual costs until 2013 and to slash 30.000 jobs, keeping its option open putting Countrywide, once the No. 1 mortgage lender, into bankruptcy, whose adquisition has cost the bank tens of Billions of Dollars, remaining of six BofA business lines mortgages the only one still losing money. JPMorgan Chase bought the troubled fifth largest U.S. investment bank Bear Stearns and acquired almost all of Washington Mutual/ WAMU, with $307 Billion in assets the nation’s largest savings and loan and among the worst hit by the housing crisis, creating a nationwide retail franchise rivalled only by Bank of America, which lost the title as the U.S. nation’s biggest bank as JP Morgan Chase passed BofA’s $2,2 Trillion in assets. JP Morgan Chase posted a strong $17,4 Billion annual profit in 2010, returning the U.S. capital investment of $25 Billion, reporting a disappointing 23% drop in fourth quarter 2011 earnings to $3,7 Billion on revenues of $22,2 Billion and for the full year 2011 still a profit of $19 Billion. WAMU filed a chapter 11 reorganization plan after resolving a $4 Billion dispute with JP Morgan Chase and the FDIC, having the FDIC seized Washington Mutual’s flagship bank in 2008 selling its assets to JP Morgan Chase for $1,9 Billion. U.S. banks, probably with the only exception of Wells Fargo, which relies less on investment banking closing 2011 most likely with a record profit of $15,5 Billion, see difficult year 2011 as ‘a year to forget’.
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After EU regulators insisted in the necessity to increase transparency in the $615 Trillion over-the-counter/OTC derivatives market linked to the global credit crisis, banks agreed to an European clearing mechanism for European Union-based credit default swap/CDS contracts, acting as buyer to every seller and as seller to every buyer, absorbing losses in the event of default, crafting the U.S. rules for a stricter control of OTC derivatives making its trading safer and more transparent, to be negotiated in the future through exchanges or central clearing houses regulated by the Security Exchange Commission/SEC and the Commodity Future Trading Commission/CFTD, seeking the U.S. global rules to avoid abuses. European leaders negotiated a new model for financial supervision creating three new agencies starting to operate beginning 2011 to monitor banks, insurance companies and trading on markets, the European Banking Authority/EBA-London, the European Securities and Markets Authority/ ESMA-Paris and the European Insurance and Occupational Pensions Authority/EIOPA-Frankfurt, complemented by the European Systemic Risk Board monitoring potential threats to financial stability and a European System of Financial Supervisors checking quality and consistency of national regulatory authorities. The Obama administration supported an overhaul of the U.S. financial regulatory system to protect consumers and avoid risky practices, giving the Federal Reserve new oversight powers, controlling the SEC rating agencies. The historic Wall Street reform could mark the end of an era of deregulation with ‘no more bailouts’ and ‘no banks too big to fail’, looking Wall Street to Republicans hoping their party will ensure that regulators do not impose rules considered as too restrictive for banking industry. The financial crisis produced large withdrawals and investment losses to the hedge fund industry managing at its peak beginning 2007 about $2,2 Trillion in assets, expected to shrink according to estimates by more or less 45%/$1 Trillion, introducing the European Union and the United States, where hedge funds with more than $30 Million in assets under management will have to register with the SEC, a stricter control and tighter regulations. The crisis conduced also to a tightening in lending standards of credit card issuers with consumers to lower risk profile, declining revolving credit card debt and net charge offs.
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The German Government completed the total nationalization of troubled Hypo Real Estate, one of Europe’s biggest commercial property lenders, transfering the bank €210 Billion in risk positions and non strategic assets to a ‘bad bank’. The Hypo Real Estate Nationalization Bill created the contingency initiative called Special Fund for Financial Market Stabilization/SoFFIN for an amount of up to €500 Billion to control the troubled mortgage lender and safeguard the overall German banking system, creating a ‘bad bank’ plan, estimating the Government that German banks may have as much as €230 Billion worth of toxic assets in their books. SoFFIN has been reactivated until the end of 2012 making available loan guarantees reaching €400 Billion to back toxic assets including also sovereign bonds to be placed into a special purpose vehicle ‘bad bank’ and direct credits of up to €80 Billion to help German financial institutions, needing 6 German banks according to a new EBA stress test €13,1 Billion to comply with EU recapitalization requirements until mid-2012, among them Commerzbank €5,3 Billion and Deutsche Bank €3,2 Billion. Germany’s economy expanded by 3,6% in 2010 and by 3% in 2011, although contracting by 0,25% in the fourth quarter of 2011, and could face a mild recession during the first half of 2012 ending 2012 with a gowth of only about 0,5%. The German State deficit rose to 3,3% in 2010 and fell to 1% of GDP in 2011, expected to remain at that level also in 2012, reaching German public debt 81,7% of GDP in 2010 projected to decline to 81,1% in 2011, while the jobless rate decreased to 6,4% ending 2011, dropping the annual inflation rate to 2,1% in December 2011. The German Government approved two economic stimulus packages worth of €50 Billion and €49,25 Billion during the last financial crisis, setting up to fight credit crunch a €115 Billion ‘German Fund’ which expired ending 2010 and introduced a bank crisis fund imposing a tax on banks to help finance a future financial crisis. Deutsche Bank, the biggest bank in Germany, raised €10,2 Billion to increase its share to a controlling stake above 50% in Postbank and to meet stricter capital requirements according to Basel III, buying also one of Europe’s oldest private banks Sal. Oppenheim, reporting for 2010 a net profit of €2,3 Billion, for the first quarter of 2011 a net income of €2,1 Billion, declining for the second quarter to €1,2 Billion and for the third quarter to €777 Million. Germany’s Deutsche Boerse and stock market operator NYSE Euronext sealed a $9,53 Billion deal to merge, purchasing Deutsche Boerse, which would own 60% of the combined entity all stock of NYSE Euronext, to create the world’s largest exchange operator, gaining the deal U.S. approval, however leaning European regulators toward blocking the merger. Reversing policy after the Japanese nuclear debacle Germany’s coalition decided to go nuclear-free by 2022, closing immediately eight of its oldest reactors and to phase out the nine remaining operating facilities over the next decade. After a surprise nationalization of Fortis Dutch business, French BNP Paribas took control of troubled Fortis operations in Belgium and Luxembourg in a €14,5 Billion deal, jumping BNP’s net profit 2010 to €7,8 Billion on revenues of €43,8 Billion. The French Government revealed its economic stimulus package for €37 Billion principally oriented towards investment efforts, expanding GDP by 1,6% in 2010, predicting economists a growth of 1,5% in 2011 and of only 0,2% in 2012 barely avoiding recession. The British Government nationalized part of UK’s banking system, buying up to Pstg.50 Billion preference shares or other interest bearing shares in 7 big UK banks, granting Pstg.250 Billion of loan guarantees up to three years and another Pstg.100 Billion in short-term liquidity. The Royal Bank of Scotland/RBS, the Halifax Bank of Scotland/HBOS and Lloyds TSB more urged to be recapitalized participated in the program, owning British taxpayers 70% of RBS and 43,5% of Lloyds, creating the British Government the UK Financial Investments Ltd/UKFI to control its stakes in financial institutions, while Barclays and HSBC raised capital from private investors to avoid conditioned Government support. Barclays reported for 2010 a net income of $5,7 Billion, posting HSBC, the biggest European bank group, a net income of $14,191 Billion applicable to common shares in 2010 and of $4,15 Billion for the first quarter of 2011 falling charges for bad loans, returning also Government controlled RBS and Lloyds, which had acquired HBOS, to profit. The British Government increased its rescue package by another Pstg.100 Billion adding new measures, such as an insurance against a fee to protect financial institutions against future defaults on mortgage and other loans. UK’s economy expanded by 1,3% in 2010, falling Britain’s GDP 0,2% in the fourth quarter of 2011, struggling the economy to avoid falling back into a recession, and is expected to grow 1,1% in 2011 and 0,6% in 2012. Ending 13 years of Labor Party rule the leader of the Conservative Party David Cameron became new Prime Minister forming a coalition with Liberal Democrats, resigning defeated Gordon Brown. UBS posted a net profit attributable to shareholders of CHF 7,2 Billion or CHF 1,87 per share for all of 2010, of CHF 1,8 Billion for the first quarter of 2011 of CHF 1,02 Billion for the second quarter and dropped 39% to a net profit of CHF 1,018 Billion, overcoming a CHF 1,8 Billion rogue trading loss. After the U.S. and Swiss Governments agreed that UBS will submit details of 4.450 American clients suspected of tax evasion, the Swiss Government showing confidence regarding the situation of the investment bank, sold its 9% UBS stake at a profit of about $1,1 Billion to institutional investors. Swiss Parliament approved finally in 2010 the U.S.-UBS tax treaty lifting the veil on the country’s traditional banking secrecy. Credit Suisse increased its capital base with new investments of about $8,8 Billion from a group of private investors, increasing its stake a subsidiary of the Qatar Investment Authority, already a major shareholder, declining net profit to CHF 5,1 Billion or CHF 3,91 per share for all of 2010. Russia supported its banking system using its biggest states banks VTB and Sberbank, providing much needed longer-term liquidity, shored up its weakend stock markets and established a new recovery plan offering $90 Billion in stimulus spending through tax cuts and social welfare benefits to stimulate domestic consumer demand. With rising energy prices, a strengthened financial sector, an improved investment climate and diversifying its economy Russia showed signs of recovery, reaching its gold and foreign exchange reserves again $507,5 Billion. The Russian Government plans to issue ruble denominated bonds and prepared a privatisation program over 5 years worth some $40 Billion selling minority stakes in about 900 State controlled companies helping to finance budget deficit. Signaling President Medwedjew he will step aside next year taking Putin’s place as Prime Minister, Prime Minister Putin’s ambition to seek Russian Presidency again in 2012 could mean a return to autocracy, losing Putin’s United Russia party in Parliamentary elections its two-thirds majority in DUMA, continuing still as the strongest power, confronting Putin the largest opposition demonstrations ever protesting alleged fraudulent elections, calling Russian former President Gorbatschow on Putin to resign. After endless negotiations a Ministerial Conference finally accepted Russia as a WTO member. Japan’s budget deficit 2010 reached 9,6% of GDP, exceeding public debt mountain 225% of GDP, urging the IMF to take measures to reduce debt including a gradual increase of consumption tax, downgrading Standard & Poor’s Japan’s long-term credit ratings, lowering Moody’s the nation’s debt rating from stable to negative. The Bank of Japan intervened several times to stop a further yen appreciation, cutting its key rate to virtually cero, setting up a $60 Billion fund to buy Government bonds and other assets helping to safeguard a fragile recovery and acknowledging that its global economic status is declining Japan said it will work to open up the country, redoubling efforts to forge free trade agreements. Quake-hit Japan approved a budget blueprint 2012/13 of $1,16 Trillion that includes record high spending aggravating its debt problem raising pressure to increase taxes and may grow only 0,6% in 2011 after expanding 3,9% in 2010, shrinking GDP at an annualized rate of 1,3% in the second quarter of 2011 after contracting by 3,5% in the first quarter, growing 1,5% in the third quarter, helping reconstruction which could cost estimated €217 Billion to accelerate economic expansion, however predicting leading Japanese firms no growth in 2012 because of the yen’s continued strength and slowdowns in the U.S. and European economies, producing probably in 2011 to the country’s first annual trade deficit since 1980. China put into force a massive stimulus initiative of $586 Billion, including heavy infrastructure investments, tax cuts and low interest rate loans, accelerating growth to an annual rate of 10,4% in 2010, contribuiting also to the region’s stabilization, surpassing Germany as the world’s biggest exporter, overtaking the U.S. as the biggest energy consumer, passing Japan in 2010 to become the world’s second largest economy, expanding GDP 9,2% in 2011 after slowing to 8,9% in the fourth quarter, decreasing inflation to an annualized 4,2% in November 2011, still above the Government’s annual target of 3%. Expanding China’s domestic consumption will be a top priority of the Government’s economic work in 2012 to ensure retail sales to maintain an annual increase of 15% during the five-year plan 2011-2015 and reach 32 Trillion yuan/$5,08 Trillion by 2015. In 2011 retail sales rose 17% year-over-year to 18 Trillion yuan/$2,86 Trillion. China and Japan, the world’s second and third largest economies, unveiled important deals to tighten finance ties, supporting Japan the sale of bonds denominated in China’s yuan, buying Japan’s Government eventually up to $10 Billion worth of yuan-bonds, agreeing also to encourage the use of their own currencies in bilateral trade, dealing in the future largely without using the U.S. Dollar.
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Existing home sales climbed to a 5 month-high rising 5% in December 2011 to a seasonally adjusted annual rate of 4,61 Million units, picking the market for single-family homes up in the second half of 2011. New single family home sales surged to a seven-month high in November 2011, rising purchases of single-family properties 1,6% to a 315.000 annual pace. Housing starts increased 9,3% in November 2011 to a 685.000 annual rate, the highest level in 19 months. The National Association of Home Builders confidence index climbed to 21 in December 2011 from a revised 19 in November, meaning readings below 50 poor conditions. As of the end of March 2011 about 5,6 Million houses were either in foreclosure or their owners were more than 30 days behind their mortgage payments, owing 28% of U.S. homeowners more than their properties are worth. ‘The Homeowner Affordability and Stability Plan’, a mortgage loan-modification program pledging up to $75 Billion aimed at helping three to four Million people at risk of foreclosure providing incentives to lenders to change terms of loans to make them more affordable to struggling homeowners, reducing interest rates to as low as 2% with payments reaching 31% of their income, and allowing four to five Million homeowners to refinance their mortgages into loans with cheaper payments through Fannie Mae and Freddie Mac, increasing the guarantee against losses on the mortgage investments of the two Government controlled mortgage giants to $200 Billion each, rising also the size of their portfolio limits from $850 Billion to $900 Billion. To fight the foreclosure another plan encourages homeowners who have not been rescued through a loan modification program paying them some cash to sell their houses for less than the balance of the mortgages, compelling lenders to accept that deal forgiving the difference between the market price of the property and what they are owed. The Government announced new rules for the mortgage-refinance-program making it easier for homeowners to refinance their mortgages to revive still moribund housing market. The Obama Administration is pumping $3 Billion into its Hardest Hit Fund/HUD intended to help unemployed homeowners at risk of foreclosure not to lose their homes. Fannie Mae and Freddie Mac seized by the Treasury Department and put into a Government conservatorship run by the Federal Housing Agency reported substantial losses in 2009 and 2010, totaling Government assistance $148,2 Billion to keep them operating ensuring that mortgage credit remains available, owning taxpayers about 79,9% of the two companies which may need over the next three years some $215 Billion more to survive. Allowing the Government to exceed the current emergency limit of $400 Billion for the two mortgage giants, which own or guarantee almost 31 Million home loans worth about $5,5 Trillion facing mounting losses from mortgage defaults, the Obama administration pledged to provide to them until the end of 2012 unlimited financial assistance to stay afloat. However the final intention of the Government is to reduce its engagement in the mortgage market starting soon to wind down mortgage giants Fannie Mae and Freddie Mac. According to reports some $2 Trillion of the $6 Trillion in U.S. mortgages and home-equity loans that were securitized during the height of the housing bubble from 2005 to 2007 are likely to go into default, causing the housing bust ultimately losses of $1,1 Trillion on those bonds to be absorbed by bondholders and partly by banks. Top legal officers of all 50 states opened a joint investigation on documentation practices of banks and mortgage companies. U.S. regulator sued 17 financial institutions over mortgage deals accusing them of misrepresenting the quality of securities they assembled and sold to Fannie Mae and Freddie Mac claiming compensations of $28 Billion.
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The Basel Committee on Banking Supervision advanced on Basel III, announcing higher global minimum capital standards to create a more secure financial system, agreeing on transitional arrangements for implementing new standards rising levels of minimum common equity/risk weighted assets/RWAs from actually 2% to 3,5% on January 1, 2013 to 4% on January 1, 2014 and to 4,5% on January 1, 2015 and of Tier 1 capital/RWAs from actually 4% to 4,5% on January 1, 2013 to 5,5% on January 1, 2014 and to 6% on January 1, 2015, remaining total capital/RWAs at 8% from January 1,2013 through 2015, requiring a counter-cyclical capital conservation buffer to be phased from January 1, 2016 to January 1, 2019 when it must reach 2,5%, rising minimum common equity/RWAs to 5,125%/2016, 5,75%/2017, 6,375%/2018 and 7%/2019, increasing Tier 1 capital/RWAs to 6,625%/ 2016, 7,125%/2017, 7,875%/2018 and 8,5%/2019, growing also total capital/RWAs to 8,625%/2016, 9,125%/2017, 9,875%/ 2018 and 10,5%/2019. 28 of the world’s largest banks are considered as systemically relevant – banks too big to fail – and will have to hold as much as 2,5% in additional capital as part of an effort to prevent a future financial crisis. During the global finance crisis former President Bush invited leaders of developed and developing countries to a G20-meeting, participating Argentina, Australia, Brazil, Britain, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, United States, also the European Union, IMF, World Bank and United Nations, approving to reinforce international cooperation to boost growth policies according to domestic conditions. Gulf Cooperation Council/GCC finance ministers proposed a joint response as the global financial crisis reached the Persian Gulf, after a sharp decline in oil prices left their economies vulnerable threatening their financial sector and above all government and privately funded projects across the region as the United Arab Emirates/UAE property prices fell. The 21 APEC member economies, including the United States, Canada, Australia, Japan, China, Russia, Chile, Peru and Mexico, accounting for 49% of world trade and representing 55% of the global gross domestic product, also agreed to increase efforts to stimulate recovery and economic growth. China with the world’s largest foreign exchange reserves exceeding $3,2 Trillion held $1,17 Trillion in U.S. debt at the end of June 2011, rising its portfolio in European bonds and assets and investing more in Japan’s debt, holding Japan with the world’s second largest gold and foreign exchange reserves of $1,06 Trillion U.S.-Treasuries worth $911 Billion. The foreign exchange reserves of China fell from $3,2 Trillion in September 2011 to $3,18 Trillion at the end of 2011, the first quarterly decline in more than a decade. Japan acknowledged it could buy up to $10 Billion worth of Government bonds from China, its largest trading partner, and would be the first developed country to buy yuan-denominated bonds with foreign exchange reserves, agreeing Japan also to support the sale of China’s yuan-bonds by Japanese companies in Tokyo and foreign markets, announcing China and Japan, the world’s second and third largest economies, to encourage the use of their own currencies in bilateral trade, which up to now is conducted mostly in U.S. Dollar. China’s Government proposed to replace the present U.S. Dollar dominated currency system, expanding the role of the ‘Special Drawing Rights’ of the IMF based on a basket of currencies -US$, Yen, Euro and Pound Sterling-creating a new reserve currency disconnected from individual nations, increasing Chinese efforts to promote the use of their local currency internationally, switching to the yuan for its foreign trade, wishing to establish the yuan as reserve currency. To be added to the IMF currency basket China has to make its currency fully convertible. G20 nations pledged $1,1 Trillion tripling available IMF funds immediately to $500 Billion and later to $750 Billion, creating the IMF additional $250 Billion in ’Special Drawing Rights’, providing $100 Billion to the World Bank and other multilateral development banks and increasing world trade financing available for cross-border trade by $250 Billion through export credit agencies in each country. G20 leaders announced that the ‘Financial Stability Forum/ FSF’ will be replaced by the new ‘Financial Stability Board/FSB’, including as members all the G20 countries, Spain and the European Commission, to collaborate with the IMF avoiding through early warnings future macroeconomic and financial risks, creating stricter capital requirements for banks revamping risk management and accounting systems, strengthening regulations of financial sector and control of systemically important financial institutions, including hedge funds and credit rating agencies, taking action against tax havens, implementing limits on bank pay and bonuses and call on accounting standard setters to work urgently on a common international approach to dealing with toxic assets on the balance sheet. World leaders agreed to expand the role of G20 as a global forum for economic cooperation taking a lead in global recovery and decided to fundamentally reform the banking system, tightening regulation on complex financial instruments and to limit bonus pay. A G8 summit condemned North Korea’s nuclear test and missile launches and summoned Iran to accept discussing its nuclear program after the disclosure of a second secret underground uranium enrichment plant, watching outside world after North Korean dictator’s sudden death transition to his third son and heir apparent Kim Jong-un as new leader of the isolated nation. Tehran made it clear it had no intention to stop uranium enrichment, adopting the U.N. Security Council pushed by the U.S. drastic new Iran sanctions, persisting Iran in provocations activating the reactor at the Russian built Busherhr nuclear power plant operating under IAEA supervision and unveiling its first home made unmanned long-range bomber drone capable of launching missiles and torpedoes, set to gain also more influence in Iraq with the departure of U.S. combat forces. Initiating massive naval exercise near the Strait of Hormuz, testfiring anti-radar medium-range missiles, Iran threated to close the strategic waterway disrupting the flow of Middle East oil to world markets, warning the U.S. it will not tolerate any interference with the passage of vessels, agreeing the EU to ban Iranian oil imports, escalating confrontation with Iran over its nuclear prorgam. G20 agreed on a historic IMF reform, approved by the fund, to transfer 6,4% of voting power to dynamic emerging-market and developing countries by the fall of 2012 doubling the fund’s quotas standing currently at $328 Billion, keeping industrialized nations with 57,7% the majority while emerging economies obtain 42,3%, becoming China with a quota exceeding 6% behind the U.S. and Japan the fund’s third most powerful member, ahead of Germany (5,6%), France, Britain and Italy, giving also a bigger stake and more voting rights to Russia, India and Brazil to form part of the 10 largest shareholders, surrendering Europe 2 seats on the 24-member executive board, retaining the U.S. with a quota of more than 17% its voting power as important decisions require a supermajority of 85%. During his four nation tour of Asia and first visit to India President Obama announced trade deals worth almost $15 Billion between American and Indian companies, renewed in Indonesia his call for expanding ties with moderate Muslim world, visited Seoul to participate in the G20 summit and continued trip to Yokohama to attend APEC meeting, where he confirmed a new commitment to Asia as a strategic center of power. G20 leaders discussed the issue of imbalances, urging the IMF to work on guidelines to identify big persistent dangerous imbalances, promised to avoid ‘competitive devaluation’ of currencies and ‘uncoordinated economic actions’ and approved Basel III and IMF reform, rejecting the U.S. proposal to impose quantitative targets/4% of GDP on trade surpluses and G20 Finance Ministers agreed on a list of five indicators to measure global economic imbalances and subject seven of the world’s largest economies to heightened scrutiny. A magnitude 8,9 earthquake and subsequent tsunami rocked Japan, damaging reactors at the Fukushima plant producing risk of significant radiation leak and contamination, hurting its economy, facing insurers significant losses, approving EU a stress test for European nuclear power plants, joining G7 nations efforts to stabilize the Japanese currency, damaging powerful aftershocks also the Ongawa nuclear power plant. On his first trip to South America President Obama signed a trade and co-operation agreement in Brasilia to strengthen ties with Brazil, visiting also Chile and El Salvador. During a G8 summit world leaders agreed to update nuclear safety standards after Japanese nuclear power plant debacle, implement global minimum standards for internet, discussed miliatry operations in Libya and offered economic aid programs of up to $40 Billion to Egypt and Tunisia to continue transformation into democracies supporting the ‘Arab spring’ in North Africa and the Middle East, coming $10 Billion in form of bilateral aid from G8 members, $20 Billion from international financial institutions and $10 Billion from Saudi Arabia, Qatar and Kuwait, pledging G8 nations $38 Billion in new aid to Arab spring economies, Egypt, Tunisia, including this time also Jordan and Marocco, receiving also Libya funds from the IMF as soon as change of Government is concluded. In a visit to ally Poland President Obama extended Trans-Atlantic unity message at a dinner with 17 regional leaders. French Finance Minister Lagarde was named as the first woman to head the IMF after its managing director Strauss-Kahn resigned being indicted by a grand jury of New York on criminal sexual-assault charges, finally dismissed by a State judge, returning Strauss-Kahn to France. G20 named 29 global banks as systemic relevant requiring more capital and a closer surveillance, calling for tighter regulations for the so-called ‘shadow banking’ sector to make financial markets more secure, planning also actions on grows and employment, remaining a decision about an increase of IMF’s resources pending until the next meeting of G20 Finance Ministers in February 2012.
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Tunisians ousted their President and elected CPR Party chief Marzouki, a member of the opposition returning from exile as new interim President. Unrest forced Egypt’s President Mubarak to step down, handing over power to the ‘Supreme Council of the Armed Forces’ under the leadership of the Minister of Defense Tantawi, dissolving Mubarak’s former ruling party, beginning trial against Mubarak on charges he ordered killing of protesters, holding Egypt’s first post-Mubarak Parliament its inaugural session dominated by the Muslim Brotherhood and other religious groups. Protests spread across the Middle East, crushing security forces in Yemen pro- democracy demonstrations, calling opposition for the end of President Saleh’s 33-year rule, signing Saleh a deal to hand over power giving him and his family immunity from prosecution, asuming a transitory Government headed by opposition chief Mohammed Basindawa until Saleh leaves power beginning February 2012, blocking Iranian riot police opposition marches in Tehran, reviving the anti-Government movement which started protests after Iran’s disputed Presidential election in 2009, launching military a violent crackdown on Shiite minority in Bahrain, withdrawing Saudi-troops which had entered as part of the Gulf Cooperation Council force to help Sunni ruling family control Shiite protests, killing Syrian security forces anti-Government protesters making mass arrests, mobilizing opposition outraged over escalating brutal violence used by Syrian Government, condemned by the UN Security Council, the Obama Administration, and the EU, increasing U.S. financial sanctions against Syria, including Assad-family and top-officials followed by the EU enforcing in addition an arms embargo and banning imports of Syrian oil, fleeing more than 11.000 refugees from Syria into Turkey which shelters anti-Assad-fighters, announcing Syria a new law permitting the formation of opposition parties for the first time in 48 years without ending supremacy of the ruling Baath Party, confirming the Arabe League suspension of Syria’s membership because of bloody suppression imposing broad economic sanctions, arriving Arab League observers in Homs, where security forces fired still on protesters, getting 11 monitors injured, gathering tens of thousands of anti-Government demonstrators in cities across Syria, withdrawing Gulf nations monitors from Syria after a failed mission urging U.N. action. Contagion from Mideast unrest reached even China, blocking authorities coverage of ‘Jasmine Revolution’ protests and democracy campaigns. Saudi king Abdullah announced $36 Billion worth of social benefits increasing spending further including $67 Billion on housing to maintain order in the oil-rich kingdom, where demonstrations are strictly prohibited by law, demanding influential Saudi intellectuals far-reaching political and social reforms moving toward a constitutional monarchy, challenging Saudi clerics reforms proposed by the king, allowing the monarch for the first time women to vote. Popular uprising in Libya turned into an armed conflict overthrowing Qaddafi’s regime taking over power a National Transitional Council/NTC organized by the opposition. NATO, preparing for a post-Qaddafi Libya, stopped October 31, 2011, its air war over Libya supporting NTC fighters, ending the UN Security Council Libya no-fly authorization, proclaiming the NTC after Qaddafi’s death formally the country’s liberation, presenting NTC chief Rahim al Kib his new cabinet announcing elections in 20 months. The NTC announced the capture of Qaddafi son Saif al-Islam, former heir apparent of Libya’s late ruler, and of Qaddafi’s intelligence chief Senussi, both wanted by the International Criminal Court/ICC for trial on crimes against humanity. President Obama announced that the U.S. will support the ‘Arab Spring’ helping democracy movements in the Middle East and North Africa, promising $2 Billion in loan guarantees and debt forgiveness for Egypt and measures to stabilize Tunisia’s economy , signaling he wants to move forward with peace negotiations between Israel and Palestinians mentioning two sovereign States with secure borders in a possible deal based on 1967 borders rejected by Israel, warning on Palestinian bid for full UN membership, saying ‘peace will not come through statements and resolutions at the UN’, requesting Palestinians formally UN membership, becoming Palestine full member of UNESCO.
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ECB – exchange reference rates 01/27/12 - 1,-Euro/€ = USdollar/USD 1,3145, Swiss Franc/CHF 1,2078, Japanese Yen/JPY 101,18 and Chinese Yuan Renminbi/CNY 8,2995. Measured versus a group of currencies the trade weighted value of the Euro isn’t moving at a low level as 1,20 USD appears as a ‘fair’ value. While a weaker Euro is expected during the first half of 2012, its long-term outlook is seen as a currency neither cheap nor expensive. The EU agreed on a fiscal pact joining 26 of its 27 member States - minus Britain, continuing financial markets nervous due to a downgrade fever of skeptical U.S. rating agencies and a negative growth in the Eurozone, seeing ECB rising tensions on markets for sovereign bonds in addition to already existing bank problems increasing financial stability risks in dimensions of a systemic crisis, considering however a fracture of the Eurozone as unthinkable, voting Croatia to join the European Union to become its 28th member. Italy’s Senate gave its final approval to the country’s emergency budget containing tax rises and spending cuts totaling €30 Billion, passing a vote of confidence to the newly appointed Prime Minister Monti, who said the Eurozone will put more focus on growth and employment, announcing Spain’s conservative leader and elected new Prime Minister Rajoy an austerity package worth €16,5 Billion to meet the country’s EU-agreed budget target of 4,4% of GDP in 2012, revising budget deficit 2011 forecast upward to above 8% of GDP from 6%. The IMF offered a new more flexible Precautionary and Liquidity Line/PLL as insurance for nations, giving countries with relatively good economic policies access to credit for six months and confirmed that it is looking to boost funding by $500 Billion to $600 Billion to increase its own bailout fund from actually $400 Billion to $1 Trillion to address global financing needs of about $1 Trillion over the next two years, proposing to emerging countries, its European members outside the Eurozone and Japan to extend their contributions by some $300 Billion, after European Governments promised to provide up to €150 Billion in fresh resources to help if necessary troubled nations like Italy and Spain, remaining pending a G20 decision on an increase of the IMF’s firepower. Eurozone’s issue volume 2012 will reach again more than €800 Billion, having weaker countries already high refinancing needs during the first half of the year. Italy, facing as long-term problem a weak growth, allowed its finances to be monitored not only by the EU Commission but also through the IMF, reaching Government financing needs about €381 Billion in 2012, remaining yields elevated, considering Fitch Italy as the biggest risk to the Euro. The leaders of Germany, France and Italy agreed to push limited changes to EU Treaty strengthening the Growth and Stability Pact with an enforceable and strong sanction mechanism for ‘budget sinners’ to fix root causes of the Eurozone debt crisis, seen as a necessary step towards a fiscal union, and want that changes enter into force until March 2012 preferably with all 27 EU members, but are also ready to sign with the 17 Eurozone members and willing EU countries intergovernmental agreements compatible with the EU legislation and preserving function of European institutions. ECB chief Draghi said that a new historic fiscal pact is vital to restoring credibility ensuring the common currency’s long-term future and may allow the central bank to act more forcefully to calm markets. The crucial December 8/9 EU summit produced a new fiscal pact supported by the 17 Eurozone members and 9 of the remaining 10 EU countries, of which Hungary, Sweden and the Czech Republic promised to reconsider Eurozone treaty, leaving Britain after its veto isolated, becoming the pact valid once ratified by at least 9 Eurozone nations. The treaty changes include automatic sanctions for countries with budget deficits above 3% of GDP, reducing new debt to 0,5% of GDP and committing each nation to adopt in its constitution a ‘golden rule’ or ‘debt brake’ preventing it from running persistently budget deficits. EU leaders agreed also to bring forward the launch of the permanent bailout facility/ESM from mid-2013 to mid-2012, including a private sector involvement to be carried out according to IMF rules – no ‘lex Europe’ – remaining voluntary private sector Greek debt cut a special case, and decided that the two Eurozone bailout funds, the temporary EFSF and the ESM will be managed by the ECB. Moody’s joint Fitch confirming France’s AAA rating, reviewing more European countries for downgrade. Standard&Poor’s, which already jointly with Fitch cut Belgium’s credit rating, notified France of its decision to downgrade the country from AAA to AA+, losing also Austria its AAA rating because of its high exposure to troubled Eastern European countries, downgrading to AA+ the temporary bailout fund/EFSF reducing its loan capacity from €440 Billion to €260 Billion if issuing AAA-rated bonds, cutting S&P further ratings of Italy, Spain, Portugal, Cyprus, Malta, Slovakia and Slovenia, keeping Germany, Finland, Netherlands and Luxembourg their AAA rating, putting the European Investment Bank/EIB with a negative outlook after its callable capital fell from €137 Billion to €96 Billion due to downgrades of triple A nations France and Austria, downgrading Fitch Italy, Spain, Belgium, Cyprus and Slovenia, affirming Ireland’s credit rating. Moody’s and Fitch confirmed France’s AAA rating, hurting S&P downgrade of the country French President Sarkozy’s re-election campaign, promising EU leaders to speed up implementation of fiscal pact and getting permanent bailout fund/ESM running as soon as possible, backing German Chancellor Merkel a proposal to relax regulations for institutional investors to take into account such ratings to reduce dependency on U.S. based rating agencies. The next EU summit on January 30 will focus on a fast ratification of the fiscal pact and boosting groth and employment in the Eurozone increasing competitiveness. Investors are waiting on a final solution to the Eurozone debt crisis and a deal for more U.S. deficit reductions than those included in the new debt ceiling legislation, existing also worries about Japan’s swelling public debt exceeding 225% of GDP. Moody’s downgraded because of their exposure to Eurozone countries in difficulties three top French banks, BNP Paribas, Société Générale and Crédit Agricole, cutting ratings of 12 UK financial institutions, 35 Spanish banks, putting 8 Spanish banks on review and downgrading 10 German Public-sector banks, saying they were now less likely to obtain State support if needed, downgrading Fitch 6 Spanish banks, UK’s RBS and Lloyds and Switzerland’s UBS, cutting its long-term ratings on Barclays, Credit Suisse, Deutsche Bank, BNP Paribas, Bank of America and Goldman Sachs, affirming its long-term ratings on JP Morgan Chase, Morgan Stanley and Société Generale, cutting Standard & Poor’s credit ratings of Spain and 10 Spanish banks threatening that other 4 banks could follow, downgrading 31 Italian banks. IMF chief Lagarde urged a recapitalization of European banks, needing systemically relevant banks according to new EBA stress test additional capital of €114,7 Billion to comply with EU-requirements increasing their Tier 1 capital to 9% up from a 4% core capital until June 30, 2012, stepping in Governments against taking ownership stakes if they can’t raise fresh capital on their own, getting involved finally the EFSF, starting European banks to sell assets, joining the Fed, ECB and 4 other major central banks forces to ease debt crisis by increasing the availabilty of Dollars outside the U.S., lowering the costs of so-called Dollar swap-lines. International disputes over currency manipulation are not yet over, discussing U.S. Senate a currency exchange rate reform bill, accusing China to maintain its currency undervalued obtaining competitive advantages, however declining the U.S.Treasury to label China as ‘currency manipulator’ opting for a softer language, intervening Bank of Japan several times to stop a further appreciation of the yen avoiding disadvantages for Japanese exports, having the Fed’s QE2 measures also been critizised for aiming to weaken the Dollar. Ireland, whose budget deficit including bank bailouts rose to 32,4% of GDP in 2010 to be reduced to at least 10,3% in 2011, became after Greece the second Euronation to apply formally for EU/ ECB/ IMF help and the first to use the EFSF, obtaining an emergency aid package of €85 Billion to support state finances/€50 Billion and stabilize banks/ €35 Billion. Spain with an unemployment rate above 22% lost its triple A credit rating and announced a drastic austerity plan, including pay cuts for the public sector, a pension freeze, a labor reform and a wealth tax that had been abolished three years ago, to reduce budget deficit from 9,2% in 2010 to 6,4% in 2011, revealing it will sell a 30% stake in the national lottery and privatise partially airports in Madrid and Barcelona, preparing a plan for a partial State-takeover to recapitalize its troubled savings banks, forcing them to become conventional banks and seek stock exchange listings, agreeing Spain on constitutional limit to public deficit. Portugal had to increase taxes and to lower salaries for public employees to cut budget deficit 2010 surging to 9,2% to 5,9% of GDP in 2011, asking formally for EU financial assistance, approving EU/IMF a bailout package worth €78 Billion, agreeing the nation on a wide-ranging privatisation program of €5,3 Billion and tax increases to bring down its deficit to 4,5% already by 2011 and to 3% in 2013, accepting after Spain a constitutional debt limit, downgrading Fitch Portugal’s sovereign debt to junk or beyond investment grade. Italy with a public debt of more than €1,9 Trillion (120,6% of GDP), the world third largest after the U.S. and Japan and Eurozone’s third largest economy, approved emergency austerity measures worth some €100 Billion to reduce budget deficit from 3,8% of GDP in 2011 to 1,4% in 2012 targeting to balance budget by 2013/2014. Following Portugal and Spain also Italy pledged to insert a debt limit and a balanced budget amendment into its constitution, downgrading Standard & Poor’s and Moody’s Italy’s credit rating keeping a negative outlook. Due to a controversial Central Bank law IMF and EU suspended talks on financial assistance with crisis hit Hungary, surging sovereign credit-default swaps to record high, cutting also Fitch Hungary debt to junk status. Eurozone banks with a high exposure in the so-called PIIGS nations face according to the ECB up to €195 Billion in potential loan losses over the next 18 months, on top of the €238 Billion in bad debts written off by the end of 2009, while they may need to raise between €3,5 Trillion and €5,5 Trillion in additional long-term funding and to hold €2 Trillion more in highly liquid assets according to the new banking standards agreement/ Basel III. The European Banking Authority/EBA organized in 2011 a much stricter stress test for banks than in 2010, failing 8 out of 90 banks the test (OEVAG/ Austria, Caja 3-Catalunya-Unnim-CAM-Banco Pastor/ Spain, ATEbank and Eurobank Ergasias EFG/ Greece) requiring €2,5 Billion in fresh capital, getting troubled Belgean bank Dexia which had not failed EBA’s new stress test rescued and part of it nationalized. UniCredit’s stock plunged 30% in two days after the largest Italian bank slashed its offering price for €7,5 Billion of new shares, increasing Aabar, an investment vehicle of Abu Dhabi’s SWF, its stake to 6,5%, maintaining Libyan Central Bank and the Libyan Investment Authority a combined 7,5% stake. Relying debt crisis nation’s banks increasingly on the exceptional support of the ECB, its new President Mario Draghi eased collateral requirements providing unlimited short-term, medium-term and now even three-years funds, taking Eurozone lenders € 489,19 Billion in cheap three-year loans, a massive financial lifeline also seen as a rescue package for debt crisis nations, going a major part to South European banks, reaching ECB lending to Italian banks €210 Billion at the end of December 2011. Banks used some of the three-year funds to pay off shorter ECB loans, reaching net lending still €235 Billion bringing total loans to banks to almost €1 Trillion, making the ECB a lender of last resort to banks, prevailing distrust among the continent’s banks using ECB’s overnight deposit facility posting a record €590,72 Billion rather than lending to each other. The ECB is reluctant to be a lender of last resort to sovereigns after spending already more than €211,5 Billion since May 2010 in its bond-purchasing program buying debt from Greece, Ireland, Portugal, Italy and Spain, establishing a temporary weekly bond-buying-ceiling of €20 Billion helping to bring down high yield levels for their bonds, lasting probably its limited support until the EFSF takes over the role to buy bonds of crisis nations in the secondary market. ECB chief Draghi is supported by Germany warning to provide unlimited financial assistance to debt crisis nations monetizing public debt and deficits, because it won’t stabilize current situation in a sustainable way and could undercut ECB’s credibility. The head of China’s largest credit rating agency, Dagong Global Credit Rating, accused his three dominating Western rivals to be politicized and becoming too close to the clients they were assessing, downgrading the U.S.-credit rating adding a negative outlook because of doubts about the American intention to repay debts. The EU wants more control of credit rating agencies through the European Securities and Market Authority/ESMA, planning stricter rules, demanding more transparency and that rating firms should be held accountable for their mistakes, advancing using a concept of Roland Berger Strategy Consultants the launch of a European rating agency as a new private non-profit organization in form of a foundation with a capital of €300 Million provided by 30 European institutional investors and to be incorporated in the Netherlands. EU Finance Ministers agreed on a new mechanism to stabilize the Euro establishing an emergency safety net of €500 Billion, including €440 Billion in credits/ guarantees of up to three years from Euronations to extend financial assistance to troubled Euronations and a balance of payment facility of the EU Commission, the European Financial Stability Mechanism/ EFSM increased to €60 Billion open to all EU countries, with complementary loans from the IMF reaching €250 Billion, rising the total to €750 Billion. To make the €440 Billion European Financial Stability Facility/ EFSF available to the 17 Euromembers operational, a special purpose vehicle based in Luxembourg has been created, which will sell as needed bonds that can be issued in any desired currency lending the money it raises to the country in problems, assigning and maintaining the three major global agencies top credit rating triple A to the crisis fund. Bonds have to be either backed by countries with triple A rating or by cash to be rated triple A expanding Eurostates with the strongest credit ratings their loan guarantees up to €780 Billion, coming €211 Billion from Germany, to increase the fund’s lending capacity to its real size of €440 Billion. After S&P cut the EFSF rating from AAA to AA+, downgrading AAA-countries France and Austria there are remaining only Germany, Netherlands, Finland and Luxembourg as triple A Eurozone members, reducing if issuing AAA rated bonds EFSF loan capacity from €440 Billion to €260 Billion or maintaining current lending level accepting a lower rating. Creating the beginning of a ‘European Monetary Fund’ seen as a final product of European integration, the EFSF and the future ESM have been made more flexible, allowing to give States ‘precautionary credit lines’ before they were shut out of the markets, lend Governments money to recapitalize struggling banks and to buy up bonds of highly indebted nations in the secondary market in ‘exceptional’ circumstances and subject to ECB approval. As the current EFSF loan capacity may prove insufficient if larger economies like Italy or Spain need bailouts and ruling out Germany any increase of its current liability limit of €211 Billion, Eurozone leaders planned to leverage the fund up to €1 Trillion, using its resources, partially committed for loans to Ireland, Portugal and a second Greek bailout, to insure new bonds issued by distressed Eurozone Governments offering investors first-loss guarantees ranging from 20% to 30%, delivering on this portion a possible fivefold increase in the fund’s firepower, and authorizing the EFSF to constitute Co-Investment Funds/CIF buying Eurobonds, attracting foreign public and private investors like sovereign wealth funds from Asia and the Gulf. Eurobonds purchased by the CIF would also be guaranteed partially by the EFSF. Financial and political problems in Greece and Italy turned investors more cautious about risky assets and the Eurozone as a whole, making leverage efforts of downgraded EFSF much more difficult, deciding Eurozone leaders that both bailout funds, the EFSF and the permanent ESM, will be managed by the ECB. Eurozone Finance Ministers decided that terms of Eurozone bailout loans to Greece, Ireland and Portugal can be improved, cutting interest rates to about 3,5%/3,9% and extending repayment periods to a minimum of 15 years and even up to 30 years with a grace period of 10 years. EU leaders approved an amendment to the EU-treaties when expiring the temporary Eurozone’s rescue facility, backing constitutionally the creation of a permanent Euro-safety-net, called European Stability Mechanism/ESM for member countries in crisis, totaling €500 Billion, replacing the EFSF/€440 Billion and the EFSM/60 Billion, and including the IMF participation of €250 Billion the total available for troubled nations would reach €750 Billion, providing a case-by-case involvement of private sector creditors. Euronations will finance the ESM paying €80 Billion in cash, half of which in 2013 and the remainder during the next three years, pledging also €620 Billion in guarantees or callable capital for a total of €700 Billion to ensure a lending capacity of €500 Billion. For nations considered solvent the private sector creditors would be encouraged to maintain their exposure. In case that a country would appear to be insolvent it has to negotiate a comprehensive restructuring plan with its private sector creditors, including a standstill, extension of the maturity, interest rate cut and/or ‘haircut’ , before it can obtain additional assistance through the ESM, urging Germany that EU nations need an ‘Insolvency Statute’. Accordingly debt issued from the moment the ESM enters into force would include collective action clauses/CAC’s forcing bondholders to accept restructuring measures if necessary, deciding Eurozone leaders worried about contagion risks on Italy and Spain and lacking the monetary union actually such a mechanism, to bring forward the launch of the ESM from mid-2013 to mid-2012 or earlier, speeding up the payment of capital into the ESM, facing debt-ridden Eurozone nations probably difficulties to raise the money to pay their share. Following demands of the IMF to boost the bailout fund to protect global financial stability, the ECB wants to allocate unused EFSF funds of about €250 Billion to the ESM increasing its lending capacity to at least €750 Billion. Eurozone Finance Ministers agreed on final regulations for the ESM fund, getting it running as soon as possible, deciding that only countries which previously ratified the new fiscal pact may request credits, planning EU-chiefs to examine again in March the fund’s size. Greece received a first financial aid package of €110 Billion, coming €80 Billion from Eurozone members and €30 Billion from the IMF, agreeing European leaders on a second aid program, including different bond exchange schemes taking banks, insurers and other investors a voluntary average loss of 21% on their Greek bonds, triggering most inevitably a selective or restricted default for a short period, however most likely no payment of bond insurance/CDS as private sector involvement is voluntary. Under worsened overall economic conditions private sector creditors accepted instead of 21% write-downs a bigger voluntary ‘haircut’ of 50%, considering Greece to introduce a posteriori collective-action clauses to bind all creditors on a deal it hopes to reach by the majority of 75%/80% to reduce Greek public debt as demanded by the Eurogroup and the IMF by about €100 Billion reaching Greek debt-to-GDP ratio 120% in 2020. Private creditors hold about €205 Billion of Greek debt and planned participation rate of 90% includes 25% of creditors not yet identified like Hedgefunds not favoring a 50% write-off threatening legal action if Greece imposes losses, buying up some of the €18,3 Billion of Greek bonds under English or foreign law, which would be immune from any changes to Greek law, including Greek English law bonds pari passus clauses meaning creditors have to be treated on an equal footing and could give them leverage over the ECB which owns about €55 Billion worth of Greek bonds bought in the secondary market at discounted prices of 70cents to 75 cents on the Euro. The ECB might exchange its current bonds for a different form of Greek debt, or pass them on for less than their face value to the EFSF, at a cost similar to the distressed bonds without taking a loss and Greece would get its benefit of that discount, reducing its debt burden, saying the IIF it would be prepared for concessions if also the ECB and other public creditors would waive claims making a contribution too. Eurozone Finance Ministers rejected a debt deal agreed between Prime Minister Papademos and Charles Dallara, the Institute of International Finance/IIF chief representing creditors, with a variable interest rate between 3,5% and 4,6%, a 30 year maturity period and English law as jurisdiction for the new bonds, insisting that Greece’s creditors must accept a coupon with an interest rate not exceeding 3,5%. European policymakers and creditors could go towards an involuntary debt swap, including eventually ECB’s Greek bond holding of €55 Billion and Eurozone credits to Greece of actually €53 Billion, if there is now agreement reached soon, raising the risk of a disorderly default and in a worst case scenario leaving Greece the Eurozone. Greek officials are anxious to sign a memoradum of understanding, however the deadline for a final Private Sector Involvement/PSI deal by January 30, the date of the next EU summit, will be missed and negotiations could extend into mid-February. The bond swap will exchange every 100 Euros of old bonds with 35 Euros of new bonds and 15 Euros of top-rated EFSF bonds with a two-year maturity, a near cash-equivalent for which the EFSF plans to commit up to €30 Billion. The IIF asked the Eurogroup also for additional credit enhancements for holders of the €14,5 Billion bonds maturing on March 20 in order to participate in the deal voluntarily. Eurozone leaders promised to provide Greece besides the €30 Billion for sweeteners another €100 Billion in new public bailout funds until 2014. Redoubling efforts to relaunch Greek economy the EU authorized its Structural Fund to finance Greek investment projects up to 95%, visiting Athens a special EU task force to push Community financed projects and promote reforms. Greece’s public debt rose from 142,8% in 2010 to 165% of GDP (€360 Billion) at the end of September 2011, while budget deficit is expected to be reduced from 10,5% of GDP in 2010 to 8,9% in 2011, missing Athens due to a weaker economic outturn deficit target of 7,6%, shrinking Greek economy 5,5% in 2011. Greek Parliament approved a five-year austerity package totaling €78 Billion including an ambitious privatization program to raise up tp €50 Billion, planning to sell up to 30 State controlled companies, passing another drastic austerity plan, cutting 30.000 State jobs, reducing pensions and imposing a property tax to be collected through electricity bills. Lucas Papademos, a former Vice President of the European Central Bank has been appointed as new PM leading a transitory Unity Government whose mission is to accept the EU October 26/27 ‘haircut’ and bailout deal, ensuring its parliamentary approval and a fast implementation and organizing early elections to be held in April to allow first a fulfillment of bailout conditions. Meeting Greece the EU/IMF conditions the delayed € 8 Billion sixth tranche of the extisting Greek aid has been made available to the country, facing Greece the next big €14,5 Billion bond redemption on March 20, 2012 if not included in the complex debt-cutting deal with private sector creditors needed to be sealed to obtain new financing and avert default. A new IMF/EU/ECB- the Troika-mission initiated on January 16 a planned inspection in Athens intending to adjust the existing rescue strategy to worsened Greek conditions as doubts increase about the crisis-performance of PM Papademos and the country’s financial restructuring ability. China revealed the creation of a €3,6 Billion fund to help Greek shipping companies buy Chinese made vessels, planning the Chinese state owned container terminal operator COSCO, which has a 35-year concession to operate Greece’s main port Piraeus a deal worth €3,4 Billion, to increase its investment allowing by 2015 to move 3,7 Million containers a year. Europe is challenged to grow from the Economic and Monetary Union/ EMU into a political and fiscal union deepening integration, accelerating the debt crisis the creation of a sort of European ‘Economic Government’, asking France and Germany European Council President van Rompuy to head it and act in the future as spokesman for the Euro, linking more support for highly indebted Euronations to a closer coordination on financial, economic and social policies to increase competitiveness of weaker Eurozone economies, harmonizing taxes, wage bargaining, vacations and the retirement age, curbing effectively debts, approving the European Parliament six directives reforming the Growth and Stability Pact tightening the control of national budgets (Eurozone limit 3% of GDP) and of national debts (Eurozone limit 60% of GDP) to detect problems early to act in time, introducing tougher budgetary rules to ensure deficit cutting measures, preventing with real and effective sanctions financial discipline. The new economic policy package, including a committment to insert until 2012 a debt limit into the constitution, is named the Euro Plus Pact or the Six Pack of legislative measures, running on an intergovernmental basis for Eurozone members and was joined by all EU nations with the exception of Britain, Sweden, Hungary and the Czech Republic. Germany’s constitution is already limiting the country’s budget deficit to 0,35% of GDP or to about €10 Billion until 2016, allowing States no debts at all as from 2020, reaching German public debt 81,7% of GDP in 2010 and 81,1% in 2011, pledging France with a public deficit of 84,3% of GDP in 2010 to reduce budget deficit from 7,7% in 2010 to 5,7% in 2011 and new budget savings of €11 Billion and €18,6 Billion until 2013 and of €65 Billion until 2016. As long as member States persue their own fiscal policy and a deeper fiscal union has not been reached France and Germany are resisting the EU idea of a shared liability issuing joint European Government bonds/Eurobonds or Stability Bonds, suggested to cover deficits of Euromembers up to a predetermined percentage of GDP, saying Standard & Poor’s that a joint bond issue would get the weakest member’s rating if it was jointly guaranteed by Eurozone member States, meaning a Greek rating for everybody. The German Council of economic experts proposed a debt redemption fund to place Eurozone member States’ debts in excess of 60% of GDP which could be redeemed within 25 years, lowering the fund interest rates on the repayment of the debt. Germany banned uncovered short-selling of Eurozone Government bonds, credit default swaps based on those bonds and of shares from Germany’s leading financial institutions, extending legal prohibition to all uncovered sales, saying that speculations in financial markets are fuelling the Eurozone’s debt crisis, announcing the EU new financial market regulations tightening rules on naked short-selling and dealing with naked CDS’s, largely banning this sort of operations as from November 2012. German authorities agreed to regulate banking, imposing as a contribution to the costs of financial stability a levy of 15% of the annual net profit on financial institutions to finance a bank restructuring fund overseen by the Federal Authority for Financial Market Stabilization/ FMSA, which is also controlling SoFFIN and Germany’s ‘bad banks’. Taking effect beginning 2011 the fund, which is expected to raise about €1 Billion a year, will handle troubled banks to avoid at an early stage that a bank becomes insolvent, reducing the relyance on State bailouts. The EU, pushed by French President Sarkozy and supported by German Chancellor Merkel, is moving ahead with its plan to create a worldwide tax on financial transactions in which Europeans are involved getting into force by 2014, blocked by Britain fearing it would drive financial businesses out of London, suggesting the EU a rate of 0,1% for trading stocks and bonds and of 0, 01% for derivatives and to include only the 17 countries that use the Euro if all 27 EU members can’t agree. G20 Finance Ministers highlightened the need for sustainable public finances and G20 leaders endorsed a pledge by rich nations to cut budget deficits in half by 2013, stabilizing Government debt to GDP ratio by 2016. Troubled Euro-countries known as PIIGS including along Portugal, Greece and Spain also Ireland and Italy will face a difficult year 2012, probably shrinking its economies between 0,7% and up to 3%, with the exception of Ireland whose GDP may rise by 0,9%.
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Gold $1.738,57 – 01/27/12 - Commodity favored as safe-heaven. The U.S. currency is losing its global reserve status driven by power of emerging market economies and China is calling for a new currency to replace the Dollar. The World Bank seeing the end to Dollar’s hegemony advocated to return to an international monetary system based on a basket system, the gold standard as an international reference point and involving the Dollar, Euro, Yen, Pound Sterling and the Renminbi, replacing the current ‘Bretton Woods II’ floating exchange rate system. Increasing gold demand from China, rising gold jewellery demand particularly from Asian nations, continuing central banks buying the precious metal to reduce their dependence on the Dollar as reserve currency, persisting Mideast tensions, the U.S. debt downgrade, the ongoing European debt crisis and worries about an economic slowdown in the U.S. and Europe have pushed gold prices higher, but contributing uncertainties in financial markets to volatile commodity prices.
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2.a) Gold
Global gold mining increased in 2010 to about 2.652 tonnes from an output of 2.554 tonnes in 2009, jumping Chinas gold production to a record of around 340 tonnes up from 319,98 in 2009, followed by Australia with the biggest year on year increase of about 268 tonnes compared to 227 tonnes in 2009, the United States, South Africa and Russia. The largest proven and probable ore reserves are in South Africa, the United States (Nevada, Alaska, California, Colorado, New Mexico, Utah), Russia, Canada, Brazil, Ghana and Simbabwe; total reserves are estimated at 60.000 tons. Central banks and supranational institutions hold around 32.000 tonnes of gold, becoming central banks slight net buyers of gold in 2010, while more than 105.000 tonnes are in private hands, around 22.000 tonnes in coin and bullion and exceeding 83.000 tonnes in jewellery. The 10 largest official gold holders are: United States/ 8.134 tonnes, Germany/3.401 tonnes, IMF/2.814 tonnes, Italy/2.452 tonnes, France/2.435 tonnes, China/1.054 tonnes, Switzerland/1.040 tonnes, Russia 792 tonnes, Japan 765 tonnes, Netherlands/613 tonnes. China with the world’s largest foreign exchange reserves of $3,18 Trillion at the end of 2011 is seen as a very substantial player in the global gold market, rising its total consumption in 2011 to about 430 tonnes coming about 327 tonnes from its own gold production and about 100 tonnes from imports. India represents the world’s largest gold jewellery market by volume, following in terms of consumption demand the United States, the Middle East (Saudi Arabia, Dubai), Turkey and Italy. Gold trade is a chief driver of economic diversification in the Gulf region and particularly in Dubai, reexporting into the vigorous Arab markets. The industrial, electonic and dental uses are accounting for around 10% of gold demand, rising gold investment demand in gold-backed Exchange Traded Funds/ETFs to a new high of 2.167 tonnes worth about $98 Billion by December 2010. Gold has reinstated its age old position as the best hedge against inflationary times and increasing wealth in Brazil, India and China is contributing to leave demand outstripping mine supply. Gold mining will not going to be easier, it gets deeper and more expensive. It looks as if the general fundamental outlooks for gold continue to be quite positive.
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WTI Crude Oil $99,62/Brent Crude Oil $111,52 – 01/27/12 IEA seas a slowdown in oil demand due to high oil prices and a lower growth in developed nations, however called for an increase in world oil production seeing signs that elevated crude prices affect economic recovery by widening global imbalances. OPEC oil producers agreed a supply target of 30 Million barrels a day, sealing their first new production limit in 3 years, while world oil inventories boosted by rising Libyan oil output at 1 Million barrels a day, from a pre-war level of 1,6 Million barrels a day. Saudi Arabia’s crude oil output reached 10 Million and 40 barrels per day in November, after producing 9,45 Million barrels per day in October, favoring the country a crude price of $100,- per barrel. Iran concluding naval exercises warned U.S. navy not to return to the Persian Gulf alarming oil markets.
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2.b) Oil
The International Energy Agency/IEA alerts that new investments to increase oil output, which shows a natural annual decline of 9,1%, are necessary to meet future oil demand of China, India and other developing countries, as OPEC members restart thanks to higher oil prices $165 Billion drilling investments. Total global oil consumption 2010 reached estimated 86,57 Million barrels a day/bbl.d., demanding United States 19,13 Million bbl.d., Europa 15,22 Million bbl.d., China 9,05 Million bbl.d. and Japan 4,40 Million bbl.d., accounting NON-OECD countries for all of the world’s consumption growth in the next two years, with the largest consumption coming from China, the Middle East and Brazil, continuing to decrease consumption of nations belonging to the OECD, compensating a decline in Europe’s biggest 5 countries a small increase in the U. S. Total world production increased to 86,40 Million bbl.d. in 2010, coming 51,52 Million bbl.d. from NON-OPEC countries and 34,88 Million bbl.d. from OPEC nations. NON-OPEC production increase is expected in a few countries, particularly in China, Brazil and Canada, while OPEC oil output will also rise to accomodate more world oil consumption. OECD petroleum inventories held 2,71 Billion barrels ending 2010, equivalent to 58 days of forward-cover. Leaving behind Iran with a production of 3,75 Million bbl.d., NON-OPEC country China ranked in 2010 as the world’s fourth biggest oil producer, meeting domestic output of 4,26 Million bbl.d. less than half of the nations demand. Oil output of NON-OPEC country Russia, a net oil exporter and the largest global oil producer, rose to a record of 10,13 Million bbl.d. in 2010, followed by OPEC member Saudi Arabia with 8,41 Million bbl.d., with a production capacity of more than 12,19 Million bbl.d. at the end of 2010, and the United States, also a NON-OPEC nation, growing its domestic crude oil production by 150.000 bbl.d. to 5,51 Million bbl.d. in 2010, expected to decline in 2011 by 20.000 bbl.d., remaining the largest net oil importer. Canada has over 170 Billion barrels of recoverable bitumen from oil sands with today’s tecnology and Alberta oil sands with an estimated total bitumen reserve between 1,7 Trillion and 2,5 Trillion barrels, more than the total OPEC oil reserves of about 900 Billion barrels, are for decades not considered part of the world’s oil reserves because the oil there wasn’t economically extractable at prevailing prices but could become the most important source of new oil in the world in coming years, buying PetroChina, Asia’s largest oil and gas company, and Sinopec, a Chinese State controlled company, full ownership stakes and participations in important oil sands projects in Alberta, urging the Government of Canada to approve a pipeline to Canada’s Pacific coast so that tankers can ship oil sands crude to China. There are also expectations Arctic may hold as much as 90 Billion barrels or 13% of the world’s undiscovered oil and 30% of the world’s undiscovered gas reserves. Great oil production increases are expected from NON OPEC country Brazil, showing Russia the world’s second biggest oil producer a declining oil output, believing observers that the period of intense oil production in the oil reach western Siberia is over. Brazil’s newly discovered deepwater ‘pre-salt’ oilfields like Tupi, Lara and Guará, located in an area of 800 sq km offshore 16400 feet below sea level, which may contain between 50 Billion and more than 100 Billion barrels, could transform the country into one of the major oil-producing and -exporting countries, announcing the state-controlled PETROBRAS the discovery of 65 Million barrels in the Barracuda oil field 100 km off the coast of Rio de Janeiro and that it will invest about $224 Billion over the next 5 years to increase oil output, turning to China, Brazil’s biggest trade partner, for cash, signing a loan agreement of $10 Billion with the China Development Bank and a 10 year pact for delivery of up to 200.000 barrels a day of crude oil to Chinese companies. PETROBRAS filed for a record global stock offer of $67 Billion to finance part of its ambitious offshore plans to turn Brazil into a major oil exporter, making Brazil’s Congress PETROBRAS sole pre-salt operator. Oil output in Mexico is also slowing down, facing the state owned oil company PEMEX a cronical lack of cash and of technical capacity for deepwater exploration and production. Concerns over President Chavéz’s socialist revolution delay one of the biggest biddings to explore oil fields, called the Carabobo auction, competing Chinese, Russian, Indian, Colombian and Brazilian state oil companies with oil majors Shell, BP, Chevron, Total, Eni and Statoil for access to the Orinoco belt with a huge potential of tar-like extra-heavy crude, requiring the Venezuelan state oil company Petróleos de Venezuela/PDVSA at least a 60% share in each project, getting partners at most a 40% share, but will have to provide a 100% financing, announcing Venezuela deals with Russia and China with investments up to $36 Billion producing until 2012 about 900.000 barrels a day from the heavy oil deposits Junin 4, Junin 6 and Carabobo. Exxon Mobil and Russian oil giant Rosneft agreed to explore oil and gas in the Arctic Kara Sea and in the deep waters of the Black Sea, two of the most promising and least explored sea offshore areas globally, giving the U.S. access to potentially huge oil and gas fields in Russia’s Arctic Sea shelf and Russia stakes in Exxon’s operations in the Gulf of Mexico and Texas, raiding Russian officials the Moscow office of BP, whose hopes ended of developing Artic offshore oilfields with Russia. The world is not running out of oil, the biggest threat to the future of supplies is the lack of spare production capacity worldwide to cover a shortfall. Shortfalls are caused by oil rich countries such as Nigeria, Kuwait, Venezuela, Iran and Iraq, where politics has stymied production growth. Oil rich Nigeria, where rebels are attacking oil wells and pipelines, Iran, because of its nuclear program and the spreading unrest in North Africa and the Middle East continue to be lingering hotspots the markets are focusing on. Saudi Arabia completing the development of its giant Khursaniyah field, complying with a huge expansion program to increase its production capacity of about 12 Million bbl.d., pumping actually 8,4 Million bbl.d., could rise its spare oil production capacity to 15 Million bbl.d. if needed, but seems comfortable with the world’s current production capabilities and is defending oil price stability and a fair oil price not hurting producers neither consumers. OPEC member Iraq, with the world’s fourth largest proven oil reserves estimated to stand at 143,1 Billion barrels, is opening its giant key producing oilfields to Britsh and US companies to restore its oil infrastructure and to raise output from the actual level of 2,021 Million bbl.d. by a combined 1,5 Million bbl.d. OPEC’s proven crude oil reserves estimates rose 12,1% to 1,19 Trillion barrels or to 81,3% of the world’s proven crude reserves in 2010, led by Venezuela with 296,5 Billion barrels surpassing Saudia Arabia with 264,5 Billion barrels and Iran with 151,1 Billion barrels, showing BP statistics Venezuela still with 211,2 Billion barrels in conventional oil reserves, avoiding unconventional oil reserves such as Venezuelan heavy crudes.
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2.c) Sovereign Wealth Funds/SWF
The IMF created a code of ‘best practices’ guiding SWF to ensure transparency and good governance, expecting SWF from the countries that are getting the funds money to accept the same rules and avoiding over-regulations! Abu Dhabi, the oil-rich Emirate of the Gulf region, owns the largest SWF the Abu Dhabi Investment Authority/ADIA with around $627 Billion. Middle Eastern investors have been repatriating their assets, reinvesting attracted by high returns especially into the Gulf region’s spectacular mega projects. Gulf states invested Billions of Dollars in tourism, culture and infrastructure, rising foreign investments into regional markets. Due to the global financial crisis SWF have suffered according to estimates declines in the value of their overall portfolios of at least 18% to 30% and have refrained from new investments in financial institutions and major transactions, helping to shore up their home economies. Especially the Gulf- SWF are reviewing their investment strategy, finding a growing interest from emerging countries and considering the historic decline in share prices started to buy stakes in Central European and some German companies. Oil poor overindebted Gulf Emirate Dubai hit by recession dropping real estate prices, having received already financial aid from oil rich neighbor Abu Dhabi, had to freeze its debt repayments in order to restructure liabilities amounting to $59 Billion, forming part of Dubai’s debts (sheikdom and state owned companies) estimated to reach 109,3 Billion, requesting from its providers of financing an extension of maturities until at least 30 May 2011 for the Government owned holding company Dubai World and its real estate arm Nakheel World, developer of Palm Islands Dubai. Abu Dhabi provided under not disclosed conditions essential last minute bailout to Dubai helping with another $10 Billion, opening Dubai the world’s tallest 828 meters high building, named Burj Khalifa to honor Abu Dhabi’s ruler Sheikh Khalifa bin Zayed al Nahyan, also UAE’s President. Ambitious Dubai World revealed it plans to sell its prized assets over a period of 8 years to generate as much as $19,4 Billion to pay off creditors. China’s CIC with a net asset value of $374 Billion reported a $51,5 Billion net profit in 2010, adding $35,7 Billion in new investment, continuing North America as the largest destination accounting for 41,9% of the fund’s portfolio, followed by the Asia Pacific region at 29,8% and Europe at 21,7%.
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3. Globalization
Globalization has helped reduce poverty in a large number of developing countries, but too many nations and people have been left out what does not justify a retreat to nationalism and protectionism. Globalization today is increasingly both flowing business from developed to emerging economies and from one developing country to another, competing everyone from everywhere for everything. Companies from emerging markets, mostly from the so-called BRIC economies Brazil, Russia, India and China, are rising fast to rank between the world’s biggest firms, creating opportunities to raise living standards around the world, as well as threats if less well-run competitors enjoy subsidised capital, help from political cronies or privileged access to resource supplies. Increasing consumption in the BRIC countries might offset to a large extend the slowdown in the United States and their share of global demand is starting to move towards that of all G7 nations. China does not favor the regionalisation tendencies of Latinamerican nations and continues to support globalization, bringing growth as companies invest into booming markets reducing risks of exchange rate fluctuations. The world is becoming more interconnected as emerging market companies are seeking to expand not only with Western economies but also among themselves.
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4. Global Warming
The dramatic change in West Antarctic Ice could produce a significant rise in global sea levels; Antarctic ice sheet is melting rapidly, as much as 36 cubic miles of ice a year. Sea level rise, warming temperatures, uncertain effect on forest and agricultural systems and increased variability and volatility in weather patterns are expected to have a significant impact. Going oil and gas prices up, reliance on coal is increasing especially in China, India and the United States, meaning that global emissions of carbon dioxide will rise and there is little hope of averting the worst effects on climate change! The Kyoto protocol, ratified by over 166 countries, but not by the former Bush administration, entered into force in February 2005 and is due to end in 2012. The US, mayor developing countries and big polluters like Brazil, China and India became fully engaged in signing up to a post-2012 agreement, centred on the United Nations Framework Convention on Climate Change/UNFCCC, having G8 leaders agreed to consider and adopt the goal of achieving at least a 50% reduction of global emission by 2050. President Obama has committed himself to play a constructive role in the international UN negotiations”Global Green New Deal” for the post-Kyoto treaty and to reduce greenhouse gas emissions in the United States by 80% – below 1990 levels – by 2050, proposing Government spending of $150 Billion over the next 10 years in clean energy infrastructure creating as many as 5 Million jobs, asking for action of developing countries like China and India to do their part. Obama’s administration announced a historic first U.S. wide regulation proposing tough standards to limit the release of greenhouse gases by cars and trucks raising also fuel efficiency standards by 2016, approving the House a climate bill, formally known as ‘American Clean Energy and Security Act’, establishing first national limits on greenhouse gas emissions. EU leaders agreed on a deal to cut by 20% greenhouse gas emissions on 1990 levels within the European Union by 2020, which could rise to 30% if other developed countries match the European target, dropping EU greenhouse gas emissions 6% in 2008 as global economic crisis slowed industrial activity, setting Japan as target to cut greenhouse gas emissions 25% from 1990 levels by 2020. G8 nations approved tentatively to keep temperature increases to no more than 2 degrees celsius confirming a far-reaching proposal to reduce greenhouse gases by 2050 of industrialized nations by 80% and worldwide by 50%. Russia, one of the world’s greatest emitting countries, agreed with the EU to cooperate on climate change, raising its greenhouse gas emissions reduction target from 15% to 20%/25% by 2020 from 1990 levels, while President Obama offered to reduce U.S. greenhouse gas emissions by 17% below 2005 levels by 2020 setting an emission target of 28% by 2020 within the Federal Government, China proposed to cut its carbon intensity – carbon dioxide emissions per unit of gross domestic product by 40% to 45% by 2020 compared with levels in 2005 and India confirmed its intention to cut the carbon emitted relative to the growth of its economy – its carcon intensity – by 24% by 2020. The U.N. climate conference 2010 in Cancun ended with a compromise build on the progress of the previous Copenhagen summit, reaching still no concensus on a post-Kyoto agreement, allowing global temperatures to rise not more than 2% cutting drastically greenhouse gas emissions, proposing to set up with the help of the World Bank a Green Fund to raise an annual $100 Billion aid to assist poor countries to adopt to climate change. Delegates of the 2011 U.N. summit on climate change in Durban reached a last minute compromise pact including top emitters China, India and U.S. setting course to reduce greenhouse gas emissions over the next decade, extending the Kyoto Protocol and to agree on a new binding international climate deal until 2015 to enter into force in 2020, abandoning Canada the Kyoto Protocol, announcing Japan and Russia they will not be signing the treaty renewal in 2012.
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5. His Holiness Pope Benedict XVI Joseph Ratzinger
Pope Benedict has developed an intense scientific activity and his publications constitute a point of reference for many people. In his usual clarity he made notable contributions to Church and to the Christian Society. Pope Benedict met with Muslim religious leaders and scholars at a Catholic-Muslim forum in Rome, agreeing on the creation of a permanent interreligious committee to prevent and resolve conflict, which is considered vital to put into practice principles both religions have in common. Followers of Islam increased in such an extraordinary way that today 19,2% of the world population is Muslim, while 17,4% is catholic. King Abdullah of Saudi Arabia said we have lost sincerity, morals, fidelity and attachment to our religions and to humanity, deploring the desintegration of the family and the rise of atheism in the world, a frightening phenomenon that all religions must confront and vanquish, and calls for dialogue among monotheistic religions, project which the King discussed with Pope Benedict during a landmark visit to the Vatican. Pope Benedict views the United States as essential ‘battleground’ in what he considers the ‘war’ of today’s era – proving that modernity doesn’t have to stamp out religious faith! Pope Benedict spoke of his affection for America, a land of hope and opportunity for millions across the world, and offered his support to strengthen the United Nations, where he has promoted human rights as basis for ending war and poverty! The Pope expressed worries about displays of racism in some countries, saying that social and economic problems could never justify contempt or racial discrimination! During his Mideast tour including Israel, described as one of reconciliation and as pilgrimage of peace, the Pope expressed deep respect for Islam, making no secret of his support for the Palestinian people, calling for the creation of a Palestinian state as a solution to the conflict with Israel, saying that Christians, Palestinians and Jews should live in peace, made a forceful condemnation of anti-Semitism and acknowledged the Vatican has committed mistakes, after revoking the excommunication of an ultraconservative bishop who denies the Holocaust. Responding to many requests the Vatican announced it has worked out a process allowing groups of Anglicans who are dissatisfied with their faith to join the Catholic Church. The Vatican dismissed criticism linking Pope Benedict to a sex abuse cover-up while he was archbishop of Munich, as other priestly sex abuses are reported in Germany, Holland, Austria and Italy, saying church secrecy on reports of abuse has never been understood as a ban denouncing the crimes to the civil authorities. On his first visit to Britain the Pope urged the country not to let secularism overshadow Christianity and met with clerical sex-abuse victims expressing deep sorrow and shame. The Roman Catholic world was caught by surprise as the Vatican relaxed its longstanding opposition to the use of condom, saying the Pope that the condom use is acceptable in ‘single justified cases’. In a Vatican ceremony assisted by more than a Million pilgrims Pope Benedict beatified his predecessor Polish-born John Paul II, moving him one step closer to sainthood. On his first State visit to Germany the Pope told the German Parliament that politicians must not sacrifice ethics for power, warning Germany ignoring religion.
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