1read’s Weblog

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U.S. PRESIDENTIAL ELECTION 2012 – President Obama is eligible for a second and final term, looking like a strong contender for re-election, framing the Obama-campaign the upcoming general election projecting President Obama as protector of the middle class strengthening his position. However there still exists wariness on economy of voters, holding neither Obama nor Romney a decisive advantage on who can fix jobs and economy, urging the President European leaders to contain the continent’s debt crisis ahead of the November election. Initiating his campaign President Obama showed support for same-sex marriage, producing a divide over gay-marriage, rejected by mormón Republican Presidential candidate Mitt Romney, who cleared his way to the GOP nomination, extending his nationwide delegate lead including preferences of super delegates to 1.084 (needing 1.144 delegates to win the nomination), after his followers Santorum and Gingrich suspended GOP Presidential bid. Observers expect a likely Obama-Romney showdown as the general election begins, blocking Republican hostility in an already unpopular Congress the President’s agenda.

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Elected House speaker Republican Boehner seeks changes in the health care and financial regulation legislation 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, probably ending with an estimated deficit of $1,33 Trillion, and revealed a 10-year blueprint showing annual deficits exceeding $600 Billion every year except 2018, including budget 2013 spending of $3.8 Trillion with a planned deficit reduction to $901 Billion targeting higher taxes on the wealthiest. 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 Super Committee’ 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. 26 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, abandoning the White House a controversial part of the healthcare law dropping plans to implement a new program to provide Americans with long-term-care insurance seen as financially not viable. Ending a three-day review the Supreme Court seems divided over whether such a sweeping overhaul exceeds the Federal Government’s powers. The Court may consider several approaches if just the requirement that individuals have insurance is removed, not invalidating the entire healthcare law, and a decision, which will affect Presidential election, is expected to come in June, warning President Obama that ‘unelected’ justices shoudn’t overturn the will of Congress. 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%. 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 achievement. As expected Congress passed the extension of payroll tax cut and jobless benefits, maintaining Medicare reimbursement rates for doctors. 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. A deadly chain of events after Koran burning leaves doubts about reliance on Afghan forces and exit strategies in Afghanistan, mourning Afghanistan 16 apparently killed by U.S. soldier, lashing President Karzai out at NATO.

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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 declined to an all time low of 3,78%:

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:

Check out our new health care app:

We can’t afford to lose our way:

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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-zone and the Euro continue 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 remains cautious, sees jobs and economy improving, but feels that higher growth is needed to lower jobless rate, keeping rates near zero, signaling 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 from 8,2 % in March 2012 to 8,1% in April as work force shrinks, adding the U.S. economy only 115.000 new positions, fewer jobs than in March, falling weekly first time jobless claims to 367.000. The Thomson Reuters/University of Michigan final index of consumer sentiment rose to 79,3 in May 2012 from 76,4 the prior month, the highest level in 4 years. U.S.- consumer spending, which accounts for about 70% of the U.S. gross domestic product, increased in 2011 just by about $160 Billion with an outlook for 2012 best remaining regular, advancing 0,8% in February 2012 after a 0,4% gain in January, helping a modest 0,2% rise in incomes to spend more, dropping savings rate to 3,7%, surging consumer borrowing $8,7 Billion reaching total consumer borrowing $2,52 Trillion, declining credit-card debt by $2 Billion after dropping $3 Billion in January 2012. The U.S. consumer price index/CPI climbed 0,3% in March 2012 from the previous month easing run-up energy prices, rising the core index excluding volatile food and energy prices 0,2%. According to the Institute for Supply Management/ISM the index on the U.S. manufacturing sector expanded to 53,4% in March 2012 from 52,4% in February, while the index of the service sector, which employs 90% of the U.S. work force, decreased to 56% in March 2012 from 57,3% in February, indicating a continued growth at a slower rate. U.S. auto sales ended 2011 with strong gains, reaching the industry an annual sales pace of estimated 12,778 Million or 10% more than in 2010 with 11,589 Million vehicles, continuing strong sales in the first three months of 2012, slowing to a just 2,1% gain in April, declining year-over-year sales of Ford 5% and of GM 8,2%, rising sales of Chrysler 20%, of Volkswagen/VW 31,5% and of Toyota 11,6%. 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 Toyota with reported global car sales of 7,9 Million. However Toyota is again the world’s largest automaker, selling 2,49 Million autos in the first quarter of 2012, compared to GM’s 2,28 Million and Volkswagen’s 2,16 Million. U.S. retail-sales rose a meager 0,1% in April 2012, growing sales excluding auto sector also 0,1%, while March increase of 0,8% was revised down to 0,7%. The U.S. annual inflation rate declined to 2,65% in March 2012 from 2,87% in February, forecasting the Fed a level between 1,5% and 2% for 2012. U.S.-GDP rose 1,7% in 2011, slowing growth in the 1Q 2012 to an annualized rate of 2,2% from 3% in the last quarter of 2011, rising personal consumption expenditures 2,9% but falling Government spending, predicting the Federal Reserve an economic expansion between 2,4% and 2,9% for 2012. The IMF lowered its world 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 1,5% in 2011, forecasting the EU a zero growth for 2012, making EU27 up about 30% of the world economy, growing the 17-nation Euro-zone economy by 1,4% in 2011 after shrinking 0,3% in the last quarter of 2011, expecting the EU a ‘mild recession’ for the Euro-zone in 2012 and a contraction of GDP by 0,3% for the whole year, projecting a growth of 0,6% for Germany and of 0,4% for France, while economies in Italy and Spain will shrink by 1,3% and 1% respectively, contracting also economies in the Netherlands, Belgium, Portugal and Greece. The annual inflation rate in the Euro-zone eased slightly in April 2012 to 2,6%, surpassing ECB’s target of 2%, and the bloc’s average unemployment rate hit a record 10,9% the same month. The European Central Bank/ECB kept its key rate steady at 1% in May 2012, signaling concerns about long-term inflation in the Euro-zone, forecasting the annual rate in 2012 to be between 2,1% and 2,7%, urging Euro-zone to focus on growth, predicting a gradual economic recovery in the second half of 2012. The average budget deficit in the Euro-zone dropped to 4,1% of GDP in 2011 (largest deficits: Ireland 13,1%, Greece 9,1%, Spain 8,5%), facing as main problem increasing long-term pension costs and other age related expenditure, standing public debt in the monetary union in 2011 at 87,2% of GDP (worst debt situation: Greece 165,3%, Italy 120,1%, Ireland 108,2%).

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BRIC COUNTRIES: 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 2,7% in 2011, replacing Britain as the world’s sixth largest economy, after the U.S., China, Japan, Germany and France. Russia, the energy giant, saw its GDP growing by 4,2% in 2011, targeting an expansion by 3,4% in 2012. India’s  economy grew 6,9% in fiscal year ending March 31, 2012, projecting a growth of 7,6% for the current fiscal year, cutting Morgan Stanley growth forecast from 6,9% to 6,3% for 2012 and from 7,5% to 6,8% for 2013, giving Standard & Poor’s the country a negative outlook due to high debt and fiscal deficit, expanding China’s GDP 9,2% in 2011, lowering the country its growth target for 2012 to 7,5%, increasing to 8,8% for 2013, slowing GDP growth to 8,1% in 1Q 2012. The 4 BRIC countries invited in 2010 South Africa to join the group, accounting roughly 42% of the world’s population and representing a combined GDP of $13,6 Trillion or 20% of the world’s total in 2011. The bloc is launching plans for a joint development bank and measures to work more closely together.

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U.S. BANKS: During the global financial crisis Lehman Brothers filed for Chapter 11 bankruptcy protection owing a record $639 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. After bankruptcy judge approved payback plan Lehman Brothers exits bankruptcy protection in March 2012 starting on April 17 to distribute about $65 Billion of asset value left to creditors who had asserted more than $300 Billion in claims. 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 bought back after receiving regulators’ permission the preferred shares it sold to Berkshire Hathaway paying $1,64 Billion for Warren Buffett’s help, dropping net earnings for the year 2011 67% to $2,5 Billion, reporting for the 1Q 2012 net profit of $2,11 Billion or diluted earnings of $3,92 per common share on net revenues of $9,95 Billion. The S.E.C. sued Goldman Sachs for securities fraud, off-loading risk of sub-prime 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, posted for the full year 2011 an income of $4,2 Billion or $1,26 per diluted share, reporting 1Q 2012 net loss of $119 Million or 6 cents per diluted share due to accounting rule cost/debt valuation adjustment/DVA of $2 Billion, dropping revenues to $6,9 Billion. 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 full year of 2011 a net income of $11,3 Billion on revenues of $78,4 Billion, remaining 1Q 2012 result flat from a year ago with earnings of $2,93 Billion or 95 cents a share on revenues of $19,4 Billion, excluding one-off items earnings per share were $1,11 and revenues $20,217 Billion, rejecting shareholders executive pay plan. Wells Fargo, the largest U.S. home lender, closed a $15,8 Billion stock deal to buy all of Wachovia Corpration and returned $25 Billion TARP funds, increased for the full year of 2011 net income 28% to 15,9 Billion or 2,82 per diluted share, becoming the nation’s biggest bank by stock market value reaching $178 Billion, about $70 Billion more than Citigroup and some $8 Billion more than JP Morgan Chase, but Wells Fargo has still fewer deposits than its closest competitor, posting for the 1Q 2012 a 14% profit gain earning $4,2 Billion or $0,75 per diluted share rising revenues to $21,6 Billion. 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, posting for the full year 2011 a net income to common shareholders of $85 Million or 1 cent a share and for the 1Q 2012 a net income of $653 Million or 3 cents per diluted share, including accounting charges/negative valuation adjustment of $4,8 Billion, reaching revenues of $22,5 Billion. 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 Construction 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 purchase 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 rivaled 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 returned the U.S. capital investment of $25 Billion, reporting for the full year 2011 a profit of $19 Billion, posting 1Q 2012 net income of $5,4 Billion or $1,31 a share rising revenues to $27,4 Billion. JP Morgan Chase disclosed a trading loss of $2 Billion, dropping the bank’s value by $13 Billion, underscoring need to implement new regulations in the financial reform law limiting risky bets by large banks. 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.

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TIGHTER REGULATIONS: 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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EUROPE/RUSSIA/JAPAN/CHINA: The German Government completed the total nationalization of troubled Hypo Real Estate, one of Europe’s biggest commercial property lenders, transferring 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% in 2011 and grew by 0,5% in the first quarter of 2012, ending 2012 probably with a GDP growth of about 1%, increasing up to 2% in 2013. The German State deficit fell to 1% of GDP in 2011, expected to remain at that level also in 2012, declining German public debt to 81,1% of GDP in 2011, reaching the annual inflation rate 2,1% in March 2012 and falling jobless rate to 5,7% in February 2012. 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 a net profit of €4,3 Billion for 2011, although making a fourth quarter 2011 loss of €351 Million before taxes. EU blocked a merger between Germany’s Deutsche Boerse and stock market operator NYSE Euronext, saying the deal would create a ‘quasi-monopoly’ in derivatives trading, saying Deutsche Boerse it will sue Bruessels over NYSE block. 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. Former East German civil-rights activist Joachim Gauck was elected as German President replacing Christian Wulff. Christian Democrats, the Chancellor’s party, lost elections in Germany’s most populous State, seen by many as indicator of the broader intentions of voters ahead of next year’s general elections. Chancellor Merkel, enjoying enormous popularity among Germany’s general population, is up for re-election in 2013 intending to run for a third term. 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. The French Government revealed its economic stimulus package for €37 Billion principally oriented towards investment efforts, expanding GDP by 1,5% in 2011, predicting economists a growth of only 0,4% in 2012. New French President socialist Francois Hollande promised to shift burden of hardship to the rich and soft current prescription of German-led austerity. 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. 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. Britain’s economy grew by only 0,8% in 2011, shrinking by 0,3% in the 1Q 2012, falling back into double-dip recession and is expected to expand by 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 just CHF 4,2 Billion or CHF 1,10 per share for 2011. Swiss Parliament approved 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 only CHF 1,95 Billion in 2011. Russia supported its banking system using its biggest states banks VTB and Sberbank, providing much needed longer-term liquidity, shored up its weakened 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 privatization program over 5 years worth some $40 Billion selling minority stakes in about 900 State controlled companies helping to finance budget deficit. Prime Minister Vladimir V. Putin, whose United Russia party lost its two-thirds majority in DUMA, continuing still as the strongest political power, won overwhelmingly re-election for six years to the Russian Presidency and was sworn in as police attempted to stamp out a second day of protests in Moscow, taking previous President Medvédev Putin’s place as Prime Minister heading also the United Russia Party. 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 and Fitch Japan’s long-term credit ratings, lowering Moody’s and Fitch the debt rating of the highly indebted nation from stable to negative. The Bank of Japan intervened several times to stop a further yen appreciation, cutting its key rate to virtually zero, 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, turning trade focus to China and South Korea. 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, contracting its economy 0,9% in 2011 after shrinking 0,6% in the fourth quarter, helping hopefully reconstruction which could cost estimated €217 Billion to accelerate economic expansion by 2% in 2012 and 1,5% in 2013, 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, posting Japan’s trade balance in January 2012 a record $18,5 Billion trade deficit. China put into force a massive stimulus initiative of $586 Billion, including heavy infrastructure investments, tax cuts and low interest rate loans, accelerating growth contributing to the region’s stabilization, surpassing Germany as the world’s biggest exporter, overtaking the U.S. as the biggest energy consumer, passing Japan to become the world’s second largest economy, expanding GDP 9,2% in 2011 after slowing to 8,9% in the fourth quarter, easing annual inflation to 3,4% in April 2012, projecting China a consumer price index/CPI increase of around 4% in 2012. Steering China’s economy away from a double-digit export led growth to a more sustainable expansion of its domestic consumption will be a top priority of the Government’s economic work in 2012, targeting an average growth rate of 7% through 2015, ensuring 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, rising retail sales 17% year-over-year to 18 Trillion yuan/$2,86 Trillion in 2011. China’s world GDP participation reached 8,6% in 2010, while its global export share was 8,5%. 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, agreeing China, Japan and South Korea to press ahead with purchase of each other’s Government bonds.

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U.S. HOUSING MARKET: Existing home sales grew 3,4% in April 2012 to a seasonally adjusted annual rate of 4,62 Million units, reaching the national median price $177.400 up 10,1% from a year ago. Realtor’s index of pending home sales slipped 0,5% to 96,5 based on contracts signed in February 2012. New single family home sales rebounded in April 2012 rising 3,3% to an annual rate of 343.000, increasing the median price of a new property to $235.700, up 0,7% from March 2012. Housing starts rose 2,6% to a seasonally adjusted annual rate of 717.000 in April 2012, while building permits fell to a 715.000 annual pace. In March 2012 foreclosures are reported to have been filed on just fewer than 199.000 properties, 17% less than a year earlier, dipping the monthly total the first time since July 2007 below 200.000, reaching foreclosures the lowest quarterly level since late 2007. ‘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 White House announced a new plan to help homeowners lower their monthly mortgage bill with a $5 Billion to $10 Billion refinancing program for people who are current on their payments. The Obama Administration pumped $3 Billion into its Hardest Hit Fund/HUD intended to assist 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, studying a single way to package home loans into securities as an interim step to develop a home mortgage guarantee system.  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. U.S. regulators announced an estimated $25 Billion deal with 5 major U.S. banks agreeing 49 States to sign on to the settlement allowing nearly 2 Million homeowners to benefit from mortgage relief.

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BASEL III/G20/G8/G7/GCC/APEC/IMF/WORLD BANK: 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 $1,15 Trillion in U.S. debt at the end of 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, offering other BRIC countries yuan loans, wishing to establish the yuan as reserve currency, widening the yuan’s daily trading band against the US Dollar from 0,5% to 1%. 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 Bushehr 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, test-firing anti-radar medium-range missiles, Iran threatened 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 program. 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 super-majority 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 Japan 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 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, 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 Morocco, receiving also Libya funds from the IMF as soon as change of Government is concluded. 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. 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. The World Bank selected U.S. nominee Jim Yong Kim as new President.

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‘ARAB SPRING’: 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, holding Egypt’s first post-Mubarak Parliament its inaugural session dominated by the Muslim Brotherhood and other religious groups, heading Muslim Brotherhood candidate Mohammed Morsi and Ahmed Shafiq, Mubarak’s last Prime Minister, according to partial results of first free Presidential polls held May 23/24 to a run-off sheduled for June 16/17, hoping Brotherhood for a Presidential victory. Protests spread across the Middle East, assuming elected Vice President Hadi as new President of Yemen, 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, increasing U.S. financial sanctions against Syria followed by the EU enforcing in addition an arms embargo and banning imports of Syrian oil, confirming the Arab League suspension of Syria’s membership because of bloody suppression imposing broad economic sanctions, fighting Assad’s military dissident troops around Damascus and renewing shelling of rebel stronghold Homs, closing the U.S. Syrian embassy, backing U.N. Security Council supported by China and Russia Kofi Annan’s peace efforts, agreeing Syria to cease-fire on April 10, demanding Assad rebel guarantee before troop pullout, taking thousands of protesters streets as hostilities slow down, beginning the U.S. and dozens of other countries to equip and pay rebels, while Turkey could play a key role in any military intervention in Syria, sending U.N. Security Council ceasefire monitors to Syria. 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, proclaiming after Qaddafi’s death formally the country’s liberation, presenting NTC chief Rahim al Kib his new cabinet announcing elections in 20 months. 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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EUROPEAN DEBT CRISIS: ECB – exchange reference rates 05/25/12  - 1,-Euro/€ = US.Dollar/USD 1,2546, Swiss Franc/CHF 1,2014, Japanese Yen/JPY 99,80 and Chinese Yuan Renminbi/CNY 7,9470. 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. 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, announcing Spain’s conservative leader and elected new Prime Minister Rajoy an austerity package worth €16,5 Billion, missing the country deficit target 2011 by a wide margin reaching 8,9% of GDP instead of the agreed 6%, raising also deficit target for 2012 to 5,8% of GDP from the EU-agreed 4,4%, demanding the Euro-group a reduction to at least 5,3%, announcing Spain a tough austerity budget to produce savings of €27 Billion and spending cuts of €10 Billion reforming education- and healthcare systems. 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. 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 is boosting its own bailout fund of actually $380 Billion to about $1 Trillion to be able to address global financing needs over the next two years, endorsing G20 Finance Ministers the increase of IMF’s firepower to reassure markets, totaling actual commitments from Euro-zone countries, Poland, Switzerland, Britain, Nordic nations, Japan, Singapore, South Korea, Saudi Arabia and BRIC countries China with a  possible contribution of $60 Billion, Russia, India and eventually Brazil more than $430 Billion in additional emergency lending capacity, refusing the U.S. and Canada to take part. Euro-zone’s issue volume 2012 will reach again more than €800 Billion, facing weaker countries with high refinancing needs more mistrust from investors and are exposed to increasing borrowing costs. Strengthening the Growth and Stability Pact and moving the EU closer to a fiscal union the new German-led EU fiscal pact to fix the root causes of Euro-zone’s debt crisis, supported by ECB chief Draghi as vital to restore credibility, includes 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 ‘debt brake’ preventing it from running persistently budget deficits. Ireland announced plans to call a referendum on May 31 to vote on the new fiscal treaty, ruling out a rejection of the treaty any further bailout cash. With the exception of Britain and the Czech Republic, 25 of the 27 EU member States signed the new European fiscal compact with balanced budget rules in national legislation, pledging EU Governments to increasingly refocus their efforts on reviving the economy and fighting unemployment, planning the EU Commission to redirect €82 Billion for jobs and growth, making access to EU Structural Funds easier. Croatia voted to join the European Union becoming its 28th member. New French President, socialist Francois Hollande, announced to soft the current German-led austerity, saying France won’t ratify the fiscal pact in its current form without adding a growth and jobs focus. German Chancellor Merkel rejected a renegotiation of the treaty, opposing expensive economic Government stimulus programs which nations with already high deficits can’t afford, demanding  necessary structural reforms, preparing a growth plan targeting primarily to strengthen the possibilities of the European Investment Bank/EIB to finance industrial infrastructure projects and support investment in energy, transport and technology, supporting a capital increase of €10 Billion of EIB and to facilitate access to EU Structural Funds, making their utilization more effective, considering also to propose special economic zones/SEZ to attract investors. An informal meeting on May 23 of EU leaders to discuss France’s demand for less austerity and more money for growth to prepare common ground for the EU summit June 28/29, exposed serious differences between Germany and France, as French President Hollande pressed to issue Euro bonds rejected by Germany as the wrong prescription at the wrong time with the wrong side-effects, plunging markets and hitting the Euro a near two-year low. After G8 members pledged to keep Greece in the Euro-zone, EU leaders followed urging the country, which seems to have a plan to introduce a parallel currency to the Euro, to stay in the bloc. EU agreed to initiate a pilot program on European project bonds 2012/13, making a cooperation between private stake holders and the European Investment Bank/EIB , EU and the member States on infrastructure projects easier, setting the EU aside €230 Million in guarantees to attract a total of €4,6 Billion of investment. Standard& Poor’s downgraded France 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, adding a negative outlook, 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 also Fitch and Moody’s Euro-nations and European financial institutions. Investors are waiting on final solutions to end Euro-zone 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. IMF chief Lagarde urged a recapitalization of European banks, needing systemically relevant banks according to new EBA stress test additional capital of €115 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. European Finance Ministers reached a compromise and will approve a time table for 8.300 European banks to comply gradually with the Basel III requirements, allowing Governments to introduce stricter capitalization rules to improve protection against a new financial crisis, needing banks additional €460 Billion until 2019 to rise their Tier 1 capital ratio from 2% to 7%. 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 criticized for aiming to weaken the Dollar. Ireland, whose budget deficit including bank bailouts rose to 32,4% of GDP in 2010, became after Greece the second Euro-nation 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 a record-unemployment rate reaching 24,4% in March 2012 lost its triple A credit rating and is suffering further downgrades due to significant growth and deficit risks, announced plans to sell a 30% stake in the national lottery, privatize partially airports in Madrid and Barcelona and for a partial State-takeover to recapitalize its troubled savings banks, forcing them to become conventional banks and seek stock exchange listings. Rating agencies downgraded more Spanish banks, including Banco Santander and BBVA, totaling toxic property assets more than €184 Billion, needing Spain to pump €19 Billion of rescue finance into Bankia, effectively nationalizing the country’s third largest bank, to restore confidence in the stability of its financial sector. EU/IMF/ECB approved a bailout package worth €78 Billion for Portugal, agreeing the nation on a wide-ranging privatization program of €5,3 Billion and tax increases bringing down its deficit to 4,2% in 2011 targeting a 3% level for 2013, downgrading credit rating agencies Portugal’s sovereign debt into ‘junk’ category. Portugal’s debt-to-GDP ratio grew to 107,8% primarily because its economy is shrinking, increasing jobless rate to 15%, contracting GDP by 1,6% in 2011. But Portugal is not Greece, existing a broad Portuguese consensus on austerity and making the country really good progress on reforms, signaling the Euro-group more flexibility in the terms of the bailout memorandum. 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 Euro-zone’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 2014, suffering also a downgrade of most of its important banks, and followed Portugal and Spain pledging to insert a debt limit and a balanced budget amendment into the country’s constitution. 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 Belgian 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 Euro zone lenders in three-year loans at ECB’s key rate of 1% € 489,19 Billion in December 2011 and another €529,5 Billion in February 2012, a massive financial lifeline also seen the long-term refinancing operation/LTRO totaling more than €1 Trillion as a rescue package for debt crisis nations giving them more time for restructuring and reforms, using banks some of the three-year funds to pay off shorter ECB loans, becoming ECB a lender of last resort to banks, easing fears of a credit crunch, surging Spanish banks’ ECB borrowing in March 2012. The ECB remains reluctant to be a lender of last resort to sovereigns after spending already more than €211,5 Billion since May 2010 in its Securities Markets Program/SMP, purchasing 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, and would prefer to avoid to intervene again in capital markets as pressure on Spanish and Italian bonds elevate borrowing costs for these countries. 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 cleared the way for credit rating competition agreeing to require companies to rotate agencies and in turn encourage ratings competitors to enter the market. EU Finance Ministers agreed on a new mechanism to stabilize the Euro establishing an emergency safety net of €500 Billion, including the European Financial Stability Facility/EFSF with €440 Billion in credits/ guarantees of up to three years from Euro-nations to extend financial assistance to troubled Euro-nations 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 EFSF available to the 17 Euro-members 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 Euro-states with the strongest credit ratings their loan guarantees up to €780 Billion, coming €211 Billion from Germany, in order 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 Euro-zone 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 temporary EFSF and the future permanent 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, Euro-zone 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 Euro-zone Governments offering investors first-loss guarantees ranging from 20% to 30%, and authorizing the EFSF to constitute Co-Investment Funds/CIF buying Euro-bonds which also would be also guaranteed partially by the EFSF. Financial and political problems in Greece and Italy turned investors more cautious about risky assets and the Euro-zone as a whole, making leverage efforts of downgraded EFSF much more difficult, deciding Euro-zone leaders that both bailout funds, the temporary EFSF and the future permanent ESM, will be managed by the ECB. EU leaders approved an amendment to the EU-treaties when expiring the temporary Euro-zone’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. Euro-nations will finance the ESM paying €80 Billion in cash to give the fund with a capital stock more credibility ensuring probably the top-level triple A rating, 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 will include collective action clauses/CAC’s forcing bondholders to accept restructuring measures if necessary. Euro-zone leaders worried about contagion risks on Italy and Spain and lacking actually a mechanism allowing a private sector involvement/PSI according to IMF rules, signed off the €500 Billion permanent rescue fund ESM to be launched one year earlier on July 1, 2012, speeding up payment of capital into the new fund, deciding that only countries which previously ratified the new fiscal pact may request credits, insisting there will be no ‘lex Europe’ and that the private sector Greek debt cut was a special case. Following demands from IMF, OECD, EU Commission and France to increase Euro-zone debt ‘firewall’ to €1 Trillion, Euro-zone Finance Ministers agreed to boost the bloc’s emergency funding to roughly €800 Billion, comprising €500 Billion of the permanent ESM bailout fund, plus €200 Billion EFSF bailout programs for Greece, Ireland and Portugal, plus another €100 Billion in bilateral loans and EU funds in relation with the first Greek aid package, and to make unused €240 Billion of EFSF money as a kind of emergency reserve available for another year until mid-2013 since the new ESM will have a lending capacity of only €200 Billion in the first year. Of the €800 Billion package about €300 Billion have been used or pledged and only €500 Billion may be classified as ‘readily available’. Germany’s highest court ruled that a Parliamentary panel of nine lawmakers to decide on Euro-zone aid was largely unconstitutional and that Germany must convene all 620 members of its Parliament to approve most emergency measures to be taken by the Euro-zone’s rescue fund. Euro-zone Finance Ministers established that the terms of Euro-zone 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. Greece received a first financial aid package of €110 Billion, coming €80 Billion from Euro-zone members and €30 Billion from the IMF, remaining €35 Billion still available, approving Euro-zone Finance Ministers €130 Billion in new public bailout funds to cover financial needs until 2014 and a private sector involvement/PSI designed to cut current Greek debt from €350 Billion by €107 Billion reducing it from 160% to about 120,5% of GDP by 2020. Euro-zone Finance Ministers released the remaining €94,5 Billion in new Greek bailout funds after authorizing already €30 Billion for the payment of sweeteners to support the private sector bond-swap and €5,5 Billion to pay off accrued interest to investors. According to the Institute of International Finance/IIF private creditors take a debt cut of 53,5% facing an overall loss of around 75% if they bought old bonds at their face value, exchanging their holdings of Greek bonds against new ones with a maturities of 11 and 30 years under English law with a coupon of 2% until 2015, increasing to 3% until 2020, of 3,65% in 2021 and then of 4,3% from 2022 through 2042, receiving holders of new bonds GDP-linked securities for annual payments of up to 1% beginning 2015 according to Greek economic growth in excess of specified targets. Private creditors hold about €206 Billion in Greek debt of which €177,5 Billion are under Greek law, tendering bondholders €152 Billion of Greek-law bonds or 85,8%, activating Greece collective action clauses/CACs on these bonds to force all holders to sign up for the swap, while also out of a total of €28,5 Billion in Greek bonds issued under foreign law or by State-owned companies guaranteed by Greece, €20,3 Billion were also tendered, informing Athens that it reached a participation rate of 96,9% worth about €199 Billion. Bond holdouts not agreeing to the debt exchange involve apparently a Dutch bank and two well-known distressed debt funds Elliot Associates and Aurelius Capital Management, representing around 3% of the privately held debt, betting that at the end Athens and Euro-zone supporters prefer to pay them back in full rather than let the bonds default. Greece’s credit rating was upgraded after completing successfully bond swap. The International Swaps and Derivatives Association/ ISDA declared Greek debt swap as ‘credit event’, triggering bond insurance/CDS payments of $3,362 Billion setting value of 21,5% of par for Greek bonds meaning CDS will have to pay as loss compensation $2,64 Billion or $78,5 cents on the Euro to settle contracts. Protecting its Greek bond portfolio worth €55 Billion bought in the secondary market at discounted prices paying about €43 Billion, the ECB had exchanged bonds at their face value for new ones, planning to distribute profit made through the technical operation to the 17 Euro-zone central banks to lend it on to the EFSF, allowing Euro-zone Governments to reduce bailout interests for Greece from actually 3,5% to 2%, contributing with 2,8% of GDP to a Greek debt reduction. National European central banks holding  €12 Billion more of Greek bonds bought at a discount agreed to give up profits and to pass those gains back to the Greek Government, adding another 1,8% of GDP to Greek debt reduction. Therefore the interest of private investors has been officially subordinated, obtaining central banks a privileged position as they are prepared to assist Greece with further financial help. The successful private sector involvement/PSI bond swap exchanged every 100 Euros of old bonds with 31,5 Euros of new Greek bonds and 15 Euros of top-rated EFSF bonds with a two-year maturity, a near cash-equivalent for which the the EFSF committed up to €30 Billion provided as sweeteners out of the second Greek bailout package, which includes €23 to recapitalize Greek banks. There will be €35 Billion offered through the EFSF allowing Greece a possible buyback of Greek bonds held as collateral in the Euro-system, issuing Greek banks in exchange common shares or in some cases contingent convertible bonds to the Greek State, limiting voting rights. The IMF approved a loan worth €28 Billion to Greece over a four year period as part of the second international bailout package for Athens, withdrawing still available €10 Billion offered as part of the first bailout package, covering the IMF loan part of Greece’s financial needs of €21 Billion until the first quarter of 2016, while the new EU bailout aid runs until the end of 2014, signaling there might be a funding gap of €13 Billion to be closed by the Euro-zone nations in case Greece still can’t access capital market, which could increase up to €50 Billion until 2020. There will be a permanent European team in Athens monitoring Greece’s implementation of the EU/ECB/IMF-’Troika’-austerity measures and bailout money paid to the Greek Government will be directed into a special account that will prioritize Greek debt repayment. Greece’s budget deficit reached 9,1% of GDP in 2011, missing Athens due to a weaker economic out-turn deficit target of 7,6%, contracting Greek GDP by 6,8% in 2011, reaching jobless rate 21,7% in February 2012. Greek Parliament approved a five-year austerity package totaling €78 Billion including an ambitious privatization program to raise up tp €50 Billion, expecting the ‘Troika’ only €19 Billion until 2015, and passed additional budget savings of €3,3 Billion for 2012 to unlock the second bailout package, searching Athens and the EU ‘task force’ for measures to improve Greek economy. Voters bolstering parties on the far left and far right punished in Greek Parliamentary elections the two main, co-ruling and pro-EU parties socialist PASOK and conservative New Democracy blaming them for the country’s economic disaster, obtaining together less than 33% of the vote, retreating PASOK emerging as the big loser (from 44% to 13,18%) to a third place behind New Democracy(18,85%) and the anti-bailout radical left coalition Syriza (16,78%), becoming main opposition. New Democracy, Syriza heading the anti-austerity group and PASOK failed to form a coalition Government, ending also a last effort of President Papoulais to form a Government of experts with non-political personalities without success, withdrawing Greek depositors in one day nearly €900 Millions from local banks. Papoulais designated finally Pikrammenos, the President of the country’s highest administrative court, as Greece’s caretaker PM to form a transitory Government before fresh Parliamentary elections on June 17, which could strengthen radical anti-austerity parties further, compromising the implementation of the EU/IMF program and the continuity of Greece in the Euro-zone. The head of Democratic Alliance and New Democracy leader joint forces intending to form a united pro-European front that will wage the battle for a change in the bailout memorandum’s policies; under the current election law the party that gets most votes qualifies for a 50-seat bonus, showing polls that Syriza is maintaining its lead with 30% of the vote followed by New Democracy with 26%. Euro-zone Governments released €4,2 Billion in financing for Greece, sending a signal by withholding €1 Billion, stopping ECB to provide liquidity to some Greek crisis banks that are severely undercapitalized, downgrading Fitch Greece again. 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 Euro-nations to a closer coordination on financial, economic and social policies to increase competitiveness of weaker Euro-zone 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 (Euro-zone limit 3% of GDP) and of national debts (Euro-zone 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 commitment 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 Euro-zone 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 5,4% 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 pursue their own fiscal policy and a deeper fiscal union has not been reached, Germany is resisting the idea of a shared liability issuing joint European Government bonds/Euro-bonds or Stability Bonds, socializing risk and responsability, suggested to cover deficits of Euro-members 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 Euro-zone member States, meaning a Greek rating for everybody. The German Council of economic experts proposed a debt redemption fund to place Euro-zone member States’ debts in excess of 60% of GDP, forming a new mutualised bond market worth some €2,3 Trillion, arranging redemptions within 25 years, pledging each country a specific tax to provide the cash, while crisis nations Greece, Portugal and Ireland, receiving actually bailout aid would not be able to participate. Germany banned uncovered short-selling of Euro-zone 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 Euro-zone’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 reliance on State bailouts. The EU 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 and opposed also by Sweden, suggesting the EU a rate of 0,1% for trading stocks and bonds and of 0, 01% for derivatives, announcing France to introduce the new financial transaction tax in August 2012, looking European Finance Ministers for a compromise replacing eventually financial tax with a stamp duty that mainly taxes shares, which could be more acceptable to Britain and Sweden, pledging the European Parliament to implement the new tax until the end of 2014. G20 Finance Ministers high-lightened 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. The economic divide between the Euro-zone countries will remain substantial in 2012 and probably 2013, facing the troubled Euro-countries known as PIIGS including along Portugal, Greece and Spain also Ireland and Italy a difficult year 2012. According to the EU Commission twelve EU nations face economic risks and the Commission will propose corrections: Belgium, France, Finland and Britain – exporters suffering considerable market share losses, high public debt; Italy – high public debt and slow growth; Spain – excessive jobless rate; Denmark  - exporters with market share losses, high private debts; Hungary, Cyprus and Bulgaria – high public debt, elevated current account deficit; Slovenia – high production costs; Sweden – record high real estate prices.

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GOLD $1.567,90  -   05/25/12 -  Commodity favored as safe-heaven. The U.S. currency is losing its global reserve status driven by power of emerging market economies, calling China for a multi-currency system 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 Yuan. Increasing gold demand from China, rising gold jewellery demand particularly from Asian nations and continuing central banks buying the precious metal to reduce their dependence on the Dollar as reserve currency have pushed gold prices higher, contributing uncertainties in financial markets to volatile commodity prices.

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Global gold mining reached in 2011 a new annual record high of 2.809,5 tonnes, up 4% from 2010, increasing output in China, the world’s largest gold producer, by 5,89% to 360,96 tonnes, followed by Australia rising gold production 10%, 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 Zimbabwe; total reserves are estimated at 60.000 tons. Central banks and supranational institutions hold around 32.000 tonnes of gold, continuing central banks to be net buyers of gold, soaring their purchases from 77,0 tonnes in 2010 to 439,7 tonnes in 2011, 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/ 8.133,5 tonnes, Germany/3.396,3 tonnes, IMF/2.814,1 tonnes, Italy/2.451,9 tonnes, France/2.435,4 tonnes, China/1.054,1 tonnes, Switzerland/1.040,1 tonnes, Russia 873,6 tonnes, Japan 765,2 tonnes, Netherlands/612,5 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 annual demand to 769,8 tonnes up 20% year-on-year as a result of increases in both jewellery and especially investment soaring 69%. India represents still with over 500 tonnes the world’s largest gold jewellery market by volume, followed by China with 496 tonnes, up 15% from a year earlier, remaining India in 2011 with 933,4 tonnes, 7% less than in 2010, the country with the largest gold demand, generating India and China 55% of global jewellery demand which reached a new annual record of $99,2 Billion. China emerged in the fourth quarter of 2011 as the largest consumer of gold with a demand reaching 190,9 tonnes compared with India’s 173,0 tonnes. Gold trade is a chief driver of economic diversification in the Gulf region and particularly in Dubai, reexporting into the vigorous Arab markets. Global demand for gold rose to 4.067,1 tonnes worth estimated $205,5 Billion. The industrial, electronic and dental uses are accounting for around 10% of gold demand increasing 1,1% in 2011 to 330,4 tonnes worth some $16,7 Billion, dropping annual gold investment demand in gold-backed Exchange Traded Funds/ETFs from 367,7 tonnes in 2010 to 154,0 tonnes, while total investment sector demand rose 5% to 1.640,7 tonnes in 2011 with a value of $82,9 Billion, including gold bars and coins which climbed 24% to 1.486,7 tonnes. Gold has reinstated its age old position as the best hedge against uncertainties and inflation, 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 and general fundamental outlooks for gold continue quite positive.

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WTI CRUDE OIL $90,72/BRENT CRUDE OIL $106,80   –   05/27/12  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 soaring crude prices threaten global economy risking recession. 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 mb/d, from a prewar level of 1,6 mb/d. Saudi Arabia favors a crude price of about $100,- per barrel, saying Saudi Arabia’s cabinet it will work to restore ‘fair’ prices for crude. Defiant Iran besieged by sanctions over its nuclear program threatened 6 European nations to cut off immediately their Iranian oil imports, halting oil shipments to Britain, France, Greece, Spain and apparently Germany, pushing up high oil and commodity prices inflation in Europe.

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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. Global oil demand is expected to climb to 89,9 mb/d in 2012, a gain of 0,8 mb/d on the year. NON-OPEC supply fell by 0,2 mb/d to 53,2 mb/d in January 2012, rising OPEC crude oil supply to 30,9 mb/d. OECD industry oil stocks declined in January 2012 by 40,8 mb to 2.611 mb, a level below the five year average. NON-OECD countries are accounting 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., remaining the largest net oil importer. The U.S. is looking for a greater energy independence, enjoying a mini gas and oil boom thanks to shale gas and shale oil produced mostly from the Bakken shale formation in North Dakota and Montana and the Eagle Ford one in Texas, importing also increasingly heavy crude, known as bitumen found primarily in Canada’s Alberta Province, becoming for the first time in decades a net exporter of petroleum products, such as jet fuel, heating oil and gasoline, rising U.S. oil production to nearly 5,7 mb/d in 2011, expected to increase up to 7 mb/d by 2020. NON-OPEC production increase is expected in a few countries, particularly in China, Brazil and Canada, while OPEC oil output will also rise to accommodate more world oil consumption. NON-OPEC country Russia, a net oil exporter, continues as the world’s largest oil producer, followed by OPEC nation Saudi Arabia and NON-OPEC nation U.S., a net oil importer, ranking NON-OPEC country China fourth covering its oil output about half of its national demand. Declining Russian oil production will allow Saudi Arabia, increasing its spare oil production capacity up to 15 mb/d, not only to match its output of about 10,5 mb/d, but to overtake Russia as top oil producer in coming years, believing observers that the period of intense oil production in oil reach Western Siberia is over, surpassing Saudi oil output with 9,923 mb/d in March 2012 Russia. Canada has over 170 Billion barrels of recoverable bitumen from oil sands with today’s technology 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. NON OPEC country Brazil’s newly discovered deep-water ‘pre-salt’ oilfields like Tupi, Lara and Guará, located in an area of 800 sq km offshore 16.400 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 chronicle lack of cash and of technical capacity for deep water 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 Arctic 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 mb/d, pumping actually 8,4 mb/d, could rise its spare oil production capacity to 15 mb/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 British and US companies to restore its oil infrastructure and to raise output from the actual level of 2,021 mb/d by a combined 1,5 mb/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 Saudi 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 crude.

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