Sunday, November 24, 2013

Master Bank Closed In Russia

Master bank
Anxious customers gathered outside Master bank closed doors, millions of credit cards suddenly off the abrupt closure of Master Bank this week has plunged the Russians in the most traumatic of the post- Soviet period hours. The central bank withdrew the license of the Master bank Wednesday with immediate effect. The bank was established in 1992 and which has in its Board of Directors Igor Putin, the Russian president 's cousin . The regulator said that they have no other choice after finding the violation on money laundering “repeated violations" , the Ministry of the Interior evaluating the sums involved more than 45 million.

At first glance, Master Bank is the 70th Russian bank in terms of assets hence it may seems that it is a relatively small institution. But “this is the first time a bank with more than three million customers lost its license," he said at a press conference Oleg Ivanov, vice president of the Association of regional banks. And consequences for the general public were eye souring, as Master Bank controls one third of the ATM network in Russia and ranks fifth in terms of total credit cards in circulation. Suddenly, millions of Russians were left without access to their account. Others who thought they had no connection with Master Bank, have seen their credit card stop working all of a sudden and the bank offered its services data processing 200 other small establishments.

Numerous shops, hotels, restaurants, as well as the liberal political party Yabloko were using his credit card to pay the salaries of their employees, who find themselves stranded. Notable difference resounding bank failures of the 1990s, most customers should recover much of their funds: Since 2004, the deposits are insured up to 700,000 rubles (15,700 Euros). Beyond this threshold, the holders have priority to be compensated at the end of the bankruptcy proceedings. The news has had a considerable impact in Russia, where a portion of the population keeps the painful memory of flights in bank failures, especially during the 1998 financial crisis economies, and is suspicious with respect to banks.

Can Structural reforms help Europe!

Structural reforms
The introduction of the single currency has allowed the accumulation of deep macro economic imbalances within the Euro area. Some member countries have generated current account surpluses, while others dug large current account deficits. These imbalances are explained in the loss of competitiveness "peripheral" countries: their real exchange rate has appreciated by 6-15 % compared to few others between 2001 and 2009. These losses of competitiveness explain themselves in part by strong price increases observed in the markets of non-tradable goods, particularly in the property sector. When imbalances are settled violently in 2009, the periphery has shifted into a severe recession and public debt is soaring mechanically. During an economic crisis, each member country of the Euro area can not vary its exchange rate to stimulate activity.

 Therefore, the peripheral countries have sought to simulate a devaluation of the exchange rate. For this, they have implemented structural reforms aimed at increasing competition in the labor markets and products. These include reducing the one hand, the monopoly power of firms and, on the other hand, the bargaining power of workers. In this way, the reforms allow favorable price drops and in purchasing power, prevent excessive wage increases, stimulate entrepreneurship, job creation, etc. Adopting structural reforms, peripheral in Euro area countries hope to regain competitiveness and improve their current balance. In addition, as the reforms are supposed to get agents to expect higher growth in the future, so encourage them to spend today, they should stimulate domestic demand. Structural reforms should they be provided in place when economies are in recession? When aggregate demand is insufficient or governments increase their spending directly to restore the level of aggregate demand , or the central bank eases monetary policy to stimulate private spending. If, in such a context, governments are forced to adopt austerity plans; that is in view of stabilizing the public debt and reassure markets about the sustainability of public debt, then the drop demand accelerates.

However, if the shock is particularly violent, a central bank may not be able to sufficiently lower its key rate to bring the economy to full employment and prevent the onset of deflation. Anticipating a further decline in prices and wages, private agents have an incentive to postpone spending in time, which leads firms to lower new prices and wages. Deflation is also reflected by an increase in real interest rates, which increases the burden of debt. Households and businesses are then no incentive to borrow, but rather to deleverage, which depresses the purchase of new durable goods.

In this case, households are encouraged to reduce their expenses if they anticipate a deterioration of employment protection in times of mass unemployment. Structural reforms cannot be implemented in a recession if governments and central banks are able to offset the impact on aggregate demand. Otherwise, they feed the contraction. Far from building trust and encourage investment, reforms may maintain pessimism and savings behavior. Therefore, they also degrade the potential growth by maintaining long-term unemployment and disincentive for companies to invest.

Friday, November 1, 2013

Iran-Pakistan pipeline unviable

Iran-Pakistan pipeline
While Pakistan has asked Iran for 2 billion dollars to fund its own portion of a pipeline could not be more strategic , ignoring the U.S. sanctions , a recent report now lets hear the Iran Pakistan pipeline would not viable in the state , saying that a review of the conditions necessary. The report by the Institute of Sustainable Development Policy Institute (SDPI ) on the pipeline - report " Rethinking the energy equation of Pakistan" - and says that since the price of purchased gas for the project is linked to prices of crude oil, the country is in this case openly ignoring the dynamics of the energy sector and the development process cost.

The Institute explains and insisting the most unfortunate side of this situation. Since that the United States now paved the way for the implementation of the pipeline project through a softening of sanctions against Iran, the new report says the gas supply agreement should be renegotiated, including on tariff part, otherwise deal a fatal blow to the country's economy. According to calculations made by the authors of the report, in the present state of things, the Iran- Pakistan pipeline should not be allowed to resolve energy problems of Pakistan and rather equivalent to a bailout. The reporters urged Islamabad to renegotiate the import of natural gas earlier price.

As a reminder, Pakistan has a production capacity of 24 000 MW combined electricity, but cannot currently reach this level because of natural gas supply problem. The country is indeed currently facing a decline in natural gas production, a problem even more crucial that domestic demand has more than doubled. To address this shortage, service stations selling compressed natural gas (CNG), low-cost fuel used by taxis, buses, motorcycles and motorists of the middle class will be closing soon. The quantity thus saved should serve the demand for home heating during the winter.

Iran-Pakistan pipeline
At present, Pakistan limited already open pumps few days a week, causing long queues and irritation of the population movements. Under the terms of an agreement in 2013 with Iran, Pakistan should import term in 2014, 21.5 million cubic meters of gas per day from its neighbor Iran, all on for 20 years, and can be extendable to additional 5 years. Note that the pipeline - including the cost of construction is estimated at $ 7.5 billion - about 1,800 km which connect Iran's South Pars gas field - located offshore - and Nawabchah, north of Karachi, Pakistan's economic hub.

The Iranian public television Irib said in March that the construction of 900 km of the Iranian part of the pipeline was completed; adding that 780 km through Pakistani territory remained to be built. At that time, Iran had agreed to pay $ 500 million to Islamabad, one third of the estimated cost of the Pakistani portion. But Pakistan is currently facing financial problems in order to continue the construction of the particular section.

The case could take a significant extent in the coming months; Islamabad may be required to pay compensation to Tehran if Pakistan fails to complete by December 2014 part of the pipeline where it belongs, Pakistan has to pay one million dollars per day of delay. Tending the boom in Tehran, the Pakistani minister however said in early October that the time could be met if Iran had a hand in the portfolio. However, suggesting that the precious goods subsidies should be promptly put on the table quickly in order to ensure the availability of technical equipment necessary to complete the pipeline.

 At present, nearly 50 % of Pakistan's needs are met by natural gas; analysts also believe that the country should look forward to more innovative options, not just the use of energy sources non- conventional and alternative. The report regrets that the country has not taken any substantial degree to initiate the process to take advantage of the potential of shale gas.

Urging Pakistan to follow the example of India to maintain high economic growth. Regarding the issue of sanctions against Iran, it has recently been raised by the Pakistani Prime Minister Nawaz Sharif , during his meeting with President Obama , but the authorities do not confirm or refute a possible softening of the position United States on the issue . Recall that the project, which emerged in the 1990s, has long been delayed, mainly because of pressure from the United States on Pakistan and India, which was initially involved in the IPI project (Iran - Pakistan - India).

 For a decade now, the United States has tried to link the file to the sanctions against the nuclear program of Iran, warning against the risks of the same order that could lead to a possible participation. Faced with these pressures, New Delhi withdrew from the project in 2009, arguing that the financial and security problems.

Thursday, October 31, 2013

China Now Issues Bonds In Euros

China Now Issues Bonds In Euros
Here is hot news that should displease the United States and more to the Fed (U.S. Federal Reserve) and Janet Yellen, its new boss. The China is now on the market for Euro-denominated bonds. The dollar God has longer to behave them. In late September, the oil giant China National Offshore Oil Corporation (CNOOC) has raised € 500 million within a short span of seven years and closely followed by their competitor Sinopec, with 550 million Euros in the same period.

 Experts believe that it is too early to identify a trend in the bond market; the trend is expected to grow according to them. They expect indeed that, in order to diversify their sources of funding Chinese groups continue to try to issue in Euros, and especially the Chinese domestic market does not seem big enough to meet its needs. Encouraging data, the two programs have met with strong demand; some even consider it quite exceptional.

The issue of Sinopec will thus attract a total of 279 investors demand to € 3.3 billion. Another factor to consider: the U.S. fiscal crisis will have prompted investors to turn to the European markets, while Old Europe can regain its appeal as a safe haven. Since the end of 2010, Chinese companies have flooded the credit markets with a dramatic speed.

In the space of a few years or a few months, China has become the first issuer of bonds in foreign currency, surpassing Korea with an average of $ 25 billion. According to Yves Jacob; in 2010, China raised less than $ 5 billion per year, which is an insignificant amount across international markets. For 2013, expects that will up about $ 100 billion. The current context of liberalization of the Chinese economy to alleviate the exchange control system will also gradually open the door to Chinese companies for a program on international markets while now offering the ability to repatriate funds in China.

 Element which should accelerate the movement signed early October a currency swap agreement between the European Central Bank (ECB) and the People's Bank of China, for a period of three years, including facilitating business transactions. The agreement, called “swap “concern more than 350 billion Yuan, 45 billion Euros. What is the third largest amount behind Hong Kong (400 billion Yuan) and South Korea (360 billion Yuan), largely below the agreement signed by the Bank of England (200 billion Yuan) in Paris. Through this agreement, banks in the Euro zone may obtain Yuan in exchange for Euro, China could in turn receive Euros in exchange for Yuan.

Sunday, October 6, 2013

Wall Street and the budget debate!

With perplexity but without panicking, the Wall Street brokers watching the budget negotiations and debt embroiled in Washington and expect an output of impending crisis to be able to look calmly on corporate earnings. Over the past five sessions, the Dow Jones Industrial Average, featured together 30 values NYSE index dropped 1.22% to close at 15,072.58 points. The Nasdaq, dominated by technology, and is slightly advanced 0.69% to 3807.75 point. The week was “surprising “to the New York Stock Exchange, said an Economist.

The indices are mounted on the first day of the budget deadlock, when hundreds of thousands of American officials have been on leave without pay due to lack of agreement on the budget to Congress. They fell Wednesday and Thursday “while walking away the possibility of a resolution close to the crisis," before resuming the force Friday. "Investors do not want to commit, neither too bet down to not miss the relief rally that will surely come when an agreement will be reached , nor of course too early to bet on good news ," he says. "If the situation is the same at the end of next week , then the indices, which have already lost 4% since the highs of mid-September, could lose it again as " the expert predicted . " But if there is a sense that things are moving, we can regain these losses. "

 But beyond the economic impact of the paralysis of government services, investors see approaching at high speed the maturity of the debt ceiling that is after October 17, the U.S. Treasury will not be able to honor its payments. "Until now investors keep their calm, saying that one side will end up making concessions , or that the Treasury still has some cards in reserve to avoid default," says Douglas Porter of BMO Capital Markets . Investors are not rushing to the options market to protect their positions.

 Even if the volatility has increased the portfolio managers did not make sudden changes of direction. Market players leave in a principle that politicians, even the most intransigent, “know they cannot play with the debt ceiling, it's much too dangerous." But, he laments, " you can always have a party completely loses control." Hoping that doomsday scenario does not materialize, investors will begin to look at the quarterly accounts of companies.

 Finally, even if monetary policy has been overshadowed in recent days against uncertainty over the country's budget, brokers pay particular attention to the dissemination Wednesday minutes of the last meeting of the U.S. central bank. The institution was then largely surprised investors by maintaining the status quo on its measures to support the economy.