Liquidity Trap

During the Great Recession, many central banks reduced their interest rates to historically low levels. However, the interest rate was good to be its zero point, it remained higher than the natural rate, that is to say, the nominal interest rate which closes the output gap and ensure price stability. However, once the zero lower bound is reached, the central bank may further cut its key interest rate, which exposes the economy to deflationary pressures and an increase in its unemployment rate. In such a situation called liquidity trap, where monetary policy is proving excessively restrictive fiscal authorities must necessarily intervene to counteract deflationary pressures. The finance managers adopt their next steps "unconventional" to make them more effective monetary policy. However, the Great Recession is different from previous episodes of liquidity trap, including the lost decade in Japan, that the phenomenon of liquidity trap this time has a global dimension. The United States, UK and the other Euro countries are the countries most closely linked by trade and financial linkages that have experienced the largest slowdown in crisis, bringing their monetary authorities to fix the interest rate to the nearest zero.
According to famous Economist, the appearance of liquidity traps in a context where markets for goods, services and capital are integrated internationally gives a new dimension to the dilemma highlighted by the literature in finance International (also called "impossible trinity" or "impossible trinity"). The traditional interpretation of this phenomenon, a country cannot simultaneously ensure the opening of capital markets, fixed exchange rates and monetary policy autonomy. If achieved two goals, the third becomes unattainable. However, even if the exchange rate is flexible and fully opens capital markets, monetary policy loses its effectiveness in a liquidity trap. If the domestic economy is a powerful external shock depressing domestic demand, the zero lower bound is likely to constrain its own monetary policy. Financial markets play a key role in the spread of the phenomenon of liquidity trap a country to another.
The economic literature have suggested that the introduction of capital controls to reduce the risk that a country will suffer destabilizing capital inflows: inflows are indeed likely to fuel an unsustainable credit expansion, the formation of bubbles assets and excessive currency appreciation, especially in emerging countries. The introduction of capital controls makes monetary policy more effective in reducing the risk that the economy switches into a liquidity trap.

Business Line of Credit

For immediate need of finance and one which is convenient, business line of credit is the most possible option wherein the business owners can avail the funds in moment of an emergency or a crisis. Business Line of Credit, gives the user the flexibility to access the finances needed, conveniently and within a short span of time and the best feature is that the clients pays just what is used. Business financing is designed with a view to provide the much needed finances for immediate funding purpose. Services providers have been providing finances to business owners of various businesses from small to medium to large sized units. Business owners can take advantage of their services wherein the client does not have to face any upfront fee, or a credit check. The applied finances are approved within 24 hours and the funding process is done within a matter of a few days. Their entire financing process in efficiently handled wherein their client’s financing requirements are quickly addressed, with a personalized touch irrespective of their credit history.

 They offer customized programs to fit every business needs which are convenient for their clients. The procedure of applying for funding services is a simple process wherein the client needs to furnish the desired details at the site in order to avail the same. On receiving the details, they get to work in providing their clients with the business finances they are in need of. They strive to provide their clients with all their financial needs conveniently with ease in order to help business units to overcome unstable situation which may be due to lack of finances. Lenders can look forward to the provider in seeking the desired financing to either restore or improve a business, made available to them that are flexible, fast and dependable with the purpose of helping business owners to get back on their feet in difficult situations.

The Future Economic Rebalancing Of The World

In 2017, no European country will be included in the top ten contributors to global economic growth. The emerging economies will account for fifty percent of global production of goods and services. According to IMF, in the year 2018 the proportion will increase to 55%. And this is only the continuation of a trend that began there more than thirty years and represents a consolidation in the global economic consequences. As noted by the chief economist of Goldman Sachs who invented the concept and acronym BRIC's in the 1980s when the growth of the Chinese economy was even more important today, a growth rate of China's economy 10% was less important to the world that U.S. growth by 1%. In 2013, the rates of equivalence are 8% and 4%. Today, financial markets are equally concerned of China slowdown as the U.S. recovery. No wonder that, as growth in emerging was much stronger than the rest of the world, and that their standard of living per capita has steadily catching up with the seven most industrialized countries. By the mid-1990s, countries such as Germany and Italy had dropped from the list of top ten countries with the highest growth rates. While in the 1980s, the United States accounted for 30% of global growth and Europe 20%; in 2017 no European country will included in the top ten contributors to global growth. Europe as a whole no longer and will contribute only 6% of it, while India and China will contribute to almost 50%. Even more surprising is the speed at which occurs rebalancing and this because of the masses in. The economic transformation and urbanization of China occur at a scale with the population is one hundred times greater than that of Great Britain at its early industrialization and a speed ten times. Thus the Chinese momentum is 1000 times that of Britain 200 years ago. This rebalancing is a return to the state of the world that existed in the early nineteenth century. But this is only small consolation because it is perceived as a stall and undoubtedly contributes to the gloom in US, as in the rest of Europe.

China takes control of its Currency

The Chinese government has recently reaffirmed its commitment to lead a prudent monetary policy. A message was signaled to all banks and other Chinese companies and foreign business partners. After a recent meeting, the Chinese government issued a statement which reads: "China will continue its prudent monetary policy in ensuring growth of credit to the real economy, the agricultural sector and small businesses." "Will continue", says the text, and in fact, the direction is not new. Publicly adopted in 2010, it is associated with a budget "proactive" policy, in force since 2008. On the issue of the exchange rate of the Yuan, the Chinese government encourages the continuation of the current rate "to a basically stable level." So if the Yuan is revalued, it will be a movement of low amplitude. Already at the end of last year, the new administration had announced their resolution to "expand wisely the amount of social financing to ensure a moderate emissions growth of loans." The Chinese economy is facing a double challenge: The first and foremost one is to maintain a growth rate of around 7% to ensure the increase of the population's standard of living and inflation under control, and the second one is to set right their export market which was seriously damaged by the European debt crisis which considerably reduced its export markets. To answer the western financial crisis, the Chinese launched in 2008, a multi-year recovery plan 4000 billion Yuan. They slowed and the slowdown the growth of their economy, but still fear that the financial crisis in their main customers being turned into an economic crisis, if the growth rate falls more below. The temptation is strong in these conditions, increasing the money supply. They have repeatedly reduced the benchmark interest rates and reserve requirements for commercial banks. But then tip the risk of inflation, which is not only a malfunction of the economy, but also the source of popular discontent, and thus a political danger. This is why banks are expected to deal with the "real economy", rather than seeking sources of short-term profit, spontaneous tendency of any financial institution. In this framework, they will be encouraged to provide loans. They will not be to fuel property speculation. The message is clear to European countries that China needs to export; it has no incentive to engage in any trade war. But it will remain master of its currency.

The Gold Prices Falling Because of the Fed

The Federal Reserve has brought down the price of gold this week as investors reacted to the announcement of the U.S. central bank, suggesting that it would progressively restrict its extraordinary support measures to U.S. economy. The ounce of gold and has tumbled nearly $ 100 in the space of a week, from Thursday even below the threshold of 1300 dollars. This is something that had not seen for nearly three years. Friday, the price reaches $ 1295.45, which is its lowest level since mid-September 2010. Perverse effect of supportive policies, the Fed now considers the views of official figures, the economic recovery appears to begin in the United States no longer justifies the pace with which it buys Treasury bonds and mortgage-backed securities. These are the operations that are currently around 85 billion Euros per month. However, the withdrawal of these liquidity injections, which dilutes the value of the dollar, greatly reduces investor concerns about a possible resurgence of inflation. Thereby making the purchase of precious metals such as gold is much less attractive. The barbarous relic while losing its safe haven qualities, strengths as a bulwark against the rising prices are having so little appeal.

Some analysts believe that gold is now in a vicious circle, the decline in encouraging investors to liquidate ETF (investment funds backed by physical gold stocks). Thus, the most important of these funds, has seen its shares fall below 1,000 tons of gold this week. However, these new gold ETF disbursements weigh themselves on courses, racing somehow the machine. Meanwhile, physical demand is affected by the measures taken by the Indian government. The authorities have indeed raised the customs duties on the yellow metal, while the rupee is at a record low against the dollar. Now, gold imports will be allowed only for purposes of jewelry making. In addition, importers must now pay for their purchases in cash, without payment facility. India believes that these imports represent a significant portion of its current account deficit. A policy should reduce gold imports during the month of June, while India is the world's largest consumer of the precious metal. Finally, on the London Bullion Market, an ounce of gold finished at $ 1,295.25 at auction Friday night, against 1391.25 dollars at the end of last week.

The Corporate Bankruptcies and The Crisis

The real crisis, the corporate bankruptcies are the real crisis and it is the creative destruction. Like it or not, the real victims of the crisis in Europe are definitely businesses. The loss of business in the Euro zone increase indeed 21% in 2013, to return to a growth rate moderate 7% in 2014. These bankruptcies are concerned and unfortunately synonymous with soaring unemployment and a real deindustrialization. Since the record figures of 2009, the waves of loss, of the United States to China, passing throughout the Europe, concentrated in areas with erratic tax incentives, such as construction and services. Once the boost is flown, numbers of companies were no longer profitable. Today, the shock wave is more fundamental: the sharp slowdown in consumer spending in Europe, or at half the exports for Asia. In Europe, the areas of distribution, furniture, consumer electronics, and automotive, and are strongly affected. This industrial Darwinism seems to be the swell of the year 2013, still marked by the credit crunch. But the induced effects are numerous: for example in Asia, companies see their market melt like snow in the sun and the overcapacity problem. This economic turbulence with a number of businesses created which also increases in many countries could it is a synonym for renewal? Economic entropy can be conducive to a new beginning, if we are to believe the evolutionary hypothesis of Schumpeter. The undertakings least well adapted and especially the least innovative way to let those who are reinventing themselves and meet new needs. "The perennial gale" Schumpeter, after the storm of 2009 and the economic winter it starts to make a lot. And yet ... The needs are there, in sectors with high added value, intensive skills, human capital and social capital, driven by research and innovation and entrepreneurship. So, of course the news is bad with soaring business failures and accelerated payment risk, while margins are already weakened. But, is it better to jump back? The answer is “Maybe”. It is also necessary that the guidelines are taken on supporting innovation, the business environment, or incentives to take care of seedlings, otherwise incubators will also be decimated.

After Gold Bubble Burst!

The soaring price of gold in recent years in early 2009 it was $800 and it reached more than 1900 dollars an ounce in fall 2011 - had all the characteristics of a bubble. And now, like any soaring prices of disconnected assets fundamentals of supply and demand, this gold bubble deflates. At the height of the outbreak, mad gold - a paranoid mixture of investors and others whose political agenda is determined by fear - happily predicted the price of gold on the order of 2000, 3000 or even 5000 dollars an ounce within the next few years. But the price has been declining since. In April, gold was at about $ 1,300 an ounce - and its price continues to trade under 1400 dollars, a drop of nearly 30% from its 2011 high. Many reasons can explain the bubble burst, and why the price of gold will probably fall further to stabilize at around $ 1,000 an ounce in 2015. First, the price of gold tends to buckle when serious economic, financial risks, and geopolitical threat to the global economy. During the global financial crisis, even the safety of bank deposits and government bonds was doubted by some investors. If there is concern of a financial Armageddon, it really is time metaphorically in his bunker to store weapons, ammunition, canned and gold bullion. But even in this terrible scenario, gold would be a poor investment. Indeed, at the height of the global financial crisis of 2008 and 2009, gold prices have collapsed several times. In an acute credit crunch, leverage purchases of forced sales or leads, because any price correction triggers margin calls. Gold can be very volatile - up or down - at the height of a crisis. Secondly, gold performs better when there is a risk of high inflation, insofar as its popularity as a store of value increases. But despite an aggressive monetary policy by many central banks - successive rounds of quantitative easing have doubled and even tripled the money supply in most advanced economies - the overall inflation is still low and steady decline.

 The reason is simple: when the monetary base explodes, the velocity of money slows as a result of the accumulation of liquidity by banks as excess reserves. The reduction of public and private debt keeps growing global demand below that of the offer. Companies therefore have little flexibility in their pricing because of too much capacity, and the bargaining power of workers is reduced due to high unemployment. In addition, with power increasingly weakened union, globalization has led to a cheap production of goods with high labor in China and other emerging markets, undermining the wages and employment prospects of workers unskilled workers in advanced economies. With low wage inflation, it is unlikely that there has been a steep rise in property. However, inflation fell even more today because of the overall downward adjustment of commodity prices in response to weak global growth. And gold follows the actual and expected decline in inflation. Third, unlike other assets, gold yields no income. While publicly traded stocks pay dividends, bonds have their coupons, and houses, rents, or are just a game of capital appreciation. Now that the global economy recovers, other assets - listed real estate or even the resurgent shares - now give better yields. Indeed, U.S. and global equities listed are far better than gold since the sharp increase of its course in early 2009. Fourth, the price of gold rose sharply when the real interest rate (adjusted for inflation) became negative after the various rounds of quantitative easing. The time to buy gold is when actual returns on cash and bonds are negative and declining. But the best prospects in the U.S. and global economies imply a term exit quantitative easing and zero interest rates from the Federal Reserve and other central banks, which means that real interest rates will rise rather than drops. Fifth, some have argued that the heavily indebted sovereigns would encourage investors to turn to gold because of the risks borne by the bonds. But there is an opposite situation. A large number of heavily indebted governments have substantial gold reserves which they may decide to get rid of to reduce their debts. In fact, the information that Cyprus planned to sell a small fraction - about 400 million Euros ($ 520 million) - its gold reserves led to a fall in the price of gold by 13% in April. Countries like Italy; which have massive gold reserves (over $ 130 billion), might also be tempted to do so, which would lead to a further decline in the price.

Sixth, some ultra-conservatives, especially in the United States, have so encouraged the gold rush that the effect was counterproductive. For this right-wing fringe, gold is the best hedge against the risk posed by the government conspiracy to expropriate private wealth. These fanatics also believe that a return to the system of the gold standard is inevitable, since the hyperinflation drift "devaluation" of paper money by the central banks. But in the absence of any conspiracy, and given the decline in inflation and the inability to use gold as a currency, such arguments are not valid. A currency serves three functions: it is a means of payment, unit of account and a store of value. Gold can be a store of value, but it is not a payment, you cannot use it to pay his races. It is not a unit of account the prices of goods and services, and those financial assets are denominated in gold. Gold remains so this "barbarous relic" by John Maynard Keynes, with no intrinsic value and mainly used as a safe haven against fear and panic largely irrational. Yes, all investors should have a very small share of gold in their portfolios as a hedge against extreme risks. But other real assets can be comparable coverage and extreme risk - although still present - are definitely lower than they were at the height of the global financial crisis. Even though the price of gold is likely to rise in the coming years, it will remain very volatile and will decline over time, over the improvement of the global economy. The gold rush is over.

More About Financial Bubbles

But why economic agents do not learn a lesson from history and what is the origin of the observed market euphoria? It should actually wonder more generally about the rationality of agents. By their individual actions, they participate in effect to create a gap between the actual value of a thing and its market value. And this gap increases; more the bursting of the bubble is near, even if the term is unknown. This process can be summarized by the metaphor of the beauty contest Keynes in Chapter 12 of the General Theory. So imagine that you are in a competition against a host of other competitors. You are facing a hundred photos of girls all equally charming as the other, and you are asked to select six, the six prettiest. The person whose choice is closest to the average choice (that is to say the girls who got the most votes) will be the winner of this competition and win the jackpot. Three techniques are available to you and to win. First, you choose a simple, even naive strategy, which is to choose the six most beautiful girls according to your standards of beauty. But you can also adopt a strategy. which is more vicious this time to copy your selection on the other competitors with your expectations. Finally, you say that there is no reason for you to be the one to embrace the second strategy you determine an ultimate, which includes the fact that each competitor will not only formulate expectations about choice other participants, but also on your own. The metaphor of beauty contests and shows that speculation is mainly due to expectations that each agent makes about the behavior of other agents. Worse, it seems rational to participate in this type of competition because there is a real jackpot game now apply this reasoning to any other market (financial, real estate or even tulips) and you now understand that when Prices are disconnected from reality is that economic agents engaged in a competition of beauty contests guy and that large batches are obviously involved other words, do not enter a speculative market generates a cost (opportunity) that corresponds to the potential gain that you would not have achieved; corollary, it is rational to participate in inflating a bubble in order to enrich themselves, knowing that sooner or later the bubble will explode . If the game mirrors expectations promote the creation of speculative bubbles, it should be noted that favorable market conditions may also participate in this movement. Thus, over the last ten years, it is interesting to note that each period of financial euphoria is a situation of low interest rates and abundant liquidity. Thus to extinguish the fire of the Internet bubble of the early naughtier, the Federal Reserve has made successive rate cuts that have led to a rise in private debt and the emergence of a real estate bubble The subprime; Belated. Again, the response of central bankers involved in the reduction rates that, this time, encouraged the public debt; replete. And since it seems that we are now cured syndrome "this time is different" (Reinhart and Rogoff), the current historically low interest rates could facilitate the emergence of a new bubble. What will be the nature of the next big crisis? An early response, rather obvious, is of the bond market, when many experts welcome historically low borrowing rates, especially for states but also for corporate, bond bubble continues to swell to form a time bomb. And if some commentators are trying to alert the markets inevitable future rise in interest rates, the warnings remain almost unnoticed as the general euphoria is great. But other risk factors may also be highlighted. Real overheating in China, seven-fold during the decade gold bubble carbon and financing of energy transition and finally growing attraction for bit coin. Yes, this totally paperless currency created in 2009 by a computer meeting the pseudonym Satoshi Nakamoto, who was at the center of media talks some time ago, due to the sudden surge in its course and all its fall brutal. At its inception, the parity bit coin stood indeed one thousandth of a dollar before reaching on April 10 to a high of 266 dollars, then lose in just a few days over 70% of its value to pass under the below 80 dollars. All bubbles eventually burst and one day or the other. But the man never lacks imagination to always find a new source of enrichment. And when he is not at the origin, it adopts a mimetic behavior that allows him to achieve his goal. This process can really be repeated ad infinitum? Or, maybe it does not itself amount to a giant bubble that would only swell for centuries?

The Financial Bubbles Happened In The Past! -1

What is the common point between the Asian crisis of 1997, the Internet crisis of 2001, the subprime crisis in 2008, the sovereign debt crisis of 2010 and what will be the next financial and economic crisis? They all originate from the bursting of a speculative bubble. This phenomenon of artificial inflation of prices though not new, for more than three centuries actually, economic agents know that trees do not grow to the sky. And yet they are still surprised when a bubble bursts. It all began in the late sixteenth century, when Dutch traders introduced in the country of tulips from Turkey. New, rare and unlikely mix of colors, a combination which gave very quickly tulip flowers to have high value relative to many other flowers that were the kingdom. Tulip and gradually became a luxury item particularly popular with the wealthy but also by the Dutch bourgeoisie. Finally freed from Spanish rule, the latter had indeed reaped significant benefits from trade with Asia, not hesitating to build large houses surrounded by flower gardens particularly with tulips. For almost forty years, the price of tulip flowers then continued to grow at a moderate pace at first, then more sustained from the 1630s rhythm, and in 1635 it took an average of 2,500 florins to buy a tulip flowers,to a greater cost of 25 750 euro( as the value of 2002 ,if we are to believe the calculations of the International Institute of Social History). The price of tulip flowers reached its peak in 1636, the same year; parliament actually discussed a project on the transformation of the nature of the contracts that would become the purchasing options and not obligations which is a windfall for speculators. Thus says at the beginning of year 1637, a tulip flowers could be traded on the futures market against the equivalent of three paintings by Rembrandt, or ten times the annual salary of a skilled craftsman, or against a field of five acres ... data often from pamphlets of the time which it is impossible to verify the accuracy.

One thing is for sure though; the price of tulip flowers was abnormally high. Especially when we know that the color intensity of the flower was actually linked to a mosaic virus of the flower. Finally, in February 1637 that the euphoria ended and the prices of futures fall sharply, marking the end of speculation, understand the "trade wind." The tulip mania and was one of the first bubbles in economic history. It also marked the beginning of a long list of other bubbles - Crash of 1720 following speculation on the South Sea Company, crash of Vienna in 1873 due to soaring property prices in Paris Berlin and Vienna stock market crashes of 1929 and 1987 and, more recently, the subprime crisis - causes and consequences substantially similar. A mass hysteria and the rapid enrichment of people’s misunderstanding one another, movements of brutal impoverishment and bankruptcy.

The need of better integration in environmental criteria in investment!

Banks have become essential in the transition to a greener and more sustainable economy. If their role in financing green infrastructure and renewable energy is identified, their efforts should also focus on the integration of environmental criteria in their funding decisions and investment, primarily in sensitive areas and eventually in all sectors. The 2008 crisis revealed the considerable power to influence of banks on the economy. Respondents even criticized, they undergo a double injunction to continue to finance the economy in all its complexity while being more transparent. Their indirect responsibility is increasingly sought: external stakeholders like customers, shareholders, institutional investors and NGOs), the challenge of repeatedly on the assets they finance and the behavior of large customers they accompany their development. Beyond all controversy, it has become imperative for them to be able to explain their decisions to finance and investment. How can banks now tackle the challenge of meeting the ever increasing global needs while encouraging the development of a production of "sustainable"? To meet this dual standby, banks must gradually integrate Environmental, Social and Governance (ESG) in all funding decisions and investment. The goal is to better understand the potential risks to better identify projects for funding, companies in which to invest, and the most sensitive regions. Their inclusion will progressively as they are both away from the heart of business of the bank (financial risk analysis), long-term and with a low probability of occurrence but maximum impact if realized. The most sensitive to environmental or social terms economic sectors must be supervised by funding policies and responsible investment that apply to all products and services, including asset management. In a little over a year, our group has worked on the areas of palm oil, nuclear, agricultural raw materials essential to the pulp and paper and finally the electricity produced from Coal. These are very heavy projects: each policy requires six months of work on average. All stakeholders are consulted to help position the criteria ambitious enough to have a real impact on the environment and society, but also to ensure realistic level their implementation. Finally, these policies should identify the most critical links in the production chain. Of course, all companies must comply with the existing laws in the field of the environment, but they must also be transparent by providing certain information, to assess the management of their risks on this subject. A thorough analysis of the specific risks of each sector is then used to define performance criteria that companies and / or Projects must meet. These policies approved by the Executive Committee, have been widely disseminated to all trades. If they respond to a pending trade and managers have accurate prior to any decision making instructions, they nevertheless induce profound changes: it is necessary to train and support unfamiliar teams sometimes certain criteria 'very technical evaluation. They also assume a new type of dialogue with customers or companies in whom we want to invest: beyond financial performance criteria, it is now necessary to address much broader issues. Our philosophy is not to exclude a sector as a whole (except those that are subject to legal prohibitions) but we do not forbid, as a last resort, to exclude companies that do not wish evolve and take into account our policies. The approach taken must and will therefore continue in both applying to other sectors, if necessary by revising existing policies (e.g., nuclear policy could evolve following the stress tests carried out in European level) but also in the declining in specific sectors.

European Commission and Taxing policy on financial transactions!

The European Commission and the European Parliament are to authorize the implementation of an enhanced cooperation procedure between 11 Member States to implement a tax on financial transactions. The contours of the project are summarized below.

 EFSM: European Financial Stability Mechanism, EFSF: European Financial Stability Facility, Financial institutions: credit institutions, investment firms, organized markets, insurance companies, asset management companies, pension funds, holding companies, leasing, securitization vehicles. The expected charges is 0.1% for cash instruments and 0.01% for derivatives. The scope includes the "financial markets" broadly, carefully avoiding the financing of the real economy through the exclusion of the primary market and financial products distributed by the retail banking and insurance. However, the purchase and sale of securities by an individual investor will be taxed via the taxation of the financial intermediary through which this negotiation channeled. The project raises vehement reactions from the world of finance. European banks have made their estimates, which showed that the FTT will sign their death warrant. The French associations instead, sent the Minister of economy to measure on the fate of individual financial institutions, but very they are very alarmed about the impact of the tax on the financing of the economy. It is difficult to sort through the flood of objections that can be read at this time. I chose to retain both. The tax applies to the negotiation and not the transfer of ownership. It is true that the presence of intermediaries and clearing induces a succession of transfers of ownership in the post-market cycle.

But such transfers resulted in two orders (purchase and sale) that resulted in an execution. The purchase and sale will be taxed ... 2 times as expected. However, it will not be the same if the negotiation goes through the OTC market, involving broker-dealers who buy the securities for their own account before transferring to their clients. This leads to the second point. The European Commission assumes that the FTT will effectively eliminate altogether certain market activities. This is what emerges from the published 02/14/2013 impact study. Effect on the market for public debt as the primary market is not taxed investments "buy and hold" long-term types will be favored. The implication speculation on debt of countries in the Euro zone, it's over. Effect on the repo market: The overnight repo will be replaced by secured loans (non-taxable). Therefore also exit the repo, considered a particularly opaque part of the "shadow banking" and carrying systemic risk by successive transfers of collateral. Impact on the OTC derivatives market: there too, the Commission expects a significant drop in volumes, without being moved more than that. Effect on market makers, systematic and other proprietary traders internationals: taxation of transactions of all these intermediaries will lead to cascading effects.

These are fully paid and their consequence capture spreads, become unprofitable cease altogether. Finally, one may wonder if there is not in this project a public agenda and calendar, otherwise hidden, the less "discreet." The public agenda was a political component: meet the largely hostile public opinion in the world of finance, and tax issues: generating additional revenue that would help significantly reduce the contribution of the participating States to the EU budget. The hidden agenda is, if not eradication, at least in the drastic limitation of certain activities deemed unnecessary or predatory for the real economy. It is obvious that the realization of this hidden agenda will also have the effect of reducing tax revenues, but this effect appears here, too, assumed perfectly.

European Commission and Audit Reform

Force companies to change auditors periodically and prohibit auditors from providing other services are part of changes to draft legislation to open the market for audit services in the EU and to increase the quality and transparency adopted in Committee on Legal Affairs on 25 April 2013. The role of auditors has been questioned because of the financial crisis. "We need to regain the confidence of investors, who want quality audits and independent give them the assurances they need when investing in European companies," said Sajjad Karim (ECR, UK), in charge on the reform of the audit. The committee decided by 15 votes for and 10 votes against to open negotiations with the Council in order to reach a common text. The S & D, Greens / EFA and GUE / NGL voted against. Informal negotiations begin as soon as possible. The legislation would force auditors in the EU to publish audit in accordance with international standards reports.

For auditors of public interest entities, such as banks, insurance companies and listed companies, the committee agreed that audit firms should provide stakeholders and investors a comprehensive document containing all actions of the listener and providing a comprehensive manner, the accuracy of the accounts of the company. As part of a series of measures to open the market and to increase transparency, the committee voted in favor of the proposal to ban contractual clauses "only four major companies" that require the audit is performed by one of them. The public interest entities would be forced to launch a tender in the selection of a new auditor. To ensure that the relationship between the auditor and the audited company become too familiar, MEPs adopted a mandatory rotation rule that an auditor would have the right to audit the accounts of a company for 14 years maximum, a period that could be extended to 25 years if guarantees are provided.

The European Commission had proposed a period of six years, but a majority of MPs in the committee felt that it was an expensive and undesirable intervention in the audit market. To avoid conflicts of interest and threats to their independence, EU audit firms would be forced to comply with rules similar to the standards internationally. Most members of the committee considered the proposal for a general ban on the provision of other services, counterproductive to the quality of audits. They agreed that the only other services that could threaten the independence should be banned. They also approved a list of services that would be prohibited under the new legislation. Audit firms could, for example, continue to provide certifications regarding compliance with tax requirements but would no longer provide tax advisory services that directly affect the financial statements of the company. They could also be examined by the national tax authorities.

The hurdles Fed has to overcome!

The persistent weakness of the U.S. economy - where deleveraging public and private sectors continues - has led to a stubbornly high unemployment and a lower than normal growth. The effects of austerity - a sharp increase in taxes and a sharp drop in public spending since the beginning of the year - further undermine economic performance. Indeed, recent data have silenced some officials of the Federal Reserve, who hinted that the Fed could start out the third round of quantitative easing, which is currently underway for a period indefinite. Given the low growth, high unemployment which fell only because discouraged workers are now leaving the workforce and inflation well below the goal of the Fed is not the time to begin to constrain liquidity. The problem is that liquidity injections by the Fed are not generating credit to finance the real economy, but to stimulate borrowing and risk-taking in financial markets. The bond sloppy risky under contractual commitments vague and excessively low interest rates is increasing, the stock market hit new highs, despite the slowdown in growth and the money goes mass to emerging markets high yield. Even the periphery of the Euro area has wall of liquidity triggered by the Fed, the Bank of Japan and other major central banks.

Because interest on state of the United States, Japan, the UK, Germany and Switzerland to absurdly low levels bond yields, investors are in a global search for yield. It is perhaps too early to say that many risky assets have reached bubble levels, and the levels of debt and risk-taking in financial markets have become excessive. However, the reality is that it is likely that credit bubbles and asset / equity form in the next two years, due to the accommodative U.S. monetary policy. The Fed has indicated that QE3 would continue until the labor market has improved enough probably early 2014, providing an interest rate of 0% until unemployment has dropped to less than 6.5%. Even when the Fed will begin to raise interest rates at some point in 2015, it will proceed slowly. In the previous tightening cycle that began in 2004, the Fed needed two years to normalize the policy rate. This time, the unemployment rate and household debt and public are much higher. A rapid normalization - such as realized in the space of a year in 1994 - would cause a crash in asset markets and the risk of a hard landing for the economy. But if financial markets already tend to bubble now, imagine the situation in 2015, when the Fed will begin to tighten its terms, and in 2017 at the earliest, when the Fed has completed the process of tightening. The last time interest rates have summers too low for too long during 2001-2004, and the normalization of rate thereafter was too slow, which had formed a huge credit bubble, housing and stock markets.

 We know the end of this film, and we may be ready to see more. The weakness of the real economy and the labor market, as well as high debt ratios, suggest the need to exit the monetary stimulus slowly. But a slow output may create a bubble of credit and asset as important as the previous one, if not more. The search for stability in the real economy, it seems, could again lead to financial instability. Some at the Fed - as chairman Ben Bernanke and Vice Chairman Janet Yellen - argue that policymakers can pursue two objectives: the Fed will raise interest rates to slow economic stability, while preventing financial instability (bubbles and credit created by the high liquidity assets and low interest rates) through supervision and macro-prudential regulation the financial system. In other words, the Fed will use regulatory instruments to control credit growth, risk taking and debt. But another faction of the Fed - led by Governors Jeremy Stein and Daniel Tarullo - argues that macro-prudential tools have not been tested, and that the debt limit in a part of the financial market only pushes liquidity elsewhere. Indeed, the Fed regulates banks, so that the liquidity and debt migrate to the informal banking system if bank regulation is stricter. As a result, Stein and Tarullo argued that the Fed has only one instrument of interest rates to tackle all the problems of the financial system. But if the Fed has only one effective instrument - interest rates - the two objectives of economic and financial stabilities cannot be pursued simultaneously.

Either the Fed continues the primary purpose of keeping rates low for longer and to standardize very slowly, in which case a huge credit bubble and assets would form in time, either the Fed focuses on the prevention of instability financial and increases interest rates much faster than the low growth and high unemployment have also requested, thus stopping an already sluggish recovery. Exit policies QE and zero interest rates the Fed will be treacherous: a too quick exit would cause a crash in the real economy, while a slow start out by creating a huge bubble and then cause a crash the financial system. If the output can be operated successfully partisan compromise Fed is more likely to create bubbles.

Reason behind Buying Gold!

Buying gold is favored by almost all investors and laymen in the field for three main reasons: In fact, buying gold would be sought from the purchase ornament that the metal is a store of value and a safe haven much more net growth in a context of crisis especially now. Indeed, buying gold is the only safe other than the other monetary valued purchase. It is for these reason even central banks are getting into and carry out purchase of gold. Buying gold is a kind of asset protection for professional investors who believe that buying gold is a good investment for both the long term and short term benefits. This not to mention the attractive European taxation regarding this specific area stipulating a progressive exemption by 10% annually and that from the third year of the tax on the capital gain that would result in a tax exemption on the capital gain after 12 years of holding gold assets.

 Buying gold for the purpose of hoarding seems reasonable for several reasons. Indeed, buying gold is hoarded in order to avoid the trustee payments but also by a fear of an upset or simply to avoid certain estate costs. This leads us to say that to capitalize on gold through buying gold can only lead to benefits. In addition, buying gold is going to be a real guarantee despite it does not generate revenue. Therefore by purchasing gold, it is good before speculating wait for the right moment when gold allow you to generate good profits. As such each would behave selfishly by hoarding their gold and wait for the right moment because gold cannot be a generator of profit.

Dramatic Decline In The Price Of Gold!

In this month, the price of an ounce of gold has decreased by over 12%. This is the largest decline in the price of gold last 33 years history of gold. A decline in the selling price of gold, which affected the activity of buying gold from the counters of the jewelers around the world and it create a new rush in the bullion and gold coins across Asia and America. The ounce of gold traded in London at $ 1,790 October 5, (the highest price in the year 2012-1675), Friday, 12 April it was $1548 and on Monday and fell to $1416 before stabilize in the next few days between 1380 and 1400.

 Many explanations have accompanied the fall of the price of gold, some were optimistic and explained the decline of renewed confidence among investors in the economic and banking system as they no longer fear a collapse of the international banking system and no longer reluctant to put their money in financial products. So it is indeed signal the end of the crisis. Other explanations are much less positive considering that it is the fear of a resumption of the weaker global economy that was expected, resulting in less stress on the commodities market and therefore a lower risk of slippage in prices. Gold, he did not forget, is primarily a protection against inflation.

The Financial Rating Agencies

The rating agencies are responsible for assessing the risk of a borrower's credit worthiness, which may be a business, a state or a community at large. In other words, they size up the risk of a borrower not to repay its debt. Only financial criteria are taken into account in the scoring. There are around150 rating agencies are there in worldwide but the most important are a few more particularly Moody's, Standard & Poor's and Fitch. They are in the lime light in the recent years due to the worldwide financial crisis. The scoring system, which is the statistical analysis, is more specific to each rating agency and they differ.

For example let us consider the following two agencies which were mentioned above, their possible scores are the best score to worst:
 
Standard and Poor's: AAA, AA, A, BBB, BB, B, CCC, CC, D


Moody's: Aaa, Aa, A, Baa, Ba, B, Caa, Ca, C

Generally, agencies add to their score the medium term may be positive, neutral or negative. Financial markets are very attentive to the ratings agencies. Thus, the rating given by rating agencies has a direct impact on the borrowing rates. AAA borrower can expect to get loans at very low rates (about 3% for the State), while a borrower rated poorly will have real difficulties in obtaining the same loan for higher rate of interest. These agencies have been criticized, especially about the role they played in the Greek crisis of 2010. The European Commission and European governments feel they have contributed to speculation on the financial markets. Evaluation methods of banks by the rating agencies have recently been questioned by the European Securities and Markets Authority (ESMA) after the rating downgrade of a large number of international banks and the lack of stability of their ratings.

Social Capital and It's Importance

Recently I came across a article which described about Social Capital and its importance and how we can save a lot of money for little or nil effort. And here I wish to give you a brief outline of it and show you the value of the social capital. What is social capital? The Social capital is the capital which is obtained through service to others. With every service rendered, you get a chance to get some favor in return. For life in the big cities, it is certain that it is more difficult to accumulate social capital because people know little and therefore do not see the value of helping someone. However, in small towns, social capital is a much more powerful tool.

Large firms are much less present, and competition is less severe for small traders. Prices in chains stores like bakery, supermarket, mechanics, etc are extremely high relative to manufacturing costs. But shopkeepers in smaller cities may sell goods and provide services at a much lower price. A price that is even lower if you helped this person to move last week. Let us see how to create and use the capital with some examples. Helping your landlord to perform certain tasks in the building could help you reduce your few dollars rent and reduce in your share of maintenance expenses of the building you are rented. Organize your neighbor’s lawn and help him to mend repair his truck or be a baby sitter for someone. Using the social capital depends on what you need.

The idea of social capital is to serve without knowing what service you will receive in return, not even knowing if you need anything from this person in the future. This is why it is important to build social capital with people from varied occupations and knowledge: a kind of diversification of capital. To summarize, social capital is a very powerful tool that many can use to save money. Moreover, it is highly likely that social capital have preceded the money as a way to exchange services. The important is to build a kind of community of people around you who are able to perform various tasks and help you in many areas.

Few Financial Mistakes We Should Avoid!

Regardless of our income, financial situation or lifestyle, it is wise to manage personal finances and avoid unnecessary spending. Many people do not pay enough attention to where their hard-earned money goes. Here is a compilation of some financial mistakes and tips to avoid them.

Credit card Usage:

 According to famous economist, a credit card is an essential financial tool, but only when it works for you and not vice versa. The credit card allows you to make online payments, regulate your purchasing power, to accumulate rewards points and build a solid credit rating. By cons, it is easy to fall into the traps when you are in financial pressure. Avoid all cash advances, unpaid balances, minimum payments and late payments in a credit card. These are all ways leads you to get into debt and sullying your credit reputation. It is also necessary to handle the number of credit cards and their limits as they may hurt you when you apply for a car loan or mortgage.

Budget:

 Do not holding a personal budget is a mistake that could cost you without you even knowing it. Holding a budget is your advantage to take the time to analyze your income and expenses and then focus on what is important to you. A budget is not synonymous with austerity, but prosperity, because knowing where your money goes and you can avoid unnecessary leaks profit pleasures (restaurants, trips, outings and other). 3. Not realize that the "little expenses" add up quickly. You maybe realize or not, but daily losing $ 3 is more than $ 1,000 annually, enough to pay for a trip! Day to day, these expenses seem innocuous, but your budget will prove just the opposite. A simple change in your habits will save you considerable sums.

Financial commitments:

When you make financial commitments such as buying a house, a car or even furniture, make sure you do not live on the edge of your means. The game plan here is in case of a loss of income that would stretch or if an increase in interest rates and therefore monthly payments. Live to the nearest dollar that you do bring additional stress and not happiness.

 Having an emergency fund:

 Would you be able to find $ 2,000 to repair your car in case of mechanical failure? Can you able to pay $1,000 for unexpected medical expenses? In addition to a transaction account (also called checking account) and a savings account, you should have an account for emergencies to bet the contingencies of life. Do not rely on your credit card to fix these problems because you risking to pay the price. Do take advantage of discounts: Without falling into consumerism, trying to find good deals when shopping. Competitive traders such as banks, dealers, supermarkets, shops, tour operators and others cut their prices to have you as a customer, so enjoy. Just be careful: a discount is not necessarily a bargain!

Open a joint bank account:

 Love is blind, it is known. Opening a joint bank account may seem like a good idea when the relationship is doing well, but when things escalate, you may regret your decision. Make arrangements just between you and your spouse and think twice before opening a joint bank account. Avoid unnecessary bank charges: Paying a withdrawal fee is an aberration! Try to withdraw money from ATMs of your bank and take larger amounts to avoid annoying situations. In addition, you will be less likely to spend the cash on you compared to a credit card.

Take advantage of tax cuts:

 When you make investments or save money, you use all the financial vehicles available to save tax? The government offers a variety of products for tax saving which are tax-advantaged. Contribute the maximum to those who make the most sense for your situation.

Plan your future:

 We are good at planning things trivial: dinner with friends, a romantic evening or a weekend with the family, but how much time does we spend planning our future? Buying a house, organizing a major trip, planning a career or studies are all crucial decisions. Make sure you think about and plan for your future that is to your liking.

Market Cycles Vs Economical Cycles

The indices help the financial growth of listed companies; indices give us indications of future economic cycle. Therefore, the market operates in advance. In summary, the market cycle has a lead time of one or two quarters on the real economy. The graph above illustrates the gap between the economic cycle and the market cycle yellow blue. For long-term investors, it helps to have an idea of the sectors that beat the market during different periods.

In times of prosperity (middle-top bull), you have the total: robust growth, falling unemployment, rising wages, the credit facility. The technology sector, basic industry and capital goods will cost to investors.

 In times of crisis (early top-bear), we arrive at an inflection point. More money circulates with wage increases and low interest rates. Therefore, inflation appears like toothpaste out of its tube, which will cause a general decline in consumption. During this period, the non-cyclical sectors such as the food sector perform well. Finally, precious metals, energy and utilities benefit to the mortification of the purchasing power of households, inflationary effects.

In a recession or depression (early-late bear), households are deleveraging and they consume little, companies are restructuring according to demand and credit activity is scarce. So, we are in a vicious circle and despair reign. At stock, investors are in general, sector based discrimination favoring defensive sectors such as sustainable consumption and unsustainable and health.

 During recovery (late early bull-bear), returns for hope everything is done to break this impasse whatever means: growth is back, the activity is not shrinking consumption and restarts more beautiful. The sectors that will benefit from this new momentum are finance, health and consumer always.

 Hope this article will help you in enhancing your knowledge in the future your future stock market investments.

Want to be a millionaire?

Want to be a millionaire? Who is having his money well placed and with which, if he can easily ensure the financial independence, then he can become millionaire easily. Becoming a millionaire is not as hard as some people think and it does not necessarily to earn five or six digits to get there.

First and foremost one to be a millionaire is, you have to acquire a good financial education and build up some personal qualities such as interest, curiosity, perseverance, love to meet the challenge etc. Most of the millionaires have the excellent investing knowledge with action back up. Most of them read read read read..... a lot. Invest and Read books on personal finance that will make you to win thousand times of your profitable investment in books. The more you earn the more likely you will become a millionaire. However you should know the importance of spending less than you earn. Since you are in consumer society you should know the differentiate between your needs and your desires then only you can save more by eliminating unwanted expenses there by your savings will be more. Leading a simple life with fulfilling your only basic needs pave way for your millionaire dream. Never allow your bank account to dry. Minimize your debts and give first priority to repay them.

If you are to be a millionaire then you must work with your money. To achieve this every month you automatically convert minimum 10% of your income in to your savings. Preferably invest in shares of the growing companies that offer regular dividends that fill your pocket with passive interest. Diversify your investment strategies so that you will not be affected by the stock market fluctuations. Never forget to build a capital security to cope with the unexpected happenings. Finally keep it in mind; the millionaire has a plan and stick to it very firmly with a self disciplined manner. Unfortunately wealth in a quick time does not exist. With respect to your income you always open the opportunities for diversification. If you are earning more means you can invest more and that will create a snow ball effect on all your investments to generate even more.

 Spend less, earn more, save, invest these are the key and the strict rule to follow. Repeat this method as many time as possible.

 Last but not the least: Take action and be persistent in your work plan.