GLOBAL ECONOMIC RECOVERY !!!

[kueytoc]

Global recovery requires rebalancing act: IMF economist

AFP - Wednesday, August 19

WASHINGTON (AFP) - - The global recovery from recession underway requires a delicate rebalancing of economies -- notably between the United States and Asia -- to sustain it, the chief IMF economist said Tuesday.

"The recovery has started. Sustaining it will require delicate rebalancing acts, both within and across countries," Olivier Blanchard said in an IMF article, released in advance of publication Wednesday.

Blanchard cautioned that predictable models based on past recoveries from recessions would not apply to the worst global slump in seven decades.

"The world is not in a run-of-the mill recession. The turnaround will not be simple. The crisis has left deep scars, which will affect both supply and demand for many years to come," he said.

The United States, the epicenter of the crisis, "is central to any world recovery," he said in the article, titled "Sustaining a Global Recovery."

Blanchard said two rebalancing acts will have to come into play to sustain the global recovery: a switch from public to private spending and the rebalancing of international trade flows.

The latter would require "a shift from domestic to foreign demand in the United States and a reverse shift from foreign to domestic demand in the rest of the world, particularly in Asia," he said.

Pointing to a decline in American household consumption -- which "represents 70 percent of total US demand" -- and a rise in the personal saving rate that is expected to persist for some time, Blanchard estimated a 3.0 percentage point drop in the ratio of consumption to US gross domestic product, a broad measure of economic output.

With the 3.0 percent drop unlikely to be made up by increased investment and the eventual phase-out of the massive fiscal stimulus, "US net exports must increase" for the US recovery to occur, he said.

Key to the rebalancing act will be an increase in foreign demand for US goods, particularly in countries with large current account surpluses, notably in China and other Asian countries.

"From the point of view of the United States, a decrease in Chinas current account surplus would help increase demand, and sustain the US recovery. That would result in more US imports, which would help sustain world recovery," the top economist at the 186-nation institution said.

China may be willing to pursue that "because it may well be in its own interest," said the economist, but other emerging market Asian countries that run large current account surpluses have weaker incentives than China to boost internal demand.

Blanchard recalled that in a typical recession model, lower-than-normal growth gives way to higher-than-normal growth for some time, until the economy has returned to its normal growth path.

"The current global recession is far from normal," he said, citing the breakdown in parts of the economic system.

"In advanced countries, the financial systems are partly dysfunctional, and will take a long time to find their new shape," he said.

Emerging market countries may not see dwindled capital inflows return to pre-crisis levels for a few years.

The end result of the global crisis: possibly a permanently lower potential output, he said.

Blanchard said the IMF's upcoming edition of the twice-yearly World Economic Outlook will cover 88 banking crises over the past four decades in a wide range of countries.

"While there is large variation across countries, the conclusion is that, on average, output does not go back to its old trend path, but remains permanently below it."

[aliciangsl]

Global recovery requires rebalancing act: IMF economist

AFP - Wednesday, August 19

WASHINGTON (AFP) - - The global recovery from recession underway requires a delicate rebalancing of economies -- notably between the United States and Asia -- to sustain it, the chief IMF economist said Tuesday.

"The recovery has started. Sustaining it will require delicate rebalancing acts, both within and across countries," Olivier Blanchard said in an IMF article, released in advance of publication Wednesday.

Blanchard cautioned that predictable models based on past recoveries from recessions would not apply to the worst global slump in seven decades.

"The world is not in a run-of-the mill recession. The turnaround will not be simple. The crisis has left deep scars, which will affect both supply and demand for many years to come," he said.

The United States, the epicenter of the crisis, "is central to any world recovery," he said in the article, titled "Sustaining a Global Recovery."

Blanchard said two rebalancing acts will have to come into play to sustain the global recovery: a switch from public to private spending and the rebalancing of international trade flows.

The latter would require "a shift from domestic to foreign demand in the United States and a reverse shift from foreign to domestic demand in the rest of the world, particularly in Asia," he said.

Pointing to a decline in American household consumption -- which "represents 70 percent of total US demand" -- and a rise in the personal saving rate that is expected to persist for some time, Blanchard estimated a 3.0 percentage point drop in the ratio of consumption to US gross domestic product, a broad measure of economic output.

With the 3.0 percent drop unlikely to be made up by increased investment and the eventual phase-out of the massive fiscal stimulus, "US net exports must increase" for the US recovery to occur, he said.

Key to the rebalancing act will be an increase in foreign demand for US goods, particularly in countries with large current account surpluses, notably in China and other Asian countries.

"From the point of view of the United States, a decrease in Chinas current account surplus would help increase demand, and sustain the US recovery. That would result in more US imports, which would help sustain world recovery," the top economist at the 186-nation institution said.

China may be willing to pursue that "because it may well be in its own interest," said the economist, but other emerging market Asian countries that run large current account surpluses have weaker incentives than China to boost internal demand.

Blanchard recalled that in a typical recession model, lower-than-normal growth gives way to higher-than-normal growth for some time, until the economy has returned to its normal growth path.

"The current global recession is far from normal," he said, citing the breakdown in parts of the economic system.

"In advanced countries, the financial systems are partly dysfunctional, and will take a long time to find their new shape," he said.

Emerging market countries may not see dwindled capital inflows return to pre-crisis levels for a few years.

The end result of the global crisis: possibly a permanently lower potential output, he said.

Blanchard said the IMF's upcoming edition of the twice-yearly World Economic Outlook will cover 88 banking crises over the past four decades in a wide range of countries.

"While there is large variation across countries, the conclusion is that, on average, output does not go back to its old trend path, but remains permanently below it."

The rate of umemployment is still high in the States, but share prices has been up in Singapore.

This has shown that the consumer confidence is on the rise, however, the underlying issues of the problems are still not adressed...

[kueytoc]

Pfizer to pay record $2.3B penalty over promotions

By DEVLIN BARRETT, Associated Press Writer AP - Thursday, September 3

WASHINGTON - Federal prosecutors hit Pfizer Inc. with a record-breaking $2.3 billion in fines Wednesday and called the world's largest drug maker a repeating corporate cheat for illegal drug promotions that plied doctors with free golf, massages, and resort junkets.

Announcing the penalty as a warning to all drug manufacturers, Justice Department officials said the overall settlement is the largest ever paid by a drug company for alleged violations of federal drug rules, and the $1.2 billion criminal fine is the largest ever in any U.S. criminal case. The total includes $1 billion in civil penalties and a $100 million criminal forfeiture.

Authorities called Pfizer a repeat offender, noting it is the company's fourth such settlement of government charges in the last decade. The allegations surround the marketing of 13 different drugs, including big sellers such as VIAGRAx, Zoloft, and Lipitor.

As part of its illegal marketing, Pfizer invited doctors to consultant meetings at resort locations, paying their expenses and providing perks, prosecutors said.

"They were entertained with golf, massages, and other activities," said Mike Loucks, the U.S. attorney in Massachusetts.

Loucks said that even as Pfizer was negotiating deals on past misconduct, they were continuing to violate the very same laws with other drugs.

To prevent backsliding this time, Pfizer's conduct will be specially monitored by the Health and Human Service Department inspector general for five years.

In an unusual twist, the head of the Justice Department, Attorney General Eric Holder, did not participate in the record settlement, because he had represented Pfizer on these issues while in private practice.

Associate Attorney General Thomas Perrelli said the settlement illustrates ways the Justice Department "can help the American public at a time when budgets are tight and health care costs are rising."

Perrelli announced the settlement terms at a news conference with federal prosecutors and FBI, and Health and Human Services Department officials.

The settlement ends an investigation that also resulted in guilty pleas from two former Pfizer sales managers.

Officials said the U.S. industry has paid out more than $11 billion in such settlements over the past decade, but one consumer advocate voiced hope that Wednesday's penalty was so big it would curb the abuses.

"There's so much money in selling pills, that there's a tremendous temptation to cheat," said Bill Vaughan, an analyst at Consumers Union, the nonprofit publisher of Consumer Reports.

"There's a kind of mentality in this sector that (settlements) are the cost of doing business and we can cheat. This penalty is so huge I think consumers can have some hope that maybe these guys will tighten up and run a better ship."

The government said the company promoted four prescription drugs, including the pain killer Bextra, as treatments for medical conditions different from those the drugs had been approved for by federal regulators. Authorities said Pfizer's salesmen and women created phony doctor requests for medical information in order to send unsolicited information to doctors about unapproved uses and dosages.

Use of drugs for so-called "off-label" medical conditions is not uncommon, but drug manufacturers are prohibited from marketing drugs for uses that have not been approved by the Food and Drug Administration. They said the junkets and other company-paid perks were designed to promote Bextra and other drugs, to doctors for unapproved uses and dosages, backed by false and misleading claims about safety and effectiveness.

Bextra, for instance, was approved for arthritis, but Pfizer promoted it for acute pain and surgical pain, and in dosages above the approved maximum. In 2005, Bextra, one of a class of painkillers known as Cox-2 inhibitors, was pulled from the U.S. market amid mounting evidence it raised the risk of heart attack, stroke and death.

A Pfizer subsidiary, Pharmacia and Upjohn Inc., which was acquired in 2003, has entered an agreement to plead guilty to one count of felony misbranding. The criminal case applied only to Bextra.

The $1 billion in civil penalties was related to Bextra and a number of other medicines.

A portion of the civil penalty will be distributed to 49 states and the District of Columbia, according to agreements with each state's Medicaid program.

Pfizer's top lawyer, Amy Schulman, said the settlements "bring final closure to significant legal matters and help to enhance our focus on what we do best _ discovering, developing and delivering innovative medicines."

In her statement, Schulman said: "We regret certain actions taken in the past, but are proud of the action we've taken to strengthen our internal controls and pioneer new procedures."

In financial filings in January, the company had indicated that it would pay $2.3 billion over the allegations.

The civil settlement announced Wednesday covered Pfizer's promotions of Bextra, blockbuster nerve pain and epilepsy treatment Lyrica, schizophrenia medicine Geodon, antibiotic Zyvox and nine other medicines. The agreement with the Justice Department resolves the investigation into promotion of all those drugs, Pfizer said.

The government said Pfizer also paid kickbacks to market a host of big-name drugs: Aricept, Celebrex, Lipitor, Norvasc, Relpax, ######, Zithromax, Zoloft, and Zyrtec.

The allegations came to light thanks largely to five Pfizer employees and one Pennsylvania doctor, who will now share $102 million of the settlement money.

FBI Assistant Director Kevin Perkins praised the whistleblowers who decided to "speak out against a corporate giant that was blatantly violating the law and misleading the public through false marketing claims."

To rein in the abuses, the government's five-year monitoring will force Pfizer to notify doctors about Wednesday's agreement, encourage them to report any similar behavior, and publicly post any payments or perks it gives to doctors.

Under terms of the settlement, Pfizer must pay $1 billion to compensate Medicaid, Medicare, and other federal health care programs. Some of that money will be shared among the states: New York, for example, will receive $66 million, according to the state's attorney general, Andrew Cuomo.

When Pfizer originally disclosed the settlement figure, it also announced plans to acquire rival Wyeth for $68 billion. That deal, which would bolster Pfizer's position as the world's top drug maker by revenue, is expected to close before year's end.

Shares of Pfizer dropped 14 cents to $16.24 in midday trading.

[Fuzzy]

The employee who blew the whistle on pfizer is getting over USD$50 million for the reward... Can buy a very very big tank...

[kueytoc]

Lehman's collapse -- an insider's view

AFP - Monday, September 14

WASHINGTON (AFP) - - A chill runs down the spine of Lawrence McDonald every time he drives past the Wall Street building of collapsed investment bank Lehman Brothers, where he was one of the most profitable bond traders.

"The big takeaway is that the fate of 20,000 souls was determined in that building, especially on the 31st floor," McDonald, 43, told AFP in an interview ahead of the first anniversary Tuesday of Lehman's collapse.

The 158-year-old Lehman filed for bankruptcy protection on September 15, 2008, in the largest US bankruptcy filing in history, leaving the future of 25,000 staff in jeopardy and sending a financial tsunami across the globe that continues to reverberate today.

But McDonald thinks Lehman, which collapsed under the weight of hundreds of billions of dollars in risky mortgage-backed securities, could have been saved if the bosses would have heeded a number of clear early warnings.

The top Lehman leadership, housed on the bank building's 31st floor, "drove us a 162 miles (261 kilometers) an hour... right into the biggest subprime iceberg ever seen."

Bank chief executive Richard Fuld and president Joe Gregory heard warnings beginning in 2005 that the property market, on which they were "betting the ranch," was on the verge of collapse but turned their backs each time, McDonald charged.

"It was 24,992 people making money and eight guys losing it," said the man who rose from a humble pork chop salesman to top-notch Wall Street trader -- once his team made 250 million dollars in a single day.

Lehman was heavily overleveraged at the top of the market in 2007 -- its net tangible equity was 17 billion dollars but its total investment was 750 billion dollars -- a good chunk of it in mortgage-backed securities that turned "toxic."

"Inside Lehman, some really weird things were going on... the 31st floor was one of those mysterious places on Wall Street because we had incredibly talented risk takers that were politically outmaneuvered and squashed like grapes," said a fuming McDonald.

"They didn't just rule with an iron first, they wore brass knuckles."

Asked if he had personally raised the issue with the top brass, McDonald said he had no access to them, but his immediate bosses had raised the alarm. "It would be complete suicide if I were to go to" the top management, he said.

McDonald is now managing director of Pangea Capital Management and has co-authored a top-selling book, "A Colossal Failure of Common Sense: The Incredible Inside Story of the Collapse of Lehman Brothers."

The book, published in July, squarely points the finger of blame at Fuld and his board, accusing them of taking dangerous risks in pursuit of short-term profits.

"I spoke to 150 people, 45 managing directors, members of the risk committee who were my best friends, and members of the executive committee. This is incredible access," he said.

Fuld was so perturbed about McDonald's book that he angrily phoned a pair of former Lehman traders he believed secretly had helped to contribute to the account of the bank's stunning collapse, the New York Post reported last week.

The former chief executive said he felt "horrible" over the bank's demise when he testified to the US Congress in October 2008, one month after the bank's collapse, to explain the events leading to the disaster.

"What has happened is an absolute tragedy," Fuld said. "I take full responsibility for the decisions I made and for the actions I took."

Fuld also told lawmakers that if he could turn back the clock, he would do many things differently but lawmakers took turns to castigate him.

One of them held up a chart suggesting that Fuld's personal remuneration totaled 480 million dollars over eight years but Fuld said the figure was exaggerated and that the majority of the compensation came in stock, most of which had not been paid to him at the point of Lehman's bankruptcy.

McDonald said the lessons from Lehman's collapse were important -- "not just to warn of such disasters in the future but ultimately to provide a beacon to help us serve Main Street better."

[kueytoc]

Newest Professions, Growing Salaries

Larry Buhl, for Yahoo! HotJobs, Yahoo! HotJobs

The latest directory of job titles from Occupational Information Network (O*Net) features a variety of new entries that many people have never heard before.

Some of these jobs -- at least the duties -- have been around in some form for a while. What's new is a "professional pathway" for these careers, according to employment expert and author Laurence Shatkin. "O*Net officially recognizes job titles once there is a critical mass of workers in those jobs and a clear road map for attaining the positions," he says.

Green Energy

There are many new green-collar job titles on O*Net, which is developed for the U.S. Department of Labor. The number of new green jobs is not surprising, given the federal government's active role in building a green economy.

Even before the federal stimulus dollars kicked in, wind energy was big and growing. The American Wind Energy Association (AWEA) reports that the wind industry grew by 45 percent in 2007 alone. Civil engineers who work on various aspects of the wind farm now have their own job category: wind farm engineers. These engineers work on performance of turbines and the overall performance of the wind farm and also oversee aspects of construction and mechanical development. They usually have a B.S. in engineering with a focus in construction or civil or structural engineering. Some technical colleges now offer degrees in wind farm engineering. AWEA pegs the average salary at $80,000.

Solar thermal technicians design, develop, install, and maintain solar thermal systems used to heat water and produce energy. Renewable energy plants, companies that install solar panels for domestic use, construction companies, consulting firms, and hotel chains use these technicians. A degree (2- or 4-year) in mechanical engineering or electronics is helpful, but some apprenticeship programs exist as well.

Salaries vary widely and will increase if demand continues to outstrip supply. Solar thermal technicians can expect to start at around $40,000 a year or $20 an hour, according to Red Rocks Community College in Colorado. The upper salary limit is a moving target, as the job category is emerging so quickly.

Health Care

Nursing informatics is a nursing specialty that integrates nursing science, computer science, and information science to manage and communicate data, information, knowledge, and wisdom in nursing practice. Informatics nurse specialists are registered nurses trained in graduate level informatics. Salaries start at $60,000 but can more than double after a few years' experience.

"Most often they are liaisons between clinicians and information and computer science people. These jobs are growing because information technology is now becoming a major tool in health-care settings," says Stacey Prince of the American Nurses Association.

Anesthesiologist assistants work under the direction of a licensed and qualified anesthesiologist in hospitals. They perform preoperative tasks, support therapy, recovery room care, and intensive care support. They do well money-wise: around $90,000 to start and more than double that with 10 years of experience, according to the American Medical Association. A master's degree in nursing and certification by the National Commission for Certification of Anesthesiologist Assistants are required.

Business and Management

The roles of IT professionals continue to splinter and become more specialized as new technologies dominate businesses. Business continuity planners are responsible for developing plans to recover from cyber attacks, terrorism, or natural disasters. They also may be responsible for scaling IT as a company grows (from regional to national, for example), duties that used to be handled by information systems managers. A bachelor's degree in business, management, or disaster management is the minimum requirement. The median salary for disaster recovery managers, who have a similar job description, is $100,000, according to salary.com.

America's interest in getting healthy has led to a growing business specialization of spa managers, who are employed by resorts, health clubs, and other facilities offering sports and wellness activities. The median income for spa managers in the U.S. is $56,000. A college degree is not mandatory, but a high school diploma or GED and at least five years experience in the managing a related area are usually required.

Education

Distance learning, which provides instruction to students who are not on-site, is booming. O*Net now recognizes distance learning coordinators, who prepare and run online courses at colleges, trade schools and secondary schools. A master's degree instructional design, curriculum design, curriculum development is usually required, as is a strong understanding of Web-based technologies.

The Bureau of Labor Statistics doesn't yet recognize distance learning coordinators as a job category, but an analysis of job openings shows a range from the upper $30s to the low $60s for a coordinator with at least two years' experience.

Entertainment and Media

Video game designers have been around for a while, but as the $9 billion interactive entertainment industry matures, new specialties are emerging, such as user experience designer, which focuses solely on improving the user interaction. Designers can also move up to be creative directors as well. A college degree is still not mandatory everywhere, however, strong skills in computer programming, computer engineering, software development, computer animation, graphic design, and computer graphics -- or all of them -- are helpful.

Big employers like Microsoft and Electronic Arts snag a large chunk of new designers, but smaller companies are starting to offer competitive wages and career tracks as well. Designers earn $50,000 and $80,000 annually, and the highest reported salary was $200,000, according to the International Game Developers Association.

Social media is a specialty field of public relations that uses the growing social networking technologies, including RSS, Twitter, Facebook, and blogs. A few years ago, social media duties were performed by marketing managers or communications directors. Now there is a social media career track.

An entry-level company blogger can earn less than $20 per hour (and many blogging jobs are part-time). A director of social media, the top of the social media chain, can pull in $70,000 or more. In the middle, a social media manager, can expect to earn around $50,000. A bachelor's degree is usually required, and job seekers should possess strong writing abilities and a keen understanding of online marketing, public relations, and new media.

[kueytoc]

The demise of the dollar

October 6, 2009

By Robert Fisk

Independent News and Media Limited

In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading

In the most profound financial change in recent Middle East history, Gulf Arabs are planning - along with China, Russia, Japan and France - to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.

The Americans, who are aware the meetings have taken place - although they have not discovered the details - are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs. Against the background to these currency meetings, Sun Bigan, China's former special envoy to the Middle East, has warned there is a risk of deepening divisions between China and the US over influence and oil in the Middle East. "Bilateral quarrels and clashes are unavoidable," he told the Asia and Africa Review. "We cannot lower vigilance against hostility in the Middle East over energy interests and security."

This sounds like a dangerous prediction of a future economic war between the US and China over Middle East oil - yet again turning the region's conflicts into a battle for great power supremacy. China uses more oil incrementally than the US because its growth is less energy efficient. The transitional currency in the move away from dollars, according to Chinese banking sources, may well be gold. An indication of the huge amounts involved can be gained from the wealth of Abu Dhabi, Saudi Arabia, Kuwait and Qatar who together hold an estimated $2.1 trillion in dollar reserves.

The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China's extraordinary new financial power - along with past anger among oil-producing and oil-consuming nations at America's power to interfere in the international financial system - which has prompted the latest discussions involving the Gulf states.

Brazil has shown interest in collaborating in non-dollar oil payments, along with India. Indeed, China appears to be the most enthusiastic of all the financial powers involved, not least because of its enormous trade with the Middle East.

China imports 60 per cent of its oil, much of it from the Middle East and Russia. The Chinese have oil production concessions in Iraq - blocked by the US until this year - and since 2008 have held an $8bn agreement with Iran to develop refining capacity and gas resources. China has oil deals in Sudan (where it has substituted for US interests) and has been negotiating for oil concessions with Libya, where all such contracts are joint ventures.

Furthermore, Chinese exports to the region now account for no fewer than 10 per cent of the imports of every country in the Middle East, including a huge range of products from cars to weapon systems, food, clothes, even dolls. In a clear sign of China's growing financial muscle, the president of the European Central Bank, Jean-Claude Trichet, yesterday pleaded with Beijing to let the yuan appreciate against a sliding dollar and, by extension, loosen China's reliance on US monetary policy, to help rebalance the world economy and ease upward pressure on the euro.

Ever since the Bretton Woods agreements - the accords after the Second World War which bequeathed the architecture for the modern international financial system - America's trading partners have been left to cope with the impact of Washington's control and, in more recent years, the hegemony of the dollar as the dominant global reserve currency.

The Chinese believe, for example, that the Americans persuaded Britain to stay out of the euro in order to prevent an earlier move away from the dollar. But Chinese banking sources say their discussions have gone too far to be blocked now. "The Russians will eventually bring in the rouble to the basket of currencies," a prominent Hong Kong broker told The Independent. "The Brits are stuck in the middle and will come into the euro. They have no choice because they won't be able to use the US dollar."

Chinese financial sources believe President Barack Obama is too busy fixing the US economy to concentrate on the extraordinary implications of the transition from the dollar in nine years' time. The current deadline for the currency transition is 2018.

The US discussed the trend briefly at the G20 summit in Pittsburgh; the Chinese Central Bank governor and other officials have been worrying aloud about the dollar for years. Their problem is that much of their national wealth is tied up in dollar assets.

"These plans will change the face of international financial transactions," one Chinese banker said. "America and Britain must be very worried. You will know how worried by the thunder of denials this news will generate."

Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars. Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq.

Read also:

'China will overtake America, the only question is when'

'The end of the dollar spells the rise of a new order'

[kueytoc]

Dollar facing 'power-shift': analysts

AFP - Monday, October 12

LONDON (AFP) - – The dollar's position as the world's leading reserve currency faces increased pressure as the financial crisis allows emerging economies greater influence on the world stage, analysts said.

A report last week in The Independent claiming that China, Russia and Gulf States are among nations prepared to ditch the dollar for oil trades has heightened the uncertainty surrounding the US currency's future.

The dollar slumped against rivals last week in the wake of the British daily's controversial report.

"The US dollar is being hurt by the continued talk of a shift away from a dollar-centric world," said Kit Juckes, an analyst at currency traders ECU Group.

"Three conclusions stand out very clearly. Firstly, the shift in economic power away from the G7 economies is continuing. "Secondly, there is a growing acceptance amongst those winners that one consequence of this power shift will be to strengthen their currencies.

"And finally, as long as the US economy is not strong enough for any rise in interest rates to be conceivable for a long time, the dollar's underlying downtrend will remain in place," added Juckes.

The Independent, under the front-page headline "The Demise of the Dollar", reported last Tuesday that Gulf states, together with China, Russia, Japan and France, were considering replacing the dollar as the currency for oil deals.

"In the most profound financial change in recent Middle East history, Gulf Arabs are planning -- along with China, Russia, Japan and France -- to end dollar dealings for oil," wrote The Independent's Middle East correspondent Robert Fisk.

They would switch "to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar," added Fisk, citing Gulf Arab and Chinese banking sources.

The report was denied by a host of countries, including Kuwait, Qatar and Russia, while France dismissed it as "pure speculation."

Even so, the United Nations itself last week called for a new global reserve currency to end dollar supremacy, which had allowed the United States the "privilege" of building up a huge trade deficit.

UN undersecretary-general for economic and social affairs, Sha Zukang, said "important progress in managing imbalances can be made by reducing the (dollar) reserve currency country's 'privilege' to run external deficits in order to provide international liquidity."

Zukang was speaking at the annual meetings of the International Monetary Fund and World Bank, whose President Robert Zoellick recently warned that the United States should not "take for granted" the dollar's role as preeminent global reserve currency.

Meanwhile at a G20 summit in Pittsburgh last month, world leaders unveiled a new vision for economic governance, with bold plans to fix global imbalances and give more clout to emerging giants such as China and India.

Following the summit, US Treasury Secretary Timothy Geithner repeated Washington's commitment to a strong dollar.

But last week the finance chief was left to watch as traders used The Independent's report as an opportunity to push lower the troubled US unit.

The report "has helped concentrate the minds of traders and investors alike, and has given them another excuse to take the dollar lower," GFT Global Markets analyst David Morrison told AFP.

"Despite what the Fed and other central bankers say, a weaker dollar is desirable because it is necessary to rebalance the global economy.

"As long as the decline is gentle and orderly, then they're happy. But aggressive selling would spook the markets," he added.

Commerzbank currency analyst Antje Praefcke agreed that the market's reaction was significant because it showed that the dollar was on a downward trajectory.

"The questionable article in the Independent was of course disclaimed," Praefcke said.

"It is nonetheless an interesting study of the pscychological factors which are currently putting pressure on the dollar. Even if conspiracy theories turn out to be nonsense, the dollar is subsequently able to retrace only some of its losses."

[kueytoc]

Where's moi Tycoon BankeR ???

Bank of America reports $1 billion loss

AFP - 2 hours 23 minutes ago

NEW YORK (AFP) - – Bank of America on Friday announced a steeper-than-expected net loss of 1.0 billion dollars in the third quarter, linked to hefty writedowns of assets from Merrill Lynch and other charges.

The total loss for shareholders was even larger, at 2.24 billion dollars, or 26 cents per share, five cents worse than expected by most analysts.

The company paid special dividends of 1.2 billion dollars, including 893 million to the US government for its capital injections.

The largest US bank by assets said its results were "negatively impacted by continued weakness in the US and global economies and stress on the consumer, which continues to result in high credit costs."

Like some other major banks, Bank of America faced headwinds in mortgage and consumer segments, offset by stronger results from investment banking.

Credit card operations lost 1.0 billion dollars and home loans lost 1.6 billion. Its global markets trading operations however posted a profit of 2.1 billion dollars.

The overall results were hurt by 2.6 billion dollars in writedowns on some assets, including from Merrill Lynch, the troubled brokerage giant acquired by Bank of America at the height of the financial crisis. But the company said this was due to "the market's improved view of Bank of America's credit cost."

The group also took a 402 million dollar pretax charge to pay the US government to terminate its asset guarantee program.

Chief executive Kenneth Lewis, who is stepping down at the end of the year, said the bank performed well excluding these "non-core" costs.

"Excluding those items, our revenue continued to hold up well," Lewis said.

"Obviously, credit costs remain high, and that is our major financial challenge going forward. However, we are heartened by early positive signs, such as the leveling of delinquencies among our credit card customers."

Revenue net of interest expense rose 32 percent to 26.4 billion dollars in the quarter.

The disappointing results from Bank of America came on the heels of stronger-than-expected profits from its key peers -- JPMorgan Chase, Goldman Sachs and Citigroup.

Bank of America has expanded during the global crisis, absorbing giant lender Countrywide Financial as well as Merrill Lynch.

Unlike some of its peers, it has not repaid the government for its capital. It received 25 billion dollars under a program to shore up capital in the banking system and another 20 billion to help it absorb Merrill Lynch.

Under an agreement announced Thursday, Lewis agreed to work without pay for 2009 on the recommendation of the government "pay czar" overseeing compensation to bailed-out firms.

[kueytoc]

U.S. cuts pay at bailed out firms, BofA hits back

Reuters - Friday, October 23

By Karey Wutkowski and David Lawder

WASHINGTON - The U.S. pay czar on Thursday slashed compensation for top earners at seven bailed-out companies for the final two months of the year, and was immediately slammed by the country's largest bank which claimed the cuts could send talent fleeing.

Many of the firms, which have together received more than $300 billion in taxpayer aid, issued conciliatory statements, but Bank of America said the ruling would put it at a disadvantage in competing with companies not under the pay czar's thumb.

"People want to work here, but they want to be paid fairly," said BofA spokesman Scott Silvestri.

Pay czar Kenneth Feinberg said competitive concerns and public outrage both played a role in how he reworked pay contracts for the 25 highest-paid employees at the five financial firms and two automakers who are the biggest recipients of government aid.

He said their cash compensation rates for the remainder of 2009 would drop 90 percent compared to 2008. Their overall compensation rates for those two months would on average be cut in half.

But he added he will not claw back payments already made. "I'm not going to go back and ask everybody to repay what they've already earned," Feinberg said.

The companies affected are American International Group Inc, Bank of America Corp, Citigroup Inc, General Motors Co, Chrysler, GMAC and Chrysler Financial.

U.S. officials have said Wall Street pay practices must be reformed to rein the excessive risk-taking that fueled the crisis that pushed the financial system to the brink of collapse last year.

Huge pay packages for banks and other financial firms have ignited public anger at a time the U.S. unemployment rate is at a 26-year high and seen climbing.

President Barack Obama said Feinberg's actions would help curb risk-taking, while still allowing the firms to prosper.

"We don't disparage wealth, we don't begrudge anybody for doing well, we believe in success," Obama said. "But it does offend our values when executives of big financial firms -- firms that are struggling -- pay themselves huge bonuses even as they continue to rely on taxpayer assistance to stay afloat."

Feinberg hinted the bailed-out firms did not seem to get the message adding that without exception, all of the pay plans that they submitted were inconsistent with the public interest.

"Some of the negotiations were very intense," he said.

His rulings cut salaries across the board and shifted much of the base salary to stock that can only be sold in one-third installments, beginning in two years. Bonuses can also only be paid in long-term restricted stock and are contingent upon performance and repayments of bailout funds.

BANKERS' PAY DRAWS PUBLIC IRE

"Corporate America, I hope, will be looking at this," Feinberg said.

He said the cuts that applied to November and December could impact which employees will be the top 25 earners at these firms in 2010. Those top earners are the only ones for whom he can alter pay contracts.

Feinberg said his office will start work on pay contracts for 2010 at the beginning of the year and will use the 2009 rulings as a baseline. The rulings on next year's pay would likely come in the first quarter, he said.

AIG's Chief Executive Robert Benmosche moved to quell concern among the insurer's employees on the potential impact of Feinberg's actions.

"It is important that all of you know that the Special Master's jurisdiction is quite limited, and we expect Feinberg's ... decisions on compensation to cover only the top 25 employees at AIG," Benmosche said in an internal memo obtained by Reuters.

While Feinberg's powers only extend to the seven bailed-out companies, the government on Thursday unveiled a broader initiative to have the Federal Reserve closely police pay across financial firms.

The Fed issued guidelines to tie compensation at the banks it regulates more closely to the risks these firms take. The Fed oversees more than 5,000 bank holding companies and over 800 smaller state-chartered banks.

"Banking organizations too often rewarded employees for increasing the firm's revenue or short-term profit without adequate recognition of the risks the employees' activities posed to the firm," the U.S. central bank said.

Public anger boiled over in March when insurer AIG handed out fat bonuses just months after accepting tens of billions of dollars in government aid.

Recent news that Goldman Sachs Group Inc had set aside $16.8 billion for compensation, so soon after repaying $10 billion in taxpayer money, fueled concerns that Wall Street was already returning to the lavish pay practices that were commonplace before the financial crisis struck.

[kueytoc]

Recession or not? US economy likely to be in limbo

AFP - Sunday, October 25

WASHINGTON (AFP) - – The US economy is poised to show growth in the third quarter, rebounding from its worst slump in decades, but whether the recession is over is a more complex question.

The first official estimate due Thursday on gross domestic product (GDP), or output of goods and services, is expected to show expansion of between 3.0 and 4.0 percent in the July-September period after four negative quarters in a row.

Yet the economy may linger for months in a "no-man's land" in which GDP is expanding but no one is sure if the recession is "officially" ended, because of the way business cycles are defined in the United States.

For decades, the US government and economic community have recognized a panel of academicians with the private National Bureau of Economic Research as the official arbiter of business cycles.

The NBER panel does not use the definition employed in many countries of recession as two consecutive quarters of declining GDP.

NBER says a recession is "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."

Moreover, the NBER generally waits months before its pronouncement, leaving the question of recession or not in limbo.

Complicating the issue is the sharp rise in unemployment, which has hit a 26-year high of 9.8 percent, making it still feel like recession for many.

"The average American doesn't think you have recovery until the unemployment rate comes down, and it won't come down until you have a sustained rate of 3.0 percent," says Cary Leahey, senior economist at Decision Economics, a research firm.

"This is not really a meaningful recovery."

Leahey expects the economy to show growth of roughly 3.9 percent in the third quarter, but sees a slowdown to around 2.0 percent in the fourth quarter as the expansion stalls.

Moreover, analysts point out that much of the growth will be the result of businesses rebuilding inventories following sharp production cuts, and from government stimulus efforts that may not be sustained.

Nariman Behravesh, chief economist at the research and consulting firm IHS Global Insight, said he believes the recession ended in June or July and that NBER should provide at least a preliminary pronouncement of the fact.

"I'm sure the recession is over, the only question is the strength of the recovery," he said.

"NBER could provide a preliminary reading, they could say, 'This is our best estimate,' instead of leaving everybody guessing."

Behravesh said it may be as long as a year before NBER decides and that the state of uncertainty "is not helpful for businesses."

Federal Reserve chairman Ben Bernanke said last month the recession is likely over "from a technical perspective" but that the economy will struggle due to difficult credit conditions and high unemployment.

"It's still going to feel like a very weak economy for some time as many people will still find that their job security and their employment status is not what they wish it was," the Fed chief said.

The NBER declared the current recession on December 1, 2008, a full year after the downturn began. That was made despite data showing modest growth in the fourth quarter of 2007 and second quarter of 2008.

NBER declared an end to the 2001 recession only in July 2003, even though revised data showed there were not two consecutive negative quarters for GDP.

Roger Farmer, chairman of the economics department at the University of California at Los Angeles, said he believes NBER will eventually declare the recession ended in May 2009.

But Farmer said many Americans still will be feeling economic pain and that the NBER should consider other factors such as long-term unemployment.

"I think the economy is fragile, and the recovery could easily fizzle out," he said.

Even if the recession were declared over, "until the unemployment rate comes down, the US economy is going to be in trouble," he said.

"Only when we start spending again, and confidence returns to the private economy will the recession be over."

[kueytoc]

US rebounds from Recession

AFP - Friday, October 30

WASHINGTON (AFP) - – The United States rebounded from recession in the third quarter, posting its strongest economic growth in two years as government stimulus spurred consumer spending, official data showed Thursday.

After four negative quarters, the world's largest economy grew at a seasonally adjusted 3.5 percent annual rate in the July-September period from the second quarter, the Commerce Department said.

The increase was the first since the second quarter of 2008 and the strongest expansion since the 2007 third quarter, when a US subprime mortgage crisis triggered a global financial crisis that hammered the world economy.

The expansion followed an unrevised 0.7 percent decline in the second quarter.

The department's first estimate of third-quarter gross domestic product (GDP), a broad measure of the country's output of goods and services, was slightly higher than the 3.2 percent reading expected by most analysts.

President Barack Obama welcomed the data as "an affirmation that this recession is abating and the steps weve taken have made a difference."

But, he warned: "We have a long way to go to fully restore our economy, and recover from what has been the longest and deepest downturn since the Great Depression."

"The benchmark I use to measure the strength of our economy is not just whether our GDP is growing, but whether we are creating jobs, whether families are having an easier time paying their bills, whether our businesses are hiring and doing well."

While a recession is widely regarded as ended by one quarter of economic growth, in the United States the economy will not be officially out of recession until it has been declared by the National Bureau of Economic Research.

Unemployment remains a key hurdle to sustained recovery. The jobless rate rose to a new 26-year high of 9.8 percent in September and is expected to hit double digits. Since the official start of recession in December 2007, the number of unemployed has climbed by 7.6 million to 15.1 million.

The Labor Department reported Thursday that new weekly claims for unemployment benefits fell slightly.

"The recession is over, but don't be fooled by today's number -- the underlying rate of recovery is weaker," said Nariman Behravesh, chief economist at IHS Global Insight.

Behravesh said that underlying growth was closer to 2.0 percent and predicted momentum would only pick up in the second half of next year as consumers and businesses grow more confident.

After shrinking a sharp 6.4 percent in the first quarter, the world's largest economy has been on life support from the federal 787-billion-dollar emergency stimulus and other support measures.

The third-quarter rebound was led by consumer spending, which accounts for two-thirds of US economic activity and added 2.36 percentage points to GDP growth.

Consumer spending surged 3.4 percent after a 0.9 percent drop in the second quarter, a rise the department said "largely reflected" auto purchases under the government's popular "cash-for-clunkers" program in July and August.

Dean Baker, co-director of the Center for Economic and Policy Research, noted that, excluding the auto sector, consumption grew at a 1.0 percent annual rate.

"With disposable income falling due to continued job losses and declining hourly wages, and the reversal of the surge in car sales, consumption growth will almost certainly be negative in the fourth quarter," Baker said.

Other leading drivers of third-quarter growth were business inventories and home building.

The core inflation rate -- which strips out volatile food and energy prices -- fell to 1.4 percent from 2.0 percent, indicating inflationary pressures remain tame amid economic weakness.

The Federal Reserve, which keeps a close eye on the reading, is widely expected to leave its key interest rate unchanged at nearly zero when policymakers meet on November 3-4.

"If we do indeed get a second consecutive quarter of good growth, there will be a lot of pressure on the Fed to start raising rates," said Joel Naroff of Naroff Economic Advisors.

"Indeed, I wouldnt be surprised if the markets start pricing that into bond yields during the rest of the year."

[kueytoc]

OPEC head: $75 to $80 a barrel a 'good price'

AFP - Tuesday, November 17

ABU DHABI (AFP) - – Seventy-five to 80 dollars a barrel is a satisfactory price for oil, the president of OPEC said Monday, adding that the cartel may leave production unchanged at its meeting next month.

"Seventy-five to 80 dollars a barrel is a good price... for the recovery of the world economy," Jose Maria Botelho de Vasconcelos, who is also Angola's oil minister, told reporters on the sidelines of a conference on Gulf energy security in Abu Dhabi.

Oil prices were trading within that range on international markets on Monday.

De Vasconcelos said the cartel may leave production unchanged at its next scheduled discussion in Luanda on December 22, "but there is a provision for an increase" in production.

"This situation will be discussed" at the December meeting, he added.

He also told reporters on the sidelines of the conference that "the market is oversupplied."

De Vasconcelos said the rate of compliance by OPEC members with their production quotas "is around 65 percent." This rate is satisfactory, he added.

OPEC expects oil demand to rise by 20 million barrels a day (bpd) to 106 million by 2030, he said, but warned of uncertainty in the market.

"There is too much uncertainty in the market over such matters as future world economic growth levels, consuming country policies and technology," the OPEC chief said in a speech to the conference.

"This makes it almost impossible to devise effective investment strategies for future production capacity, to meet forecast rising levels of demand."

"The latest projections in OPEC's reference case see world oil demand rising by 20 million bpd to 106 million between 2008 and 2030. But these are only projections -- the reality may turn out to be very different in an uncertain world."

"So every effort must be made to avoid adding to this uncertainty in an unnecessary way," he added.

He said that one way to minimise the uncertainty is through consumer governments devising measures to ensure transparency and consistency in their policy making, which OPEC had already urged governments to do.

"This is one key area where efforts can be made to reduce uncertainty," he said.

In Asian trade on Monday, New York's main contract, light sweet crude for December delivery put on 71 cents to 77.06 dollars a barrel.

Brent North Sea crude for January delivery gained 55 cents to 76.86 dollars.

[kueytoc]

Prepare for another 'crisis' soon !!!

Dubai blackout over debt plans to hit Gulf markets

AFP - Sunday, November 29

NICOSIA (AFP) - – A lack of details on how Dubai plans to pay off its 80-billion-dollar debt mountain will hit Gulf stock markets sharply this week when they trade for the first time since news broke of the emirate's problems, analysts predict.

"It's a very serious and severe problem that is likely to shake up the Gulf financial system as a whole. I expect Gulf bourses to dive like the September crash last year" following Lehman Brothers' bankruptcy, warned Saudi economist Abdulwahab Abu-Dahesh.

Abu Dhabi, Dubai's oil-rich neighbour in the United Arab Emirates, is widely expected to use some of its wealth to rescue Dubai, but speculation is rife about what conditions it might impose.

"Abu Dhabi could quite easily resolve the problems for Dubai if it wanted to but the question is how and at what price," said economist Jan Randolph, director of sovereign risk at the IHS Global Insight consultancy.

"Part of this price now seems to involve the creditors that are effectively being asked to share in the restructuring efforts."

Dubai World, a state-controlled conglomerate whose businesses include global ports operator DP World and construction giant Nakheel, announced on Wednesday that it was seeking to suspend debt payments for six months while the group is restructured.

The contract most directly affected is the redemption due in December of a 3.5-billion-dollar (2.9 billion euro) Islamic bond issued by Nakheel, the company behind Dubai's iconic Palm Jumeirah tree-shaped artificial island.

The emirate's borrowings are the equivalent of a full year's gross domestic product, and Dubai World's overall debt of 59 billion dollars comprises three-quarters of the emirates' total debt.

Dubai's government chose to unveil the shock debt moratorium request immediately before a four-day break for the Muslim holiday of Eid al-Adha, giving regional stock exchanges no chance to react.

European markets partly recovered on Friday after sharp falls a day earlier, but analysts expect the Dubai and Abu Dhabi markets to weaken on Monday when they reopen.

Elsewhere in the Gulf, investors must wait even longer -- the Kuwait and Qatar bourses resume trade on Tuesday, Bahrain on Wednesday and Saudi Arabia on December 5.

Oliver Bell of Swiss bank Pictet thinks the Dubai World crisis is a "disaster" for Middle East and North Africa equity markets, and is braced for a big sell-off, he told the UK's Citywire financial news website.

When news of Dubai World's problems first broke, he "hoped it was a miscommunication," but a later statement from Sheikh Ahmed bin Saeed al-Maktoum, head of Dubai's Supreme Fiscal Committee, confirmed Bell's worst fears.

"This was more alarming as it suggests it has been carefully planned and they knew markets would be very concerned. Now we are in a vacuum of no news again," he said.

"If all news stays as it is the UAE market will sell off very sharply when it reopens after Eid," Citywire quoted Bell as saying.

On Thursday, Sheikh Ahmed said "further information will be made available early next week," but Randolph said Dubai World's announcement has raised many questions that will be hard for Dubai to answer.

"This was a crisis waiting to happen; all the tell-tale signs were there. Many creditors assumed that the Dubai government/sovereign would support their investment and invested companies -- this is now in question," the analyst said.

Randolph pointed out that Abu Dhabi has the "all-important" oil wells and still generates trade surpluses from its exports.

"Abu Dhabi is virtually debt-free and has huge assets -- including the largest Sovereign Wealth Fund in the World with 400 to 500 billion dollars in assets and at least four other smaller SWFs and finally foreign exchange reserves at about 33 billion dollars," he said.

But the economist believes Dubai needs to face up to its difficulties rather than rely completely on help from its richer neighbour.

"It is necessary that Dubai goes through this restructuring, to sort out the good assets from the bad, that which has an economically viable future and that which does not," Randolph said.

The Financial Times said on Saturday: "Dubai must sort this mess out. It will not now be able to restore confidence in its solvency without support from Abu Dhabi."

"For its part, Abu Dhabi should give whatever help is needed to bring this episode of incompetence to a close. Abu Dhabi allowed it to be believed that it was backstopping Dubai, so it should make good its promises.

"This will require a public guarantee of Dubais debts -- and soon. The reputation of the whole UAE depends upon it."

The Dubai market's DFM Index closed on Wednesday at 2,070.89, up more than 40 percent from the start of the year but still down by two-thirds from its peak of 6,253.10 two years ago.

Rules stipulate that it cannot fall by more than 10 pct in one day.

[kueytoc]

Wall Street braces for Dubai debt fallout, jobs data

AFP - Saturday, November 28

NEW YORK (AFP) - – Wall Street braced for repercussions of the Dubai debt crisis to unfold and for looming key economic data, after winding down a turbulent holiday-shortened week.

The Dow Jones Industrial Average edged down 0.9 percent on the week to 10,309.92, snapping a three-week streak of gains for blue chips.

The technology-heavy Nasdaq composite tumbled 3.5 percent to 2,138.44 and the broad-market Standard & Poor's 500 index was flat, slipping 0.01 percent to 1,091.49.

Closed Thursday for the Thanksgiving Day holiday, Wall Street reopened for an abbreviated session in the midst of a global market rout triggered by news that Dubai is seeking a debt moratorium.

The Middle Eastern city state announced late Wednesday that its state flagship conglomerate, Dubai World, wanted a six-month standstill on 59 billion dollars in debt, sending markets into a panic over fears of a debt default.

The news wiped out the Wall Street gains made earlier in the week.

"It's not a default yet, it's a small financial crisis, but what we've learned from history is that small financial crises can become bigger financial crises," said Hugh Johnson of Johnson Illington Advisors.

"I wouldn't be surprised to see this situation take more time to be resolved than you might expect -- it does create so many questions," he said, adding that the crisis comes "at a time when some would argue that the market is overvalued."

David Kotok at Cumberland Advisors warned that the Dubai World debt crisis carries "contagion risk."

"Insolvency cannot be permanently papered over by excess liquidity, not in the Middle East nor, for that matter, in America," he said.

The Dow, which had closed Wednesday at its highest level since October 2008, shed only 1.48 percent Friday, although the movement could have been exaggerated amid thin volume as many traders took the day off.

"The real test will be on Monday," said Peter Cardillo of Avalon Partners.

The week began with a roar as investors welcomed a series of economic reports, which "continue to point in the right direction, although most are weakly pointing in the right direction," said Gregori Volokhine of Meeschaert New York.

"As long as the recovery outlook holds, the market will continue to rise or be supported," he said. "One cannot think about a correction when one has the notion that things are going to get better."

Among the positive data, the market in particular appreciated a fall in the weekly number of initial unemployment insurance claims, to below 500,000 for the first time since September 2008.

Analysts said the Dubai crisis would likely be the main topic in the marketplace, as earnings season has ended.

Investors will have a full economic calendar to digest, including the ISM manufacturing index and construction spending on Tuesday, and the Federal Reserve's Beige Book on the economic outlook on Wednesday.

The key monthly unemployment rate and payrolls data caps the week Friday.

Most analysts expect the November jobs data to show the unemployment rate held steady at 10.2 percent, a 26-year high hit in October, with the economy shedding 114,000 jobs, down from 190,000, amid recovery from recession.

The labor report comes as the year-end holiday shopping season shifts into high gear and traders are expected to pore over the numbers for clues on the direction of consumer spending, which drives two-thirds of US economic activity.

"We do not expect an imminent recovery in employment, but the rebound in business profits suggests that labor market deterioration is in its final stages, barring a relapse in financial conditions," said Joseph Brusuelas of Moody's Economy.com.

Bonds gained for the week. The yield on the 10-year Treasury bond fell to 3.211 percent from 3.356 percent a week earlier and that on the 30-year bond dipped to 4.209 percent from 4.295 percent. Bond yields and prices move in opposite directions.

[kueytoc]

Investors dump stocks over Dubai scare

AFP - Saturday, November 28

LONDON (AFP) - – Investors dumped shares in alarm on Friday, sending markets plunging as fears of debt defaults bred fresh concern for the world economy after Dubai's shock request to suspend major loan repayments.

Investors "headed for the exit door" after the Dubai government's investment vehicle Dubai World sought to suspend debt payments for six months, IG Markets analyst Ben Potter said.

Asian, European and US stock markets fell sharply as investors were spooked by the news, analysts said. The price of oil slumped to a seven-week low point close to 72 dollars and the dollar struck a 14-year low against the yen.

"The news of Dubai World raises some serious questions about where the global economy truly is at the present time and, most importantly, the effect this will have on market sentiment," said Chris De Pury of specialist property law firm Berwin Leighton Paisner.

It has "reminded people that the underlying fundamentals have not changed, but it should not come as a surprise and it won't be the last such large scale default," he added, in a note.

"The question now is the extent of the drag on the wider global economy."

Hong Kong slumped almost five percent by the close and Wall Street indexes fell more than two percent at the open.

Tokyo dived 3.22 percent, hit also by the yen striking a fresh 14-year high point against the dollar, which is bad for Japanese exporters.

Europe's major stock pulled up in late London trading after earlier extending the losses of Thursday, when they had plunged by more than three percent in shock at the Dubai request.

In late afternoon European trading, London's benchmark FTSE 100 index of leading shares was up 1.18 percent at 5,255.45 points, one day after falling by its sharpest amount since March.

Frankfurt's DAX 30 added 1.24 percent to 5,682.77 points, and in Paris the CAC 40 rose 1.46 percent to 3,733.01, pulling back from a drop of almost two percent shortly after the open.

Analysts said the news from Dubai was a major blow to the emirate's image but would have little lasting impact on other Gulf states, and others played down the impact on major banks with loans in the region.

But jittery investors Friday dumped stock in the two foreign banks with the heaviest exposure to Dubai -- HSBC and Standard Chartered -- as ripples from a feared debt default spread worldwide.

In Hong Kong trading HSBC dropped 7.6 percent to 87.00 Hong Kong dollars (11 US dollars) and Standard Chartered fell 8.6 percent to 185.90 Hong Kong dollars.

The Financial Times described Dubai's shock announcement as a "serious misjudgment or, more likely, a breathtaking cXock-up."

The financial daily said the Dubai government's decision "leaves a trail of unanswered questions that has done real damage to its reputation." Related article: Foreign banks in the firing line

"Of all the glitzy emirates on the western shore of the Gulf, Dubai is easily the brashest. With the grenade it has just lobbed into the capital markets by calling for a six-month creditor standstill for Dubai World, it is effortlessly living down to that reputation," the FT said.

Analysts at Exane BNP Paribas said that "so far the situation in Dubai seems contained, but a rise in government bond yields due to a higher risk premium because of soaring budget deficits is one of the main risks" for 2010.

[kueytoc]

Dubai as finance hub faces first test

AFP - Sunday, November 29

NICOSIA (AFP) - – Dubai's ambitions to become an international financial centre are in doubt after the shock announcement that its main state-owned firm wants to suspend debt payments, analysts said on Sunday.

"What happens next and, more pertinently, how critical decisions are disclosed will cement its continuing credibility and its place as a financial centre," said Cubillas Ding, senior analyst at Celent research and consultancy group.

"Dubai's untested financial legal system is now facing its first real test in relation to how it deals with the international community. No one wants to play in a playground where the rules are unclear," he said.

Dubai International Financial Centre, a 110-acre (44.5 hectare) free trade zone which opened in 2004, prides itself on its website as "the world's fastest growing international financial centre."

And "it aims to develop the same stature as New York, London and Hong Kong."

Among businesses based there are the local stock exchange Dubai Financial Market and international sister market Nasdaq Dubai. Related article: Dubai dream turns to nightmare

Borse Dubai, majority shareholder in both operations, also holds 22 percent in the London Stock Exchange and 19.9 percent in Nasdaq OMX, owner of New York's mighty Nasdaq exchange and several stock markets in European countries.

"As the world economy goes through fundamental change and realignment, DIFC is poised to emerge as a major global player in the coming years," David Eldon, chairman of the DIFC authority, said at celebrations this month to mark the fifth anniversary of the centre's launch.

The DIFC said at that time, without giving details, that the business cluster in its financial district had registered an annual growth rate of 127 percent.

But the performance of the DFM Index, the main indicator for the emirate's stock market, tells a different story.

It peaked above 6,000 points two years ago then began to fall, tumbling sharply during the global credit crunch late last year and dropping below 1,500 points.

It closed its latest trading day on Wednesday at 2,070.89, up more than 40 percent from the start of the year but still down by two-thirds from its all-time high.

Dubai authorities chose the evening before the start of a four-day holiday for the Muslim festival of Eid al-Adha to make the shock announcement that its massive Dubai World holding company wants to suspend debt payments for six months pending a restructuring of the conglomerate.

The loss of confidence in Dubai by international investors was compounded by the difficulty of obtaining information about what Dubai plans to do to resolve the debt crisis.

"The predictability of decision-making processes and the lead up to decisions is a major concern," Celent's Ding said. "Transparency is important. With the manner the sequence of events has been managed, this has not been forthcoming."

The contract most directly affected by the moratorium is the redemption due in December of a 3.5-billion-dollar (2.9-billion-euro) Islamic bond issued by Dubai World construction business Nakheel, the company behind Dubai's iconic Palm Jumeirah tree-shaped artificial island.

Dubai has an estimated debt mountain of 80 billion dollars, as large as the emirate's entire gross domestic product. Dubai World's group debt of 59 billion dollars comprises three-quarters of the total.

Sheikh Ahmed bin Saeed al-Maktoum, head of Dubai's Supreme Fiscal Committee, issued a statement on Thursday seeking to reassure investors.

"The government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react. We understand the concerns of the market and the creditors in particular," he said.

"Further information will be made available early next week."

But the lack of detail merely served to alarm investors further.

Kit Juckes, at London-based currency trading group ECU, said: "To my mind, (he) simply fails to answer any of the questions the market is asking.

"Everyone will speculate about whether the request to re-schedule debt will succeed or lead to default, what other Dubai-based entities could suffer a similar fate, whether it could prove more widely contagious and which banks globally are most exposed."

Oliver Bell of Swiss bank Pictet thinks the Dubai World crisis is a "disaster" for Middle East and North Africa equity markets that will trigger a big sell-off, he told the UK's Citywire financial news website.

When news of Dubai World's problems first broke, he "hoped it was a miscommunication," but Sheikh Ahmed's statement confirmed Bell's worst fears.

"This was more alarming as it suggests it has been carefully planned and they knew markets would be very concerned. Now we are in a vacuum of no news again," he said.

"If all news stays as it is, the UAE market will sell off very sharply when it reopens (on Monday) after the Eid" holidays, Citywire quoted him as saying.

[shengyuan]

Hey bro you like The Beatles ah? Noticed the "Long and Winding Road will never disappear" reference in the title

[kueytoc]

Hee Hee...U hit the JACKPOT dude !

Hey bro you like The Beatles ah? Noticed the "Long and Winding Road will never disappear" reference in the title

[kueytoc]

Dubai looks to oil-rich neighbor for possible aid

By BRIAN MURPHY,Associated Press Writer - Sunday, November 29

DUBAI, United Arab Emirates – As world markets absorbed the shock of Dubai's debt crisis, the ruler of the once-booming city-state left town for an important meeting in a desert palace. His hosts: the leaders of neighboring Abu Dhabi whose balance sheets are flush with oil revenue.

It's not known what promises were made inside the halls in Al Ain during the parade of visitors for an important Islamic feast day on Friday. But their new relationship is clear. Abu Dhabi has the cash and cache to be Dubai's white knight _ in a Gulf version of a too-big-to-fail bailout or to help calm markets with promises to intervene if Dubai's fiscal mess deepens.

The direction Abu Dhabi takes will likely set the tone for the coming week as analysts try to sort out what banks and institutions have the most at stake in the money crunch _ which has suddenly shifted Dubai's image from a desert dream factory of indoor ski slopes and a "seven-star" hotel to a reckless spender sideswiped by the recession and unable to pay its bills.

Just this month, Dubai's ruler, Sheik Mohammed bin Rashid Al-Maktoum, assured international investors that all was well with Dubai's finances and told media critics to "shut up."

"Depleting market confidence in Dubai carries serious risks for Abu Dhabi," said Hani Sabra of Eurasia Group, a U.S.-based research firm that assesses political risk for foreign investors in Dubai and the Gulf.

"Differences between the two city-states remain on how to approach the economy and the financial crisis," Sabra added. "But now Abu Dhabi is obviously the more dominant emirate."

Dubai's empty pockets _ mostly drained by collapsing real estate prices and over-ambitious development plans _ touched off panic selling across world markets on fears that the reckoning from the global recession is not over.

In a surprise announcement Wednesday, Dubai said it seeks a six-month delay in paying creditors on nearly $60 billion in debt held by its main development arm, Dubai World, whose holdings range from port operations around the world, Dubai's iconic palm-shaped island and the luxury retailer Barneys New York. The next tranche was a $3.52 billion bond due Dec. 14 by Dubai World's troubled real estate division, Nakheel.

On Friday, the Dow Jones industrial average suffered its biggest drop in nearly a month _ closing down 154.48, or 1.5 percent, to 10,309.92, in a shorted trading day because of the Thanksgiving break. Asian exchanges fell sharply for a second day, but European markets bounced back on confidence the Dubai damage would not spread to other Gulf economies.

Dubai and other Middle East financial markets reopen Monday after an Islamic holiday.

But much attention will remain on Abu Dhabi's response. It stepped in earlier this year with a $10 billion bailout for Dubai when the first blast of the recession hit. Dubai ruler Sheik Mohammed has stressed the close bonds between the two most powerful emirates in the UAE, which celebrates its national day on Wednesday and offers a perfect forum to display unity.

An editorial in The National newspaper _ which is bankrolled by Abu Dhabi and closely reflects the opinions of its rulers _ said Dubai's infrastructure is sound and pointed out General Motors' revival after receiving a U.S.-backed bailout in comments that suggested an unchecked Dubai meltdown could harm the entire country.

"Confidence is a fragile commodity," said the Friday editorial.

Yet Abu Dhabi's largesse may be reaching some limits. On the same day that Dubai announced its debt payment "standstill," two Abu Dhabi-controlled banks bought $5 billion in Dubai bonds for a stopgap cash infusion, but went no further.

"I guess Abu Dhabi is saying there will be no blank check for Dubai," said Jane Kinninmont, a London-based specialist on Gulf economies at the Economist Intelligence Unit.

What Abu Dhabi could get for their money, however, is greater long-term influence over Dubai's development policies. That would essentially mean giving the wealthy and more conservative rulers in the UAE's capital the task of trying to rein in Dubai after years of living beyond its means.

Dubai crash landed about a year ago as the global economic downturn ended a sizzling property boom, which saw prices skyrocket and investors lining up for new projects. The state-backed Dubai World led the charge with a catalog brimming with ever-bigger ideas and the bold motto: "The sun never sets on Dubai World."

Some were completed before the bubble burst, such as the Palm Jumeirah island that included a Hollywood A-list opening of the Atlantis resort in November 2008. But dozens of major projects, including entire mini-cities in the desert, have been shelved.

Abu Dhabi has moved ahead with more caution _ comfortable in the fact it has vast oil wealth that Dubai does not enjoy.

Its rulers have concentrated on what they see as attempts to gain global stature as hub for culture and innovation: funding an alternative energy research center and building satellite museums for the Louvre and Guggenheim. The Abu Dhabi sovereign wealth fund is constantly on the hunt for new investments, including U.S. companies such as Citigroup Inc.

Abu Dhabi's strategists are expected to dig deeper into Dubai World's books before deciding their next move, analysts say.

Dubai officials said plans to restructure Dubai World will not include its profitable ports management division, DP World, which has a presence in nearly 50 facilities around the world. The main retooling will be to Dubai World's battered real estate units, led by Nakheel.

A report from Goldman Sachs said the lenders HSBC Holdings PLC and Standard Chartered PLC could have the most exposure to Dubai debt, but the potential credit losses appeared relatively small. The deeper risks could directly hit Emirates' banks and investment firms.

Christopher Davidson, an expert in Emirate affairs at Britain's Durham University, wondered if Abu Dhabi wanted to become too deeply involved in lifting Dubai from its fiscal wreckage.

"There is no point throwing good money into Dubai's black holes," Davidson said. "These are mistakes of Sheik Mohammed and he needs to deal with them."

Associated Press Writer Barbara Surk contributed to this report.

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PHEW !!!

Asian markets rebound as Dubai debt fears recede

AFP - Monday, November 30

HONG KONG (AFP) - – Asian shares rebounded Monday after a heavy sell-off in global equities last week, as the United Arab Emirates central bank moved to bolster its banking sector and calm fears over Dubai's debt problems.

Hong Kong's Hang Seng index surged by more than three percent in morning trade, recovering some ground after Friday's tumble of nearly five percent, to stand at 21,833.75.

In Seoul the benchmark KOSPI was up 2.47 percent intraday after falling 4.69 percent Friday while Sydney surged 2.77 percent as of 0315 GMT.

After concerns "over the risks of a Dubai debt default becoming a global systemic event, there appeared to be a little more comfort", Philip Borkin, economist at ANZ bank in Wellington, told Dow Jones Newswires.

In Tokyo, shares rose 2.39 percent with confidence also buoyed by a rise in factory output and government plans for an extra stimulus of 31 billion dollars this fiscal year to tackle the surging yen and weak equities.

Chinese shares rose 0.65 percent Monday after the government said last week it would continue its loose monetary policy next year, dealers said.

However, the region's markets had yet to recoup all of Friday's losses, and the recent volatility was "an important reminder that all is not yet well in the global economic and financial system", said Borkin.

Sentiment was boosted by the UAE central bank decision to pump more liquidity into its banking sector, amid fears that Gulf stock markets may plunge when they reopen later Monday after a four-day Islamic festival. Related article: UAE markets set to fall

The intervention came after last week's shock announcement that state-controlled conglomerate Dubai World wants to halt payments to creditors until at least May next year.

The news had sent jitters throughout world stock markets, stoking fears of a possible default by Dubai and its state-owned businesses, which together owe 80 billion dollars.

The International Monetary Fund welcomed the UAE central bank's move.

"The United Arab Emirates is a strong resource-based economy and we welcome today's announcement by the central bank of the UAE making available to banks a special additional liquidity facility," an IMF statement said.

The central bank gave no figures for the amount of liquidity being made available, but its step helped boost confidence in Asia.

In Hong Kong, shares in the two banks with the largest exposure to Dubai perked up.

HSBC was 3.9 percent higher at 90.35 Hong Kong dollars, after plunging 7.6 percent Friday. Standard Chartered was up 5.3 percent at 195.40, after sliding 8.6 percent in the previous session.

HSBC's Middle East arm was by far the single biggest foreign lender in the UAE with outstanding loans of 17 billion US dollars at the end of last year, according to the Emirates Banks Association.

Standard Chartered was next with 7.8 billion dollars owed at the end of 2008.

The dollar lingered in a 14-year trough against the yen in Asian trade Monday ahead of a slew of US economic data that could raise fresh concerns surrounding growth in the world's top economy.

However with the greenback flat at 86.74 yen in Tokyo morning trade, up from a nadir of 84.82 last week, there was some comfort for exporters.

Commodities also recovered ground in the broader market recovery.

Oil was higher in Singapore with New York's main contract, light sweet crude for January delivery, gaining 49 cents to 76.52 dollars a barrel. Hong Kong gold opened higher at 1,175.00 US dollars an ounce.

Markets were also waiting for interest rate decisions in Europe and Australia later this week.

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Dubai says not responsible for Dubai World debt

Reuters - Tuesday, December 1

By Rania Oteify and Tamara Walid

DUBAI - The Dubai government said on Monday it was not responsible for the debts of Dubai World, dealing a blow to creditors' assumptions that the Arab emirate would guarantee the conglomerate's liabilities.

"Creditors need to take part of the responsibility for their decision to lend to the companies," said Abdulrahman al-Saleh, director general of Dubai's Department of Finance. "They think Dubai World is part of the government, which is not correct."

In its first statement since the crisis began, Dubai World, the government-controlled holding company at the heart of the storm, said a restructuring would involve $26 billion in debt and mostly affect its property firms, Nakheel and Limitless.

Other firms, such as DP World, Jebel Ali Free Zone and Istithmar World would not be included in the restructuring because they were financially stable, it said in a statement released by e-mail late on Monday night.

The previously unreleased figure of $26 billion may help markets to grapple with the scope of the crisis following estimates that the restructuring could affect $59 billion or more in liabilities.

United Arab Emirates stocks plunged on Monday as investors waited for clarity on Dubai's request for a delay until May 2010 on repaying billions of dollars in debt issued by Dubai World and its Nakheel unit, developer of three distinctive palm-shaped islands in the emirate.

European shares fell as investors worried about sovereign financial crises, with the FTSEurofirst 300 off 1.4 percent. But the U.S. dollar fell against the euro after the United Arab Emirates promised liquidity, easing worries about default.

Saleh's remarks in an interview to Dubai TV, a station owned by the ruler of Dubai, came after UAE markets closed.

"They have confirmed there is going to be a restructuring and are doing what they can to differentiate between the government and companies," said Mohieddine Kronfol, managing director at Algebra Capital.

"It doesn't take away from the fact that you have a major potential event that is unraveling. People's expectations aren't going to be met with this announcement."

The UAE's central bank pledged financial support, helping to steady global markets.

The central bank promised additional liquidity to local banks and an official in Dubai's oil-exporting neighbor, Abu Dhabi, said on Sunday it would offer selective support to Dubai firms.

Without referring directly to the Dubai World debt problems, the UAE's central bank governor said on Monday there was no cause for concern about local banks, which he said had proven themselves able to weather the global crisis.

"I have advice for foreign investors. They should study available investment opportunities and conduct realistic feasibility studies to make sure they are real opportunities with no risk," the state news agency WAM quoted Sultan Nasser al-Suweidi as saying.

Michael Ganske, head of emerging market research at Commerzbank in London, said a default, which could ultimately benefit the region, "is becoming more likely.

"At the end of the day it should be positive for Dubai, Dubai's sovereign risk should go down," he said.

Dubai World -- which had $59 billion of liabilities as of August -- shocked investors last week with news of the standstill request while it restructures, along with its property developer Nakheel. The agreement would affect about $5.7 billion of debt due to mature before the end of May.

Nakheel earlier on Monday asked for three of its Islamic bonds, worth a total of $5.25 billion, to be suspended on Nasdaq Dubai until it was in a position to "fully inform the market.

STANDALONE ENTITY

Saleh made clear on Monday that while the government owned Dubai World, the conglomerate had long operated as a stand-alone entity and was never guaranteed by the emirate's government.

"It deals with all parties on this basis and it borrows based on ... its projects and not the guarantee of the government," Saleh said.

When contacted by Reuters and asked whether Dubai could still repay its Nakheel bond, Saleh declined to comment.

The head of a Dubai budget committee said the government's own debt was $10 billion. "Dubai government's debts have been declared. They are only 10 billions. There should be no confusion between and any company," Dhahi Khalfan Tamim, also Dubai's police chief, told Al Arabiya television.

Dubai World Chairman Sultan Ahmed Bin Sulayem also declined to comment on Monday. Other Dubai World officials could not immediately be reached.

John Sfakianakis, chief economist at Banque Saudi Fransi-Credit Agricole Group, said the distinction between the Dubai government and the flagship company appeared minimal.

"What role does the sovereign play? This continues to create uncertainty," he said from Riyadh. "Their motivation is to make a distinction between the two, but the difference ... is nebulous."

Saleh said he believed the market reaction to last Wednesday's announcement by Dubai World, which initially shook global financial confidence, was exaggerated.

"The restructuring is a wise decision that is in the interest of all parties in the long-term but might bother creditors in the short term," he declared.

[kueytoc]

Bank of America to repay $45 billion to US

AFP - Thursday, December 3

WASHINGTON (AFP) - – Bank of America said Wednesday it had reached an agreement to repay the US government the entire 45 billion dollar investment it provided the bank under a program to stabilize the financial system.

The largest US bank by assets will be making the largest single payback under the Troubled Asset Relief Program, a program approved by Congress last year at the height of the financial crisis.

"We appreciate the critical role that the US government played last fall in helping to stabilize financial markets, and we are pleased to be able to fully repay the investment, with interest," said Bank of America chief executive Kenneth Lewis.

"As America's largest bank, we have a responsibility to make good on the taxpayers' investment, and our record shows that we have been able to fulfill that commitment while continuing to lend.

"We believe that this is good news, not only for the US taxpayer and our company, but for the country as it is a milestone indicating that public policy has succeeded in helping our industry and the economy begin to recover."

Many banks repaid the government earlier this year, escaping tougher scrutiny from regulators that could include limits on executive pay and bonuses at bailed-out firms.

"We are pleased that Bank of America is moving ahead with plans to pay the taxpayers back in full," a Treasury official said in an email to AFP.

"As banks replace Treasury investments with private capital, confidence in the financial system increases, taxpayers are made whole, and government's unprecedented involvement in the private sector lessens."

The bank based in North Carolina said it would repurchase the preferred shares issued to the US Treasury as part of TARP, but would not immediately buy back the warrants, or options to buy additional shares.

"This is good news that the bank can get out of the TARP and can stop having to answer to public and government criticism," said Jon Ogg at 24/7 Wall Street.

"But this is going to be dilutive (to shareholders) at a minimum."

Shares, which had shed 1.51 percent in New York, soared three percent to 16.12 dollars in post-session electronic trading.

Bank of America said it would use 26.2 billion dollars in "excess liquidity" and 18.8 billion dollars from the sale of "common equivalent securities," subject to shareholder approval of the sale.

This will increase the bank's capital ratios seen as an important indicator of financial health.

In addition, Bank of America agreed to increase equity by four billion dollars through asset sales to be approved by banking regulators. If not approved, the company agreed it would raise a commensurate amount of common equity.

Bank of America said it would raise up to 1.7 billion dollars through the issuance of restricted stock in lieu of a portion of incentive cash compensation to executives as part of their normal year-end incentive payments.

"Year-end incentive payments are dependent on the performance of the company, business units and individuals and have not yet been determined," the company said.

Bank of America had received 25 billion dollars under the initial program to shore up capital in the banking system under a plan engineered by the administration of president George W. Bush.

It also received an additional 20 billion dollars to help absorb the troubled brokerage giant Merrill Lynch -- a deal that has raised hackles among lawmakers and the public because of massive losses and hefty bonuses that were not initially disclosed at the Wall Street firm.

Amid the uproar, Lewis announced he would give up his title as chairman and later announced he would step down as CEO on December 31.

In September, Bank of America agreed to pay 425 million dollars to the US government to exit a guarantee program put in place to cover potential losses in its takeover of Merrill Lynch.

Many major banks began repaying the government after the "stress tests" that indicated how much capital they would have to raise in private markets.

Citigroup, which also received 45 billion dollars, still has its TARP funds outstanding but has converted a portion of that to common shares, giving the government a major ownership stake.

[kueytoc]

ADB urges caution in Asia against withdrawing stimulus

Reuters - Wednesday, December 16

By Karen Lema

* Raises growth forecasts for region, China view unchanged

* Sees quick rebound for Asia, but global recovery fragile

* Asia's risk is short-lived recovery in developed economies

* Capital flows a risk, urges against capital restrictions

MANILA, Dec 15 - The Asian Development Bank raised its growth forecasts for developing economies in Asia on Tuesday, but warned against any hasty withdrawal of stimulus packages, saying they were still needed to ensure a solid recovery.

It also cautioned governments that restricting the capital flooding Asia's emerging economies carried risks, suggesting that allowing more flexible exchange rates was one way to control the investment flows into the region.

The ADB raised its regional forecast to 4.5 percent on average in 2009 and 6.6 percent in 2010 from expectations in September of 3.9 percent and 6.4 percent, respectively.

"Global recovery is still fragile so Asian countries need to maintain current stimulus packages," ADB Chief economist Jong-Wha Lee said. "The Asian countries' monetary and fiscal policies should remain accommodative but they also need to design exit strategies from these stimulus packages."

Asian policymakers have put in place massive fiscal incentives and slashed interest rates to record lows to help their economies cope with the global economic crisis.

Many have paused to assess the impact of easier policy, while others have either begun or signalled they were ready to hike interest rates to keep a lid on infationary pressures as their economies gradually pick up.

Withdrawing stimulus too quickly is a risk, the ADB said.

"If done too soon, recovery may be at risk; if too late, fiscal deficits and monetary expansion could become unsustainable and inflationary," ADB said in a separate statement.

It said, however, that inflation remained muted for the moment and was likely to remain so, even while the recovery was taking hold. This had allowed authorities to maintain fiscal and monetary stimulus packages.

"In the medium-term, inflation could pick up in line with the general economic recovery and higher commodity prices," it said.

The report showed that the ADB maintained its growth forecasts for China at 8.2 percent in 2009 and 8.9 percent in 2010. It raised the 2009 growth forecast for India to 7.0 percent from 6.0 percent, but kept 2010 at 7.0 percent.

"Recent data reinforces ADB's impression that developing Asia can expect a V-shaped recovery from the global economic downturn," the ADB said. "For many countries in the region, growth in the third quarter of 2009 has been higher than forecast."

CAPITAL INFLOWS

Risks to Asia's expansion included a short-lived recovery in developed economies and destabilising capital flows, it said.

"Faster recovery and higher growth in the region should attract more capital inflows, and limited exchange rate flexibility in the region could also encourage increased capital inflows, speculating on anticipated appreciation," it said.

"Yet, capital flows could destabilise the real economy. Changes in risk sentiment might lead to sudden capital flow reversals."

Both Brazil and Taiwan have imposed capital controls and other countries have suggested they are studying measures to restrict capital or redirect it to other economic sectors.

Lee cautioned against imposing capital controls, saying there were other ways by which policymakers could stem inflows.

"If you increase the flexibility of the exchange rate, if you improve the strength of financial market regulation, that will help manage more effectively these capital inflows.

"You also need to strengthen other regulatory measures to address possible bubbles in the domestic market. You don't need to necessarily prevent the capital inflows. You can strengthen your domestic capacity to minimise negative impact from hot money capital inflows."

Higher capital inflows have resulted in currency appreciation mainly in emerging markets in Asia and Latin America.

"If capital inflows become too messy and then the appreciation in asset price become excessive, some countries considering restricting capital inflows need to be very careful and they need to communicate with financial markets, otherwise it might create a negative impact on private sector," Lee said.

[kueytoc]

Last US banking giants to repay state bailouts

AFP - Tuesday, December 15

NEW YORK (AFP) – Citigroup and Wells Fargo struck deals to repay a total of 45 billion dollars in state aid, winding down a year-long US government effort to save the banking sector from wholesale collapse.

The firms were the last banking giants to repay loans from state bailouts that totaled over 300 billion dollars across the sector under the Troubled Asset Relief Program (TARP).

Facing a global economic meltdown not seen since the Great Depression of the 1930s, the US Treasury at the end of 2008 stepped in with the series of bailouts to stabilize the financial system and keep credit flowing.

Citigroup unveiled their plans to repay 20 billion dollars in state aid and outlined plans to emerge from their massive bailout, while Wells Fargo said it would return the 25-billion-dollar TARP loan.

"We are pleased to be able to repay the US government's trust preferred securities and to terminate the loss-sharing agreement," said Citigroup chief executive Vikram Pandit.

"We owe the American taxpayers a debt of gratitude and recognize our obligation to support the economic recovery through lending and assistance to homeowners and other borrowers in need."

The government injected a total of 45 billion dollars in the firm, once the world's biggest banking group.

Wells Fargo CEO John Stumpf acknowledged that TARP stabilized the US financial system "when confidence in financial markets around the world was being tested unlike any other period in our history."

Both companies said their shareholders would be taking losses in the deals, with Citi saying the repayment would result in a loss of some eight billion dollars, but would save the firm 1.7 billion dollars a year in interest.

Wells Fargo's repurchase of TARP preferred stock will likely reduce common shareholders' income available by two billion dollars in the forth quarter, because "the book value of the preferred stock is less than the amount paid," the bank said.

The announcements came as President Barack Obama warned senior bank executives visiting the White House Monday to prepare for a fight unless they drop objections to plans for the most sweeping regulatory reform.

"America's banks received extraordinary assistance from American taxpayers to rebuild their industry and now that they're back on their feet we expect an extraordinary commitment from them to help rebuild our economy," he said.

In an interview with CBS television aired Sunday, Obama lashed out at Wall Street bankers saying he did not run for office "to be helping out a bunch of fat cat bankers."

The Treasury said after Citigroup's announcement that it was "pleased" by the return of funds.

The department said in a statement that it "has repeatedly stated that the United States never intended to be a long-term shareholder in private companies.

"As banks replace Treasury investments with private capital, confidence in the financial system increases, government's unprecedented involvement in the private sector diminishes, and taxpayers are made whole."

Bank of America said last week it had completed repayment of 45 billion dollars to the Treasury after raising new capital.

The largest US bank by assets had received 25 billion dollars under the initial program to shore up capital in the banking system under a plan engineered by the administration of president George W. Bush.

It also received an additional 20 billion dollars to help absorb the troubled brokerage giant Merrill Lynch -- a deal that raised hackles among lawmakers and the public because of massive losses and hefty bonuses that were not initially disclosed at the Wall Street firm.

Many banks repaid the government earlier this year, escaping tougher scrutiny from regulators that could include limits on executive pay and bonuses at bailed-out firms.

Most of the major financial institutions began repaying the government after the "stress tests" that indicated how much capital they would have to raise in private markets.