Archive for the ‘Banking’ Category

On the final day of the Fed’s two-day mid-year meeting, the bond and equity markets eagerly await Fed Chairman Bernanke’s comments regarding the Fed’s plans for the future of its massive bond buying program, otherwise known as Quantitative Easing 3 (QE3).  Will the Fed signal that it will taper, i.e., gradually ease out of its bond buying program; or will it tighten the program, i.e., begin to liquidate its balance sheet of bonds and trend to raising rates?

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This week in international business, we cover news on the World Trade Organization’s forecast for projected trade growth in 2013, China’s new currency trade partner,  Luxembourg’s bank secrecy rules, and U.S. Federal Reserve plans for stimulus-related policy of purchasing of U.S. bonds.

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This week in international business, we have an update on relations between Apple and China.  We also cover news on  efforts in Japan to achieve 2% inflation rate, impact of Puerto Rican bonds on the U.S., and revelations on who is taking advantage of offshore tax shelters.

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So, just when you thought Cyprus would fall below the radar for a while, today Cyprus Finance Minister Michael Sarris resigns.  Sarris’ resignation comes just days after the European financial community bucked up Cypriot banks with a 10 Billion Euro bailout. Some in the Cypriot political community believe that the deal should have come sooner and it remains to be seen whether Sarris has become the fall guy for the bailout taking as long as it did. Cyprus did get some concessions on an extension from three to five years to meet the fiscal conditions of the bailout, as well as the preservation of healthcare for 170,000 Cypriots. Cypriot government spokesman Christos Stylianides noted that the agreement “should have taken place a lot sooner, under more favourable political and financial circumstances.” But he noted that the situation in Cyprus is now “normalizing,” paving the way for the economy to get back on solid footing.

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While I post here from time to time on international economic and tax matters, most recently on economic and financial issues facing Cyprus and Greece, our Meritas affiliates are on the ground in those and many other EU member countries.  In the March 2013 Meritas Tax Newsletter, from their perspective, it seems that many European nations are refocusing on national tax priorities.  Meritas explains:

With a continuation of the general downturn in Government finances across much of Europe, greater efforts are being made to open up the tax base, to clamp down on evasion and reassess the most aggressive avoidance schemes. The result is new, more targeted legislation, say lawyers, at both the individual and corporate level.

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Cypriot and European Union officials wrapped up an agreement overnight to hopefully keep Cyprus from falling into economic ruin. Cyprus now becomes the fifth European country after Greece, Ireland, Portugal and Spain to receive bail out funds from the European Central Bank since the sovereign debt crisis began. The deal will prove costly to both local and foreign individuals and businesses with more than €100,000 at Popular Bank and market leader Bank of Cyprus.

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The news has been filled with stories involving the hacking of companies, governmental departments, and prominent peoples’ private computer information.  U.S. government sources claim that much of the hacking is being done by the Chinese.

With the advent of computer technology, the world has become a smaller, faster, and more organized place.   Each step forward brings downside impact  with it.  With the internet and IT technology, the issue of security has become a critical issue.  There are those at the highest levels of government who concede that cyber warfare is this century’s most lethal weapon.  Hackers can turn off national electric grids; steal secret government information; and obtain intellectual property, development plans, or economic information that can be used for profit or mischief.

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The Fed wrapped up its March 2013 meeting this afternoon with Fed Chairman Bernanke trimming the Fed’s economic growth forecast for the balance of 2013, although projecting an increase in jobs. Bernanke projected the economy to grow at a slower pace than previously projected, with the projection now at 2.3% to 2.8% by the end of the year. Bernanke also projected the unemployment rate to fall to 7.3% to 7.5% by the end of the year. The current unemployment rate is 7.7%.

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With the Federal Reserve Bank Chairman Ben Bernanke about to deliver his remarks following the conclusion of the Bank’s current two-day meeting, Cyprus is in turmoil … again.  Yesterday, the Cypriot parliament blocked a €10 billion bailout by the European Union by rejecting a tax on bank deposits that would help fund the rescue. Cypriot officials are in emergency talks with EU Central Bank, the European Commission, and the International Monetary Fund officials to develop a plan to keep Cyprus from falling off the economic cliff.  Cyprus promised to raise to raise €5.8 billion to prevent the country’s debt from exploding.

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BERNANKE AND HIS FED COLLEAGUES MEET TODAY AND TOMORROW – WILL QE AND INTEREST RATE SUPPRESSION CONTINUE?  HAVE A BANK ACCOUNT IN CYPRUS, WATCH OUT!

The U.S. economy continues to recover and grow, but probably not fast or solid enough for Bernanke and the Fed to table its Quantitative Easing (QE) policy or allow interest rates to rise.  The Fed seems to believe that notwithstanding the growth in the job market and modest recovery in the housing sector that the economy continues to be weak behind the obvious numbers.

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