OECD Warns of Turmoil as Central Banks Unwind

By Dow Jones Business News,  March 28, 2014, 06:55:00 AM EDT
Financial markets may be facing periods of “considerable turmoil” as central banks in developed economies prepare to reverse the stimulus programs they put in place in the wake of the 2008 financial crisis, the Organization for Economic Cooperation and Development warned Friday. In its annual report on government borrowing, the Paris-based research body said the agencies responsible for selling government bonds will have to cooperate closely with central banks to ensure that the exit from those programs is as smooth as possible. But it said both sets of institutions face huge challenges in communicating their intentions to investors without triggering a sharp rise in government bond yields and other forms of harmful volatility in asset prices. The OECD said that as a result of its stimulus programs, the U.S. Federal Reserve held $2.15 trillion of Treasury bonds as of Nov. 2013, while it expects the Bank of Japan to hold 190 trillion yen ($1.86 trillion) of Japanese governments by the end of 2014. The Bank of England has purchased 375 billion pounds ($622.91 billion) of U.K. government bonds. Central bankers have yet to decide what portion of those holdings they will sell, and over what time period. The OECD said bond sales by central banks are likely to take place when the borrowing needs of governments remain high, with the result that interest rates will rise. But it said that the reaction of investors to recent moves by the Fed to taper its stimulus program highlight the risk that rates will move earlier and more sharply than policy makers would wish, possibly damaging the economic recovery. “Expectation about imminent exits could…rock government securities markets by pushing up longer-term rates in government bond markets more strongly than desirable or warranted,” the OECD said. The research body said investors may react to announcements of central bank policy changes by anticipating subsequent moves, leading to a tightening of monetary policy before that is appropriate to the state of the economy. “There is an apparent gap between the reality of investors seeking to price final destinations on the one hand, and the desire of central bankers to minimize the scope for disorderly shocks, on the other,” the OECD said. “Central banks are facing extraordinary expectation-formation challenges.” The research body said that given the novelty of tapering and the reversal of stimulus programs, it may not be possible for central banks to announce policy changes without prompting turbulence in financial markets. In order to minimize market disruption, central banks, governments and debt management agencies should work together to communicate their intentions as clearly as possible. “Failure to do so may not only affect adversely the credibility of the overall monetary and fiscal exit strategy, but it may also prompt a return to dysfunctional markets, including higher stress in inter-banking markets and sovereign debt markets,” the OECD said. The report noted that in response to increased borrowing needs and uncertain market conditions, debt management agencies have become more “opportunist” in recent years, selling bonds when they can and outside a pre-announced timetable. The OECD said that will have to change as part of the unwinding of stimulus programs. “A transparent debt management framework and a strong communication policy are instrumental in reducing the type of market Subscribe to WSJ: http://online.wsj.com?mod=djnwires
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Source:  http://www.nasdaq.com/article/oecd-warns-of-turmoil-as-central-banks-unwind-20140328-00252?

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Russia’s secret weapon: crashing US economy by collapsing petrodollar

© Photo: Voice of Russia Russia can collapse the United States, prominent US trader Jim Sinclair believes. The economist, famous for his forecasts, explains that the strength of the dollar is based on the US agreement with Saudi Arabia that all contracts for fuel deliveries be in the US dollars. Now, Moscow can collapse the petrodollar in one moment. The slapping of sanctions on Russia is tantamount to a shot in the foot. The expert explains that the only true value in the world today is the petrodollar. But Russia can collapse it by demanding Euros or Yuan for its oil. What’s more, the US may lose its influence on Europe for good, if Russia starts selling its fuels for anything but the dollars. Angela Merkel would be only happy, for Germany, as well as other European countries would then have no need for currency markets. The rate of the Euro would then grow, while the cost of oil and gas would go down. But the United States should be ready for an abrupt increase in gasoline prices, for hyperinflation amid a poor business climate and a crash of the Dow Jones industrial average, Sinclair predicts. But does Moscow need this kind of scenario? One of the tough measures that the West said it would resort to should be cutting Russia off the SWIFT interbank payment system. But should this happen, the sanctions would hit hardest their own authors, says a Stock Market Chair Professor at the Higher School of Economics in Moscow, Alexander Abramov, and elaborates. “Technically, it is pretty easy to cut Russia off the SWIFT system by blocking Russian banks’ IP addresses. But SWIFT is one of the main systems that banks use for international payments. Hardly anyone in the US or Europe would like to resort to this kind of move, since banks are interrelated. If Russian banks are unable to use the system, they will fail to make timely payments to their western counter parties, which will prove quite a shock to the financial system. Now, this is by far more real a threat than using Euros to pay for oil. I think the financial world, which has just started emerging from the crisis, can’t be happy about these kinds of shocks”. Now, Moscow would not have to exert itself to retaliate for sanctions, says the director of the analytical service of the Alpari Company, Alexander Razuvayev, and elaborates. “Russia accounts for a large share of the energy market, above all, in Europe. Russia is also paid in dollars for its gas deliveries, and only partly in Euros. Russia therefore props up foreign currencies by accepting those for its oil and gas supplies. Well, energy markets were formed quite some time ago, so Russia accepted the rules of the game. But since Russia sells its own raw materials, it can change these rules. At least Russian state-run companies, such as Rosneft and Gazprom considered that option in late 2008. But, of course, this kind of move would only prove suitable in an extreme situation”. Russia is fully in control of the petrodollar and could cause the Dow Jones industrial average to plummet as it has never done before. One can wave the Stars and Stripes as long as one likes, but it’s a fact that the Russians can turn the US economy upside down, Sinclair warns. So far, Moscow has been in no rush to resort to extreme measures. Russia is going to react in a mirror-like way, – to retaliate with a blacklist of US officials for a US list of Russian officials. The West’s economic bans have thus far failed to prove too grave, so they rather cause Russians to mobilize themselves. For instance, when Visa and MasterCard boycotted some Russian banks for a short while recently, the Russian authorities took the decision to set up Russia’s own payment system shortly. Meanwhile, serious partners with a long history of cooperation, such as Siemens, are signing new contracts and are not about, or so it seems, to shoot themselves in the foot. Read more: http://voiceofrussia.com/news/2014_03_28/Russia-s-secret-weapon-crashing-US-economy-by-collapsing-petrodollar-5071/

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Walmart Just Revealed How Poor U.S. Shoppers Are

Walmart is no stranger to sensational headlines, but there’s at least one story this week that is just begging to be taken apart. Anyone who thinks “Walmart Just Revealed How Poor Its Customers Are” is an accurate reflection of the facts, needs to keep reading. Because the problem isn’t that Walmart revealed how poor its customers really are, it’s that Walmart revealed how poor U.S. shoppers really are. The hook here, the news peg, is that Walmart released its annual report and in it, there’s a paragraph that states:
Our business operations are subject to numerous risks, factors and uncertainties, domestically and internationally, which are outside our control … These factors include … changes in the amount of payments made under the Supplement[al] Nutrition Assistance Plan and other public assistance plans, changes in the eligibility requirements of public assistance plans, …
The implication is that Walmart preys on the poor, that the retailer has somehow created poor people by paying low wages. That it relies on government assistance in a way that goes beyond accepting payment from shoppers via government programs. According to Business Insider:
Walmart, for the first time in its annual reports, acknowledges that taxpayer-funded social assistance programs are a significant factor in its revenue and profits. This makes sense, considering that Walmart caters to low-income consumers. But what’s news here is that the company now considers the level of social entitlements given to low-income working and unemployed Americans important enough to underscore it in its cautionary statement.
Not quite. It’s not the first time Walmart noted that a reduction in the Supplemental Nutrition Assistance Program (SNAP) would hurt business. It may have been the first time it was mentioned in an annual report, but that’s because the reduction took effect during the fiscal year in question. In November, benefits for a family of four were reduced by $36 a month. Benefits had been increased as part of the Recovery Act in 2009, but Congress allowed the increase to expire on Nov. 1, 2013. An estimated 48 million Americans benefit from SNAP while roughly 80% of U.S. consumers shop at Walmart at some point during the year. Not all of them use SNAP, but the majority have some kind of budgetary constraint and it’s a number that keeps growing. Ten years ago, roughly 50% of Walmart shoppers cited low prices as the most important reason to shop at Walmart; today that number is 75%, said Andy Murray, Walmart senior vice president, creative, speaking at the Shopper Marketing Summit this week. Walmart shoppers are particularly sensitive to fluctuations in the price of gas, to small tax increases or to anything that adds another $20 burden to a household in any given week. Budgets are tight and getting tighter all the time, in spite of a slowly recovering economy. Walmart is hardly the only retailer to be affected by a reduction in SNAP benefits, or to say so in financial documents. The dollar store segment is also vulnerable. Roughly $4 billion in SNAP benefits were vaporized, money that was once spent at U.S. stores, not just at Walmart. This was bad news for shoppers and retailers, across multiple channels. As one grocery executive said in an online retail forum regarding the issue, “This cut hurts all of our sales, not just Walmart, let me make that clear. The struggle is universal for retailers, and sales are down around 8-10% since the first of the year.” I’m not a fan of criticizing other reporters or publications, but these headlines are designed to get clicks, to be shared, to fan the flames of outrage. In this case, it’s a false and very misplaced outrage. Walmart didn’t just reveal how poor its customers really are, it revealed just how poor so many U.S. shoppers are. Follow me on Twitter @lfheller Source:  http://www.forbes.com/sites/lauraheller/2014/03/28/walmart-just-revealed-how-poor-u-s-shoppers-are/?partner=yahootix

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Why are there NO SANDY HOOK VICTIM’S LAWSUITS?

I’m sharing this one because I really have questions about this incident…  don’t you??? /dt sandy hook victims 1DC Clothesline – by Dean Garrison What are the odds, in today’s world, of 26 victimized families ALL deciding not to sue a multi-millionaire who is a seemingly easy target? Peter Lanza has a lot of money. Whether you believe he is responsible for the actions of his son, or not, you can not deny that the man is loaded by most people’s standards. Are you aware that he was paying Nancy Lanza over $250,000 a year to take care of Adam?   Our best clue of his actual salary comes from Yahoo:
But where is the father’s culpability in all of this? The General Electricfinancial executive, who makes over a million dollars a year helping his company evade taxes, has so far gotten a pass from the media and the public.
Before I go on, I want to note that I do not believe that Peter Lanza should be sued and many of our readers will not either. But in today’s world when people see dollar signs and opportunity they jump. I just find it very odd that none of those 26 families are suing. I should also note that one lawsuit did surface after the shooting. It was subsequently dropped and was not from a family of one of the deceased. On January 2, 2013 (less than a month after the incident) CNN reported:
Outcry over a request for permission to sue the state of Connecticut formillions of dollars in the aftermath of the Newtown shooting prompted a New Haven attorney to at least temporarily withdraw his client’s petition, the attorney said Tuesday. “I was getting hundreds of (Facebook) comments” about the potential lawsuit. “So I figured I’d take (the request) off the table for now,” said Irving Pinsky, who represents the parents of a 6-year-old survivor of the mass shooting at Sandy Hook elementary school. Last week, Pinsky said in his filing that the state had failed to protect his client from what he described as “foreseeable harm.”
That is the only evidence I can find of any associated lawsuits, and I know of none by the families of the deceased. How odd is this? Very odd if you compare it to…

Columbine

It would seem that there is some precedent for suing the parents of shooters. That is why I mentioned that Peter Lanza seemed to be an “easy target.” After the dust began to clear on the Columbine lawsuits, ABC reported:

Most of the families of the victims in the Columbine massacre two years ago today settled their lawsuits against the parents of the gunmen.

Thirty of the 36 families whose relatives were either killed or injured by Dylan Klebold and Eric Harris in the April 20, 1999, school shooting agreed to participate in a settlement for a total of $1.56 million, according to Stephen Wahlberg, who led the families’ attorneys in the case. A judge will determine how the money is distributed.

Six of the families whose children were killed in the shootings opted not to settle. They are still pursuing suits against the Klebolds and Harrises, lawyers said.

Do you think that an attorney might advise a family to sue based on the results of Columbine litigation? To be fair, not all of these mass shootings have gained the same results as the Columbine suits, but ALL of them featured multiple lawsuits from families of the deceased. Let me share the info I have for the Virginia Tech shooting and the Aurora theater shooting as well.

Virginia Tech

Two of the victim’s families sued the school. Originally they received a positive ruling but lost later on appeal. The Courant notes:
The Virginia Tech lawsuit exemplifies a case that provided some closure and redress for two grieving families — the parents of deceased students Erin Peterson and Julia Pryde. In the Virginia Tech tragedy, a student, Seung-Hui Cho, murdered two of his classmates in one of the Virginia Tech dormitories. Roughly 21/2 hours later, Cho broke into one of the university’s classroom buildings and gunned down an additional 30 students and professors before killing himself. Families of the deceased students brought suit, alleging that school officials knew many facts aboutthe first killing and there was sufficient time before the mass killing for the officials to warn the university community of the danger. The court agreed with the plaintiffs, finding school officials responsible. Although this finding was overturned on appeal, the Virginia Tech lawsuit exemplifies a school shooting case that delved into the facts of a tragedy, answered some important questions for the grieving families and provided some closure.

Aurora Theater Shooting

Ten families of the deceased victims of alleged shooter James Holmes are still in process of suing the theater, and received a ruling to move forward from a judge in April of 2013.Hollywood Reporter revealed:
After the shooting tragedy last July 20 in Aurora, Colorado, during a midnight showing of The Dark Knight Rises, families of those hurt or killed looked for someone to blameJames Holmes is being charged with the criminal act of murders and attempted murder, but that wasn’t enough for several victims. Ten separate lawsuits were filed against Cinemark, the owner of the theater where the shooting took place, which responded by saying that it couldn’t have foreseen a shocking criminal act. On Wednesday, U.S. District Court judge Richard Brooke Jackson considered whether the lawsuits should proceed. In a personal note within his opinion, Jackson writes, “I suspect that many people, despite overwhelming sympathy and grief for the victims of the Aurora theater shootings, might upon hearing about these lawsuits have had reactions like, ‘how could a theater be expected to prevent something like this?’ I confess that I am one of those people.” But the judge quickly adds that the lawsuits “present difficult questions of interpretation and application of law,” and calling it a “close call,” he has decided that Cinemark should continue to face questions about its responsibility for the mass shooting last year.
Looking at three similar tragedies it would seem that the lack of legal actions in the wake ofSandy Hook are certainly an anomaly. It proves nothing in and of itself. It is however just another in a long line of Sandy Hook anomalies. The arguments against the conspiracyand/or cover up have become weaker with time. No longer can many people deny the oddities. You can not explain things like The Associated Press using predated photos that were taken days, weeks, months and even years before the tragedy took place. More often than not I hear a single recurring argument now… Do you know how manypeople would have to be complicit for them to pull something like this off? Indeed. ens_121712_sandyhook  http://www.dcclothesline.com/2014/03/25/sandy-hook-victims-lawsuits/

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