By TraderVox.com

Tradervox (Dublin) - European Finance Ministers have capped the firewall kitty at 500 billion Euros after Germany led a coalition to oppose a further expansion of the region’s firewall power.  This comes as a shock to traders who were expecting a consensus in building a larger firewall kitty. However, the 500 billion lending capacity excludes the 300 billion Euros already given to Ireland, Greece, and Portugal.

Therefore the overall size up to 2013 will be 800 billion Euros but after that the kitty will be at 500 billion Euros. The Finance Ministers did not approve the use of the remaining 240 billion Euros in the EFSF but they indicated that the money would be used to add to the ESM kitty to its full amount of 500 billion dollars.

Austrian Finance Minister Maria Fekter was the first to talk to the press at the meeting indicating that the European leaders have now acted as expected by the IMF and as agreed at the G-20 meeting. Maria Fekter was also quick to add that the sum fixed is important and now the EU is expecting the pledges from the IMF to follow. Euro zone is counting on the pledged amount and the 1 trillion Euros injected by the ECB as a stimulus package.

This new development will affect the bullish trend of the euro as it was expected that the European leaders would endorse an expansion of the kitty to 940 billion Euros. Dutch Finance Minister Jan Kees de Jager indicated that incase the 500 billion in fresh capital is not available the region guarantees the availability of the 240 billion Euros in the EFSF. In reality, this is the only amount that is available excluding the 308 billion Euros that have already been committed to Portugal, Ireland and Greece.

The Chairman of the Finance Ministers meeting canceled his press briefing after the Austrian Finance minster talked to the press before him. Traders are looking forward to a formal statement from the Chairman of the Finance Ministers Jean-Claude Juncker.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

• Below is the 4-hour chart for the Gold by ForexYard.

• The indicators used are the MACD, Slow Stochastic and RSI.

• Point 1: The Slow Stochastic shows a bearish cross, signaling that the next move may be in a downward direction.

• Point 2: RSI signals that the price of this pair currently floats in the over-bought territory, indicating downward pressure.

• Point 3: The MACD indicates a bearish cross, which supports the downward notion.

• If the impending breach is indeed downward, going short with tight stops appears to be preferable strategy in the next few days.

Gold 4 hour Chart

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

U.S. DOLLAR gold bullion prices hit $1669 an ounce ahead of US trading, more or less in line with where they started the week.

Stocks and commodities edged higher and US Treasuries dipped, while the Euro gained ahead of today’s Eurozone finance ministers’ meeting in Copenhagen.

Silver bullion meantime rose to $32.61 – a gain of 1% from the start of the week.

Heading towards the end of the first quarter of the year, gold bullion prices looked set to record their highest ever quarter-end London Fix of in Dollars, Euros and Sterling.

Silver meantime avoided a fourth straight losing quarter, positing gains of 15% in Dollars, 11% in Sterling and 11.6% in Euros.

However, most of the net gains in gold and silver for Q1 came in the first week of January, with gold having fallen sharply since gold failed to break $1800 last month.

“The physical market has stopped playing an important supportive role,” one Singapore dealer told news agency Reuters this morning.

“There is so much physical material, yet we don’t see any good offtake, as people are worried that it’s not the right time to invest in gold now…we don’t expect to see real physical demand until prices drop below $1600.”

Many Indian gold dealers remained on strike Friday, having closed their stores for the past fortnight following the Union Budget on March 16 which doubled the import duty on gold bullion and introduced a 1% tax on gold jewelry sales.

India’s government has said it is reviewing the gold sales tax, but finance minister Pranab Mukherjee says the import duty hike will not be reversed.

India imported an estimated 969 tonnes of gold bullion in 2011, according to World Gold Council data.

Including gold bullion imports in its trade figures may be “overestimating” India’s current account deficit problem, according to Rajeev Malik, senior economist at Asia-Pacific investment group CLSA.

“Although it is technically correct to include gold imports and exports in the current account balance as per IMF guidelines,” Malik says, “we peg the ‘overestimation’ of the current account deficit due to net gold imports to be around 20 to 30%.”

“The close to $200 billion in imported gold over the past decade does not represent a drain on India’s resources,” adds Taimur Baig, chief economist India, Indonesia and Philippines at Deutsche Bank.

“Rather [it is] a diversification of India’s wealth into precious metals.”

One senior gold industry figure, Rajan Venkatesh of bullion bank Scotia Mocatta, suggested this week that the Indian government could encourage gold certificates and other measures to encourage people to deposit gold with the banking sector.

Turkey meantime, which like India has a current account deficit and satisfies much of its gold consumption via imports, is also considering proposals designed to encourage the growth of gold deposit accounts in its banking sector.

“Turkey has historically been affected by repeated currency crises and resultant inflationary pressures, hence households traditionally hold substantial amounts of gold,” says the latest precious metals note from French bank Natixis.

This week, Turkey raised the proportion of Turkish Lira reserves banks can hold as gold from 10% to 20% – while cutting the proportion of foreign exchange reserves that can be held as gold from 10% to zero.

Combined with the move to encourage gold deposits with banks, the moves represents “an easing of monetary conditions, as well as enabling the Turkish banks to bolster their balance sheets through the use of a cheap source of capital,” says Natixis.

Back to Friday, and “focus is firmly on the Eurozone,” says a note from Marc Ground, commodities strategist at Standard Bank.

“We expect precious metals to follow the gyrations of the Euro/Dollar as markets react to speculations and/or announcements on this front.”

Eurozone finance ministers were today expected to approve combining the €440 billion temporary European Financial Stability Facility with the €500 billion permanent European Stability Mechanism when the latter becomes operational in July.

The move is aimed at raising Europe’s so-called ‘firewall’ against sovereign debt contagion, which was identified at last month’s G20 meeting as a prerequisite for additional International Monetary Fund aid.

“If the investors deem the plan as sufficient in reducing near-term Eurozone liquidity issues, we believe risk assets including gold may benefit,” says a note from HSBC today.

Since many Eurozone policy announcements have already been leaked, however, any moves in gold and silver prices are likely to be “knee-jerk reactions, rather than signal a new longer-term trend” says Standard Bank’s Ground.

Spain, which was hit by a general strike yesterday, was due to unveil a so-called austerity budget Friday.

Norway’s $610 billion sovereign wealth fund meantime – which owns 2% of all European stocks – is to cut its exposure to Europe from 60% of its assets to 40%, the Financial Times reports.

Iran has been helping Syria to ship oil to China in defiance of Western sanctions, Reuters reported today.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

By TraderVox.com

Tradervox (Dublin) - The Euro has been on a bearish run against major currencies this week due to the eurozone finance ministers meeting today which is expected to endorse a plan to combine the European Stability Mechanism kitty with that of European Financial Stability Facility. This will be done in a bid to strengthen the region’s financial firewall safeguarding the region’s economy against any crisis like the one for Greece. The idea of combining these two facilities had been vehemently contested by Germany and Ireland; however, these two countries have softened their stand and now they are willing to comprise in order to secure the currency bloc.

Currently the EFSF has 248 billion Euros out of its total capacity of 440 billion Euros. The ESM is set to have 500 billion Euros lending capacity and it is expected to take over from the EFSF completely. Therefore, it is expected that the Final ESM would have 500 billion-Euro capacity which include the amount that has already been utilized by the EFSF leaving only 308 billion Euros at the disposal of the newly created entity. Analysts are warning that this would lead to a less favored outcome that is likely to exert downward pressure on the euro.

Since this option is less favorable for the region, another version, which is a bit optimistic and opposed by Germany is letting EFSF and ESM to run concurrently, meaning that the kitty would amount to 748 billion Euros now, as 192 billion Euros have already be used from the EFSF kitty. The third scenario which might be acceptable is to let the EFSF and ESM to run concurrently up to then end of June when the EFSF expires and thereafter to continue with the ESM which has a capacity of 500 billion Euros.

Since the third option has been agree upon across the market, this might be the likely scenario outcome which will be against the traders’ expectation precipitating a scenario of “buy the rumor, sell facts.” It should also be noted that the high inflation rate, which despite lowering to 2.6 percent still remains above the ECB target, will affect the demand for the euro after the meeting.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

Good news for the 17-nation currency as Europe’s finance ministers met today to discuss a possible increase in the rescue fund.As a result of the meeting, European stocks extended the biggest first-quarter gains since way back in 2006 and the Euro appreciated whilst default risk dropped.

The Euro made gains of 0.4% over the U.S dollar and the cost of insuring European sovereign debt against default broke a two-day increase.

The first Quarter saw the Euro appreciate 3% versus the U.S dollar in largest quarterly gain in a year, also showing a boost of 9.9% against the Yen in the same period, its biggest quarterly gain in 11 years.

Officials met today to discuss a possible increase  of the resuce funds. The increase  on emergency lending was said to be close to 940 billion euros which would be set to go until mid 2013.

In the end, the Eurozone countries came to an agreement to boost their firewall against the debt crisis to roughly 800 billion euros. This was officialy announced by Austrian Finance Minister Maria Fekter in Today’s meeting.

The real significance surrounding the meeting today was not about how much funds are increase by, but its do with the commitment shown by the European finance ministers to tackle the issue and boost funding levels.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By TraderVox.com

Tradervox (Dublin) - The single currency held on the recovery the late night recovery of yesterday as it traded above the 1.3300 levels. The pair is approaching the monthly highs formed during this week. It is currently trading around 1.3351, up about 0.38% for the day.

The support may be seen at 1.3325 and at 1.3280. The resistance may be seen at 1.3360 and at 1.3400 levels. Retail sales in Germany declined in the month of February by 1.1% against the expected rise of 1.2%. EMU released the CPI today which came at 2.6% while the expectation was 2.5%.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

Traders moving assets to safer, lower yielding currencies appear to be playing a factor in the correction of the major crosses. The USD and JPY, which are seen as a safer bet than others currencies in times of market stress, will likely keep drawing demand as investors stay away from riskier assets.

Economic News

USD – U.S Dollar Soars against the EUR and GBP

The dollar rose against the EUR on Thursday, reversing the single currency’s earlier gains, as investors grew more risk averse and sought safety in the dollar. By yesterday’s close, the USD rose against the EUR, pushing the oft-traded currency pair to 1.3370. The dollar experienced similar behavior against the GBP and closed at 1.5900.
As the U.S economy stabilizes, currency traders have started to focus more on fundamentals such as economic growth and short-term interest rates. That shift, just getting underway, could take the shine off the soaring USD in the coming months. A stronger currency is important to the U.S. because it entices foreign investors to Treasury debt that finances the nation’s record budget deficit. The downside is that it may restrain profit growth at companies with international sales by making U.S. exports more expensive.

Looking ahead to today, the most important economic indicator scheduled to be released from the U.S. is the Revised UoM Consumer Sentiment at 12:55 GMT. Traders will be paying close attention to today’s announcement as a stronger than expected result may boost the USD in the short-term. Traders should pay close attention to the market as there is an opportunity for traders to capitalize on the fluctuations which are likely to follow this release.

EUR – Euro Tumbles vs. Main Currency Rivals

The euro fell against most of its major currency pairs yesterday on Thursday as concerns about contagion from the euro zone debt crisis resurfaced, with investors wary on the common currency ahead of Spain’s budget on Friday. By yesterday’s close, the EUR fell 1% against the JPY to 109.00.The 16 nation currency experienced similar behavior against the USD and closed at around 1.3300.
Analysts said the euro was unlikely to break below its recent range of roughly between $1.30 and $1.35, with market players expecting a euro zone finance ministers’ meeting to approve bolstering the region’s rescue fund on Friday.

Looking ahead to today, the most important economic indicator scheduled to be released from Euro-Zone is German Retail Sales at 6:00 GMT. Analysts are forecasting this figure to increase from its previous reading. Traders should pay close attention to the market as there is an opportunity for traders to capitalize on the fluctuations which are likely to follow this release.

JPY – Yen Continues its Bullishness against Major Currencies

The Japanese Yen strengthened against most of its major counterparts yesterday, continuing to prove that for the time being that this is the solid currency that traders can rely on to provide them with steady profits. The Yen extended gains versus the Dollar on Thursday, to trade at about 109.00 amid a broad sell-off in the EUR. The JPY also saw bullishness against the USD and closed at around 82.10.
As for today, the JPY’s trends will be affected by the rallies of its primary currency pairs. It seems the USD and EUR are expected to continue a volatile trading session today and their crosses with the JPY will likely be as well. Traders should keep a close look on the news coming from the U.S. and Europe as these economies will be the deciding factors in the JPY’s movement today.

Gold – Gold Sinks on USD Strength

Gold prices slipped below $1,660 an ounce in Europe on Thursday, extending their retreat from two-week highs into a third session, as the dollar recovered from a near one-month low and crude oil prices turned lower.
Spot gold was down 0.4% at $1,656.50 an ounce. It has struggled for traction after a rally early in the week sparked by Federal Reserve hints that accommodative monetary policy is set to persist.
Looking ahead, traders are advised to watch carefully the global stock markets and the major economic indicators which will be published from the U.S. in order to predict the next movements in gold prices.

Technical News

EUR/USD

A bearish cross on the daily chart’s Slow Stochastic indicates that the pair may see downward movement. This theory is supported by the Williams Percent Range on the daily chart, which is currently at -20. Going short may be a wise choice for this pair.

GBP/USD

Most long term technical indicators show this pair trading in neutral territory, meaning that no major movements are forecasted at this time. Traders may want to take a wait and see approach, as a clearer picture may present itself in the coming days.

USD/JPY

Both the Relative Strength Index and Williams Percent Range on the daily chart have moved into the overbought zone, indicating that the pair could see downward movement in the coming days. Traders may want to go short in their positions ahead of a possible bearish correction.

USD/CHF

The daily chart’s Williams Percent Range is currently in oversold territory, indicating that the pair could see an upward correction in the near future. In addition, the Slow Stochastic on the same chart has formed a bullish cross. Going long may be the wise choice for this pair.

The Wild Card

GBP/AUD

GBP/AUD sustained upward movement has finally pushed its price into the over-bought territory on the 8-hour chart’s RSI. Not only that, but there actually appears to be a bearish cross on the Slow Stochastic pointing to an imminent downward correction. Forex traders have the opportunity to wait for the downward breach on the hourlies and go short in order to ride out the impending wave.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

For years, the United States has feared an energy crisis.

That one day the U.S. would have to import nearly all its oil and gas from overseas.

If there was a disruption to the supply lines, it would lead to rising fuel prices and severe shortages. That would mean higher costs for businesses. And higher prices for consumers.

All of which could push the world’s biggest economy into recession. And cause mass civil unrest.

It would be the 1970s “oil shock” all over again. But this time… it would be much worse…

Energy Crisis Over?

But, despite those fears, the U.S. energy crisis never really happened.

Why?

Well, it may seem counter-intuitive, but it’s thanks to $100 oil.

That’s not something you’ll read anywhere in the mainstream press. But it’s true.

When oil prices were low, it was too expensive for explorers and producers to reach hard-to-get oil reserves. And the harder it is to get, the tighter the supply. And the more the West had to rely on the Middle East.

That was just fine for the Middle East oil cartel. It had plenty of easy-to-get oil.

And when oil prices soared from 2001 onwards, it seemed as though it would provide riches to the Middle East, while dooming the West (especially America) to economic depression.

In fact, some have argued the crash in 2008 was partly due to high energy costs. That may be true.

But sometimes it’s hard to look past the short term and focus on the long term. Short term, a high oil price was great for Saudi Arabia, Iran and the rest of OPEC. But it wasn’t great for the U.S. and the West.

But in the long term, the opposite will be true.

In fact, we believe the high oil price of the past 10 years has actually secured America’s energy future. And soon, it could do the same for the rest of the Western world too…

The Energy Future for Investors

You see, while high oil prices have caused short-term pain, long term it means hard-to-get energy reserves became viable.

This is where entrepreneurial and risk-hungry energy companies have started to exploit the high oil price.

In the U.S., this has mostly happened with the exploration of shale oil and shale gas reserves. 20 or 30 years ago, these resources were too expensive to consider.

That’s changed. To the extent that according to global energy giant, BP, the U.S. is set to be energy self-sufficient by 2030. And soon after it will become a net energy exporter.

That’s an amazing shift from where the U.S. was just a few years ago.

And so now, the race is on to sideline Middle Eastern influence in energy markets.

You see, while a high oil price is good news for big producers in the Middle East, it’s also bad news. Simply because a high oil price makes other projects viable.

And that means more price and supply competition. It explains why Saudi Arabian oil minister, Ali al-Naimi is so keen to make sure the market still knows who’s in charge.

As Bloomberg News reports:

“Saudi Arabia said it could potentially raise output capacity to 15 million barrels a day, from 12.5 million barrels a day, using new oil fields if needed.”

That’s all talk.

Saudi Arabia doesn’t really want to knock down the oil price. It just wants to make investors, explorers and producers think it can knock down the price.

Because while lower oil prices are actually better for the Middle East in the long term (because it makes competing oil fields less viable), in the short term, Middle East dictators like high oil prices because they can buy more trinkets (football teams, London and New York property, and so on).

And because they’re afraid of what could happen if prices fall and they can no longer afford the handouts they’ve promised their oppressed citizens.

Under-Explored East Africa

The effect is that explorers are pushing the boundaries of the exploration frontier. For years, when oil was just USD$20 per barrel, certain areas of the world were no-go zones. They were politically unstable…geologically inaccessible… or just plain not worth the risk.

But with oil at USD$100 per barrel, the reward has started to offset the risk. Of course, it’s still risky. Very risky.

But the risk is now worth taking. Norwegian oil company, Statoil is exploring in an almost untouched area – the east coast of Africa. To highlight just how risky it is, Statoil has hired armed security guards to patrol its offshore assets to protect them from pirate attack!

But even machine-gun toting pirates can’t keep the explorers away.

And why would they? The east African coastline is almost completely unexplored when it comes to oil and gas.

That’s highlighted by these amazing numbers from U.K-based explorer and producer, Afren plc…

For every 70 wells drilled in North, West and Central Africa, only one well has been drilled in East Africa.

Oil company, Africa Oil, makes a similar comparison. This time comparing the triangle of Kenya, Somalia and Ethiopia with the North Sea and the Suez Basin:

Fewer than 200 wells drilled, compared to 7,706 for the North Sea and Suez Basin. That’s just 2.5% the number of the wells drilled, in an area 10-times larger!

Despite the risks (including from pirates), exploring this untouched frontier is already starting to pay off. As the Financial Times recently reported:

“Statoil set the oil industry abuzz late last month when it announced it had found large volumes of natural gas off the coast of Tanzania, confirming east Africa’s reputation as one of the energy world’s most promising new frontiers.”

The Biggest Energy Shake-Up in 20 Years

The idea of frontier energy plays (whether it’s a geographical or technological frontier) is something we’ve focused on in Australian Small-Cap Investigator.

The idea that explorers and producers are doing things and going places that could shake up the entire world energy market.

This is attractive, because as a speculative investor, you want to be at the turning point of change. Because if you can identify a change in direction early – or as it happens – that’s where you can potentially make your biggest returns.

And as we see it, one of the biggest changes in direction is happening in energy markets right now. If you’re quick, there’s still time to get involved.

How?

We’re preparing a special report on the subject. So look out for it over the next couple of weeks.

Cheers.

Kris.

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Political risk is being blamed for driving up oil prices. The looming threat of Iran, the constant risk of further money-printing by central banks, and concerns over unrest in Saudi Arabia are three that we’ve covered.

However, it’s worth pointing out one political risk that – in the longer run – could end up making crude oil cheaper. We’re talking about Venezuela.

Hugo Chavez is sicker than previously thought. This could force him to stand down – creating a power vacuum. And even if he continues in office, he could lose the election in October.

Chances are, any change in government could result in a major boost for oil production in Venezuela. It might even help to curb the power of both Iran and Saudi Arabia. Here’s why.

A Tale of Two Economies

The experience of Brazil shows how developing countries can take advantage of a commodity boom. In the last decade, Brazil has paid down its debts, becoming a net creditor. It has also invested in roads and ports.

This has led to a virtuous circle of increased economic growth, rising living standards and increased foreign investment. Adjusted for prices, Brazil is now the ninth largest economy in the world. Towards the end of last year, credit rating agency Standard & Poor’s upgraded its debt.

Venezuela has done exactly the opposite. Since Chavez came to power in 1999, he has wasted oil revenue buying votes and supporting countries such as Syria and Cuba. His decision to take 300 private companies into public ownership – many without compensation – has scared investors away.

The oil industry has been hit hard by Chavez’s policies. Not only did he reverse plans to let the private sector have a greater role, he raised production taxes and fired a large number of oil workers for political reasons – starving the state oil company of talent.

The ‘Chavez effect’ on oil production is easy to demonstrate: in 1998, when the price of crude oil hit a low of under $11 a barrel, Venezuela produced 3,167,000 barrels of crude oil a day. Twelve years later, despite record prices, output was only 2,090,000 barrels a day – nearly a third lower.

Could Chavez Step Down?

Despite these economic failures, Chavez was re-elected in 2000 and 2006. He runs what some call a ‘soft dictatorship’. Although the law allows free speech and free elections, these rights do not exist in practice.

Those who speak out against the regime may lose their jobs or have their firms taken over by the state. Critical papers and TV stations have been banned. Voters also face intimidation while the opposition has been heavily divided. This has made it hard to effectively challenge Chavez.

However, these things may be about to change. The opposition has finally united behind a single candidate, Henrique Capriles. Despite high levels of official pressure, huge numbers of people turned out to vote in the opposition primary.

More importantly, Chavez may not make it to the election. Last year doctors found that he had cancer. Ray Walser of the Heritage Institute tips henchmen Diosdado Cabello, Rangel Silva and Adan Chavez – Hugo’s brother – as possible replacements. But Andrew Cawthone of Reuters believes that “none of the figures around him has his charisma, political and rhetorical skills.” Overall, says Walser, “if Chavez dies, I think the chances are good for a reformist. Even if he does not I think we could see the Bolivarian movement self-destruct.”

Of course, even if Chavez dies or loses the election there is a chance that his cronies could still cling to power. In 2002, a popular uprising forced him out of office, only to see pro-Chavez forces remove his successor from power. Since then Chavez has put his supporters in key military positions. He has also devolved power to political militias, and worked with Russia, China and even Iran to arm himself to the teeth. A civil war could stop all output – increasing the price of crude.

It’s All About the Long Run

Even if Chavez goes in October, there will be little short-term impact on oil prices. When he leaves office, the state firm PDVSA is also likely to be sued over the seizure of assets in 2008 and 2009, delaying any investment. Foreign firms are likely to hold back until the political situation has calmed down.

However, the ability of a free Venezuela to lower oil prices in the long run is huge. The US Energy Information Agency (EIA) thinks that Venezuela has the second largest levels of proven reserves in the world. Oil cartel Opec even claims that it could have more crude oil than Saudi Arabia.

A committed private sector player could even find the huge amount of sea oil that is not currently viable. This would bring the total amount up to 513 billion barrels.

Clearly, this isn’t a story that will have an instant impact on investors. But in the long run, Venezuela could be a ‘game-changer’ for oil prices. We’ll be keeping a close eye on it and watching for potential opportunities.

Matthew Partridge

Contributing Editor, MoneyWeek (UK)

Publisher’s Note: This is an edited version of an article that first appeared in MoneyWeek (UK).

From the Archives…

A Better Inflation Bet Than Gold?

2012-03-23 – Kris Sayce

3D Printing: How “Desktop Factories” Will Create the Next $1 Trillion Industry

2012-03-22 – Michael Robinson

How to Invest in the Fastest-Growing Energy Business of the 21st Century

2012-03-21 – Aaron Tyrrell

Why You Should Build Your Wealth Using the Biggest BRICS Possible

2012-03-20 – David Thomas

Oil Getting Ready For Its Next Rally

2012-03-19 – Dr. Alex Cowie

For editorial enquiries and feedback, email letters@moneymorning.com.au

How a ‘Venezuelan Spring’ Could Push Down Oil Prices

It’s not often that I feel sympathy for a politician.

But you have to feel for Spain’s prime minister, Mariano Rajoy. Three months into his government, and he’s facing a general strike from the unions on the one hand, and a potential buyers’ strike from investors on the other.

The unions are striking because they’re fed up with economic reform that might reduce their power. Investors are threatening to stop buying Spanish government debt because they want even more reform.

What’s a prime minister to do? And more importantly, what does his dilemma mean for you?

Spain – The Weakest Link in the Eurozone

Spain’s economy – more so than Italy’s – has always been the major fault-line in the eurozone.

Sure, Greece causes a lot of noise and commotion. There was always the chance that Greece would throw a hissy fit and pull out of the euro unilaterally. Better-behaved small countries like Portugal and Ireland barely warrant a mention in the papers these days.

Even so, people always knew that in terms of size, Greece by itself didn’t matter. It was the knock-on impact that everyone worried about. The big fear was always that the market would say to itself, “If Greece can go bust, maybe it will be someone who matters next time.”

So the point of all the bail-out packages wasn’t so much to save the smaller countries. It was to prevent fears about the small countries from spreading to the “too big to fail” ones.

For a short while, it seemed as if the European Central Bank’s LTRO (Long-Term Refinancing Operation) had done the job on that score. Now it’s starting to look as though that was over-optimistic.

Investors are fretting about Spain again. The government’s cost of borrowing over ten years has risen by around 0.5 percentage points since the start of this month.

The trouble is, Spain missed its 2011 budget deficit target (in other words, it ended up overspending by even more than expected). As a result, it set itself a softer target for 2012.

Markets don’t like to see this sort of target slippage. For now, they don’t care so much when it’s the US or the UK. Those countries have their own currencies and central banks who are prepared to print as much money as it takes to pay off their creditors.

Europe isn’t prepared to do that (although it might be getting closer to doing so). And as private investors in Greek debt have discovered to their cost, there’s no guarantee that a eurozone country with problems will make good on its debts. So naturally, investors are warier of European government debt than perhaps they once were.

Spain’s Big Economic Problems
– Debt and Unemployment

The Spanish economy’s big problem is private sector debt, which might end up on the government’s balance sheet. Spain had a massive property bubble. The fall-out from that bubble continues. Prices haven’t been allowed to fall as far as they really need to. And that means no one can be sure just how much bad debt is still sitting on the banks’ books.

When banks don’t know just how bad a state their balance sheets are in, they stop lending. That makes it even harder to dig an economy out of trouble.

Spain’s economy also has the usual European problem of overly restrictive labour laws that discourage hiring. This is something the government is trying to tackle. The general strike today is partly about an overhaul of labour rules. A new bill passed in February makes it easier to cut wages, reduces the power of the unions, and could cut the cost of firing staff.

Given that unemployment is standing at 23%, and an incredible 50% among young people, you have to wonder who’s left to go on strike. As one Spanish political communications professor tells Bloomberg, the unions “have a lot at stake as Spanish society is very much questioning their role… [They] don’t represent the unemployed.”

This is one of the rarely-appreciated benefits of having a ‘hard currency’ like the euro. When it’s harder to take the easy way out (allowing your currency to weaken) then sometimes you are forced to take genuinely tough measures to change the way your economy works.

Of course, the trouble is that it takes a strong government to cope with the resulting social upheaval. And if your economy is in such a deep hole that people don’t get to see the benefits of reforms, only the pain, then it’s even harder to push reform through.

So What Happens Next for Spain?

Spain’s economy can’t be allowed to go bust. And it won’t be. We’re going to see the usual back and forth about bail-out funds and arguing between the Germans and the rest of Europe. But the most likely outcome still seems to be some form of European quantitative easing. The ECB has already taken a pretty big step in that direction with the LTRO.

But what does all this mean? The short answer is that the future for Europe holds continued loose monetary policy, and a banking system in many countries that’s largely reluctant to lend.

John Stepek

Editor, MoneyWeek (UK)

Publisher’s Note: This is an edited version of an article that first appeared in MoneyWeek (UK).

From the Archives…

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2012-03-19 – Dr. Alex Cowie

For editorial enquiries and feedback, email letters@moneymorning.com.au

Why Spain’s Economy is the Next Big Problem for the Eurozone

Rising geopolitical tensions and high oil prices are continuing to help renewable energy find favour amongst investors and politicians. Yet how much faith should we place in renewables to make up the shortfall in fossil fuels? Can science really solve our energy problems, and which sectors offers the best hope for our energy future?

To help us get to the bottom of this Oilprice.com spoke with energy specialist Dr. Tom Murphy, an associate professor of physics at the University of California.

Tom runs the popular energy blog Do the Math which takes an astrophysicist’s-eye view of societal issues relating to energy production, climate change, and economic growth.

In the interview Tom talks about the following:

Why we shouldn’t get too excited over the shale boom

Why resource depletion is a greater threat than climate change

Why Fukushima should not be seen as a reason to abandon nuclear

Why the Keystone XL pipeline may do little to help US energy security

Why renewables have difficulty mitigating a liquid fuels shortage

Why we shouldn’t rely on science to solve our energy problems

Forget fusion and thorium breeders – artificial photosynthesis would be a bigger game changer

OilPrice.com: Whilst you have proven that no renewable energy source can replace fossil fuels on its own. Which source is the most promising for providing cheap, abundant, clean energy?

Tom Murphy: First let me say that I think “proven” is too strong a word. But yes, I have certainly indicated as much. When it comes to cheap, clean, and abundant, I am drawn to solar. I don’t care if it’s two or three times the cost of fossil fuel energy that’s still cheap. Abundance is unquestionable, and I don’t see manufacturing as being inordinately caustic. The fact that I have panels on my roof feeding batteries in my garage only confirms for me the viability of this source of energy. Wind and next-generation nuclear also deserve mention as potential large-scale sources. Yet none of these help directly with a liquid fuels shortage.

OilPrice.com: Bill Gates has stated that innovation in energy can take 50-60 years to take effect. How then do you believe that that the ARPA-E’s short term objectives for projects can be helpful for solving current energy problems?

Tom Murphy: I applaud any effort that takes our energy challenge seriously, and gets boots on the ground chasing all manner of ideas. If nothing else, it raises awareness about our predicament. At the same time, I worry about our technofix culture with a tendency to interpret news clips about ARPA-E projects to mean that we have loads of viable solutions in the hopper.

Many of the ideas are just batty. And right to the extent that implantation of innovation can take decades, we may find ourselves in a squeeze wondering where all those funky news blurbs went.

OilPrice.com: What do you think is the most exciting energy science or energy technology being researched at the moment?

Tom Murphy: As cautious as I am about techno-giddiness, I do have the giggles for artificial photosynthesis. Combining universally available sunlight (in my own backyard) with a liquid fuel that can support personal and commercial transportation on land, sea, and air with minimal changes to infrastructure is too juicy for me to resist. More so than thorium breeders or even fusion, this is a real game-changer. The catch is that our finite periodic table may not avail itself to our wishes. Groups are now shaking the periodic table by its ankles, hoping that some new and unappreciated catalysts clank to the floor. I’m rooting for them, but at the same time advocate not relying on its realization.

OilPrice.com: A recent report stated that replacing all coal based power stations with renewable energy, would not affect climate change, and in fact after 100 years the only difference would be a change of 0.2 degrees Celsius. What are your views on climate change?

Tom Murphy: I see climate change as a serious threat to natural services and species survival, perhaps ultimately having a very negative impact on humanity. But resource depletion trumps climate change for me, because I think this has the potential to effect far more people on a far shorter timescale with far greater certainty. Our economic model is based on growth, setting us on a collision course with nature. When it becomes clear that growth cannot continue, the ramifications can be sudden and severe. So my focus is more on averting the chaos of economic/resource/agriculture/distribution collapse, which stands to wipe out much of what we have accomplished in the fossil fuel age. To the extent that climate change and resource limits are both served by a deliberate and aggressive transition away from fossil fuels, I see a natural alliance. Will it be enough to avert disaster (in climate or human welfare)? Who can know – but I vote that we try real hard.

OilPrice.com: Do you think that the shale gas boom will lead/has led to reduced investment in alternative energy, and could therefore limit the advancement of alternative energy and its mainstream implementation?

Tom Murphy: I do worry about the sentiment that “our problems are solved” based on a very short history of tapping low-hanging shale-gas fruit. David Hughes presented a sobering report to put these claims in perspective. Even though it is clear that shale gas will contribute to our net energy demands in an unanticipated way, I worry that A) extrapolations based on the “gusher” equivalents is risky; B) natural gas is not a direct answer to a liquid fuels shortage; and C) the associated exuberance can stifle the imperative that we have an all-hands-on-deck response to the looming challenges.

OilPrice.com: What are your thoughts on Biofuels? Will they ever be able to compete with fossil fuels? If you were to pick one that you think has the best potential which would it be?

Tom Murphy: The scale of our fossil fuel use prohibits replacement by biofuels at a substantial level. They certainly can and do play a role, which I anticipate will increase with time – up to a point. The energy return on energy invested (EROEI) tends to be pretty poor (less than 10:1) even for the best examples like sugar cane. And it’s a heck of a lot of year-in-year-out work to manage harvests – much depending on the increasingly erratic weather. Of the biofuels, I am most intrigued by algae: mainly because it can be grown and moved about as a liquid medium in sealed tubes. That said, I worry about gunking up the works with bio-sludge, the algae contracting disease, and the fact that we have not yet found/created a viable hydrocarbon-excreting critter.

OilPrice.com: Following the Fukushima disaster many have been calling for the end of nuclear power. What are your views? Should we abandon nuclear power? Are we in a position to abandon it?

Tom Murphy: I don’t think Fukushima should be seen as a reason to abandon nuclear. True, nuclear has its challenges, its risks, its hazardous wastes. But it’s one of the few things we know how to do that can scale. Of course conventional nuclear again stares right down the barrel of limited resources, which is a déjà-vu we would rather not experience. So next-generation concepts, particularly thorium are preferable. Then again, we are not prepared to execute such schemes this moment, so they are not much help in a near-term crisis. And ultimately, like so many things, nuclear is yet another technique to create electricity. That’s not where the pinch will come. I think nuclear will remain part of our energy mix in any case, so I don’t think Fukushima spells an end.

OilPrice.com: What are your thoughts on the Keystone XL Pipeline? Is it vital for America’s energy security?

Tom Murphy: Canada produces something like 1 million barrels per day (Mbpd) of oil from tar sands. This is about 5% of U.S. demand. Ambitious plans call for 5 Mbpd production, but even this does not amount to half of our current oil imports. So could it play a role in America’s energy security? Possibly. Will it guarantee it? Not likely. We should remember that Canada is a separate country. In a global petroleum decline scenario, how much of that oil will Canada sell to the U.S.? How much will China pay for it? How much of this precious lifeblood will Canada decide to keep for themselves?

I won’t say that I’m opposed to the pipeline, but like every other “solution” out there, it’s complicated, and not a crystal clear win.

OilPrice.com: I’ve come across many comments and articles online about human ingenuity and that we shouldn’t be too concerned with peak oil and fossil fuel depletion because our scientists are surely close to an energy breakthrough. Although this thinking is dangerously naive i was hoping to get your opinion on which technology you think is closest to providing this possible breakthrough?

Tom Murphy: I worry about the strength and pervasiveness of faith in science and technology to fix our problems. And I say this as a scientist who is no stranger to high-tech design and development. We deserve better than blind hope that someone somewhere will pull off a transformative energy miracle. Some things peak. We should acknowledge that once our inheritance is spent, we may not live like the kings we want to be. I can hope along with

the rest of us that this isn’t true. But I don’t feel like gambling: I’m the type to cash out when I’m a bit ahead, rather than keep betting my purse that the next hand will hit paydirt. More concretely, I can say that most physicists I meet in departments around the country are not aware of peak oil and associated challenges. Hardly anyone I meet is working on the problem. No one (i.e., funding) has told us this is a real problem that deserves our full attention. And I sense that it would be political suicide to do so. So which technology do I think will save our bacon? Most ideas on the table provide electricity, which does not address our most critical need. As I said before, artificial photosynthesis hits the sweet spot, and batteries are tremendously important. But let’s also prepare a plan B that may be less about techno-fixes and more about behaviors and attitudes.

OilPrice.com: Giant batteries the size of a football pitch are being constructed in order to store energy from renewable sources and release it during times of low power production, for a more consistent supply. Do you think this is the future for renewable energy, or would we be better served creating a giant grid, linking many different renewable sources together so that they can cover for each other?

Tom Murphy: Batteries work, we know. I think we absolutely should be gaining experience on the practical issues/economics of giant batteries. Making large-scale storage more practical resolves the single-biggest technical barrier to widespread solar and wind deployment. I am sceptical about giant grids especially the global variety based on the simplistic notion that “It’s always sunny somewhere.” I am more attracted to resilient local solutions. Transmission loss today tends to be less than 10% on an old, dumb grid. High-voltage DC would reduce this loss somewhat, and the science fiction superconducting grid would eliminate loss (until the inevitable cryogenic failure vaporizes the lines; and let’s not ignore the considerable energy investment needed to keep the lines at cryogenic temperatures). On a moderately ambitious scale, a continental grid will reduce the need for storage, but it will not eliminate it. We still benefit from super-sized batteries.

OilPrice.com: What do you think about the idea that it would be more useful improving the efficiency of current power systems, rather than researching new types of energy production?

Tom Murphy: Efficiency is a lovely thing, and it has always been seen as a lovely thing. Because of this, efforts to improve efficiencies of the big stuff like power plants have been continuous. And we have seen improvements at the level of 1% per year. In rare instances, One can get dramatic leaps via co-generation strategies, but that relies on power plants being situated near demand for waste heat. So realistically, I think incremental efficiency improvement does not have nearly enough bite to “solve” our problem, and in any case tends to be limited to factor-of-two level changes even in the long term. We need much more than that, in the end. I have found behavioural modification to be far more effective, achieving factors of 2, 3, 5, etc. in short order without grossly changing lifestyles.

OilPrice.com: Oilprice.com published an article a few months ago on space-based solar plants. Do you think that constructing space-based power plants could be a valuable option in the future?

Tom Murphy: I have to admit to being somewhat baffled by the concept. Why make solar power even more expensive with exorbitant launch costs (which only increases as energy costs increase), placing the equipment in an unserviceable, hostile space environment (cosmic rays, debris) while only gaining a factor of five in night/weather avoidance? The microwave link is no joke either. The required dishes are huge for both diffraction and ground safety reasons. I have just made a detailed post on Do the Math on Spaced based Solar. But let’s think about storage, and save ourselves absurd machinations.

OilPrice.com: Despite the rather public failure of Solyndra and other less well known companies investments in green energy are growing. Which sectors would you be willing to invest in and do you feel offer the greatest potential to investors? Wind, solar, wave, geothermal? Or none of the above?

Tom Murphy: I am not myself an investor, but I would surely like to see more funding for battery research and development, and for anything that can synthesize liquid hydrocarbons using a non-fossil input. Investors want to make money, but I’d rather tackle the important problems. Sometimes timescales make these two goals incompatible. Can you make money on wave or geothermal? Possibly. I’ll leave that for others to determine.

But I’m not too excited about niche solutions, which may distract us from the real prizes to the extent that they exist.

OilPrice.com: What role do you think the smart grid has to play in the future?

Tom Murphy: I’d sooner have smart people than a smart grid, deciding that it’s in our collective interest to scale back energy use at a personal level. Failing that, a smart grid helps distribute demand in such a way that intermittent renewables are more easily accommodated (using energy when it’s available). Some things may work well like this, but I don’t think this is a realistic way to hide variable energy supply from the consumer. They may be irked that they lose control over when the laundry decides to start, possibly resulting in clothes smelling of mildew, or that they are not present to fold clothes at 2 AM when the dryer is finished. Loss of control may not play well. If, instead, informed people accepted limitations of future energy supplies, and modified their own behaviour accordingly under their own control, we would break the habit of people taking energy for granted: an attitude that the smart grid attempts to preserve. We want greater personal awareness of energy, not less.

OilPrice.com: Cold Fusion (or LENR) has been deemed impossible for many years, yet Andre Rossi claims to have mastered it. However he won’t let anyone examine his E-Cat machine, and some believe that it may be a fraud. Where do you stand? Do you believe that he has mastered an “impossible” science, or that the claims of fraud have merit?

Tom Murphy: This appears to be outside the domain of known physics, so I’ll not comment further.

OilPrice.com: The Kardashev scale is a method of measuring an advanced civilization’s level of technological advancement. A Type I civilization has achieved mastery of the resources of its home planet, Type II of its solar system, and Type III of its galaxy. Whilst just a bit of fun, do you think that in the future, whether it be millennia or eons, we will ever reach Type I or Type II, or do you believe it impossible?

Tom Murphy: I think it is fallacious to think that humans will master the energy flow and resources even of Earth. Successful examples of long-term sustainable living tend to see people living as part of the energy/resource flow, but not as masters of it. We are only good at mastery in our fertile imaginations. The real world tends not to care what we can imagine. Titanic hubris. I would rather see humans try to live in equilibrium with natural services, rather than attempt foolhardy domination. Our attempts thus far are not very impressive: we’re failing to hold it all together even now.

OilPrice.com: Popular focus is on the global energy crisis, but an equally important crisis is looming. Rock phosphate is vital for creating fertiliser, which in turn is necessary for producing large quantities of today’s food. It is depleting at a rate similar to crude oil, which could soon mean that the world will experience food shortages. How do you believe this problem could be solved? Should more media attention be focussed on the potential food shortage of the future?

Tom Murphy: Sigh. Another problem we must “solve.” How about this solution: one billion people on Earth would obviate many of our problems. Any takers? Any acceptable path to this state? The original question does remind us that our problems are numerous. It is no surprise that the phenomenal surge in population and living standards/expectations in the last few hundred years – both a direct consequence of exploiting our fossil fuel inheritance – should be exposing fault lines every which way. Aquifers, soil, forests, fisheries, coral, ice pack, and species counts are in decline. The very simple answer staring us in the face, yet somehow unthinkable, is to consume far fewer resources and aim to reduce population. Hopefully we can do this in a more controlled way than nature may enforce if we ignore the myriad warnings. This “solution” will no doubt offend many, but just because we want to continue growth does not mean we can. We need to take control of our destiny, and that starts with us as individuals. Decide to reduce; mentally abandon the growth paradigm. Let’s maximize our chances of preserving our accomplishments by easing off the gas for a bit.

OilPrice.com: Oil companies are mainly driven by the aim of pleasing shareholders, which generally means pursuing large dividends and high share prices. Surely this profit seeking mentality is detrimental to the advancement of green energy technologies, as the companies have little incentive to seriously invest in new types of energy whilst old, cheaper types still exist. What are your views? Is there any way to change this dynamic?

Tom Murphy: I sense that plenty of people are waiting to cash in on green energy, and investment begins to flourish when energy prices soar. But as soon as high energy prices trigger recession, demand flags, prices crash, and the volatility wipes out many green efforts. A year or two of high prices is simply not long enough for a transformation, which takes decades to accomplish. I hope that we can tolerate smoothly and continuously escalating energy prices for conventional sources, but those high prices hurt large segments of the (conventional) economy and self-generate volatility. In principle, governments could “artificially” keep energy prices high enough to maintain the impetus for developing alternatives, pumping the revenue into a national alternative energy infrastructure. But governments are bound by voters who simply don’t want sustained high energy prices. I don’t know how to evade this dynamic in a functioning democracy, except via education about the challenges we face – including a sober confrontation of the fact that failure is a likely result of our not bucking up to the challenge.

OilPrice.com: How would you best describe the current situation with oil reserves? Do you believe we have reached Peak oil or are pretty close to it?

Tom Murphy: The simple observation that a peak in global discovery in the 1960′s must be followed by a peak in production some decades later is unassailable. So we know the decline is coming, as most major oil-producing countries have experienced already. That part is easy, it’s the when that is always hard. The fact that the current petroleum production plateau has hardly budged through factor-of-three price fluctuations is very suggestive that no one has spare capacity at the ready. If we can maintain high prices without re-experiencing a spike and crash like we did in 2008, we might see sub-prime production come online fast enough to maintain the plateau. But A) this might not happen, and B) it’s not a resumption of production growth. So I would not at all be surprised if a decline makes itself clear by the end of this decade. I, would, on the other hand, be surprised to see a 5% increase of conventional petroleum production over recent (plateau) levels. But in the decline case, volatility, deliberate withholding, recession, unemployment, wars, etc. can stir in enough complexity to hide the physical truth from us for years. Will it be obvious to the world when we pass into the land of inexorable decline?

This interview is cross posted with Oilprice.com

Thank you Tom for taking the time to speak to us. For those who wish to see more of Tom’s work please take a moment to visit his blog: Do the Math

By. James Stafford of Oilprice.com

The Bank of Albania dropped its main monetary policy interest rate another 25 basis points to 4.25% from 4.50% previously.  The Bank said [translated]: “the Supervisory Board decided to reduce by 0.25 percentage point interest rate, by deducting the 4.25% level. This decision aims to create appropriate monetary conditions for meeting the inflation target over the medium term. Meanwhile, monetary policy easing provides greater support for development of private sector demand in the economy.”

The Banca Nationala a Romaniei reduced its key monetary policy interest rate by another 25 basis points to 5.25% from 5.50%.  The Bank said: “The NBR restates that achieving both price and financial stability, in the context of fulfilling the commitments under the external financing arrangements with the EU, the IMF and other international financial institutions, is essential for ensuring lasting economic growth. Increased absorption of European funds along with a gradual revival of domestic demand will secure a sustainable economic recovery.”

Previously the Bank also cut the rate 25 basis points in November and at its February and January meetings this year, prior to that its last move was a 25 basis point cut in May 2010.  Romania reported annual consumer price inflation of 2.6% in February, down from 3.44% in November, compared to previous readings of 3.45% in September, 4.25% in August, 4.85% in July, 7.9% in June, 8.4% in May and 8.3% in April 2011, and now within the Bank’s inflation target range of 3% plus or minus 1%.

Here's today's Central Bank News link list, click through if you missed the previous central bank news link list.  Remember, if you want to submit links for inclusion in the daily link list, just email them through to us or post them in the comments section below.

Here's today's Central Bank News link list, click through if you missed the previous central bank news link list.  Remember, if you want to submit links for inclusion in the daily link list, just email them through to us or post them in the comments section below.

By TraderVox.com

Tradervox (Dublin) - The Head of Sovereign Ratings at Standard & Poor’s, Moritz Kraemer has indicated that Greece might require another debt restructuring that will include the bailout partners such as the IMF and the European governments. Kraemer went ahead to state that Greece bailout will have to include its official creditors again. This statement have come at a time when the new government bonds offered by the Greece government are performing adding to the speculation in the market that the debt crisis in Greece might be far from over.

Maritz Kraemer was talking at the London School of Economics where he was accompanied by IMF mission chief to Greece, Paul Thomsen. At this event, Thomsen indicated that despite the drastic changes done on Greece fiscal structure, it might take up to a decade to wholly complete the reforms. On March 21, the acting Greece Prime Minister Lucas Papademos secured a parliamentary approval to pave way for the 130 billion-euro bailout package.

Concerns about the future of Greece are coming at a time when the country is set to go into an election set to any day from next month. Thomsen talking about the election in the country indicated that after the election the country will have to reduce its fiscal deficit and expressed doubt on the timeline of Greece’s return to the market.

These comments are coming at just a day to the euro area Finance Ministers meetings to be held on Friday 30. Despite these negative reports, the market is upbeat on the formation of a stronger financial firewall. Thomsen said there is doubt as to when Greece will return to the market as a result of the great amount of risk associated with the restructuring and the possible resistance to the program.

The euro has continued to increase against the dollar and the pound as investors wait for the results of tomorrow’s meeting. The euro rose by 0.1 percent against the US dollar trading at 1.3334.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
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By TraderVox.com

Tradervox (Dublin) - Euro continued its slide even during the US session and printed a fresh low of 1.3250. There is a downside pressure on the single currency as the GDP data from US came as expected which reveals GDP at the expected value of 3%. Euro is trading around 1.3260, down about 0.60% for the day.

The support may be seen at 1.3250 and below at 1.3200 levels. The resistance may be seen at 1.3280 and above at 1.3325. Gross domestic purchases index was also came at 0.9% and real personal consumption expenditures came at 1.3%. Both data came in line with the expectation.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

Highly compensated earners still can’t make annual contributions to Roth IRAs – directly. However, 2010 gave them a loophole…

The origins of the Roth IRA go back to Newt Gingrich’s takeover of Congress back in 1994 and the “Contract with America,” where it was called the American Dream Savings (ADS) Account.

Unfortunately the plan was vetoed and never set into motion. However, two years later the Taxpayer Relief Act of 1997 was passed and allowed people to contribute to a Roth IRA plan for the first time ever in the year 1998. The new plan allowed workers to contribute after-tax dollars and have it grow tax deferred until they’re eligible to withdraw the money tax free.

The plan also came with two more benefits. Anyone who contributes to an IRA can roll it over to a Roth IRA, and the plan uses the current year’s income to determine eligibility of contribution or rollover.

However, many individuals were prevented from participating in the Roth IRA because of the stringent qualification requirements. The legislation decreed “highly-compensated” workers couldn’t contribute to Roth IRAs.

Was this Bill Clinton’s way of claiming a possible tax break for the middle class from this Republican legislation? That’s another article…

Anyway, let’s fast-forward to the present. Highly compensated earners still can’t make annual contributions to Roth IRAs – directly. However, 2010 gave them a loophole…

Two years ago, Congress allowed for the expiration of the $100,000 adjustable gross income (AGI) limit on Roth IRA conversions. This ended income limits on Roth conversions while leaving income limits on contributions in place. In effect, this change enabled anyone (regardless of income) to convert and/or contribute to a Roth IRA.

Why Should I Care Now?

Here are few reasons why converting to a Roth may be good for you:

1. Roth contributions are made with after-tax money, but the earnings and all withdrawals in retirement are tax-free. So, a Roth provides a big tax break on the back end that a traditional IRA does not.
2. Roth withdrawals aren’t included in determining how much of a retiree’s Social Security check is taxed under current law. Nor is how much in extra income-based Medicare premiums he/she has to pay.
3. You must start taking minimum required distributions from a traditional IRA when you turn 70 and a half, but you don’t have to take any withdrawals from a Roth IRA.
4. Further, you can leave the whole account to your offspring, who can then stretch out tax-free withdrawals over their own projected life spans.
5. It especially makes sense for people who are younger, because they have more years of tax-free growth.

A Few Concerns Before Jumping In…

You may have heard that a Roth conversion usually means paying a big tax bill. Pulling all of those pre-tax and tax-deferred earnings out could mean a pretty substantial immediate hit.

If you want to limit any conversion tax hit, first roll the pre-tax dollars in your IRA (including pre-tax contributions and tax-deferred earnings) into your employer’s 401(k) plan.

Once that’s done, your IRA will hold only your after tax IRA contributions and possibly earnings on them, depending on whether your 401(k) will take such earnings. Make new after-tax contributions for 2011 and 2012, and then convert at little or no-tax cost.

You probably want to check with your employer sponsored plan about this, but the majority do allow for the roll-in of IRA money. With tax rates and reform on the legislative table, this may be an option to seriously consider.

Good Investing,

Jason Jenkins

Article by Investment U