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Central Bank Center Stage: UK prepares for future easing

Today’s central bank action shows the Bank of England and the Bank of Japan leaving things as they were. In the UK, the budget, to be announced on March 20th, will give the BoE more leeway in reaching the 2% inflation target. In other words, it will be a Go! sign for the printers and for new governor Mark Carney to save the day. As for Japan, this was the final monetary policy meeting for current governor Masaaki Shirakawa. Whether his successor will employ this new found conservatism is uncertain. Meanwhile in Brussels, the ECB‘s policy meeting has begun; no changes are expected.

In the US, the Fed’s beige book survey showed moderate economic growth and easing employment conditions. At the same time, the FT (and Bloomberg) is running an article about the 750,000 people who could be out of work by the end of the year if the sequester doesn’t get amended.

A reduction of 750,000 jobs translates into about 0.4 percentage points higher on the unemployment rate. That, in turn, could mean it takes at least six months longer to reach the US Federal Reserve’s threshold of 6.5 per cent for a first rise in interest rates.

Meanwhile, the House of Representatives voted in favor of a last-minute legislation that gives greater flexibility to government agencies that are subject to the spending cuts mentioned above, avoiding a government shutdown on March 27th. Next up: the [delayed] budget. read article

Time Warner is going to spin their Time Inc and IPC (publishing the likes of InStyle, Wallpaper* and NME) magazine arms off by the end of 2013 valuing the new public company at $2.4-3bn, after sales talks with publishing group Meredith had failed. In recent years, Time Warner also got rid of AOL and Time Warner Cable, all in the name of “strategic clarity”. read article

KPMG might lose its $81m auditing contract with HSBC, because the bank is considering a new pair of eyes for their books after 22 years. Hello there, regulatory pressureread article

Finally, France reached an unemployment rate of 10.6% in Q4 of 2012, representing the highest rate since 1999 and an increase for a sixth consecutive quarter. read article

So long.

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No growth for Europe, Starbucks wants your love back

German central bank has cut its economic growth forecast for 2013 from 1.6% (June estimate) to 0.4%. Estimates for 2014 are back at 1.9%. Oh well, so we’ll wait another year and pour more money into Europe’s open wounds. No biggie. Yesterday, the ECB said if the recovery was to kick in in the second half of 2013 as hoped [Draghi would have said ‘expected’], the eurozone will grow 1.2% in 2014read article

Also in Germany, financial regulator BaFin sat in on Deutsche Bank’s audit committee meetings during the financial crisis and should therefore have known about the skewed numbers that may have saved the bank from requiring a government bailout. The SEC, who’s investigating the derivative mis-valuations, is bound to be pissed off. read article

When Starbucks started to write your name onto its white paper cups, that was an effort to make you feel more at home, more individually loved in each stock-standard store. Then the company was part of a tax avoidance case worth millions of pounds. Today, Starbucks issued an open letter from its UK managing director, promising to pay up to £20m more in corporate tax just to be nice. Of course, that is an image-protecting half-truth, because Starbucks, Google and Amazon had become the poster children of tax avoidance in the UK. Yet, paying so much money for a one-page add just to remind me that there will always be a barrister barista waiting for me, almost got me walking into a Starbucks this morning. Then I remembered that the coffee’s not that good.

In fiscal cliff news, everybody has returned to the negotiation table, or so it seems. On that note, a depressing visualization of US debt.

The US is also awaiting jobs data that will be completely distorted by Sandy. Meanwhile, Hillary Clinton is convinced that Russia is planning a new Soviet Union and must be stopped. read article

And finally, bidding farewell to the Financial Times Deutschland.

Weekend reading

– The New Yorker goes for lunch with Warren Buffetread article

– The FT got balls: In this opinion piece on the Autumn Statement, George Osborne became G-Dawgread article (click here for a picture of the print version)

– Why Dilma Rousseff needs a new economic advisorread article

– The US could create jobs by building a Death Starread article

Have a good one.

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SEC investigates big four, Boris Johnson wants EU referendum

The American SEC is investigating the Chinese operations of the big four (Ernst & Young, KPMG, Deloitte, PwC) + BDO for failing to cooperate with the Commission investigating potentially fraudulent behavior of Chinese companies that went public in the US. The auditors could be sanctioned or even excluded from operating within the US. read article (including another angry picture of enforcement director Robert Khumzami)

In fiscal cliff newsrepublicans put a new (old) proposal on the table, which already got rejected by the White House this morning. The proposal included $800bn in tax increases over the next 10 years, paired with a number of cuts, including scarping $600bn from Obama’s Medicare program. According to the Wall Street Journal, the proposal looked a lot like a the outlines of a budget deal discussed by Obama and Johgn Boehner, speaker of the House of Representatives, in 2011, the last time America stood at the cliff. Interestingly, Boehner’s proposal “also did not specify how Congress would address the $110 billion in spending cuts set to take effect Jan. 2 in defense and discretionary spending.” read article

But that’s not the only thing on Obama‘s mind. Another one is how to compensate those who have raised the most funds for his re-election. One of them is Anna Wintour, editor-in-chief of Vogue US and the very original devil in Prada. And to say thank you, Obama might make her the American ambassador to the UKread article

The IMF has released a staff paper saying that capital controls may be beneficial to countries whose economies are struggling and unable to deal with the volatility attached to capital inflows. Previously, the IMF was vehemently against capital controls, despite their use in some emerging economies. Now, however, it argues like this:

The experiences of Spain and Indonesia, as well as Brazil and Korea during the global crisis, highlight how regulations or re-imposition of restrictions on certain transactions can mitigate the build-up of vulnerabilities.

Spain!!! You know what that means. Next thing we know, there will be capital controls all over Europe’s peripheryread article 

Meanwhile, at a morning conference in London, major Boris Johnson said that a renegotiation of the UK’s relationship with Brussels was a necessary step forward and should lead to a straight forward referendum regarding the current terms and conditions that tie Britain to the single market. read article

In Doha, British Energy Secretary Ed Davey said the UK was going to put £1.8bn towards the battle against climate change. This will include financial support to cut emissions in developing countries. Britain is the first G7 country to commit to the project. read article

So long.

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