Tuesday, January 15, 2013

How Obama Is Guaranteeing The Next Financial Crisis Will Be MUCH Worse

An empirical look at the DOJ’s policy of non-prosecution.
By John Titus, creator of the new documentary Bailout.
Obama Guarantees Next Crisis by Refusing to Prosecute Recidivist Financial Criminals
Bailout is the first documentary to demonstrate the tight linkage between the financial frauds that caused the crisis and the resulting harm to Main Street. The Department of Justice recently ensured that many more will follow.
By announcing that it will not prosecute “systemic” criminal banking enterprises like HSBC, the DOJ has guaranteed (and likely hastened) the arrival of the next fraud-driven crisis.
The DOJ did not even attempt to back up its claim that prosecuting HSBC would "destabilize the global financial system." Indeed, Lanny Breuer, the head of the DOJ's criminal division, said that prosecuting HSBC "could have cost thousands of jobs"--betraying the fact that the DOJ's real concern was the corporate perpetrator rather than its Main Street victims.
Someone should let Breuer in on the fact that white collar criminal prosecutions have a direct and immediate impact on corporate behavior. The only "systemic" risk at work here is the one created by the DOJ itself--by giving financial criminals a free pass.
This is at once apparent from a comparison of the 25-year pattern of criminal financial prosecutions from 1985-2010 with accouting deviancy in reported financial data over the same period. The historical data buttress what common sense tells us: that responding to criminal financial enterprises with a formal regime of non-prosecution is guaranteed to end in disaster.
The 25-year period reaching back to the mid-1980s includes the savings and loan crisis, so that the effect of criminal prosecutions can be highlighted in connection with two separate financial crises. It is a tale of two very different law enforcement regimes.
In the S&L crisis, financial criminals across the U.S. engaged in wholesale looting of thrifts, which set off that crisis. In response, banking regulators built cases for criminal prosecutions and referred them to federal prosecutors. The S&L crisis ended with the criminal convictions of over 1000 high-ranking financial executives, which limited losses to American taxpayers to about $125 billion.
In the current crisis, losses to American taxpayers have--thus far--reached $13 trillion. In response, the DOJ has not criminally prosecuted even a single major financial executive for the fraudulent acts and financial transactions that set off the crisis.
The scale of this anomaly is breathtaking: had prosecutors answered the current crisis with the same legal force they mustered in response to the S&L crisis, well over 100,000 senior level financial executives would be in prison. The actual number is zero (0).
The problem is that U.S. law enforcers are obedient to bankers rather than hornbooks.
When confronted with concerns over its prior bad acts, the financial class inevitably responds with some variation of “we swear we’ll never do it again” or “that just won’t happen again.” Neil Barofsky’s Bailout is replete with such accounts:
  • On why TARP didn’t need any anti-fraud provisions: “the biggest players in these programs—the big banks and investment firms—would never risk their reputations by trying to rip off the government. The reputational damage they’d suffer would be far greater than any potential profit, they argued, so it just wouldn’t happen.” (p. 88)
  • William Dudley, the NY Fed chief, on why the Fed was justified in relying on AAA ratings to support its TALF program, even though they came from the same ratings agencies that put AAA ratings on junk leading into the crisis: “we’re confident they won’t risk being embarrassed again.” (p. 94)
  • Tim Geithner and other Treasury officials on why wouldn’t game the many holes in TALF: “they seemed to honestly believe that their Wall Street brothers wouldn’t take advantage of the flaws in the program to profit at the government’s expense.” (p. 131)
While that nudge-and-wink "just trust us" mentality is not surprising from bankers, it is shocking to see law enforcers adopt the same blind trust in the good word of Wall Street as a matter of policy, but that is exactly what has happened throughout the U.S. financial regulatory apparatus.
Both the S.E.C. (which settles cases with an agreement by the offending firm not to violate the law again) and the DOJ (which enters into non-prosecution agreements to the same effect) bargain away justice by halting cases before a public record of banking improprieties and crimes can ever be made.
But what of it? Does the complete absence of meaningful prosecution (aside from depriving the public of knowledge and information gained from litigation) have any "systemic" effects on corporate malfeasance?
The clear cut answer comes in the form of the chart above, which demonstrates the starkly inverse relationship between the number of criminal referrals by banking regulators and system-wide accounting deviations—a proxy for accounting fraud—from 1985 to 2010.
By “accounting deviations,” we mean deviations by reported corporate financial data from Benford’s law, which is an efficient way to detect prima facie accounting fraud.
According to Benford’s law, the first digit of numbers taken from real-life data sources is not at all a random affair. If it were, the probability of a first-digit 9 would be the same as that for a first-digit 1. In real life (and real data), that’s simply not the case.
Rather, the first digit is 3 times as likely to be 1 than if randomly selected, with 2 slightly less likely, and so on:

Someone trying to cook a company’s books by coming up with numbers out of thin air is highly unlikely to do so in accordance with their natural distribution as taught by Benford. Cooked books, then, can be detected by assessing financial data to the extent they deviate from Benford’s law.
Jialan Wang did exactly this for three decades’ worth of financial data from 20,000 corporations reporting to the S.E.C., which is reflected by the blue line in the graph above.
Wang’s findings are fully consistent with the S&L experience: federal deregulation of savings and loans, which began in 1981, occasioned a massive wave of accounting fraud that set off the S&L crisis—and a massive ramp upward in accounting deviancy as measured by Benford’s law:

Accounting deviancy—and the fraud giving rise to much of it—has continued its ascendancy throughout the current crisis.
The danger inherent in accounting fraud should be obvious enough, but it's worth mentioning with the sudden collapse in 2008 in mind: fraudulent financial data can mask fatally serious problems until reality explodes out from under the surface. It is akin to doctors manipulating their charts to conceal the cancer eating away their patients.
Congress should ask Eric Holder what objective he's serving by encouraging banks like HSBC to engage in and continue their criminal rampages. Like Lanny Breuer and Tim Geithner, of course, Holder will emit a plume of verbiage filled with terms like "systemic."
For once, someone should then ask the real question crackling beneath the surface every story like HSBC: Might it possibly be a very bad mistake to sacrifice the rule of law to appease admitted criminals?
John Titus has practiced law in federal courts for more than 15 years.

Watch a Trailer for BAILOUT

Photos by William Banzai7...

Obama on Taxes:'The American People Agree With Me'

$25 trillion here we come.
Listen carefully.  You will hear nothing concrete about spending cuts.
Obama's White House presser earlier today.
Details here...

WARNING! Local Gas Stations May Be Gouging YOU If You Pay With Debit Or ...

Updated 04.08.11 - The Decline: The Geography of a Recession by LaToya E...

Geography of the great recession.
Watch jobs disappear from the U.S. economy.  Chart runs from January 2007 -- one year before the start of the recession -- to the most recent video update in April 2011.
UPDATECHART SHOCK: The REAL Unemployment Rate Is 22%...

Tim Krekel Orchestra, performs live Bailout Blues the new depression song

"You better bailout now, while your parachute still works."
Tim Kregel with The Bailout Blues.

I Put Borders Out Of Business, Target Is Next

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)
My wife and I used to go our local Borders Bookstore and have coffee and read magazines and books. Inevitably, we'd leave with a bag of our favorite books and magazines. Sometime in 2009, that all changed. We'd still go to bookstore to read and have our coffee but I had purchased T-Mobile G1 smartphones and I started checking the prices of each book I liked by scanning the bar-code on the back. To my surprise, I found that in the majority of cases, I could buy the book on Amazon (AMZN), shipping included, for less than half the retail price in the bookstore. Our purchasing pattern changed quickly to coffee only with the books showing up a week later by mail.
The practice of reviewing products at a brick and mortar store and then buying the same product online for less is called show-rooming. When Borders' bankruptcy hit the news, I realized that practice was not only a significant factor in the demise of the Borders chain but also the key to a paradigm shift in retail. In fact, this change is coming so quickly that I predict a large number of retailers won't have a chance to change in time to survive. Darwinian evolution at its most brutal; adapt or die.
After the Borders bankruptcy and the closing of our favorite local hangout, what did we do? We moved on to Barnes and Nobles (BKS) and started doing the same thing. But there was a difference. In the front of each Barnes and Noble bookstore, you were barraged with a massive push to buy the Nook eBook reader. Since I was already a loyal Amazon customer, I purchased a Kindle instead and a new practice started. I would go to the bookstore, browse the books and buy the same book on my Kindle for half the price.
But as with all epics, the story is not over. The practice of online price-comparison extends to most retail stores with the exception of grocery stores and retailers that sell perishables (like Starbucks) will continue to have an dramatic impact on revenue. Best Buy (BBY) is in trouble from this practice and is trying to adapt to avoid the fate that befell Borders.
Target (TGT) recently announced that it will match the prices of online retailers such as Amazon, Best Buy and Wal-Mart (WMT). While this shows clear evidence that the retailer is not going to go away without a fight, it will also put tremendous pressure on the margins and help force the paradigm shift. As margins shrink, the pressure mounts to reduce expenses, especially costs directly incurred by carrying these online shrinking-margin products such as books, electronics, clothing, sporting goods, furniture, office supplies, and any product category that isn't perishable.
My wife and I still visit Barnes and Nobles, we still drink coffee and occasionally we buy books and magazines that we can't get for a better price online but I can't help wondering how long before enough of their retail customer base shifts to online purchasing to make Barnes and Noble begin closing their bookstores.
When that happens, where will we go? We'll take our Kindles and Nooks to Starbucks (SBUX) and have our coffee and do our reading online using the free Wi-fi but retail and specifically the big-box retailers will be changing dramatically. Any retailer that doesn't have a strong online strategy will likely die but just as important, any investor tracking retail should also look for a strategy for making their brick and mortar revenue more efficient to minimize the drag this part of their business will have on their profits.

Nestlé-Zugang zu Wasser sollte kein öffentliches Recht sein

When viewing this - and it is subtitled so you have to read it - a couple of things to remember.
Six minutes for a very stark message about what "free market" means - truly means.

I have no idea if the subtitles are correct - I can only assume that

Nestle was at one point a financial supporter and participant of ALEC - we can not confirm present day - because ALEC keeps their member list secret.

ALEC believes and preaches a free market philosophy - which includes the privatization of everything - everything, do not kid yourself folks.

This video is an example (if the close captioning is correct) of the extremist views held by corporations who hold a free market philosophy.

              Access to water is not your right
                 believing you have a right to water - is an extreme belief
              Water is a raw material and a "foodstuff" that should be
                   privatized and commercialized.

This video is an example of the extremist free market philosophy probably held by many of the corporations that belong to the American Legislative Exchange Council - your death means nothing compared to corporate profits. If this guy believes it - other corporations believe this for their raw materials also.

This is the first time I really truly understand what free market means to these people.
Free market means - it is okay for people to DIE as long as corporations can maintain high levels of revenues.

More importantly, we need to make a point of boycotting Nestle's water products post haste. 
Nestle's Water division is enormous. 
Check out this partial brand list:
Aqua Spring
Deer Park
Deep Spring
Ice Mountain
Nestle Wellness
Nestle Pure Life
Poland Spring
S. Pellegrino
S. Barnardo
Water Line
Maybe if they didn’t make money on water – they would not view water as such a commodity.

Financial inequities are inherent to any market system. Due to disparities in wealth or access, some individuals are placed in more fortunate positions. Over time, instead of countering these disparities, the market nurtures them. Unlike other commodities, like wheat or oil, water is essential for survival, and it does not have any substitutes. Limited or nonexistent access to grain or oil, while potentially devastating, is not life threatening. The traditional economic principles applied to other commodities are not applicable to water. Those unable to afford the market’s price for water would be left to die.  

Income Tax Could Be Eliminated By Many Republican-Controlled States

* Single-party rule in 37 states paves way for big changes

* Some states weigh higher sales tax, eliminating income tax

* Critics say shift would unfairly burden poor, middle class

By Nanette Byrnes

CHAPEL HILL, N.C., Jan 13 (Reuters) - Hopes for overhauling the federal tax system are fading in Washington, but in some state capitals, tax reform experiments - some far-reaching - are fast taking shape.

Across the U.S. South and Midwest, Republicans have consolidated control of state legislatures and governorships, giving them the power to test long-debated tax ideas.

Louisiana Republican Governor Bobby Jindal, for instance, called on Thursday for ending the state's income tax and corporate taxes, with sales taxes compensating for lost revenue.

A similar plan is being pushed by Republicans in North Carolina. Kansas, which cut its income tax significantly last year, may trim further. Oklahoma, which tried to cut income taxes last year, is expected to try again.

"When it comes to getting pro-growth tax reform done this year, the only real opportunities are at the state level," said Patrick Gleason, director of state affairs for Americans for Tax Reform, the Washington-based anti-tax lobbying group headed by small-government conservative activist Grover Norquist.

His group and other conservative pressure organizations, such as Americans for Prosperity, have targeted state capitals for tax reform campaigns.

Cutting income taxes and shifting the overall tax burden to consumption through higher sales taxes is a long-standing goal of some tax theorists. Critics argue that approach is regressive and unfairly burdens the middle class and the poor, who spend more of their earnings on items subject to sales tax.

Nicholas Johnson, a state tax expert with the left-leaning Center on Budget and Policy Priorities, gave the chances of sweeping tax changes taking hold a low probability.

Still, he said he worried the efforts in the states could move the tax discussion in a direction harmful to middle- and low-income taxpayers and make balancing state budgets harder.

"Even if this is too radical, if it makes other radical schemes seem more reasonable, that's worrisome," he said.


But the political moment may have arrived for a test.

Thirty-seven of the 50 states now have single-party control of legislatures and governorships: 25 Republican, 12 Democratic. In those states, unlike Capitol Hill, partisan gridlock is not a big issue, making difficult projects such as tax reform easier.

In addition, new ideas look attractive in states that have suffered for years from high unemployment and tight revenue

"We have no choice but to make change," said Bob Rucho, a Republican state senator in solidly Republican North Carolina, who is leading a push in that state for major tax changes.

Rucho and other like-minded lawmakers have a plan to do away with all state individual and corporate income taxes. The plan would replace lost revenue with a new business license fee and a higher sales tax on goods and services not now taxed by the state, such as legal, accounting and spa services, and food.

In his inaugural address on Saturday, Republican North Carolina Governor Pat McCrory promised to work with business "as partners" to eliminate taxes and regulation that stifle growth.

Rucho's plan would remake the North Carolina budget, which now derives 65 percent of its $18.5 billion in total tax revenues from individual income and corporate taxes.

To make up for that much lost revenue, the state sales tax rate would have to rise to 6.53 percent from 4.75 percent, according to a supportive study done by a consulting firm run by Arthur Laffer, a former adviser to Republican President Ronald Reagan and one of the fathers of "trickle-down" economics.


U.S. states often test reforms too controversial for Washington to tackle. Although several states, including Texas and Florida, have no individual income tax, Alaska stands out in modern times for having repealed its personal income tax. It was able to replace the lost revenue with its huge state oil income.

The kind of basic shift to sales tax from income tax being eyed by Republicans is informed partly by "trickle-down" or supply-side economics - embraced by Republicans 30 years ago and still a powerful force in the party. Laffer has advised some of the states' activists.

North Carolina's Rucho acknowledged the argument that the poor would be hit disproportionately by higher sales taxes. But he said new sales taxes on services would also hit higher-income taxpayers.

He said low-income people got more government assistance that could help offset higher tax costs. Also, he added, cutting income taxes would spur economic growth, a key supply-side tenet, helping everyone.

In an interview with Reuters, Laffer said states with lower income tax burdens outperformed those with higher taxes.

Some studies, from liberal and non-partisan think tanks, say just the opposite and cite the relative economic strength of high-tax states such as New York.

The Federal Reserve Shows Barack Obama Who The Real Boss Is

The Federal Reserve Shows Barack Obama Who The Real Boss IsBarack Obama has greatly expanded the powers of the presidency during his time in the White House, but there is one institution that he simply will not mess with.  There is one organization that is considered to be so sacred in Washington D.C. that Obama will not dare utter a single negative word against it.  That organization is the Federal Reserve.  Even though he has shown that he is unafraid to pick a fight with just about everyone else in Washington, Obama flat out refuses to criticize the Fed and he even reappointed Ben Bernanke for another term as Fed Chairman even though Bernanke has a track record of failure that would make the Chicago Cubs look good.  Perhaps Obama is aware of what has happened to other presidents that have chosen to tangle with the Fed.  In any event, it has become clear that Obama submits to anything that the Fed says without question, and the controversy over the "trillion dollar coin" is another perfect example of this.  For weeks, there has been much speculation in the mainstream mediaabout the possibility that the Obama administration may print up a one trillion dollar coin that it would use to keep paying the bills of the federal government if an agreement to raise the debt ceiling is not reached.  But on Saturday the Federal Reserve killed that idea, and we shouldn't be surprised by that because under no circumstances will the Fed ever accept a threat to their monopoly over money creation in the United States.  If the Federal Reserve had allowed Obama to print up a debt-free trillion dollar coin, that would have set a very dangerous precedent for the Fed.  The American people would have realized that the federal government can actually create debt-free money whenever it wants and that it does not actually have to borrow money from anyone.  That is something that the Fed probably would have moved heaven and earth to keep from happening.  But now we won't ever know how far the Fed would really be willing to go to keep their monopoly over money creation, because Obama has no plans to challenge this latest ruling from "the real boss" of our financial system.
Sadly, most Americans don't even realize that a private banking cartel has a monopoly over all money creation in this country.  In recent years they have abused this power by wildly printing money ("quantitative easing"), and by making more than 16 trillion dollars in secret loans to their friends during the last financial crisis.  Under our system, the private Federal Reserve creates money whenever they want, and nobody else gets to create money.  It is an insane system, but very, very few of our politicians will ever dare to question it.
At this point, the U.S. Treasury Department is essentially just an arm of the Federal Reserve.  That is why it was no surprise that the Fed and the Treasury Department issued a joint statement on Saturday.  According to Treasury spokesman Anthony Coley, both the Treasury and the Fed have come to the conclusion that under no circumstances should a trillion dollar coin be printed up by the Obama administration...
"Neither the Treasury Department nor the Federal Reserve believes that the law can or should be used to facilitate the production of platinum coins for the purpose of avoiding an increase in the debt limit"
But of course it was actually the Federal Reserve which made this decision.  The following is from a report posted by Zeke Miller of Buzzfeed.com...
The Federal Reserve was responsible for killing a controversial proposal to circumvent the debt limit, a senior administration official told BuzzFeed Sunday.
On Saturday the Treasury Department released a statement ruling out the only remaining alternative to Congress raising the nation's borrowing limit, which would utilize a loophole in federal law to mint a $1 trillion coin to be deposited in the Federal Reserve and ensure the federal government could pay all bills and debt obligations.
According to that Buzzfeed article, the Federal Reserve would have actually refused to recognize the trillion dollar coin if the Obama administration had tried to deposit it with the Fed...
But it was the Federal Reserve that killed the proposal, the official told BuzzFeed, denying a purely political rationale for the announcement, saying the independent central bank would not have credited the Treasury's accounts for the vast sum for depositing the coin.
So there you go.
The real boss has told Barack Obama how it is going to be, and Obama plans to meekly comply.
So why is the Federal Reserve so adamant about maintaining their monopoly over money creation?
Well, it is all about compound interest.  Albert Einstein once made the following statement about compound interest...
"Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it."
When the Federal Reserve system was initially created back in 1913, the bankers that created it intended for it to be a perpetual debt machine that would extract massive amounts of wealth from the U.S. government (and ultimately from all of us) through the mechanism of compound interest.  Each year, hundreds of billions of dollars of interest are transferred into the pockets of the wealthy bankers and foreign nations that own our debt.  This is one of the reasons why I preach about the evils of government debt until I am blue in the face.  The debt-based Federal Reserve system is a way to systematically steal the wealth of the United States, and it is happening right in front of our eyes, but very few people actually understand it well enough to complain about it.
Unfortunately, we are rapidly getting to the point where we have accumulated so much debt that it is threatening to collapse our entire financial system.  The following comes from a recent Zero Hedge article...
By now most are aware of the various metrics exposing the unsustainability of US debt (which at 103% of GDP, it is well above the Reinhart-Rogoff "viability" threshold of 80%; and where a return to just 5% in blended interest means total debt/GDP would double in under a decade all else equal simply thanks to the "magic" of compounding), although there is one that captures perhaps best of all the sad predicament the US self-funding state (where debt is used to fund nearly half of total US spending) finds itself in. It comes from Zhang Monan, researcher at the China Macroeconomic Research Platform: "The US government is now trying to repay old debt by borrowing more; in 2010, average annual debt creation (including debt refinance) moved above $4 trillion, or almost one-quarter of GDP, compared to the pre-crisis average of 8.7% of GDP."
This is a key statistic most forget when they discuss the stock and flow of US debt: because whereas the total US deficit, and thus net debt issuance, is about $1 trillion per year, one has to factor that there is between $3 and $4 trillion in maturities each year, which have to be offset by a matched amount of gross issuance just to keep the stock of debt flat (pre deficit funding). The assumption is that demand for this gross issuance will always exist as old maturities are rolled into new debt, however, this assumption is contingent on one very key variable: interest rates not rising.
Do you understand what is being said there?
Not only is our debt rising by more than a trillion dollars a year, we also need to roll over trillions of dollars of federal debt each year.  If interest rates on that debt start rising, we are going to start feeling the pain very rapidly.
As I have mentioned previously, the average rate of interest on U.S. government debt was 6.638 percent back in 2000.  If we returned to that level today, we would be paying more than a trillion dollars a year just in interest on the national debt.
The main thing keeping interest rates low right now is the fact that the U.S. dollar is the de facto reserve currency of the world.  If that ends, interest rates on U.S. debt will skyrocket.  The following is from a recent article by Chris Ferreira...
The US Dollar is the reserve currency of the world. You need it to buy oil, a vital component of any economy. Since other countries like China cannot print US dollars at their leisure, they have to get it from somewhere. They get it from trade with the US. The US buys products in Asia and the rest of the world with US dollars, and in turn these same dollar surpluses are used to buy oil and US bonds, creating a much needed artificial demand for US dollars.
This is also how the enormous US 558$ billion trade deficit in 2011 was financed. The US has been in a trade deficit since the 1980′s and it continues the grow as jobs and manufacturing are being lost to more competitive nations. The trade deficit also accounts for the national debt. The financing of the debt creates artificial demand for US bonds which helps lower the interest rate and coincidentally helps to raise the debt levels even higher.
Unfortunately, the rest of the world is starting to move away from the U.S. dollar.  Over the past couple of years, a whole host of international currency agreements have been signed that are intended to start reducing the use of the U.S. dollar in international trade.  For much more on this, please see the following article: "The Giant Currency Superstorm That Is Coming To The Shores Of America When The Dollar Dies".
Most Americans have absolutely no idea how very close we are to financial catastrophe.  The only way we can continue to service our enormous 16 trillion dollar debt is for interest rates on that debt to remain super low.  But the only way those interest rates can remain low is for the U.S. dollar to remain absolutely dominant in international trade.  Once the rest of the world rejects the U.S. dollar, the game is over.
We are headed for total system meltdown, but neither major political party is going to do a thing about it.  They are both just going to continue to meekly comply with the dictates of the real boss of our financial system - the Federal Reserve.
It is imperative that we educate the American people about these things.  Please share this article with as many people as you can, and the following is another great article for anyone that does not understand how the Federal Reserve is destroying our financial system: "10 Things That Every American Should Know About The Federal Reserve".
The Great Seal Of The United States - A Symbol Of Your Enslavement - Photo by Ipankonin

There Will Be No Economic Recovery. Prepare Yourself Accordingly.

There Will Be No Economic Recovery. Prepare Yourself Accordingly.

Windmills Overload East Europe’s Grid Risking Blackout: Energy

Germany is dumping electricity on its unwilling neighbors and by wintertime the feud should come to a head.
Central and Eastern European countries are moving to disconnect their power lines from Germany’s during the windiest days. That’s when they get flooded with energy, echoing struggles seen from China to Texas over accommodating the world’s 200,000 windmills.

Renewable energy around the world is causing problems because unlike oil it can’t be stored, so when generated it must be consumed or risk causing a grid collapse. At times, the glut can be so great that utilities pay consumers to take the power and get rid of it.
“Germany is aware of the problem, but there is not enough political will to solve the problem because it’s very costly,” Pavel Solc, Czech deputy minister of industry and trade, said in an interview. “So we’re forced to make one-sided defensive steps to prevent accidents and destruction.”
The power grids in the former communist countries are “stretched to their limits” and face potential blackouts when output surges from wind turbines in northern Germany or on the Baltic Sea, according to Czech grid operator CEPS. The Czechs plan to install security switches near borders by year-end to disconnect from Europe’s biggest economy to avoid critical overload.

Wind Farms

The bottleneck is one of many in the last eight years as $460 billion of wind farms were built worldwide on plains, hills and at sea before networks were fully expanded to deliver the power to consumers. Upgrading Germany’s system alone to address capacity and technical shortfalls will cost at least 32 billion euros ($42 billion), its four grid operators said in May.
Germany installed more than 8,885 megawatts of wind energy since 2007, mostly in the north. Now it’s studying how to build the power backbone to connect to the industrialized south, home to hundreds of factories such as those of chemicals manufacturer Wacker Chemie AG (WCH) and Siemens AG. (SIE) The electricity detours through the Czech Republic and Poland when German cables can’t handle the load as the countries’ grids are interconnected.
The problem may intensify with the approaching winter. With an insufficient north-south connection, Germany’s power network came close to a collapse last February when high winds in the Baltic sea flooded it with power and the Czech Republic and Poland threatened to disconnect their grids. The coming winter can be critical, German Economy Minister Philipp Roesler said last week.

Aging Plants

Chancellor Angela Merkel’s decision to shut down aging atomic plants and exit nuclear power by 2022 following last year’s reactor meltdowns in Fukushima, Japan, exacerbated the power imbalance. Germany more than ever will have to rely on power generated in the more windy north.
“We do understand that the Czech and the Polish grid operators are concerned about market and system security,” Volker Kamm, a spokesman for grid operator 50Hertz Transmission GmbH, said in a phone interview from Berlin. “We are seeking a constructive solution.”
Lack of grid connections, such as in China, or oversupply as in Texas have made wind energy’s global rollout a lumpy process. Wind farms in West Texas earlier this year were paying utilities to use their electricity on particularly gusty days because they can still earn $22 a megawatt-hour in federal tax credits.

Excess Flows

Utilities like Prague-based CEZ AS (CEZ) and Warsaw-based PGE SA (PGE) are occasionally forced to disconnect some coal-fired plants in the western parts of the Czech Republic and Poland because of excess power flowing from Germany. CEZ’s Prunerov plant is often a casualty of the unplanned flows, CEPS said.
“Measures we’re using are costly and at times not sufficient,” said Jerzy Dudzik, an executive from Poland’s grid operator PSE. PGE had to adjust generation schedules at its Dolna Odra and Turow plants, he said.
Both Poland and the Czech Republic are planning to install so-called phase-shifter transformers in the trans-border area with Germany to regulate power flows and protect their transmission networks. While the Czechs are still negotiating with Germany on other short-term solutions and pushing for a creation of smaller power-trading areas with realistic capacity allocation, they’re already counting on installing four transformers by 2017, CEPS said.

‘Free Lunch’

“The Germans are using our infrastructure in an excessive manner,” CEPS board member Zbynek Boldis said in an interview in Prague. “At this point they’re getting a free lunch.”
Germany’s eastern neighbors have also said that the common German-Austrian power market puts them at a disadvantage since they must reduce cross-border transmission capacity because of trades between the two nations and have to take costly measures to protect their grids.
Southern Germany imports power from Austria’s pumped- storage hydroelectric power stations in the Alps during peak periods, again using the Czech grid while excluding the Czechs from the benefits of trading within a single-border area.
“Traders within the Austrian-German common zone don’t need to bid for capacity in auctions even though they’re using up the capacity of its neighbors, who do have to pay,” CEPS’s Boldis said. “That’s discrimination.”
The German-Austrian common market’s physical transmission capacity doesn’t correspond with the volume of transactions between the two countries, so they end up using the Czech, Polish, Slovak and Hungarian grids, Boldis said. The four countries want Germany and Austria to redraw the power-trading map, creating smaller areas that would better reflect electricity flows.
“Electricity follows a path of least resistance in the grid, according to the laws of physics,” Boldis said. “The result is that our transmission system is overloaded, we have security threats.”

Apple Drops to 11-Month Low on Reports of IPhone Cutbacks

Apple Inc. (AAPL) declined to the lowest price in 11 months after the Nikkei newswire reported that production of the iPhone was cut on weak demand.

Apple ordered about half the 65 million iPhone 5 displays it originally targeted for this quarter, Nikkei said, citing an unnamed executive at a component maker. Manufacturing curbs have been widely known since December, according to Steven Milunovich and Mark Moskowitz, analysts at UBS AG and JPMorgan Chase & Co., respectively.
Last month, Apple cut production by about 30 percent, which may be the result of inventory rebalancing or lower consumer demand, Milunovich wrote in a research report today. Order cuts may also be due to suppliers becoming more adept at building the latest iPhone, reducing the need for Apple to order excess parts, Moskowitz wrote in a note to clients today.
“The bigger message related to any potential order cuts could be that iPhone 5 manufacturing yields and thereby gross margin are on the rebound,” Moskowitz said. He said that his projection for 25 million iPhone 5 units to be sold in the quarters ending in December and in March will be exceeded under the scenario Nikkei reported.
The stock fell 3.6 percent to $501.75 in New York, the lowest closing price since Feb. 15. Apple extended its decline to 28 percent since hitting a record high in September.
Bethan Lloyd, a spokeswoman for Apple in the U.K., didn’t return calls seeking comment. Among Apple suppliers in Asia, representatives from Sharp Corp., Japan Display Inc. and Hon Hai Precision Industry Co. declined to comment.

‘Old News’

“Order cuts appear to be old news,” Milunovich wrote. He said he reduced his iPhone sales estimates in December after checks with suppliers indicated a reduction in the number of phones being made.
IPhone sales could be slowing because smartphones are already common in developed markets, where Apple is strongest, said James Cordwell, an analyst at Atlantic Equities Service in London.
“We’re getting close to saturation,” said Cordwell, who rates Apple shares “overweight” and doesn’t own any. “The real growth is going to come from emerging markets, and Apple’s share in emerging markets is much lower than it is in other markets at the moment due to such high prices.”
Apple is also facing increasing competition from manufacturers using Google Inc. (GOOG)’s Android software, including Samsung Electronics Co. (005930) Android phones are gaining users in emerging markets because they are cheaper than the iPhone.

Increased Competition

Research In Motion Ltd. (RIM), the maker of the BlackBerry smartphone, is trading at its highest level in almost a year amid signs that demand for the iPhone may be waning.
RIM’s stock rose 10 percent to $14.95, following a 14 percent gain on Jan. 11. Shares of the Waterloo, Ontario-based company have gained 26 percent this year.
“The iPhone is no longer unique, fashion fatigue will transpire and the rich price premium will be impossible to sustain,” Per Lindberg, an analyst at ABG Sundal Collier in London, wrote in a research report today.
First-quarter iPhone shipments may decline 25 percent from the previous period, Peter Yu, an analyst at BNP Paribas, said today in a note. Analysts’ average second-quarter revenue estimate for Apple may drop by about $4 billion to $5 billion and the earnings-per-share projection may decline by $1 to $1.50, Abhey Lamba, an analyst at Mizuho Securities USA, said in a report.
The iPhone may be facing supply chain constraints as Apple shortens its product cycle to introduce new models more frequently, Walter Piecyk, an analyst at BTIG LLC, said in an interview.
“It takes a manufacturer time to do it efficiently,” he said. “An iPhone sold in the March quarter is more profitable than an iPhone sold in the December quarter.”

Southeast Asia’s Time to Shine, Not Just Due to Obama

In a week where U.S. President Barack Obama has made Southeast Asia the center of his first post-election trip overseas, upbeat economic news highlights another reason why the region is gaining in prominence globally.
Nicolas Asfouri|AFP|Getty Images  
While much of the world grapples with high unemployment and anemic economic growth, data on Monday showed Thailand's economy grew a stronger-than-expected 1.2 percent in the third quarter from the second.
That followed news late Friday that Malaysia's economy expanded an annual 5.2 percent in the third quarter, much higher-than-expected and compared with growth of 5.6 percent in the second quarter.
Both Southeast Asian economies were boosted by strong demand at home, which helped offset the weakness in exports that has hurt other Asian economies.
Indeed, strong third-quarter GDP numbers make Malaysia one of Asia's fastest-growing economies behind China and Indonesia, which grew 7.4 percent and 6.2 percent respectively in the third quarter.
"Malaysia's growth performance has consistently beaten our forecast for each of the three quarters so far this year and this string of upside surprises has been caused by the robust domestic economy, with an investment boom being the main driver," OCBC Bank economist Gundy Cahyadi said in a note.
In contrast to Malaysia, Thailand, and Indonesia, economic growth in regional heavyweight Singapore contracted 1.5 percent in the third quarter from the previous one, while weak exports remain a concern for the region as whole, economists say.
Nevertheless, analysts add the region remains somewhat of a bright spot.
"We do see signs of a bottoming out in Asian economies, so ASEAN will ride higher with the general upward momentum," said Vishnu Varathan, market economist at Mizuho Corporate Bank in Singapore, referring to the Association of Southeast Asian Nations, whose members include Malaysia, Singapore, Thailand, Vietnam and the Philippines.
"It is a slightly brighter spot in a still dismal global economy," he said. "From a purely economic point of view, Obama's trip highlights that the U.S. may not have fully exploited its ties with Southeast Asia."
Obama, who flew into Thailand at the weekend, made a historic visit to Myanmar on Monday and was meeting with ASEAN leaders at a summit in Cambodia on Tuesday.
(Read More: For Southeast Asians, Obama's Re-Election Offers Continuity)

Booming Stock Markets
Southeast Asia has not just caught the attention of the U.S. President. The region's equity markets have soared this year and analysts put this down to a combination of factors such as stronger economic growth and investors buying regional shares as a way to position for a rebound in China's economy.
Stocks in the Philippines and Thailand have gained about 25 percent this year, with Philippine shares setting a record high on Tuesday following a stellar overnight rally on Wall Street. Indonesia's stock market is up almost 13 percent this year, outperforming a 9 percent tally in the MSCI Asia stock index that excludes Japan.
"We still like Thailand, it is strong fundamentally. The government has done a lot to boost local consumption, for instance raising the minimum wage, boosting farm subsidies and a lot of fiscal expansion," said David Poh, regional head of asset management at Societe Generale in Singapore.
Thailand's minimum wage is expected to rise to 300 baht ($9.8) nationwide next year.
"So, Thailand's stock market has done pretty well since the start of the year and I still favor this market," he added.
In addition, economists said strong domestic demand and tourism in Thailand have acted as a strong buffer to weak exports, which fell 3 percent in the third quarter from a year earlier as global demand for Asian goods deteriorated.
"The (Thai GDP data) underscored that the domestic demand engine is still running at a decent speed, providing some counter-weight against the firming external headwinds," Leif Lybecker Eskesen, Chief Economist for India & ASEAN at HSBC said in a note.
Investors are also turning their attention to Myanmar, which is slowly opening up its economy after five decades of tight control under military rule.
"There's a lot to be done to create an investor-friendly market," said Andrew Rickards, CEO at Yoma Strategic Holdings, a developer which has just raised about $80 million to acquire an 80 percent stake in a hotel development in Myanmar's capital city. "We are confident about the way things are moving with the current government."
(Read More: China's Strong Hand in Myanmar Under Threat?)

Apple drags on S&P, Nasdaq; Dell jumps after report

By Caroline Valetkevitch
NEW YORK (Reuters) - The S&P 500 and Nasdaq ended lower on Monday as worries over demand for Apple products drove down its shares and investors braced for earnings disappointments.
Running counter to that was Dell Inc's (DELL) stock which jumped 13 percent to about a five-month high at $12.29 after Bloomberg reported the No. 3 personal computer maker is in talks with private equity firms to go private. Dell's gains offset some tech-sector weakness.
Tech heavyweight Apple (AAPL) lost 3.6 percent to $501.75 and was the biggest weight on both the S&P 500 and Nasdaq 100 (^NDX) indexes after reports the company has cut orders for LCD screens and other parts for the iPhone 5 this quarter due to weak demand. The stock hit a session low of $498.51, the first dip below $500 since February 16.
"With Apple, it seems as if the sentiment has shifted from this being the one stock that everybody wanted to own to people beginning to look at it as a company (whose) business is slowing down somewhat," said Eric Kuby, chief investment officer of North Star Investment Management Corp in Chicago.
Adding to investor unease, fourth-quarter earnings kick into high gear this week. Analyst estimates for the quarter have fallen sharply since October. S&P 500 earnings growth is now seen up just 1.9 percent from a year ago, Thomson Reuters data showed.
The Dow Jones industrial average (^DJI) was up 18.89 points, or 0.14 percent, at 13,507.32. The Standard & Poor's 500 Index (^GSPC) was down 1.37 points, or 0.09 percent, at 1,470.68. The Nasdaq Composite Index (^IXIC) was down 8.13 points, or 0.26 percent, at 3,117.50.
Apple suppliers also lost ground, with Cirrus Logic (CRUS.O) off 9.4 percent at $28.62 and Qualcomm (QCOM.O) down 1 percent at $64.24.
The Dow fared better than the other two indexes, helped in part by Hewlett-Packard (HPQ) shares, which rose 4.9 percent to $16.95. The stock, up early in the session after JPMorgan upgraded its rating on the shares and raised its price target to $21 from $15, added to gains following the Dell report.
Tech has "become the arena for private equity or other capital-restructuring type of maneuvers because of the way their valuations and their balance sheets are," Kuby said.
Appliance and electronics retailer Hhgregg Inc (HGG) slumped 5.7 percent to $7.44 after the company cut its same-store sales forecast for the full year.
Earnings reports are due this week from Goldman Sachs (GS), Bank of America (BAC), Intel (INTC) and General Electric (GE), among other companies. Third-quarter reports ended with a gain of just 0.1 percent, the worst for an S&P 500 profit period in three years, according to Thomson Reuters data.
President Barack Obama warned Congress at a news conference on Monday that a refusal to raise the U.S. debt ceiling next month could mean a government shutdown and trigger economic chaos.
S&P futures had little reaction to comments after the bell by Federal Reserve Chairman Ben Bernanke, who urged lawmakers to lift the country's borrowing limit to avoid a debt default.
Volume was roughly 5.6 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, compared with the 2012 average daily closing volume of about 6.45 billion.
Decliners were about even with advancers on the NYSE while decliners outpaced advancers on the Nasdaq by about 12 to 11.

The £27,000 pensioner loophole: 'I’ll never have to repay my student loan'

Christine Armstrong, aged 63, benefits from a quirk in student finance rules. Jessica Winch explains how pensioners can take out a loan - but never pay it back .

'I’ll never have to repay my student loan'
Christine Armstrong's pension does not exceed the threshold beyond which student loan repayments are required Photo: Kevin Holt
Christine Armstrong went to university when she was 63 years old. Three years later, she holds a BA in English from Oxford University and is now completing a Master’s degree.
Like many undergraduates, Mrs Armstrong was granted a student loan to cover her tuition fees during her degree, as well as a maintenance grant and a bursary from Oxford.
But unlike most of her younger contemporaries, she is not required to pay her student loan back, as her pension does not exceed the threshold beyond which repayments are required.
The recent change in the student fees system could make this a possibility for many more pensioners interested in a university education. Under the new system, introduced last September, people don’t have to repay a student loan if they earn less than £21,000 a year. This threshold will rise in April 2017, in line with average earnings.
Research from Prudential showed that those entering retirement this year expected an average income of £15,300 a year – well below the loan repayment threshold.

So could a student loan be the ultimate freebie for pensioners? There is no age limit on tuition fee loans of up to £9,000 a year, which apply if you are studying full or part-time and are paid directly to your university or college.
To apply for a maintenance loan, which covers living costs, you must be a full-time UK student aged under 60 on the first day of your course.
However, there is the option of a maintenance grant, which does not need to be repaid, regardless of age as long as you are a full-time UK student. The maximum grant payable is £3,250 (£3,354 from September this year).
Kevin O’Connor, head of repayment at Student Loans Company said: “When you take a new loan out you repay it back over 30 years regardless of age. You do of course firstly have to earn above the threshold in order to qualify to make repayments.
“There are some private pensions that would be subject to deductions but in the main most pensions do not exceed the threshold and therefore no repayments would be liable.”
You may not be eligible for a student loan if you already have a higher-level qualification.
Nichola Malton, an assessment manager at the Student Loans Company, said: “If a student has an equivalent or higher-level qualification already then they may not be entitled to any tuition fee loan support for their new course from Student Finance England.
“There are some exceptions in the previous study rules set by the Government, so it is important that the student looks into what tuition fee support is available to them depending on their circumstances and the course they are intending to study.
“Once they apply to us for support we can give them a clearer decision.”
Mrs Armstrong completed a foundation certificate at Oxford’s continuing education department, which cut her degree down to two years instead of three.
She was accepted by Harris Manchester College, which takes only mature students.
“By then I had found out that 'mature’ meant aged 21 and over,” she said. “I lived in college for two years and enjoyed every minute of it. I never felt out of place; the youngsters were wonderful.”
She added: “I worked through the legal executive scheme to become a lawyer and I was a deputy district judge when I retired. But I never had a degree and I always felt the lack of it.
“The first question people ask is 'Where did you do your degree,’ no matter where you are in your career.”
She said: “The beauty of doing a degree in your sixties is you really want to do it. I didn’t want to give it up , so I applied to do a Masters in Literature and Arts, still affiliated with Harris Manchester.
“There is a lot of work involved, a lot of reading. When you’re 18 it may seem a chore, but by my age it is a great pleasure.”
As she lived in student accommodation, she was also entitled to council tax exemption on her house, which she left empty thanks to “very good neighbours who kept an eye on it”.
Other silver students are also gaining qualifications. Ian McDade started taking courses through the Open University when he was 34 years old. Now 68, he has completed two BAs, two BScs and a diploma in German.
“It started as self-education and has now become a hobby,” he said. “I initially started with a science course and then moved to my favourite subject, which is mathematics. For the past four years I’ve been studying statistics and probability.”
Mr McDade, who retired from the police force in 1994, paid for his further education with the Open University from his savings.
He said: “This is something I started, I enjoyed it, I liked the Open University system and it became a natural thing to think every year: 'Right, what am I going to do now.’
“I think people retiring from work find it a big culture shock. Some sort of study is always a consideration. And it’s better than gardening.”

TRUTH ATTACK - FACT #1: There is no law making working Americans liable for the income tax

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Bank account fees 'are next PPI scandal': Millions could be entitled to compensation after mis-selling

Millions of bank customers could be entitled to thousands of pounds each in compensation for allegedly being mis-sold fee-charging current accounts.
Around a third of customers with a packaged account, which cost up to £300 a year, fails to use benefits such as travel insurance, mobile phone cover and breakdown policies that come as part of the deal.
A fifth of current account holders have these packaged or perk accounts. Many were lured into opening them by branch staff who receive large commissions for meeting monthly targets that tie customers to a lucrative monthly banking fee.
Millions of bank customers could be entitled to thousands of pounds each in compensation for allegedly being mis-sold fee-charging current accounts.
Millions of bank customers could be entitled to thousands of pounds each in compensation for allegedly being mis-sold fee-charging current accounts.
The deals are often sold as upgrades to basic free accounts. Frequently, though, the perks are useless.
Pensioners discover they are excluded from the travel cover and drivers find they have simply duplicated insurance they already have.

Charities have complained that cancer sufferers have been unable to claim on insurance sold with the accounts because key exclusions that rule out people with health problems have not been explained.
The news follows the scandal surrounding the mis-selling of 16million policies for payment protection insurance (PPI) since 2005 to cover monthly repayments on credit cards or loans should the customer loses their job.
Banks sold the policies to people who did not need them, did not want them or, in many cases, did not know they were even buying them.
Justin Modray, of the Candid Money website, said the selling of packaged accounts also left much to be desired. He added: ‘Banks have been misleading about their marketing for these accounts and sometimes the way they were sold could be quite dubious.’
The Financial Ombudsman Service is receiving an increasing number of complaints concerning packaged accounts, particularly from those sold insurance for which they are ineligible.
A spokesman said: ‘If a consumer was unaware, did not require, or did not want a packaged account and believed that they had been mis-sold, the consumer could be entitled to all their premiums being refunded.’
Last February, the Mail reported how the Financial Services Authority had begun an investigation into the sale of packaged accounts.
It will now introduce rules forcing banks to check whether a customer can claim under insurance policies. They will also have to write to customers each year outlining their cover.
Claims firms have begun promising  to win compensation of thousands of pounds for the accounts, although they charge up to 25 per cent of a claim.
Northampton firm iSmart says it has won compensation of £900 to £1,500 from high street banks for customers who were mis-sold the accounts. 
Managing director Paul Fakley said: ‘We believe this is the next big compensation scandal after PPI.’

Best Buy's Still Broken

There was nothing in the fading retailer's holiday sales report to get excited about. It could've been worse? Yes, but the point is that it did get worse. There's also a widely misreported nugget that Best Buy's actual store-level performance was flat during the telltale nine-week period of November and December.
Let's break down this problematic missive that misguided investors were buying into on Friday.
  • Best Buy's reporting flat domestic comps for the holiday period, but the chain bakes in BestBuy.com sales into the mix. Now, Best Buy isn't the only retailer to take website sales, divide it by the number of stores, and pad its comps this way. However, since we know that Best Buy's online sales grew by $0.1 billion to $1.1 billion of the $9.9 billion, we can pretty safely say that the bank of registers at the average store actually saw a 1% decline.
  • Best Buy's online sales growth of 10% was a rare morsel of positive news in Friday's report, but this only means it continues to lose market share to Amazon.com (NASDAQ: AMZN  ) . The leading e-tailer hasn't offered up explicit holiday sales results, but analysts think Amazon.com will have increased its holiday sales by 28%.
  • Things only get worse overseas for Best Buy. Yum! Brands (NYSE: YUM  ) took a hit on Tuesday after warning that comps in China would take a 6% hit. This is devastating news, because Yum! counts on the success of its KFC chain in the world's most populous nation to drive a substantial chunk of its business. Best Buy's international operations -- largely the roughly 200 Five Star Appliance stores it runs in China -- saw a 6.4% slide in comps. That's worse than Yum!'s drop.
Schulze is a misunderstood savior
In late November, Best Buy was targeting $850 million to $1.05 billion in fiscal year 2013 free cash flow. Now, less than two months later, that figure has been whittled down to $500 million for the year ending in three weeks. This figure excludes one-time restructuring hits and includes an expected benefit from a change in restricted cash related to working capital, so things are even worse than the numbers suggest.
Some have argued that spurned founder Richard Schulze will come back to rescue public stakeholders with a buyout bid at a reasonable premium. A Minneapolis Star Tribune story last month reported that he was working on a deal to take his company private for $5 billion to $6 billion. That's not only roughly half his original $11 billion price tag, but it's also less than the $6.5 billion enterprise value that Best Buy is packing after Friday's rally.
There's nothing in this report that should force him to act quickly. Waiting longer will only make it cheaper to acquire Best Buy. There's nothing in Friday's numbers to suggest that there will be a bidding war or a need to pay up for the disintegrating giant that continues to follow in Circuit City's footsteps to the graveyard.
No shorts, no service
A big mantra at Best Buy over the past couple of years has been to boost services. Attaching high-margin service contracts to low-margin sales will help increase performance.
But that strategy has been a flop. The hard sell has turned off customers, giving them another reason to sidestep the aggressive pushers of extended warranties and the ridiculous buyback protection program in favor of online shopping.
Since Best Buy has been investing in training employees to push these plans, one would expect at least this to be a rare bright spot -- but it's not. Services revenue declined 3.1% during the holiday period, and that was after a 3.4% slide a year earlier.
The ghost of Christmas Future
The only thing uglier than Best Buy this past holiday season is a glimpse of what it will be like in the future. After turning heads in October by agreeing to price-match Amazon during the seasonally potent holiday shopping season -- a move that must've crushed margins -- will Best Buy have to make this a year-round policy?
Target (NYSE: TGT  ) announced on Tuesday that it will match Amazon's prices all year long. The bar has been raised on lower margins, and others will have to follow suit.
Target can do this. It sells a ton of fresh groceries and strikes deals with celebrities and designers for one-of-a-kind apparel and decor items that one can only buy at Target. There are no prices to match on those fronts. What does Best Buy have that's exclusive? Don't expect to be taken seriously if "Insignia" commoditized electronics is your only response.
Best Buy's report on Friday was just the next step down in a story that won't end pretty. Don't let the market's exhale convince you otherwise.
Want a less bearish perspective?
The bricks-and-mortar-versus-e-commerce battle wages on, with Best Buy caught in the middle. After what might have been its most tumultuous year in history, there are now even more unanswered questions about the future for the big-box electronics retailer. How will the new leadership perform? Will old leadership take the company private? Will a smaller store format work out for both the company and its brave investors? Should you be one such brave investor? To help answer all these questions, The Motley Fool has released a new premium research report detailing the opportunities -- and the risks -- in store for Best Buy. Simply click here now to claim your comprehensive report by today.

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Goldman Sachs bankers to reward themselves a staggering £8.3billion in bonuses

  • The bank will be first to unveil its rewards - an average of £250,000 a person
  • Increase, up from £230,000 last year, comes as families are struggling to make ends meet
  • Calls for restraint by politicians, who used taxpayers' money to bail banks out, have fallen on deaf ears

  • Britain’s army of bankers will re-ignite public fury over lavish pay rewards as staff at Goldman Sachs are expected to reward themselves £8.3 billion in bonuses on Wednesday.
    The American investment bank, which employs 5,500 staff in the UK, will be the first to unveil its telephone number-sized rewards – an average of £250,000 a person – as part of the latest round of bonus updates.
    The increase, up from £230,000 last year, comes as British families are still struggling to make ends meet five years after banks brought the economy to the brink of meltdown.
    Staggering: Bankers at Goldman Sachs are expected to share £8.3billion in bonuses
    Staggering: Bankers at Goldman Sachs are expected to share £8.3billion in bonuses
    Calls for restraint by politicians, who have used taxpayers cash to bailout many of the banks, have fallen on deaf ears.
    At taxpayer-backed Lloyds Banking Group, which is expected to make a loss this year, its boss is likely to be entitled to a multimillion-pound bonus.

    Some of the reward for chief executive Antonio Horta-Osorio is linked to the share price, which has doubled, and customer satisfaction, which means he could be in line for a £4.4 million fortune.
    But most of the anger will be directed at Goldman Sachs whose vice chairman said back in 2009 ‘inequality is a way of achieving greater opportunity and prosperity for all’.
    The comments by Lord Griffiths echoed those of fictional banker Gordon Gekko in the film Wall Street - whose mantra ‘greed is good’ came to sum up the excesses of the 1980s.
    Griffiths was of the view that taxpayers should ‘tolerate the inequality’ and insisted banks should not be ashamed of rewarding staff.
    True to this ethos Goldman is likely to have boosted its salary and bonus pot to £8.3 billion from £7.6 billion the previous year due to increased profits.
    The last three months have been strong with share trading and bonds performing well.
    Global profit could top £3.79 billion up from £2.73 billion.
    The lavish windfalls come as new research shows pay rewards are failing to incentivise Britain’s big bosses to improve the long term success of their businesses.
    'Prosperity for all': The American bank (London offices pictured) employs 5,500 staff in the UK and will be the first to unveil its massive rewards
    'Prosperity for all': The American bank (London offices pictured) employs 5,500 staff in the UK and will be the first to unveil its massive rewards
    Executive pay packages across Britain’s biggest firms are ‘overwhelmingly’ linked to short-term financial measures such as earnings and share price movement, according to research from the High Pay Centre lobby group.
    However it shows chief executive pay has trebled to £4.8million, on average, in ten years without any accompanying long-term increase in share values.
    At Lloyds, the bank has experienced a short term stock rise, but given the political tensions over banking bonuses, the Lloyds directors may decide not to pay the full amount to the Portuguese banker, who last year waived his bonus following a prolonged period of sick leave.
    Lloyds shares were the second best performing of Europe’s banks last year and closed last week at 54p, up from 25.5p in May.
    But the bank is still expected to make a full year loss of about £1.4 billion, as it continues to suffer from bad debts from corporate loans and a big bill over the mis-selling of payment protection insurance.
    The 40 per cent state-owned lender was pushed to a £144 million loss in the three months to 30 September, as it took an additional £1 billion charge for dealing with the scandal, taking its total to £5.3 billion.
    Lloyds froze basic pay for 500 senior staff for the third year in a row on Friday.