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Monday, September 1, 2008

2 important changes

I offer you two major events that could change our life a lot. Well, the ECB's rates increases are certainly affecting the life of million of home owners across the continent. My family also. So, there is a question why ECB is so keen to keep the Euro strong when obviously, this politics is damaging European exporters. I don't mean to have a weak Euro-that's out of question and I guess they want to keep it secure so that more countries prefer it as a backing currency. But still, stable isn't the same as high. And with those high rates, I don't see how people can keep their possessions in the face of this inflation. That decision is a mistery to me.
The second article is more fun. It's about USA allowing companies to obey foreign investment security rules if they prefer them. Which I won't comment since it's obvious enough and I don't want to be bad. Well, change is the normal state of history. But simply notice how finally USA starts realising it cannot continue acting like it's the boss of the world. I like that :)
  • ECB raises borrowing rate despite economic slowdown
  • Accounting Plan Would Allow Use of Foreign Rules

ECB raises borrowing rate despite economic slowdown

4 July 2008

In a widely expected move aimed at keeping inflation in check, the European Central Bank (ECB) yesterday (3 July) raised its central rate to 4.25%, sending euro trading near to its highest level against other currencies.

ECB President Jean-Claude Trichet said the decision to increase the key interest rate by 25 basis points "was taken to prevent broadly based second-round effects" on inflation, which in May hit a record high in the 15-nation eurozone (EurActiv 17/06/08).

The raise sends the ECB's central 'refinancing rate' to its highest level since 2001. The previous rate rise came in June 2007, before the credit crisis started hitting the US, dampening growth prospects in Europe and raising fears of a worldwide recession.

While Trichet admitted that the ECB's decision had been taken against a background of "weakening of real GDP growth in mid-2008," he said the economic fundamentals of the euro area nevertheless remained "sound".

"Growth in the world economy is expected to remain resilient, benefiting in particular from continued robust growth in emerging economies. This should support euro area external demand," Trichet said in a statementexternal .

The ECB's perceived narrow focus on containing inflation has been a subject of repeated criticism from Nicolas Sarkozy, the French President, who assumed the EU's six-month revolving presidency on 1 July. In his view, the ECB should also keep an eye on maintaining borrowing costs low enough to stimulate investments, exports and economic growth.

European industries are also concerned about the impact of the strong euro on exports. In a press conference yesterday, the European Aerospace and Defence Industries Association (ASD) said it is planning a meeting with the ECB to present it with the facts on how the euro-dollar rate is hurting competitiveness. "Each 10 cent devaluation of the US dollar against the euro produces a loss of margin of one billion euros to major companies," said ASD President Åke Svensson.

This view was echoed by ETUC, the European Trade Union Confederation, which said the ECB's decision was "not comprehensible" in face of the current economic slowdown. "Tightening monetary policy [...] is inviting recessionary forces to take hold," ETUC said, adding that the ECB's decision would "choke" the euro area economy and "do little to address the real causes of inflation" which "is essentially imported from the rest of the world through high oil prices".

According to Eurostat figuresexternal published in June, fuel for transport was 14% more expensive in May 2008 than one year before. Prices for milk, eggs and cheese have increased some 14% in the last 14 months. source

My comment: Btw, if you read the source, you'll see how German finance minister first said the ECB shouldn't done that and then he gets sooooooofter.

Accounting Plan Would Allow Use of Foreign Rules

Published: July 5, 2008

WASHINGTON — Federal officials say they are preparing to propose a series of regulatory changes to enhance American competitiveness overseas, attract foreign investment and give American investors a broader selection of foreign stocks

The regulatory changes are on the agenda of Christopher Cox, chairman of the Securities and Exchange Commission.

But critics say the changes appear to be a last-ditch push by appointees of President Bush to dilute securities rules passed after the collapse of Enron and other large companies — measures that were meant to forestall accounting gimmicks and corrupt practices that led to those corporate failures.

Legal experts, some regulators and Democratic lawmakers are concerned that the changes would put American investors at the mercy of overseas regulators who enforce weaker rules and may treat investment losses as a low priority.

Foreign regulators are beyond the reach of Congress, which oversees American securities regulation through confirmation proceedings, enforcement hearings and approval of the Securities and Exchange Commission’s budget.

The commission is preparing a timetable that will permit American companies to shift to the international rules, which are set by a foreign organization and give companies greater latitude in reporting earnings. Companies that have used both domestic and overseas rules have, on average, been able to report revenues and earnings that were 6 percent to 8 percent higher under the international standards, according to accounting experts.

Though foreign accounting standards are stronger in some ways than American accounting principles, they are weaker in some important areas. They enable companies, for example, to provide fewer details about mortgage-backed securities, derivatives and other financial instruments at the center of today’s housing crisis and that have troubled many Wall Street firms, including Bear Stearns.

The shift to international standards could also wind up eliminating the conflict-of-interest rules, adopted after the collapse of Arthur Andersen and Enron, that have limited auditors from performing both accounting work and consulting for the same client.

The S.E.C. also plans to announce details of a pilot program that would enable foreign brokers to deal directly with American investors, while continuing to be largely regulated by the foreign country. The first country in the program will be Australia, although officials hope to eventually include other countries. In a third move, the Public Company Accounting Oversight Board, which works under the supervision of the S.E.C., is preparing a rule that would allow it to defer to foreign regulators for inspections of some of the 800 foreign auditors of overseas companies that sell stock in the United States.

The oversight board was created by the Sarbanes-Oxley law of 2002 in response to the accounting scandals at Enron and other large companies. The law requires the board to inspect regularly all accounting firms that certify the financial results of companies whose shares are sold in the United States.

Officials say the proposed changes reflect the decades-long push toward global markets. They say the changes are necessary to attract capital from abroad and will protect Americans as they increasingly look to invest overseas. In the decade ending last November, American holdings of foreign stock increased to $4.3 trillion from $1.2 trillion.

Mr. Tafara said that the mutual recognition agreement with Australia would continue to protect American investors because the S.E.C. would continue to have the authority to prosecute foreign companies under antifraud provisions of the law for what he called “lying, stealing and cheating.” The S.E.C. would continue to investigate accusations of illegal insider trading, for example, an area where the commission has been more vigorous than many foreign jurisdictions.

But the S.E.C. would not enforce many investor-protection laws involving issues ranging from the quiet period before a stock offering to market manipulation, financial disclosures and abusive trading tactics. Nor would foreign officials apply a panoply of American securities rules that are unique in that they are intended to protect minority shareholders. Instead, the commission would rely on its Australian counterpart to enforce its securities regulations, which often involve different standards.

In a speech earlier this year, Christopher Cox, the agency’s chairman, said that working on the transition to international accounting standards and reaching enforcement agreements with foreign countries like the Australians were two of the most important items on his agenda as his term comes to a close.

But critics say that the move toward harmonizing rules and enforcement practices is fraught with problems and would dilute American securities laws, generally considered to be the most protective of investors in the world.

Although the staff of the S.E.C. has been working on the changes for many months, the agency has been hampered by vacancies at the top. Those vacancies were filled last week, when the Senate confirmed three new commissioners, including two Democrats, to the five-member commission. To adopt the changes, Christopher Cox, the agency’s chairman, will need to get the support of at least two commissioners.

Industry groups have pushed for many of the changes. Large international accounting firms, for example, have complained that the emergence of a new generation of American and foreign regulators inspecting them has led to onerous duplication.

But foreign regulators say it is absurd to think that the United States has the ability to police markets alone.

“Let’s be clear — no single jurisdiction can resolve all the problems of globalization,” said Pierre Delsaux, a senior markets regulator at the European Commission. “We are all doing the same thing. No country has a monopoly on protecting investors.”source

My comment: I was quite impressed that many americans now seach for investments outside USA. Oh,well :)

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