RBS cuts 3,500 investment banking jobsT)

A branch of the Royal Bank of Scotland is pictured in London, on August 5, 2011.

STORY HIGHLIGHTS

• Royal Bank of Scotland is to cut an additional 3,500 jobs
• It has already announced 2,000 investment banking job cuts as it shrinks its risky operations
• The investment bank will have 13,400 staff within a year, down from the end of September 2011 number of nearly 19,000

(Financial Times) -- Royal Bank of Scotland is to cut an additional 3,500 jobs as the state-controlled bank rapidly shrinks its investment banking activities in response to the worsening economic outlook and wide ranging reforms of the banking sector due to take effect before the end of the decade.

Stephen Hester, chief executive, on Thursday outlined plans to restructure RBS' wholesaling or investment banking operations into two divisions and withdraw from activities such as cash equity broking and merger and acquisition advisory work that were aggressively expanded by former disgraced chief executive Sir Fred Goodwin.

Risk weighted assets, under Basel III regulatory definitions, will be shrunk to £150bn from £225bn under the restruring plan.

The bank will continue to operate in the fixed income and debt raising markets where it has a strong position but reduce its dependence on wholesale funding markets which have frozen up in the last three years.

Since taking over in 2009, Mr Hester has shrunk RBS's balance sheet by £600bn following the disastrous acquisition of Dutch bank ABN Amro in 2008 by Sir Fred, which forced the bank to seek a government bail-out.

It has already announced 2,000 investment banking job cuts as part of Mr Hester's attempts to shrink the highly profitable but risky operations and focus on lending to corporate and institutional clients.

The investment bank, which will be restructured into a markets division and an international banking unit, will have 13,400 staff within a year, down from the end of September 2011 number of nearly 19,000.

However, people close to the bank have said that the staff numbers could fall to below below 10,000 in a worse case scenario.

The two business units will target a return on allocated equity exceeding the cost of capital, currently estimated at 12 per cent, in the medium term.

The unprofitable cash equities, corporate broking, equity capital markets, and mergers and acquisitions businesses will be closed or sold.

"Our goal from these changes is to be more focused for customers, more conservatively funded, more efficient and with better, more stable returns for shareholders overall," Mr Hester said in a statement.

The investment bank has been RBS's growth engine in the last three years, producing an average return on equity of 19 per cent, but Mr Hester made clear on Thursday the bank had to respond to the challenges thrown up by the current economic crisis.

But pressure mounted on the bank just before Christmas, when George Osborne, chancellor, said the bank, which is 83 per cent-owned by the government, should "scale back [its] risky activities".

The government has also accepted proposals from the Vickers commission, which was set up following the financial crisis and recommended splitting investment banking activities and retail banking operations in the UK's leading banks by 2019.

Shares in RBS were 9 per cent higher at 23.75p in morning London trading.

The zero lower bound in our minds

PRIOR to the crisis, there was a general (if tenuous) accord among macroeconomists of many different stripes, that the Federal Reserve could and would act to stabilise the economy when necessary. Then, in December of 2008, the Fed hit the zero lower bound, when it dropped its target for the federal funds rate to between 0% and 0.25%, where it has sat ever since. At the time, the unemployment rate was 7.3%. It eventually peaked at 10% about a year later, and it has come down, very slowly and fitfully, to just 8.5% since then. For fully three years, America has been a zero lower bound world.

During that time, economists have been working very hard to figure out what the implications of the zero lower bound are for macroeconomic policy and unemployment. Are we stuck, or what? 

At a session this morning, I saw a few presentations on the topic. There was a general agreement among them on the nature of the zero lower bound problem and the liquidity trap. There are two different kinds of people in the economy: savers and borrowers. The borrowers borrowed heavily until the shock of the crisis changed the nature of their borrowing constraint and forced them to rapidly deleverage. Without an increase in demand elsewhere, the high rates of saving of the borrowers will plunge the economy into a deep recession. Normally, the real rate of interest should adjust downward until the savers cut their desired saving enough to offset the increase in desired saving of the borrowers; that is, they spend more to make up for the others furiously trying to pay off their bills. But in some cases, the extent of the deleveraging by borrowers may be great enough to drive the market-clearing real interest rate into negative territory. Since the Fed can't cut rates below zero, savers don't spend enough, there is excess saving, and the economy is stuck with high unemployment.

What then? Paul Krugman, who presented a paper in the session with Gauti Eggertsson, noted that fiscal policy was likely to prove effective in such a situation. The government could borrow from those wishing to save more and provide the economy with needed additional demand. At the zero lower bound, government spending doesn't generate crowding out of other investment activities via higher interest rates, so policy is even more effective than usual. And so on. There are other potential solutions, as well; one presenter noted that "unconventional fiscal policy" could replicate an ideal monetary policy through a combination of tax changes—a consumption tax scheduled to rise over time alongside a tax on labour that would decline over time.

But Stanford economist Robert Hall really nailed the crux of the question, so far as I was concerned. At the AEA meetings a year ago in Denver, I listened to Mr Hall speak a few times on this issue and point out that with the market-clearing interest rate below zero the economy was stuck with high unemployment. At the time, I wondered why, if that were true, that the answer wasn't simply a higher rate of inflation, which could combine with a zero nominal interest rate to move the real interest rate below zero.

This time around, Mr Hall addressed the point head on. He noted that in a liquidity trap, the real rate of interest was simply equal to the negative inflation rate. In other words, if the Fed's nominal rate is at 0% and the inflation rate is 2%, then the real rate of interest is -2%. If a -3% real interest rate is necessary to clear the economy, then all that's needed is a higher rate of inflation—3% rather than 2%. Mr Hall noted that this was an important point because potentially the Fed could have an enormously helpful impact on the economy simply by raising inflation just a little. And here's where things got topsy-turvy. Mr Hall argued that:

1. A little more inflation would have a hugely beneficial impact on labour markets,
2. And a reasonable central bank would therefore generate more inflation,
3. And the Federal Reserve as currently constituted is, in his estimation, very reasonable; therefore
4. The Federal Reserve must not be able to influence the inflation rate.

Now, perhaps there was a political economy subtext to this argument; if so, I missed it. Rather, he seemed to be saying (as others, like Peter Diamond, have intimated) that at the zero lower bound it is simply beyond the Fed's capacity to raise inflation expectations. Now admittedly I haven't done a rigorous analysis, but it seems clear to me that the Fed has been successful at using unconventional policies to reverse falling inflation expectations. Why is Mr Hall—why are so many economists—willing to conclude that the Fed is helpless rather than just excessively cautious? I don't get it; it seems to me that very smart economists have all but concluded that the Fed's unwillingness to allow inflation to rise is the primary cause of sustained, high unemployment. And yet...this is not the message resounding through macro sessions. Instead, there are interesting but perhaps irrelevant attempts to model the funny dynamics of a macro challenge that actually boils down to the political economy constraints (or intellectual constraints) facing the central bank. Let's focus our attention on that, for heaven's sake.

How to run the euro?

How to run the euro?

• er during the euro crisis: the markets and the politicians. In 2012 the battle will become a lot more complicated, as the politicians splinter into factions. It sounds dangerous—and it is—but thrashing out political arguments is an essential part of bringing the crisis to an end.

Amid the banks’ plunging shares and the soaring yields of government bonds, it is easy to lose sight of the political questions being asked of Europe. Markets have forced Europe’s troubled economies to confront austerity and reform, but politics will determine how they do so. Markets have demanded that Germany and other creditor nations finance a rescue, but politics will decide what they demand in return. Markets want a revamp of the euro’s governance, but politics will ordain how energetically the European Union embraces federalism.

Austerity and a rescue are now under way, though a descent of Greece into anarchy could yet throw them off course. But the third element—renovating the governance of the euro—is still highly uncertain. In 2012 Germany’s Angela Merkel and her fellow euro-zone leaders will set out the sketches for that design.

Try this for a blueprint

If you were sitting down with a blank sheet of paper, you would advise the euro zone to complement its one-size-fits-all monetary policy by pooling sovereignty and creating new institutions. You would set up a European mini-IMF (call it an EMF) with enough funds to tide over troubled countries as they adjusted their economies. A pan-European banking regulator and a bail-out fund could ensure that large European banks were not at the mercy of their vulnerable sovereign borrowers. To stop the markets from picking off weaklings, you might organise centralised borrowing—in which all countries jointly stood behind the debt of each government. And, to stop spendthrift governments from exploiting these mechanisms, euro-zone countries would agree to submit their fiscal policies to the say-so of everyone else.

It amounts to a blueprint for the United States of Europe. And it is utterly beyond reach.

For starters nobody can agree on which central authority should hold all these new powers. France and Germany would refuse to boost the European Commission, which they mistrust. Smaller countries and Germany’s constitutional court would refuse to endow an ad hoc intergovernmental council. Many national leaders heartily detest the European Parliament.

Moreover, many governments are nervous about other euro-zone countries having a say about their own public spending. And the entire EU was scarred by the eight-year-long attempt to restructure the union, first by writing a new constitution—rejected and abandoned—and later by repackaging the constitution into the Lisbon treaty, which limped into force in 2009. You do not find much appetite in Brussels for a repeat performance.

Shape up, for the euro’s sake

Where does that leave the redesign of the euro? Euro-zone governments have agreed that leaders will meet at twice-yearly summits. They have set up a proto-EMF and a European Banking Authority. And they have agreed to monitor the economies of euro-zone members in a souped-up Stability and Growth Pact.

New sanctions might require a new treaty

But more is needed, especially with sanctions. Some could be enforced at the level of the nation. Euro-zone members might have to write caps on deficits and debt into their constitutions, or create independent offices of statistics and budget sustainability, rather as they must have an independent central bank today.

Ultimately, though, new sanctions might require a new treaty. But new treaties take a long time. Countries can weigh them down with their own agendas (Britain, for instance, wants to repatriate powers even though it is not a member of the euro zone). And referendums can reject treaties (just ask the Irish).

These difficulties have answers and the EU has had more than enough practice in fashioning compromises out of unpromising ingredients. But if the euro zone gets it wrong in 2012, it will be laying the foundations of the next currency crisis. 

Will 2012 be another stellar year for gold investors?

NEW YORK - 

In contrast to the closing months of 2011, gold has begun the new year on a more positive note.  Whatever the metal's short-term prospects - indeed even if gold takes another dive - we believe 2012 will be another stellar year for gold investors.

Gold topped out at an all-time high just over $1,924 an ounce in early September - a whopping gain of some $600 or about 50 percent from last January's low point.  But as investors know all too well, gold prices can be quite volatile - with big upswings often followed by big downturns, albeit around a rising long-term trend.  Such has been the experience of the past four months with gold shedding roughly 30 percent from its all-time high to its recent late-year low point of $1,522.  But, let's not forget, even allowing for this deep price correction, gold still closed the past year with just about the best annual gain of any asset class!

Looking ahead, 2012 could well turn out looking much like the past year for gold - with sizable gains, possibly as much as 50 percent (or more) from the recent lows, but also with occasional big declines that may lead many observers of the gold scene to mistakenly declare an end to the yellow metal's bull market.  Just as gold bears have been wrong over and over again in the past decade, so will they continue to be wrong in 2012.

The story of gold in recent years has been a tale of institutional traders and speculators - including hedge funds, commodity funds, and the trading desks at the big banks and financial firms - producing great two-way volatility as they rushed into gold (as we saw last summer) and then, not just unwinding long positions, but shorting the metal in a big way (as we saw this past fall).

Driving these institutional players, in addition to momentum and technical trading indicators, has been the flight from the euro into U.S. dollar assets - and the appearance of dollar strength pushing gold lower, particularly at times of massive euro capital flight.

Importantly, much of this negative activity has taken place in gold derivative markets - but, all the while, long-term physical demand has remained fairly robust.

Buying from the Asian gold-market giants - China and India - for both jewelry and investment has continued to remain firm in spite of higher prices that years ago might have discouraged continued accumulation.

Having just returned from two weeks in China and meetings with many players in the country's gold market, I can tell you that gold demand remains strong despite the recent slowdown in economic activity, thanks to personal income growth albeit at a slower pass, rising wealth among those most likely to buy gold, and also inflation fears.  Moreover, higher gold prices, rather than discouraging demand, have attracted new investors to the market.

Meanwhile, global net central bank gold buying has not just continued but has accelerated as reserve managers look for opportunities to shed U.S. dollars - and euros too - in favor of something that has a longer track record as a reliable store of value.

Central bank reserve managers, ever sensitive to buying without disrupting the market, have used episodes of price weakness to step up their buying.  This behavior now reduces downside risk while it is also helping set the stage for a surprising sizable snap-back in the metal's price.

What few gold pundits realize is that the amount of physical gold available in the world gold market - the "free float" - is shrinking, thanks not only to Chinese and other Asian buyers, many of whom are unlikely to sell, but also due to renewed interest and accumulation of gold by a growing number of central banks.  For central banks, the holding period may be measured in decades if not longer.  As a consequence, future demand will have a much more high-powered affect on the price of gold - and this is one of the reasons we expect much higher prices in the years ahead.

Short-term trading in derivative markets may, at times, produce a great deal of gold-price volatility - and can trigger significant price corrections - but, in my book, it does not affect the long-term price trend.  What governs the price of gold over the long term are the market's real-world supply and demand fundamentals - and these have been decidedly bullish and are becoming even more so.  Hence, my long-standing long-term forecast of higher gold prices over the next several years.

Jeffrey Nichols, Managing Director of American Precious Metals Advisors, has been a leading gold and precious metals economist for over 25 years. He is also Senior economic Advisor to Rosland Capital.  See www.nicholsongold.com

LBMA Forecasters See Gold Reaching $2,055 This Year

The London Bullion Market Association published the results of its Forecast on Monday, the firm’s annual survey on the direction of precious metals prices for the coming year.  The large majority of respondents – comprised of analysts and strategists from investment banks and other financial firms across the globe – predicted that gold will rise for a 12th consecutive year on its way to further new all-time highs.

The average maximum gold price estimate among the 26 respondents came in at $2,055 per ounce, a 6.9% increase over the yellow metal’s $1,923 record high in 2011.  In addition, the highest individual estimate came from UBS’s Edel Tully – last year’s most accurate gold price forecaster – who predicted that gold will reach a high of $2,500 per ounce in 2012.

The average of the mean gold estimates was $1,766 per ounce, 12.3% above the $1,572 average price in 2011.

While the analysts were quite bullish on gold in the year ahead, they were considerably less constructive on other precious metals.  The average estimate for silver in 2012 came in at $33.98 per ounce, 3.2% below 2011′s average of $35.11 per ounce.  Platinum’s 2012 average estimate was $1,624, 5.6% below 2011′s average of $1,720 per ounce. Lastly, palladium’s 2012 average estimate of $735.52 per ounce was just 0.3% above 2011′s average of $733.63 per ounce.

The numerical results of the LBMA Forecast are available at the web address below:

http://www.lbma.org.uk/assets/LBMA%20Press%20Release%202012%20Forecast%2020120106.pdf

The LBMA also noted that “The full survey, including specially written commentaries together with analysis of the historical performance of the Forecast, will be published later this month and posted on the LBMA website in mid-January.”

The Fukushima black box

The government was almost as clueless. Naoto Kan, then prime minister, had a crisis headquarters on the fifth floor of the Kantei, his office building. But emergency staff from various ministries were relegated to the basement, and there was often miscommunication, not least because mobile phones did not work underground. Crucial data estimating the dispersion of radioactive matter were not given to the prime minister’s office, so that evacuees like those from Namie were not given any advice on where to go. That is why they drove straight into the radioactive cloud. The report faults the government for providing information that was often bogus, ambiguous or slow. Perhaps the biggest failure was that nobody in a position of responsibility—neither TEPCO nor its regulators—had sought to look beyond the end of their noses in disaster planning. No one seems ever to have tried to “think the unthinkable”.
In America official reports such as those on the September 11th attacks or the Deepwater Horizon oil spill have become acclaimed books. This one is hardly a page-turner. A privately funded foundation, headed by Yoichi Funabashi, a former editor of the Asahi Shimbun newspaper, is doing a separate investigation, based partly on the testimony of TEPCO whistle-blowers. (One, according to Mr Funabashi, says the earthquake damaged the reactors before the tsunami, a claim that officials have always rejected.) It at least promises to have literary merit. Mr Funabashi, a prominent author, draws parallels between the roots of the disaster and Japan’s failures in the second world war. They include the use of heroic front-line troops with out-of-touch superiors; rotating decision-makers too often; narrow “stovepipe” thinking; and the failure to imagine that everything could go wrong at once.
Complex systems, jerry-rigged
For now, the risk is that the interim report does not get the attention it deserves. So far it seems to have aroused more interest on a techie website called Physics Forums, beloved of nuclear engineers, than in the Japanese press. The government, led by Yoshihiko Noda, has not yet used it as a rallying call for reform. One of its recommendations, an independent new regulatory body, will soon be set up. Others, such as new safety standards and broader evacuation plans, would take months to implement.
Such reports are, after all, confidence-building exercises. They are meant to reassure the public that, by exposing failures, they will help to prevent them from being repeated. In the case of Fukushima Dai-ichi there is still plenty to be nervous about. Although the government declared on December 16th that the plant had reached a state of “cold shutdown”, much of the cooling system is jerry-rigged and probably still not earthquake-proof. On January 1st a quake temporarily caused water levels to plunge in a pool containing highly radioactive spent-fuel rods.
Meanwhile, across Japan, 48 out of 54 nuclear reactors remain out of service, almost all because of safety fears. Until somebody in power seizes on the report as a call to action, its findings, especially those that reveal sheer ineptitude, suggest that the public has every reason to remain as scared as hell.

about 2011 summy og gold and selver interest and opportunites for trading

If you're bullish about the long term for gold and silver, it's mouthwatering to watch them undergo a major correction after taking earlier profits that added to your deployable cash. For a little historical perspective on pullbacks, consider the following charts.


The current 15.6% gold decline, while considered a "major" correction, is not out of the ordinary, particularly following the late summer spike. And after each big selloff, there was a price consolidation phase that in every instance led to higher prices. The message: hold on, and buy the big dips.




Not surprisingly, silver's biggest corrections are larger than gold's. This is also true for the rebounds; they've been quite dramatic. If we apply the biggest three-month recovery of 44.3% to the current correction, that would take silver to $40.63… meaning we probably shouldn't expect $60 silver by year-end.
[There's still time to capitalize on the anomaly in the metals market that will bring amazing profits to those who are positioned for it. This report will help you get started… and offers a special bonus, too. Don't delay – the tide could turn very soon.]
Regarding www.skoptionstrading.com. We have just closed another trade which generated a profit of around 23%, however, we had two trades that were not profitable so the profit on our portfolio now stands at 374.43% since inception.
Please be aware that discussions are taking place regarding an increase in the price for this service for new members, so if you are thinking about joining us, then do it sooner rather later in order to save yourself a fair few bucks by avoiding this additional expense.
Our model portfolio is up 374.43% since inception
An annualized return of 94.38%
Average return per trade of 36.57%
92 completed trades, 85 closed at a profit
A success rate of 92.39%
Average trade open for 48.13 days
 So, the question is: Are you going to make the decision to join us today?
Also many thanks to those of you who have already joined us and for the very kind words  that you sent us regarding the service so far, we hope that we can continue to put a smile on your faces.

 
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The E.U says F.U. to Every Member State

Daniel Hannan is a writer and journalist, and has been Conservative MEP for South East England since 1999. He speaks French and Spanish and loves Europe, but believes that the European Union is making its constituent nations poorer, less democratic and less free.

Daniel Hannan is a writer and journalist, and has been Conservative MEP for South East England since 1999. He speaks French and Spanish and loves Europe, but believes that the European Union is making its constituent nations poorer, less democratic and less free.
 Please click here.

 European Parliament, Strasbourg, 13 December 2011

• Speaker: Nigel Farage MEP, UKIP leader, Co-President of the EFD Group in the European Parliament (Europe of Freedom and Democracy group)

• Debate: European Council and Commission statements - Conclusions of the European Council meeting of the 8-9 December 2011 - with José Manuel Barroso and Herman Van Rompuy

- 'Blue Card' question: Alyn Smith MEP (Scottish National Party)
Group of the Greens/European Free Alliance

Please click here.

So dear readers, what do think the chances are that Britain will still be a member of the European Union this time next year? 

Regarding www.skoptionstrading.com. We have just closed another trade which generated a profit of around 23%, so our portfolio has now generated a profit of 374.43% since inception.
Please be aware that discussions are taking place regarding an increase in the price for this service for new members, so if you are thinking about joining us, then do it sooner rather later in order to avoid this additional expense.


Our model portfolio is up 384.33% since inception
An annualized return of 94.73%
Average return per trade of 36.42%
93 completed trades, 86 closed at a profit
A success rate of 92.47%
Average trade open for 49.25 days

So, the question is: Are you going to make the decision to join us today?