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LONDON, Nov 13 (Reuters) - ICAP, the world’s largest interdealer broker, said on Wednesday it had no reason to believe any of its brokers are linked to an alleged manipulation of foreign exchange markets under investigation by financial watchdogs.Regulators in the United States, Asia and Europe are looking into possible manipulation of foreign exchange benchmarks, used to price trillions of d ollars worth of investments and deals and relied upon by companies, investors and central banks.The company, which makes money by matching buyers and sellers of bonds, swaps and currencies, said the bulk of its business in foreign exchange is conducted on electronic platforms rather

than through brokers on the telephone.On a conference call following publication of its half-year financial results, the company was asked whether it believed any staff could be connected to the alleged currency rate fixing.Group General Counsel Duncan Wales said: “We have no current reason to believe that.” The foreign exchange allegations have echoes of the Libor rate rigging scandal, where six institutions have been punished, including five banks and ICAP. In the Libor case, prosecutors and regulators have said some of ICAP’s brokers acted as conduits for information at the centre of the scheme.ICAP was fined $87 million by British and U.S. authorities in September over the


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NEW MEXICO

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Stocks and shares crash into the floor as markets crash in 4th quarter of profits marketing

New York stock markets plummet into the abyss as the recession arises

The recessions prevents all business from profits as stocks decrease

Profits hit the ground and rocket in 2008

20% DRB 141.87

33% RN 2237.93

15% GHI 556.24

24% FSD 432.89


22% - TTG - 446.21 to 367.82

20% - CTEC - 653.87 to 520.76 25% - BTR - 3289.32 to 2451.65

COLD WELCOME

he bursting of a real estate or financial asset price bubble can cause a recession. For example, economist Richard Koo wrote that Japan’s “Great Recession” that began in 1990 was a “balance sheet recession.” It was triggered by a collapse in land and stock prices, which caused Japanese firms to have negative equity, meaning their assets were worth less than their liabilities.

component of GDP, fell enormously (22% of GDP) between 1990 and its peak decline in 2003. Japanese firms overall became net savers after 1998, as opposed to borrowers. Koo argues that it was massive fiscal stimulus (borrowing and spending by the government) that offset this decline and enabled Japan to maintain its level of GDP. In his view, this avoided a U.S. type

Despite zero interest rates and expansion of the money supply to encourage borrowing, Japanese corporations in aggregate opted to pay down their debts from their own business earnings rather than borrow to invest as firms typically do. Corporate investment, a key demand

Great Depression, in which U.S. GDP fell by 46%. He argued that monetary policy was ineffective because there was limited demand for funds while firms paid down their liabilities. In a balance sheet recession, GDP declines by the amount of debt repayment and un-borrowed individual


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The bursting of a real estate or financial asset price bubble can cause a recession. For example, economist Richard Koo wrote that Japan’s “Great Recession” that began in 1990 was a “balance sheet recession.” It was triggered by a collapse in land and stock prices, which caused Japanese firms to have negative equity, meaning their assets were worth less than their liabilities. Despite zero interest rates and expansion of the money supply to encourage borrowing, Japanese corporations in aggregate opted to pay down their debts from their own business earnings rather than borrow to invest as firms typically do. Corporate investment, a key demand component of GDP, fell enormously (22% of GDP) between 1990 and its peak decline in 2003. Japanese firms overall became net savers after 1998, as opposed to borrowers. Koo argues that it was massive fiscal stimulus (borrowing and spending by the government) that offset this de-

cline and enabled Japan to maintain its level of GDP. In his view, this avoided a U.S. type Great Depression, in which U.S. GDP fell by 46%. He argued that monetary policy was ineffective because there was limited demand for funds while firms paid down their liabilities. In a balance sheet recession, GDP declines by the amount of debt repayment and un-borrowed individual savings, leaving government stimulus spending as the primary remedy.Naul Krugman discussed the balance sheet recession concept during 2010, agreeing with Koo’s situation assessment and view that sustained deficit spending when faced with a balance sheet recession would be appropriate. However, Krugman argued that monetary policy could also affect savings behavior, as inflation or credible promises of future inflation (generating negative real interest rates) would encourage


More recently, however, economics textbooks have been almost the only places where labour’s share of national income remains constant. Over the past 30 years, the workers’ take from the pie has shrunk across the globe (see article). In America, their wages used to make up almost 70% of GDP; now the figure is 64%, according to the OECD. Some of the biggest declines have been egalitarian societies such as Norway (where labour’s share has fallen from 64% in 1980 to 55% now) Sweden (down from 74% in 1980 to 65% now). A drop has also occurred in many emerging markets, particularly in Asia Since capital tends to be owned by richer households, a rising share of national income going to capital worsens inequality. In countries where the gap in wages between high earners and the rest

has also increased, the two effects compound each other. in America, the share of national income going to the bottom 99% of workers has fallen from 60% before the 1980s to 50%. When growth is sluggish, as it is now, these shifts mean that most workers are getting. Politically, that is dangerous, and it is producing a lot of predictably polarised debate. The left blames fat-cat firms and the weakness of unions for workers’ declining share. Those on the right, if they acknowledge a problem at all, argue that the fault lies with big government and high taxes. These explanations are hard to square with the fact that the shrinkage in labour’s share of the pie has occurred in so many countries, with widely differing levels of unionisation and sizes of govern-


FALLEN

ECONOMY


SOUTH AMERICA Profits rocket into soil as businesses fail to keep their equity positive


EUROPE Economic disaster in the flush of all markets during 2008

ASIA Market failure causes companies to close and businesses grow weaker due to no value of stocks

AUSTRALIA Businesses fall into the ground and close leading towards the beginning of the recession

GLOBAL MELTDOWN

The global financial crisis hit happiness and eroded trust in governments, according to the OECD thinktank.Its research into the human cost of the crisis found that between 2007 and 2012, reported average life satisfaction declined by more than 20% in Greece, 12% in Spain and 10% in Italy.“In the wake of the crisis, household income and wealth, jobs and housing conditions deteriorated and have not completely recovered yet in many OECD countries,” says the How’s Life report.“This had the effect of increasing poverty and inequalities, especially among young people and low-skilled workers. The number of discouraged workers and inactive people has increased, as did perceived

work-life conflicts for employed people. Clear negative trends have also emerged in subjective well-being and civic engagement, with increasing levels of stress, lower life satisfaction and decreasing trust in national governments.” The percentage of people in the worst affected euro area countries claiming to trust national government fell by 10 percentage points in the five years leading to 2012. In the 34 OECD countries as a whole, less than half of those surveyed said they trusted their governments – the lowest level recorded since 2006.The thinktank’s research into Greece suggests the average Greek household has been “severely affected” by the crisis, particularly when it comes to


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If you are saving for retirement and find that you are glued to the radio or TV when the stock market is experiencing wild and volatile movements, you may find yourself asking “why am I taking a risk by investing and not just saving in a bank account or a GIC?�It is at times like 2001 and 2009. when we saw huge shifts of capital move from the stock market to the safety of GIC’s that cement our understanding that fear of losing far outweighs our desire to gain.The reason we invest is because we know we have to save for retirement and, in many cases, we need a decent return on our savings to achieve our goals. There were times when interest rates were so high that we could easily reach our targets with a GIC or savings account, but the days of

Traders buy and sell shares of companies. Generally, the price of a stock is determined by supply and demand. For example, if there are more people wanting to buy a stock than to sell it, the price will be driven up because those shares are rarer and people will pay a higher price for them. On the other hand, if there are a lot of shares for sale and no one is interested in buying them, the price will quickly fall. Because of this, the market can appear to fluctuate widely. Even if there is nothing wrong with a company, a large shareholder who is trying to sell millions of shares at a time can drive the price of the stock down, simply because there are not enough people interested in buying the stock he is trying to sell. Because there is no real demand for the com-



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