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AN effective coordination of the fiscal and monetary authorities that would enthrone harmony in policies from both sides has been canvassed by Abuja-based civil society organization.

Specifically, the group urged the Central Bank of Nigeria (CBN), which heads the countryâ??s monetary system, to establish strong collaboration with the fiscal policy authorities to ensure a coordinated approach to national development.

The Lead Director of Centre for Social Justice, Eze Onyekpere, while reviewing the latest Monetary Policy Committeeâ??s communiquà of the meeting held last week, said that harmony between the two will guarantee greater investments in selected critical sectors and infrastructure development, especially in the power sector, agriculture and manufacturing.

â??Special policy incentives that facilitate greater credit to the chosen sectors will spur economic growth, activate the growth drivers and create more jobs.

â??The critical issue of greater accretion to the external reserves through the proper management of the petroleum industry, including the stoppage of oil theft is crucial for revamping and stabilising the economy, which would lead to a stronger Naira and better exchange rate,â? he said.

According to him, an empirical study of the causes of excess liquidity in the Nigerian system is imperative to tackle the challenge instead of perpetually reacting to its symptoms and offering palliatives.

While acknowledging the committeeâ??s holistic view of monetary and fiscal policy and development by reiterating that key issues of employment level, wealth creation and growth of business should be central goals of monetary policy, he however pointed out that it did not articulate the mechanism for ensuring that macroeconomic stability transmits and facilitates employment, wealth creation and business growth.

â??The CBN needs to get back to the earlier promise of its governor to reduce the lending rate and make credit more available to medium and small scale enterprises.

â??The MPC should start considering steps, which would be implemented immediately after the elections to ensure that sound macroeconomic fundamentals are transmitted to improvements in the economy- production, jobs and improved livelihoods,â? he said.

Onyekpere lamented that Nigeria has become a country of perpetual potentials, which are not developed or matured to become growth drivers.

â??Gas fired plants were constructed without thinking through how they will access gas to become operational. Seven years down the line, the challenge remains largely unaddressed.

â??There has been publicity around policy action taken on paper by government and Nigerians have been informed about funds being channeled to the challenge.

â??However, progress remains snail slow and at the level of stories. Official reaction will be that it takes time and years to construct gas pipelines but no one can claim that it takes forever.

According to him, the group is recommending that the implementation of the Federal Governmentâ??s agriculture agenda be intensified, with more support should be channeled to current policy positions in favour of local production.

â??This should not be restricted to agriculture alone as we need clear policy positions in sectors such as petroleum refining, manufacturing, among others, to guarantee local investments that will reduce importation, while increasing the value of local production.

â??Federal Government should insist on the full implementation of the new automobile policy, while providing buffers that will reduce the hardship that it may engender in the short run,â? he added.

ORIGIN OF DERIVATIVE SPECIES

The origins of derivatives really came onto the scene in the early 1990 decade following the Black Monday 1987 crash. Most people believe the nation overcame the crisis. It did not. Actually the weight shifted, so that the Asian Meltdown occurred ten years later in a grand echo. The firm Jackass belief was that after a decade of adjustment to significantly higher crude oil prices (following 1973 Arab Oil Embargo) and a massive slice of US manufacturing having been outsourced to the Pacific Rim and to Japan, the USEconomy suffered a severe air pocket of insolvency. It lost its income and endured higher costs. Economists overlook the challenges with jutted chests like peacocks. The 1987 stock slam that occurred was a wake-up call. The response was the creation of a derivative banking foundation of vaporous substance. It was a shoddy attempt to compensate for the gross insolvency of the US Banking system. It operates like a constantly moving Round Robin of self-dealing fraud designed to maintain the value of the foundation itself. The US lost industry, lost income, relied upon debt security trading, lost solid foundation, and set itself up for grotesque dependence upon asset bubbles for income and wealth generation, instead of from industry and tangible work. The US created a Ponzi Economy that is fracturing finally, here and now.

TYPES OF DERIVATIVE DEVICES

Main types of derivatives litter the contrived banking landscape, all highly risky. Credit Default Swaps are insurance contracts to protect against default of corporate bonds. The most popularly traded are the CDSwaps from bank bonds, linked to the big financial firms. They tend to be traded hundreds of times over, a true absurdity. Imagine 20 neighbors have fire insurance on your home, and then some go out and borrow money on the fire insurance policy to manage their household. Chaos would come if and when a fire actually destroyed the house. Well, chaos did come to the House of Lehman, mentioned later. The Interest Rate Swap contracts are short-term versus long-term trades, then leveraged further within the contracts that link the bonds on inner workings. They are clever devices used to create massive artificial USTreasury Bond demand. The architects can even create a vacuum in which the big US and London banks must go out and secure more bonds, and to purchase them unwillingly. Evidence of such atrocity is the infamous Failures to Deliver of USTreasurys, the backwash which the Wall Street conmen prefer never to explain. They are evidence of too much reliance upon the IRSwap to create phony bond demand.

The 2011 USTreasury Bond rally was all artificially contrived, from a cool $8.5 trillion in Int Rate Swaps put on by Morgan Stanley over several months late in 2010. The financial news chose to ignore the phenomenon, and instead focus on a bond rally. They wish never to look at data from the Office of Comptroller to Currency. The intrepid Rob Kirby and the Jackass do. There was no rally in reality. In fact, there was no US loose wealth lying around from which to purchase bonds. At the same time as the hefty dose of IRSwaps dispensed by Morgan Stanley, the USFed made available between $5-10 trillion in Dollar Swaps to rescue an insolvent European banking. Their banks were in dire straits in 2011 in the aftermath of the PIIGS sovereign debt implosion. They should have collapsed, just like the Wall Street banks.

The US financial system desperately required the ZIRP to remain in place. Notice 0% is stuck, which enables long-term bonds to be bought with free short-term cash via the swap. The Int Rate Swap is used to push the demand into long-term bond instruments, and poof, a rally. The practice is very risky since it constitutes self-dealing fraud, much like structural Flash Algorithm Trading operating on a vast vapor platform. The risk is to blow away the vaporous platform and its illusory mass. The JPMorgan Chief Investment Office and USDept Treasury use the powerful Exchange Stabilization Fund to do much hidden dirty work. The ESFund is dangerous to discuss, since it controls almost every world market. Foreign nations do not wish to learn of the control of their markets from a Wall Street control room. Best to describe in rough cuts. The entire USTreasury Bond complex of 0% short-term and 3% long-term is carefully managed by derivatives. Despite the nearly complete absence of foreign USTBond buyers, and the huge uncontrollable USGovt debt to finance, the sovereign bond from the financially crippled United States remains in safe calm controlled secure ground. How so? By Interest Rate Swap contracts and fabricated demand.

The other leveraged asset backed securities use leverage squared. See the incredibly crazy Collateralized Debt Obligations whose wreckage still has not been entirely cleaned up. The mortgage bonds have a higher structure with another 25:1 or 30:1 leverage put on the already leveraged mortgage bonds. With just a 7% to 13% decline in the basis of the CDO bond, the entire bond goes worthless, and did go worthless. Much of QE bond monetization is done to offer effective cloud cover to redeem a massive amount of financial derivatives. The chairman talks about $40 billion per month, but never is coverage of derivatives mentioned. Thus the estimation of $100 to $150 billion in QE volume per month. The Jackass lives in the world of reality, not in the US propaganda shadow or fecal downwind draft.

The entire USEconomy remains totally dependent upon ZIRP and QE, thus better described as a Ponzi Scheme economy. Draghi at the Euro Central Bank devised phony super senior bonds as patches, declared illegal by the German high court. The Long-Term Refinance Operation (LTRO) attempted to create a super senior bond that lorded over the sovereign bond. In this way, a banking collapse would allow the elite owning the LTRO bonds to be paid first, not lose any money, and impose the losses on the unwashed masses for the standard fare sovereign bonds that attract all the attention. More derivative hanky panky mumbo jumbo, pure shenanigans.

DECEPTIVE LEGAL UNDERPINNING

The 2005 Bankruptcy Reform Law was a douzey, rarely ever explained for its details or consequences. The private citizen side is often discussed. If John Doe declared bankruptcy, he could no longer exercise a Chapter 7 BK. No more was permitted the lineup of all assets, placed against all debts, with a cleansing operation and single sweep. Ch-7 used to allow for the debtor to walk away with no more debts, the creditors dealt with fairly, using whatever assets existed. Imagine the debts being 5 times larger than the assets, which would mean the creditors would receive 20 cents per dollar in debt held. Clean, nice, done! It was eliminated, in favor of Chapter 13 BK. It instead stipulated a restructure of debts, often with reductions on amounts owed, along with a revised timetable for repayment, seemingly forever in many cases. Imagine a rework of a car loan or home mortgage, when more time is given, interest rate possibly reduced, with end result being more years to pay off but more manageable. The social impact was to eliminate fresh starts, and to make systemic the debt dependence, kind of a debt slavery with legion of debt vassals working in servitude. Also, a key element to the Reformed BK Law was that income taxes were never reduced or forgiven. In many cases, the repayment would take 20 to 30 years, a clear cut display of tax slavery.

The far more onerous and deceptive side of the Reformed BK Law is seen in provisions for the financial institutions. The failure of big banks or other large financial institutions would never again be a simple failure, with liquidation, with trustee management, with a hierarchy of losers. The entire hierarchy was quietly altered, but with almost zero publicity. It took many alert analysts a few years to discover the fine points of the revised law. The new law dictated the derivatives would be first in seniority for satisfaction during any bankruptcy proceeding. The truly sadistic element of the new law was the accounting classifications, whereby depositors are called unsecured lenders to the bank, while derivative owners are called secured lenders to the bank. Hence, the depositors like with CD or passbook savings accounts no longer own their accounts. They technically lend their deposits to the bank and are permitted to withdraw them with interest, provided the bank is sound. The depositors found themselves to be last in line during a failure, the disadvantaged class from the Reformed BK Law. Individuals stand behind the derivative owners. The US public had no idea what happened on the financial firm pecking order, and still largely does not. If a big bank fails, or a major mortgage firm fails, then the derivatives are handled first, and then depositors are given crumbs left on the floor. Most analysts believe the depositors will be wiped out, as the derivatives will find some salvage. It is accurate to say that the Bankruptcy Reform Act ushered in the Bail-in concept long before Cyprus hit the scene in 2013.

LEHMAN FAILURE KILLJOB amp; SHAM

Derivatives played a key role in the Lehman investment bank failure. In reality, it was more a planned financial murder event, orchestrated by JPMorgan and Goldman Sachs. Much has been written about the carefully crafted event of denying Lehman Brothers their due payouts from certain investment instruments, in order to force them into a dangerously poor liquidity position. The vultures JPM amp; GSax exploited the situation to the max. The true background was that Goldman Sachs was vulnerable to failure, as a result of its heavily leveraged position in mortgage bonds, even CDO bonds (leverage squared). The biggest victim to the Subprime Mortgage Crisis was Goldman Sachs, the venerable firm of superstars who only knew near perfection. Their strong performance is maintained through graft, collusion, insider trading, and government control. So the Wall Street kings killed Lehman in order to pick its bones and to feed Goldman Sax, in plain terms. It bears repeating. The most at risk firm on mortgage bonds during the Lehman collapse chapter was GSax (not Lehman) since more leveraged. In the aftermath, the USGovt chose to nationalize AIG for a few reasons. Among them were the desire to cover up how duplicate Credit Default Swap contracts were owned against the failed firms, even the preferential treatment. The financial derivative impact crater was large, to be kept quiet with AIG movement under the USGovt aegis. Recall several owners of fire insurance against your house, where payouts are complicated.

The Lehman CDSwap contracts had to be managed in payouts. GSax then received 100 cents per dollar on their Credit Default Swaps, incredibly, first in line, since they managed the desk. It can be said that AIG was nationalized, in order to control the derivative implosion, and to redeem GSax fully in secrecy, without AIG executives offering obstacles. Other payouts occurred at 30 cents or 60 cents per dollar insured. The Lehman event was a derivative implosion event very well disguised. When it was killed, it caused a derivative crisis and the immediate need to alter the rules, conjure up new rules, and to favor the JPM/GS tagteam of white collar crime. The derivative implosion forced the USFed into ZIRP Forever and QE to Infinity, in order to continually manage the wrecked derivative landscape. The USFed monetary policy of ZIRP/QE is stuck permanently, which continually has created a backdoor bailout to Wall Street bank portfolios, since they must manage the long-term USTreasury Bond breakdown. The USTreasury complex required free money from which to create steady ongoing never ending bond demand. The derivative foundation evaporated. The end result was the US financial system stuck with hyper monetary inflation to finance debt and to sustain the vaporous derivative foundation, that spinning whirling dirvish that still gives the impression of mass for a foundation.

LONDON WHALE DAMAGE amp; LIES

From the Lehman failure in late 2008, to the Zero Interest Rate Policy installed in 2009, to the Quantitative Easing put in place in 2011, it only took another year for the big accident to occur. The crash site was the so-called London Whale incident. It was well covered up, as per usual with Wall Street. It was another derivative disaster story. At first, JPMorgan spokesmen told a fantasy fairy tale about losses due to European sovereign bonds for the previous quarter. Divert the blame to Europe, keeping attention off the United States. Upon easy quick examination, one could see (reported in Hat Trick Letter at the time) that the PIGS sovereign bonds all improved in value during the cited quarter. The only damage done was to the USTreasury Bonds, which lost ground in a sudden bout of volatility. It is well known to experts that volatility in either direction is the bane, the key enemy, of all such derivatives like the powerful Interest Rate Swap. The JPMorgan told lie was that the London Whale, with its Chief Investment Office and London outpost, has lost $800 million. They soon changed the amount of stated loss to $1.9 billion, when in reality it is in the neighborhood of $100 billion. As of now, JPM admits its loss from the London Whale incident has amounted to $8.9 billion.

The entire story is full of lies, an absolutely fabrication of lies. In fact, Bruno Iksel has been made into something of a scapegoat. The JPM bank executives have tried consistently to put distance from themselves to Iksel himself. They gave him all the marching orders, in a closely coordinated operation, with some leeway to be sure. The Whale was managing a boatload of Interest Rate Swaps. He and JPM played serious accounting games, like not marking to market, like pushing through a late day trade to alter the final price. The truth has never come out. The full extent of losses cannot be revealed without admitting that the entire USTreasury Bond complex being from an artificially defended fortress, bound by the corrosive derivative anchors. The false story is kept alive by means of the many London banker murders, of mid-level officers who carried out the dirty details. The other JPMorgan large holes of bankruptcy are kept quiet by Swiss insurance murders.

SYSTEMIC RISK FROM CONTAGION

Apart from numerous background pressures, the system limps along deeply wounded and probably fatally so. When China wanted to exit the long-term USTreasurys, the USFed accommodated them. They launched Operation Twist without much clear explanation of its provisions. We are always led to trust the magic of their machinations. China actually transferred their long-term bond holdings to short-term holdings, in order to make possible their redemption at maturity, and soon, like before the implosion. The USFed accomplished the task by putting on an enormous swath of cleverly devised Int Rate Swaps, which in effect switched from LT bond to ST bond. There are a great many other types of derivatives, such as exotic swaps, and customized contracts.

The entire Euro Monetary Union has its foundation created upon swapped hidden debt into FOREX currencies, an illicit deed that to this day has not been resolved. The Maastricht Treaty was circumvented by means of heavy swap contracts, shifting debt onto currency obligations in the form of these derivative swaps. Many were the big investment banks eager to assist in the deception and illicit qualification process, and thus earn big fees. The nations of Italy and Spain, for instance, were able to qualify for the European Monetary Union by hiding their debt with the FOREX swaps. Prosecutions are laced all through the Deutsche Bank chambers here and now, the legal wheels of justice grinding slowly. Therefore, the Euro Currency has a phony fraudulent foundation, an illicit basis enabled by derivative abuse. The victim of the ongoing prosecution, if the USGovt chooses to impose yet more heavy fines, could be the German alliance. The Germans are ready to jump ship, away from the sinking USS Dollar.

Perhaps the ugliest derivative story is the IRS Tax secure stream contract very likely used by China as collateral, which is suspected by the Jackass to be the backend deal to secure a Gold Lease from China. It is related to the 1999 Most Favored Nation granted by US to China. The Chinese would receive gigantic direct foreign investment, and thus build an industrial base. The Wall Street criminal bankers would receive a vast hoard of gold bullion, leased from the Chinese Mao Era gold reserves. The Chinese distrusted the US bankers, after many past experiences, which might include several rafts of fake gold bars sent to Hong Kong banks by the Clinton-Rubin Admin. In the outcome, the Wall Street masters reneged on the gold lease, while the USEconomy entered a downward spiral of recession which accelerates downward. The Jackass suspects that the powerful recession made impossible the honoring of the IRS secure stream derivative contract held as collateral, forcing a national default. In the last few months, we see China busy securing US commercial property. The Chinese have taken control of the JPMorgan Chase headquarters in South Manhattan, the famed One Chase Plaza. In it is contained the largest private gold vault facility in the world. It has underground tunnels connected to the US Federal Reserve. Many are the rumors and suspicions that with the end of the Federal Reserve Act operational contract, following 100 years of hidden financial tyranny, that the Chinese might have taken over a strong interest in the Fed, maybe a controlling interest.

GOLD ON WHITE HORSE

The Western financial system is operating on fragile tenterhooks, on shaky pylons, on that same vaporous floating spinning illusory foundation. A few big banks have entered failure, like Banco Espirito Santo in Portugal. When big banks begin to fail, the belief has been, the risk of contagion will be the main focus. Since Lehman, the major Western banks have lashed themselves together for safety and security. They have done so with financial derivatives, the rope to connect them together. Thus no repeat of Lehman failure, a big financial firm failure to put the entire system at risk of breakdown. So the next failures will put the entire system at risk of collapse. This is the oft-described nuclear outcome, which has been brought upon by the overusage of derivatives. Their total in usage is somewhere between $700 trillion and $1.4 quadrillion, depending on the definition and the team doing the calculation. Claims of big reductions in derivative overall usage are a lie, since new derivatives are put on quickly. They offer short-term security but long-term systemic risk. The world faces a guaranteed systemic implosion caused by derivatives. Bank failures and contagion will lead to the widespread connected failures, and lost control by both governments and central banks to manage them. Gold will be the secure port during the stormy outcomes.

The derivative cost will be revealed as obscene, in high multiple $trillion suddenly. The public will ask questions like how we could have permitted the situation to go out of control. To be sure, derivatives assure the equivalent of a financial nuclear explosion. The answer to the question posed is that the Rubin Doctrine has been used after the Rubin thefts of the USGovt gold reserves at Fort Knox. The doctrine dictates the sacrifice of tomorrow for a few more todays. Well, tomorrow has arrived. The return to the Gold Standard is the answer, but the clean-up crews will be busy for a long time. The Gold Price will reach incredibly high levels when the derivative implosion occurs, which should occur when the East introduces a legitimate gold-backed new BRICS currency for trade settlement. The fallout will be tremendous, as the USDollar is rejected on the global stage.

A solution must also come for the ancillary devious devices like secret weapons on weather, virus, espionage, and more. Gold will continue to draw capital away from the dying corrupted sinking system. Then finally the Gold Standard will be installed, but by the Eastern nations. It will be led by Russia, China, and Germany. The United States will be indescribably isolated. The US Fascist leaders have attempted to isolate Iran, but Tehran will be integrated into the Eurasian Trade Zone. The US Fascist leaders have attempted to isolate Russia, but Moscow will be integrated into the Eurasian Trade Zone. The US Fascist leaders have attempted to coerce Europe to join a deadend insane war with an absurd basis, but the core powers of the NATO will move away and be integrated into the Eurasian Trade Zone. The United States is a hair away from losing both Germany and France to the Eastern Alliance. They will embrace gold, and walk away from the USDollar, with a certain absorbed cost. Great changes are coming like a fierce new storm.

THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.

For over five years I have been eagerly assimilating any and all free information (articles, interviews, etc) that Jim Willie puts out there. Just recently I finally took the plunge and became a paid subscriber. I regret not doing this much sooner, as my expectations were blown away with the vast amount of sourced information, analysis tied together, and logical forecasts contained in each report. (JosephM in South Carolina)

Not only have I seen many of the things you talk about in the public arena come to pass, but I have seen many of the things you say repeated three months later by the other analysts. Congratulations! (MannyM in England)

Jim Willie is a gift to our age who is the only clear voice sounding the alarm of the extreme financial crisis facing the Western nations. He has unique skills of unbiased analysis with synthesis of information from his valuable sources. Since 2007, he has made over 17 correct forecast calls, each at least a year ahead of time. If you read his work or listen to his interviews, you will see what has been happening, know what to expect, and know what to do. (Charles in New Mexico)

A Paradigm change is occurring for sure. Your reports and analysis are historic documents, allowing future generations to have an accurate account of what and why things went wrong so badly. There is no other written account that strings things along on the timeline, as your writings do. I share them with a handful of incredibly influential people whose decisions are greatly impacted by having the information in the Jackass format. The system is coming apart on such a mega scale that it is difficult to wrap ones head around where all this will end. But then, the universe strives for equilibrium and all will eventually balance out. (The Voice, a European gold trader source)

by Jim Willie CB
Editor of the HAT TRICK LETTER
Home: Golden Jackass website
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Use the above link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

Jim Willie CB is a statistical analyst in marketing research and retail forecasting. He holds a PhD in Statistics. His career has stretched over 25 years. He aspires to thrive in the financial editor world, unencumbered by the limitations of economic credentials. Visit his free website to find articles from topflight authors at www.GoldenJackass.com, which includes a Squirrel Mail public email facility.

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If you need a significant chunk of money and are unwilling to borrow it or to charge it on your credit cards, what can you do? If youre a homeowner, you may be able to tap the power of a home equity loan or a home equity line of credit, or HELOC. But dont do so without learning more about them. Here are some of the key things to know.

  1. There are two main kinds of home equity borrowing: a home equity loan secured by the equity in your home and a HELOC. With the former, you borrow what you need in a single lump sum, while the latter allows you to borrow various sums over time as needed. The former has a fixed repayment schedule, while the latter is more like having revolving credit via a credit card. The former will often sport a fixed interest rate, while the latter is more likely to have a variable rate.
  2. That interest rate will depend in part on how credit-worthy you are. Those with high credit scores (such as in the 700s and above) can expect to be offered the best rates for home equity loans and HELOCs. Those with less pristine credit records will fare less well. Those planning on taking out home equity loans should check their credit reports and scores well before doing so in order to have time to correct any score-lowering mistakes. Note, too, that the rates, terms, and fees that make up the deal youre offered will vary by lender, so do shop around. Dont focus solely on the interest rate.
     
  3. Another consideration is that home equity loans and HELOCs can be easier to qualify for if your credit is poor. The terms might not be fabulous, but you may not have many more attractive options.
     
  4. Interest rates for home equity loans and HELOCs tend to be higher than those for regular mortgages, but theyre also generally considerably lower than some alternatives, such as credit card debt. Thus they have some appeal when you need money.
     
  5. Not so long ago, before the recent credit crisis, lenders would often permit people to borrow more than 100% of the value of their home. Now theyre being a little more careful, and you should expect to be able to borrow up to about 85%. Some lenders will calculate your maximum by taking a percentage of your homes value and then subtracting what you still owe on it. So if they have a limit of 80% and your home is valued at $100,000, your maximum possible loan value is $80,000. But if you owe $50,000 on the home, youre now looking at a limit of up to $30,000.
     
  6. Of course, you shouldnt aim for the maximum, as defaulting on a home equity loan can result in the loss of your home. Thats a big deal and should factor heavily in your decision making.
     
  7. Know, too, that a lender can cancel a HELOC before youre done using it, which can cause financial pain. Home equity loans are sturdier, with various terms locked in.
     
  8. Meanwhile, if you sell your house while youve borrowed against it, youll be expected to pay off those debts pronto.
     
  9. A home equity loan can be canceled within three days of being taken, per federal law, if its secured by your primary home.
     
  10. Interest paid on home equity loans is generally deductible, up to $100,000 in home equity debt. 
     
  11. Some unscrupulous lenders out there prey on naive or older borrowers. The Federal Trade Commission has said to watch out for practices such as encouraging you to borrow (or refinance) often; adding other products to the loan package, such as insurance; ignoring your ability to pay and lending you too much so that you end up losing your home; or simply charging excessive fees. Another racket is a self-described handyman ringing your bell and offering to make repairs or renovations while helping you secure financing through some connection.
     
  12. Sometimes the borrower is the one making the regrettable move. For example, home equity loans taken out to finance renovations may not make your home sell for as much as expected. Borrowing via home equity loans or HELOCs in order to pay off other, higher-interest debt can be effective, but only if you have the discipline to pay the new debt off. Otherwise, you can keep spiraling deeper into debt.

Home equity loans and HELOCs can make your financial life much easier or much worse. Use them prudently — and learn more before jumping in.


The Monetary Policy Statement for the first half of fiscal 2015 to be announced on July 27 is subject to several dilemmas. There is already a lot of tempest over teapots on whether it should be expansionary or contractionary and to what extent it should accommodate fiscal policy expansion. A monetary stance is referred to as contractionary if it reduces the size of the money supply or increases it only slowly, or if it raises the interest rate.

An expansionary policy increases the size of the money supply more rapidly, or decreases the interest rate. Often, monetary policies are also described as accommodative, if the interest rate set by the monetary authority is intended to boost economic growth; neutral, if it is intended neither to boost growth nor combat inflation; or tight if intended to reduce inflation.

The challenges of designing and implementing monetary policy in developing market economies are very different compared with developed market economies. Analyses of monetary policy in developing countries differentiate between two types of policies: accommodative and stabilising. An accommodative policy provides a steady supply of credit for an expanding economy. In contrast, a stabilising policy is used to offset undesired changes affecting the economy.

In the accommodative stance, monetary growth accommodates output growth and price inflation targets set by the government. In the stabilising stance, the monetary authority varies monetary growth in order to counter the effects of shocks to growth, inflation, and exchange rate depending on the objectives of monetary policy.

The challenge is to strike a proper balance between accommodation and stabilisation. Bangladesh Bank has met this challenge reasonably well in recent years. BB succeeded in reducing core (non-food) inflation (from its recent peak of 11.3 percent in October 2012 to 5.4 percent in June 2014) and maintaining a stable nominal exchange rate.

Unlike in many developing countries, BB is allowed operational autonomy. Hence, the objectives of monetary policy can be clearly defined. In the Monetary Policy Statement (MPS) for January-June 2014, this was stated as follows: The monetary stance in H2 FY14hellip;hellip;.will target a monetary growth path which aims to bring average inflation down to 7 percent, while ensuring that credit growth is sufficient to stimulate inclusive economic growth. Despite the fact that both reserve money and broad money growth has been below the MPS target, the 7.3 percent inflation in fiscal 2014 has exceeded both the MPS target as well as that of last years 6.8 percent.

There are mixed signals from BB on the likely change in the monetary stance. BB took a significant monetary policy action on June 23 when it increased the cash reserve ratio on demand and time deposits from 6 percent to 6.5 percent on a biweekly and from 5 percent to 5.5 percent on a daily basis. Reserve requirements are one of the monetary policy tools any central bank uses to implement monetary policy. Banks and other depository institutions are required to hold a portion of their deposits as reserves. Banks earn no interest or profit on this. Increasing the ratio reduces the volume of deposits that can be supported by a given level of reserves and, in the absence of other actions, reduces the money stock while raising the cost of credit.

It is now the time of the year when the Bangladesh Bank announces the next six monthly monetary policy stance. In anticipation there are considerable ongoing deliberations and debate on the forthcoming monetary policy statement (MPS). Bangladesh Bank has established a rich tradition of extensive prior consultations before it announces the MPS. Nevertheless, public debate through the media is appropriate and most welcome. Yet, it is important that this debate should be based on facts and outcomes rather than on perceptions and speculations. It is in this spirit that I share with the readers my views on the monetary policy in Bangladesh.

My one time boss at the World Bank in Washington DC, Joseph Wood, a former vice president of the South Asia Region, had one favourite advice to his staff: If it aint broke, dont try to fix it. This is a simple but profound statement. In our personal lives, professional career and also in public policymaking we often spend endless fruitless hours trying to find solutions to problems that do not exist. In the arena of policymaking, there are many issues and challenges. But trying to fix Bangladeshs ongoing monetary policy runs against the sage advice of Joseph Wood. There are many problems in the financial sector, especially in the banking sector. But monetary policy for a change is running well on course and I do not see the need for changing this course. Let me elaborate.

The table shows the conduct of monetary policy in the past five years. It shows also the outcomes of monetary policy in terms of various indicators where it is expected to have most influence.

The results are follows:

Monetary policy was highly expansionary in the three years of FY2010-FY12. On average, broad money supply grew at a heady pace of 20.3 percent per year. Private sector credit grew at an unprecedented annual average rate of 23.2 percent. Inflation rate shot up, reaching a peak of 14 percent in March 2012. Stock prices soared in 2010, with the Dhaka Stock Exchange (DSE) index reaching an unsustainable peak of 8,919 points on December 5, 2010. While other factors were also at play, the rapid growth in private credit contributed strongly to pushing up stock prices.

Land prices also surged as excess liquidity found its way into land speculation. Demand for imports and foreign exchange soared, causing a huge pressure on the exchange rate, which rapidly depreciated from Tk 69.4/$ in July 2010 to a peak of Tk 81.9/$ in May 2012. The unsustainable bulge in stock prices soon burst, crashing stock prices to a low of 3,895 points on May 27, 2011, causing huge panic and social unrest among investors. The overall macroeconomy came under severe pressure until corrective monetary policy actions starting in January 2012 stabilised the economy by reducing the growth of domestic liquidity that fueled the instability.

The correction in monetary policy starting with the MPS of January-June 2012 has been carried forward further since then through end June 2014. On average the growth of money supply declined to 14.9 percent during FY2013-FY14. Inflation rate has fallen, the exchange rate has stabilised and stockmarket is stable, although the confidence factor that was shaken by the 2011 stockmarket crisis is yet to return. Land prices have normalised and even declined in real terms. The reduction in inflation has been impressive and is much better reflected in the decline in non-food inflation whereby the rate fell from its peak of 14 percent in March 2012 to a low of 4.9 percent in December 2013. It is now stable at around 5 percent. This is a remarkable achievement.

But a new survey by credit-score giant FICO offers buyers a rare peek inside the heads of credit-risk managers at financial institutions across the country and in Canada. Researchers asked a representative sample of them what single factor in an application makes them most hesitant to fund a loan request — in other words, whats most likely to prompt them to say no.

The results provide practical insights to anyone who is thinking about applying for a mortgage. Tops on the list: Surprise. Its not your credit scores. Its not how much youve got for a down payment or whats in the bank. Its your DTI — your debt-to-income ratio.

Nearly 60 percent of risk managers in the FICO study rated excessive DTIs their No. 1 concern factor — five times the percentage who picked the next biggest turnoff.

Yet many new buyers have only a rough idea in advance of an application — even for a preapproval letter — about their own DTIs, how lenders view them, and what sort of limits theyre likely to encounter.

Since they are so important to a successful application, heres a quick overview on what goes into DTIs and why they are such a big red flag. Debt-to-income ratios for home loans are the most direct indication to a bank about whether you are going to be able to afford to repay the money you want to borrow.

Debt ratios for home loans have two components: The first measures your gross income from all sources before taxes against your proposed monthly housing expenses including the principal, interest, taxes and insurance that youd be paying if the lender granted the mortgage you sought.

As a general target, lenders like to see your housing expense ratio come in at no higher than 28 percent of gross monthly income, though there is flexibility to go higher if other elements of your application are viewed as strong. In May, according to mortgage software and research firm Ellie Mae LLC, the average borrower who obtained home purchase money through investors Freddie Mac and Fannie Mae had a housing expense ratio of 22 percent. Federal Housing Administration-approved borrowers had average housing expense ratios of 28 percent.

The second DTI component — the so-called back-end ratio — measures your income against all your recurring monthly debts. These include housing expenses, credit cards, student loans, personal loan payments and others. Under federal qualified mortgage standards that took effect in January, your back-end ratio maximum generally is 43 percent, though again there is wiggle room case by case.

Most lenders making loans eligible for sale to Fannie or Freddie prefer not to see you anywhere close to 43 percent. In May, according to Ellie Mae, the average approved home purchase applicant had a back-end ratio of 34 percent. Even at FHA, which tends to be more lenient on credit matters than Fannie or Freddie, the average back-end ratio for buyers was 41 percent. The average for denied applications was 47 percent.

A good place to learn more about DTIs and to compute your own is Fannie Maes consumer-friendly know your options site (www.knowyouroptions.com), which includes calculators and other helpful tools.

The new FICO survey found that the second leading cause of concern for loan officers is multiple recent credit applications. Lenders spot these on your credit reports and take them as signals that you are seeking to add on even more debt, which could affect your ability to repay the mortgage money youre asking them to give you.

In third place as an instant turnoff: your credit scores. Most lenders want to see FICO scores well above 700 — Fannie and Freddie averages were in the 755 range in May, FHA average approved scores were a more generous 684.

Bottom line here: If you want to be successful in your mortgage application, be aware of these key turnoff points for lenders and take steps to avoid the tripwires. Most important: Postpone your purchase until your DTI ratios tell you — yes, you can afford the house you want and lenders wont reject you out of hand.

#x2022; Write to Ken Harney at PO Box 15281, Chevy Chase, MD 20815 or via email at kenharney@earthlink.net.

#xa9; 2014, Washington Post Writers Group

JOHANNESBURG Low rates and fees on short-term unsecured loans are forcing smaller lenders out of business, leading consumers to take larger (and consequently unaffordable) loans with banks or turn to loan sharks, according to MicroFinance South Africa (MFSA).

The rates and fees charged on unsecured loans were last reviewed in 2007. At the time, no feedback was given to the industry as to how they were reviewed or on what basis they were set, MFSA CEO, Hennie Ferreira tells Moneyweb.

Rates and fees on unsecured loans are currently under review by the National Credit Regulator (NCR) and Ferreira believes that to ensure a competitive and fair industry, which reflects the actual cost of credit provision and promotes financial inclusion, rates need to increase.

Currently, regulated credit providers charge an initiation fee, service fee and a maximum monthly interest of 5% on a short-term unsecured loan. According to Ferreira, capping the interest on short-term loans at this rate for the past seven years has forced a number of smaller lenders to close doors since they cannot cover business costs. He says that close to a quarter of MFSA members have deregistered as credit providers in the past year.

This forces consumers to access credit from larger credit providers, such as banks, which prefer not to extend smaller, short-term loans. Its uneconomical for a bank to issue a R500 short-term loan to a consumer. They would rather issue an R8 000 loan. Even if the consumer qualifies for this, it might not necessarily be the right product or loan for them, Ferreira says.

This can lead to a debt spiral because the repayment term is longer, the interest higher and part of the money is undoubtedly spent on unplanned consumption. The consumer then ends up paying more in interest charges for the same amount of money, as the below graph illustrates:

Source: MFSA

If a decrease in rates occurs, smaller players will be forced to either close down, go underground or not comply. Loan sharking will increase and rates will become even more exorbitant than they already are, Ferreira says.

The problem with credit information amnesty

Credit information amnesty, according to Ferreira, compounds pressure on smaller players, as it hinders the ability to take good credit decisions. Credit information amnesty forced credit bureaus to remove all adverse credit information relating to consumers as of April 1 2014. Credit providers can still access the payment profile of an individual, but this requires becoming a paying member of the Credit Protection Association (CPA).

With less data available, credit providers will issue fewer loans or simply price in the extra risk. This means that people who would have qualified for loans may no longer qualify and might turn to loan sharks, Ferreira says.

Credit information amnesty also has the potential to create a non-payment culture, where there are no repercussions on consumers for accumulating bad debt, adds Leonie van Pletzen, MFSA operations manager.

She points out that unsecured lenders are all tarnished with the same brush, when it is in fact the illegal and unregistered lenders that are lending recklessly and skewing the perception of all unsecured credit providers.

The below graph reflects the growth in rands of unsecured loans since 2007 versus the growth in short-term loans (loans smaller than R8 000 repaid over a period of up to six months), which are the kind predominantly provided by MFSA members.

Source: NCR

Although all lenders are required to comply with the provisions of the National Credit Act (NCA), they are generally not registered with the NCR and therefore simply do not comply. At this stage, only lenders that have issued more than 100 loans at a total exceeding R500 000 per year must be registered with the NCR. We believe that all lenders should be registered with the regulator, irrespective of the threshold, in order to ensure compliance with the NCA, Van Pletzen comments.

She says it is highly likely that all lenders will have to be registered when the latest round of amendments to the NCA are approved and passed, hopefully by the end of July.

Ferreira says the MFSA commissioned an Econometrix report on the unsecured lending market, the results of which are expected in the coming weeks.

Another misconception about bankruptcy Knoxville bankruptcy experts wish to debunk is that it permanently ruins your credit. For those who actually go through the process of filing for bankruptcy, they become surprised at how quickly they start to receive credit offers again and how fast their credit score becomes repaired. On average, it takes about seven to 10 years to fully repair your credit, but you may qualify for secured credit cards about six to 12 months after filing. Filing for bankruptcy is not the end of the world.

Current monetary easing measures employed by central banks in advanced economies may destabilize healthy growth in Asia, Bank of Japan Governor Haruhiko Kuroda said Thursday in Bangkok.

The current global accommodative financial conditions raise the possibility of unhealthy global capital flows into Asian economies, Kuroda said in a speech at the Bank of Thailand, the text of which was released in Tokyo.

The former Asian Development Bank president was referring to the danger of an unsustainable expansion in credit provided by banks amid unconventional monetary easing by major central banks, including the US Federal Reserve, the European Central Bank and the BOJ, that has stimulated capital inflows to emerging economies for higher yields.

As a result, real estate prices have been rising in some Asian economies due to the inflow of foreign capital.

Such capital flows could result in the build-up of distortions and risks in the financial systems, Kuroda said, noting that once the funds are withdrawn and the boom in the property market subsides, it could hamper growth substantially and for a prolonged period.

He cited a development seen last year, in which volatility in financial markets increased amid speculation that the Fed could remove monetary easing measures. Some emerging economies then suffered a sudden outflow of capital.

In order to prevent an increase in risks, the central bank chief called on rapidly growing economies in the area to improve their macroeconomic policies and strengthen their financial systems.

Policies to address such distortions and risks may differ from one country to another, Kuroda said. But he added, It is important for any economy to pursue sound macroeconomic policies as well as efforts to enhance the robustness of its domestic financial system.

He specifically called on authorities in Asia to prevent excessive lending by banks and ensure that their financial systems are robust enough to withstand and recover from shocks.

==Kyodo

The red flags bankers see

July 26th, 2014

WASHINGTON

Qualifying for a mortgage for large numbers of home purchasers not only is a tough challenge but one that ends unhappily they get rejected. The reasons for the turndowns typically involve multiple factors: below-par credit scores, inadequate documented income to support the monthly payments, little or no savings in the bank.

But a new survey by credit-score giant FICO offers buyers a rare peek inside the heads of credit-risk managers at financial institutions across the country and in Canada. Researchers asked a representative sample of them what single factor in an application makes them most hesitant to fund a loan request in other words, whats most likely to prompt them to say no.

The results provide practical insights to anyone who is thinking about applying for a mortgage. Tops on the list: Surprise. Its not your credit scores. Its not how much youve got for a down payment or whats in the bank. Its your DTIs your debt-to-income ratios. Nearly 60 percent of risk managers in the FICO study rated excessive DTIs their No. 1 concern factor five times the percentage who picked the next biggest turnoff.

Yet many new buyers have only a rough idea in advance of an application even for a pre-approval letter about their own DTIs, how lenders view them, and what sort of limits theyre likely to encounter.

Since they are so important to a successful application, heres a quick overview on what goes into DTIs and why they are such a big red flag. Debt-to-income ratios for home loans are the most direct indication to a bank about whether you are going to be able to afford to repay the money you want to borrow.

Debt ratios for home loans have two components: The first measures your gross income from all sources before taxes against your proposed monthly housing expenses including the principal, interest, taxes and insurance that youd be paying if the lender granted the mortgage you sought.

As a general target, lenders like to see your housing expense ratio come in at no higher than 28 percent of gross monthly income, though there is flexibility to go higher if other elements of your application are viewed as strong. In May, according to mortgage software and research firm Ellie Mae LLC, the average borrower who obtained home purchase money through investors Freddie Mac and Fannie Mae had a housing expense ratio of 22 percent. Federal Housing Administration-approved borrowers had average housing expense ratios of 28 percent.

The second DTI component the so-called back-end ratio measures your income against all your recurring monthly debts. These include housing expenses, credit cards, student loans, personal loan payments and others. Under federal qualified mortgage standards that took effect in January, your back-end ratio maximum generally is 43 percent, though again there is wiggle room case by case.

Most lenders making loans eligible for sale to Fannie or Freddie prefer not to see you anywhere close to 43 percent. In May, according to Ellie Mae, the average approved home purchase applicant had a back-end ratio of 34 percent. Even at FHA, which tends to be more lenient on credit matters than Fannie or Freddie, the average back-end ratio for buyers was 41 percent. The average for denied applications was 47 percent.

A good place to learn more about DTIs and to compute your own is Fannie Maes consumer-friendly know your options site (www.knowyouroptions.com), which includes calculators and other helpful tools.

The new FICO survey found that the second leading cause of concern for loan officers is multiple recent [credit] applications. Lenders spot these on your credit reports and take them as signals that you are seeking to add on even more debt, which could affect your ability to repay the mortgage money youre asking them to give you.

In third place as an instant turnoff: your credit scores. Most lenders want to see FICO scores well above 700 Fannie and Freddie averages were in the 755 range in May, FHA average approved scores were a more generous 684.

Bottom line here: If you want to be successful in your mortgage application, be aware of these key turnoff points for lenders and take steps to avoid the tripwires. Most important: Postpone your purchase until your DTI ratios tell you yes, you can afford the house you want and lenders wont reject you out of hand.

Ken Harneys email address is kenharney@earthlink.net.

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