46% ENERGY PRICE HIKES IN 5YRS---OUCHHHHH

Thursday, November 18, 2010 Expect a 46% hydro rate hike
By ANTONELLA ARTUSO, Queen’s Park Bureau Chief November 18, 2010 1:39pm

Residential electricity prices will rise by 46% over the next five years, but be offset by a new 10% hydro benefit, the McGuinty government says.The province’s fall economic statement says there are two reasons for the growing bills - the move to pricier but cleaner energy like solar and wind and an investment in electricity infrastructure and generation.While absolutely necessary, these investments are increasing electricity costs, the statement says.The government will introduce an Ontario Clean Energy Benefit as of Jan. 1 that will reduce the bills of eligible residental farm and small business consumers by 10% a month for the next five years.

The 10% comes off the entire bill, not just rates, and includes the distribution and harmonized sales tax. Rates will continue to rise.All homeowners, including those who purchased energy price plans, are eligible. The average family would save about $150 a year, the government says.Businesses that use 250,000 kWh a year or less also get the hydro price cut saving about $1,716 a year, and farms would save about $2,052a year Premier Dalton McGuinty said in the Legislature that Ontarians will view this break as good news in economically challenging times.Tory MPP Peter Shurman said the government’s decision is behaving like a guy deeply in debt who spends $50 he finds in a jacket pocket on beer with his buddies.PC Leader Tim Hudak has called for the government to wrap up the debt repayment charge on the hydro bills, and to rethink its Green Energy Act which he argues is social rather than economic policy.NDP MPP Andrea Horwath has been campaigning to get the government to remove the provincial portion of the HST from hydro bills, which adds 8% to the bill.

The fall economic statement puts the size of the provincial deficit this year at $18.7 billion, less than projected in the government’s spring budget.Tory MPP Norm Miller said Thursday that the Liberal government’s economic plan will leave a legacy debt of $20,000 per Ontarian.Miller said Ontario under the Liberals has under performed economically compared to other provinces, and has been shedding well-paying private sector manufacturing jobs by the tens of thousands.McGuinty said that Ontarians understand that the economic difficulties began outside the province with a world-wide recession, and that his government’s stimulus spending has built bridges and roads, schools, court houses and hospitals across the province while creating 300,000 jobs.Mike Schreiner, leader of the Green Party of Ontario, said the government should be offering citizens grants and loans to make their homes more energy efficient.I think the most appropriate long-term solution to rising hydro rates is an aggressive energy efficiency and conservation plan because it saves us money today, tomorrow and 10 years from now,Schreiner said.Otherwise, we’re just going to be creating more debt.

Greek PM says it at last: carbon taxes are just another way to raise revenue
Janet Daley Telegraph November 17, 2010

George Papandreou, the Greek prime minister has said that there may need to be new Europe-wide forms of taxation to help pay for the bail-outs that will be needed by the growing number of crashing economies in the euro-zone. His suggestions include carbon dioxide taxes which, he says, could provide important revenues and resouces for funding such a [bail-out] mechanism.I’ve never actually heard a major politician (let alone a national leader) admit this before: what Mr Papandreou is saying is that carbon taxes would have not have the effect of reducing emissions – because if they did, they would be useless as an additional form of revenue. All the hokum that is talked about protecting the planet by taxing carbon use is just a front for the real purpose of such penalties on industry and consumers which is to raise more money for governments to spend (in this case, on trying to remedy their own political follies).

DOCTOR DOCTORIAN FROM ANGEL OF GOD
then the angel said, Financial crisis will come to Asia. I will shake the world.

JAMES 5:1-3
1 Go to now, ye rich men, weep and howl for your miseries that shall come upon you.
2 Your riches are corrupted, and your garments are motheaten.
3 Your gold and silver is cankered; and the rust of them shall be a witness against you, and shall eat your flesh as it were fire. Ye have heaped treasure together for the last days.

REVELATION 18:10,17,19
10 Standing afar off for the fear of her torment, saying, Alas, alas that great city Babylon, that mighty city! for in one hour is thy judgment come.
17 For in one hour so great riches is come to nought. And every shipmaster, and all the company in ships, and sailors, and as many as trade by sea, stood afar off,
19 And they cast dust on their heads, and cried, weeping and wailing, saying, Alas, alas that great city, wherein were made rich all that had ships in the sea by reason of her costliness! for in one hour is she made desolate.

EZEKIEL 7:19
19 They shall cast their silver in the streets, and their gold shall be removed: their silver and their gold shall not be able to deliver them in the day of the wrath of the LORD: they shall not satisfy their souls, neither fill their bowels: because it is the stumblingblock of their iniquity.

REVELATION 13:16-18
16 And he(FALSE POPE) causeth all,(WORLD SOCIALISM) both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads:(CHIP IMPLANT)
17 And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name.
18 Here is wisdom. Let him that hath understanding count the number of the beast: for it is the number of a man; and his number is Six hundred threescore and six.(6-6-6) A NUMBER SYSTEM

WORLD MARKET RESULTS
http://money.cnn.com/data/world_markets/
CNBC VIDEOS
http://www.cnbc.com/id/15839263/?tabid=15839796&tabheader=false

HALF HOUR DOW RESULTS FRI NOV 19,2010

09:30 AM -2.43
10:00 AM -54.76
10:30 AM -55.33
11:00 AM -20.25
11:30 AM -8.67
12:00 PM -16.05
12:30 PM -16.88
01:00 PM -10.33
01:30 PM -8.86
02:00 PM -12.34
02:30 PM +2.16
03:00 PM +3.72
03:30 PM -3.94
04:00 PM +22.32 11,203.55

S&P 500 1199.73 +3.04

NASDAQ 2518.12 +3.72

GOLD 1,352.90 -0.10

OIL 81.51 -0.25

TSE 300 12,956.30 +86.30

CDNX 1996.01 +8.38

S&P/TSX/60 743.22 +5.63

MORNING,NEWS,STATS

YEAR TO DATE PERFORMANCE
Dow -17 points at 4 minutes of trading today.
Dow -61 points at low today.
Dow +3 points at high today so far.
GOLD opens at $1,345.50.OIL opens at $81.47 today.

AFTERNOON,NEWS,STATS
Dow -61 points at low today so far.
Dow +3 points at high today so far.

WRAPUP,NEWS,STATS
Dow -615 points at low today.
Dow +3 points at high today.

GOLD ALLTIME HIGH $1,423.20 (NOT AT CLOSE)

RON PAUL ON SCANNERS
http://www.infowars.com/ron-paul-unleashes-on-tsa-enough-is-enough/

http://www.infowars.com/da-now-sending-deputies-to-sf-airport-to-investigate-felony-groping/
DA Now Sending Deputies to SF Airport to Investigate Felony Groping
Kurt Nimmo Infowars.com November 18, 2010
http://abclocal.go.com/kgo/video?id=7793393

Appearing on the Alex Jones Show today, current chief deputy DA and incoming DA of San Mateo County Steve Wagstaffe said his office will prosecute TSA employees who engage in lewd and lascivious behavior while conducting Homeland Security mandated patdowns at the San Francisco International Airport in San Mateo County.Current chief deputy DA and incoming DA of San Mateo County Steve Wagstaffe on the Alex Jones Show.The case would be reviewed and if we could prove the elements of it, that it was inappropriately done with a sexual or lewd intent, that person would be prosecuted,Wagstaffe told the Berman Post on Tuesday.News report on San Mateo County DA announcing his office will arrest and prosecute TSA for sexual molestation.

Wagstaffe told Alex Jones that county police will be sent to into the San Francisco International Airport. If they witness TSA employees engaged in criminal conduct, they will make arrests and the DA’s office will prosecute. Sexual battery in Mateo County is a felony if the molestation occurs beneath clothing and makes contact with skin and a misdemeanor if the touching occurs outside clothing.The new government mandated hands-on searches are used for passengers who find naked body inappropriate, when something suspicious appears in screening, or randomly. They can take two minutes per passenger and involve sliding of the hands along the length of the body, along thighs and near the groin and breasts, according to the Associated Press.In addition, a district attorney in the county south of San Mateo, Santa Clara, told Wagstaffe his office will also prosecute TSA employees for inappropriate sexual behavior at the San Jose International Airport.Since the new search procedures went into effect, the web has exploded in opposition to naked body scanners and intrusive patdowns. Reports posted by the The Drudge Report, Infowars.com, and Prison Planet.com have gone viral on the internet and forced the mainstream corporate media to cover the issue.

Nationwide outrage against the TSA is not only bringing to light new cases of airport abuse, it’s throwing fresh attention on previous incidents that have been going on for years,Paul Joseph Watson wrote on Wednesday. Watson notes several lawsuits initiated against the TSA, including one connected to a 2008 incident at the Corpus Christi airport where the TSA exposed a young woman’s breasts.Coverage of TSA groping and public outrage has resulted in airports around the country reconsidering the procedures.Earlier today, Orlando Sanford International Airport decided to opt out from TSA screening. Larry Dale, the director of the Sanford Airport Authority in Florida, said he will send a letter requesting to opt out from TSA screening, and instead the airport will choose one of the five approved private screening companies to take over, according to central Florida’s WDBO.The outcry is huge,Texas Republican Sen. Kay Bailey Hutchison told the TSA administrator, John Pistole, at a Capitol Hill hearing yesterday.I know that you’re aware of it. But we’ve got to see some action.I’m not going to change those policies,Pistole promised.

http://www.youtube.com/watch?v=q4lyQFwCzTI&feature=player_embedded
DHS Source: TSA Infuriated With Coverage Of Nationwide Backlash
Paul Joseph Watson Infowars.com November 17, 2010
http://www.infowars.com/dhs-source-tsa-infuriated-with-coverage-of-nationwide-backlash/

A Department of Homeland Security source has told CNN that the TSA is infuriated with the attention the media has given to the nationwide backlash against naked body scanners and aggressive new airport pat down procedures.During an appearance on CNN’s Anderson Cooper, TSA chief John Pistole attempted to downplay CNN’s Homeland Security source who told them that the TSA was angry with the media’s coverage of the issue and also fuming at the portrayal of the don’t touch my junk guy as a folk hero.Pistole also ludicrously claimed that TSA workers were professionals in terms of how they carry out their business,despite a deluge of stories about TSA officials abusing, sexually assaulting and humiliating travelers, including a case currently the subject of a lawsuit where TSA goons pulled down a 21-year-old woman’s blouse before laughing and joking about her exposed breasts.Pistole also parroted Janet Napolitano’s discredited claim that Johns Hopkins University declared the naked radiation scanners to be safe, despite the fact that just three days ago Dr Michael Love, who runs an X-ray lab at the department of biophysics and biophysical chemistry at the Johns Hopkins school of medicine told AFP that statistically someone is going to get skin cancer from these X-rays.As we documented, Big Sis’ USA Today editorial was a tissue of lies from start to finish.

Pistole also lies to Cooper when he claims that people who clear the traditional metal detector are not being subjected to invasive pat downs, in an effort to dismiss the fact that people who refuse the scanner are being punitively punished for their disobedience. As we documented with the case of radio host Owen JJ Stone, who had a TSA agent put his hand inside his pants and touch his backside and genitalia, Stone cleared the metal detector without a problem but was still made to endure a humiliating pat down that amounted to sexual molestation.Pistole points to the example of underwear bomber Umar Farouk Abdulmutallab as the reason why Americans need to submit to groin checks and have their testicles squeezed by goons in uniforms.However, it was the US State Department that allowed Abdulmutallab to board Delta Flight 253 despite the fact that his father warned the US State Department about him a month before, he was on a terror watchlist and was aided through security by a sharp-dressed Indian man.Pistole has indicated that the agency will not back down on radiation body scanners or invasive pat downs despite nationwide outrage and a plethora of lawsuits amidst new cases of travelers being sexually molested and humiliated by TSA goons.Pistole told the Senate Committee on Homeland Security and Governmental Affairs that his inspectors at 453 of the nation’s airports are not going to back down in the face of complaints that techniques are invasive,reports the Washington Post.Pistole said that agency wanted to strike a balance between privacy and security needs,and yet the TSA isn’t interested in striking any kind of balance whatsoever.Groping 3-year-old children, pregnant women and the physically disabled does not represent the risk-based or professional approach that Pistole and Napolitano claim they are enforcing.Amidst the backlash, many are calling for the TSA to be abolished and the current security-theatre to be replaced with something more effective, safer, and more respectful of privacy rights.

As Isaac Yeffet, the former head of security for El Al, told CNN, real terrorists are a giveaway for people professionally trained to spot them. Using human intelligence and rationally-based profiling is a far more successful and Constitutional method of providing airport security. Using minimum-wage low grade morons to feel up toddlers and pregnant women is not.Pistole, Napolitano and the TSA are praying that the resistance withers away, but it is only growing stronger, especially now that local governments are warning TSA workers that they will be prosecuted for groping travelers and with state lawmakers in different areas of the country moving to terminate use of the body scanners entirely.

http://www.ft.com/cms/s/0/a95996c2-f3e2-11df-901e-00144feab49a.html#axzz15jz8N7tA
Full text: Bernanke speech Published: Chairman Ben S. Bernanke - At the Sixth European Central Bank Central Banking Conference, Frankfurt, Germany November 19, 2010
VIDEO OF BERNANKE SPEECH FROM ECB
http://www.thomson-webcast.net/de/dispatching/?ecb_101119_stream_video
ECB WEB
http://www.ecb.int/home/html/index.en.html
TRICHET SPEECHES-ECB INFO
http://www.ecb.int/press/pr/date/2010/html/pr101119.en.html
http://www.ecb.int/press/govcdec/otherdec/2010/html/gc101119.en.html
http://www.ecb.int/press/key/date/2010/html/sp101118.en.html
http://www.ecb.int/press/key/date/2010/html/sp101113_1.en.html
BIS BANK FOR INTERNATIONAL SETTLEMENTS-SPEECHES
http://www.bis.org/
http://www.bis.org/publ/work324.htm

Europe's Growth Challenges By Dominique Strauss-Kahn, Managing Director, International Monetary Fund Frankfurt, November 19, 2010 As prepared for delivery

Good afternoon. I would like to talk to you about one of the greatest challenges facing European policymakers today—how to ignite and sustain economic growth across the continent.The postwar European model was built upon three pillars—peace, growth, and social cohesion. All three are critically important, and all three feed on each other. Today, Europe has a serious growth problem—a problem magnified by the earthquake of the global financial crisis. Today, with so many European countries under pressure from all sides, these challenges are more urgent than ever. If unaddressed, Europe’s social model could unravel. It is time to renew the founders’ commitment to ever-greater openness and ever-closer integration.

European growth

Europe enjoyed stellar growth in the decades after the war. Growth was then driven by technology catch-up, a stable macroeconomic environment, growing European integration, and a strong banking system. But these gains ground to a halt in the early 1980s.Europe’s living standards have stopped improving for one key reason—citizens are not reaching their full potential. To some extent, this reflects a conscious social choice to work fewer hours. There is nothing problematic here—after all, happiness does not come from income alone. But there is a dark side. Unemployment in Europe is chronically high, and employment participation is persistently low—especially among women, older workers, and the young. A key reason is that labor market institutions tend to reward privileged insiders at the expense of excluded outsiders.Fundamentally, Europe is discarding too many of its people. We must never forget the immense human costs of joblessness—long-lasting income loss, worse health, higher mortality, lower children’s educational attainment, and faltering beliefs in institutions and democracy. We face the very real prospect of a lost generation, distanced from the labor market, and marginalized from society.

Low labor utilization is not the whole story. In southern Europe, in the countries with the greatest competitiveness problems, productivity is also lagging behind. Infrastructure, innovation, and labor skills are not up to par and entry barriers are large in some sectors. Here too, the denial of opportunity is harming the economy.Let’s not forget the financial sector. Over the past decade, the financial sector focused more on sophisticated innovation, and less on being a true driver of economic growth. In Europe, it is difficult for start-ups to obtain funding. Small and medium-sized enterprises—key engines of growth—are the first to be cut off when pressures arise.The global financial crisis brought these problems to a head. The euro area suffered from a deeper recession than elsewhere in the world—even the United States, the epicenter of the crisis—and is slower to bounce back. Inadequate governance in the euro area only made things worse. Close financial integration has brought great benefits, but it means that a problem with banks or sovereigns in one part of the euro area quickly becomes a problem for all. The area’s institutions were simply not up to the task of managing a crisis—even setting up a temporary solution proved to be a drawn-out process. In the end, they did what they needed to do, but the sovereign crisis is not over.

In a sense, the wheels of cooperation move too slowly. Repairing the financial sector is taking too long, in part because policymakers are not paying enough attention to the pan-European dimension. The common European vision also seems lacking when it comes to fiscal governance, internal imbalances or labor reform. Europe needs a holistic growth strategy, where every country benefits from the efforts of others.As the post-crisis world takes shape, Europe risks being left even further behind, especially as the dynamic regions of the world are bolting out of the stables.

A reform agenda

Europe must break the shackles of low growth, and stop settling for second best. This is the only way to save the social model and fulfill the common European destiny. It has done better before, and it must do better again.We need movement on many different fronts. The first step will be to address two urgent problems. Fixing the financial sector must surely come first. Banks must have sufficient capital to support growth, once investment opportunities reappear in earnest, without incurring excessive risks. The Basel III agreement is a landmark in this respect. However, policymakers must also have the ability to deal decisively with problem banks, and must forge ahead with better supervision and better crisis resolution procedures. Here European financial integration, which has brought so many benefits, also presents special challenges.In the long run, the financial sector must do more to nurture growth—especially by supporting small businesses. Right now, these businesses rely too much on banks for financing, and venture capital markets could do a lot more to meet their needs.Since the recovery remains weak, policymakers must initially take steps that support demand where it is possible. More generally, credible medium-term fiscal consolidation is crucial, with the pace tailored to country circumstances. Different countries face different challenges, but in all cases, job creation must be a priority. Growth without jobs is growth without value.

To provide momentum for labor market reform, I see benefit in launching a Single Labor Market initiative at the European level—a sequel to the Single Market initiative that harmonized goods markets. The euro area cannot achieve its true potential with a bewildering patchwork of segmented labor markets. These barriers exacerbate the diverging economic fortunes that threaten the euro area today. It is time to create a level playing field for European workers, especially in the area of labor taxation, social benefits systems and portability, and employment protection legislation.To complement these efforts, and to stay on the frontline of innovation, Europe needs to devote more resources to research and education. The euro area lags behind the United States both for publically- and privately-funded research and development. A more radical approach would be to transfer the research and university budget to the EU level.In the longer term, let us also not forget that growth in Europe, and especially the euro area, needs to become more balanced. Just like we worry about global imbalances, we should worry about imbalances within the euro area. It is simply not true that surpluses are good and deficits are bad. For growth to be sustainable, current account deficits in some European countries will need to shrink, and, in parallel, in other countries—such as here in Germany—growth will need to become more domestically driven.Long-term growth would also get a boost from a less restrictive approach to immigration. Europe seems to be fighting a losing demographic battle, with the labor force projected to decline significantly in coming decades. It makes sense to rely on immigration to address skills shortages, as has been done in North America. This could also make the social model more sustainable. However attractive it might seem from a near-term political perspective, Europe cannot solve its problems by bolting its doors.

THIS NEXT PARAGRAPH IS THE WORLD GOVERNMENT SYSTEM.EVERYTHING UNDER CONTROL OF A CENTERAL AUTHORITY,THE EU-PAID FOR BY VAT OR CARBON TAXES.OVIOUSLY THESE TAXES WOULD BE PAID TO THE IMF,THE BANK OF THE WORLD GOVERNMENT CONTROL FREAK SYSTEM AND THE BANK FOR INTERNATIONAL SETTLEMENTS WOULD BE THE POLICEMAN FOR THE WORLD GOVERNMENT.

A center-driven agenda

How can such a comprehensive reform agenda be best achieved? There is no single grand solution, but challenges on this scale can only be solved in a collaborative manner. Just look at the lessons of recent European history. When the agenda is driven by the center, things happen. Think of the single market program, or of monetary union. But when the agenda is left with the nations, things stall. Think about labor and service market reforms, especially through the Lisbon agenda.Peer pressure has not served Europe very well. It’s time to change course. The center must seize the initiative in all areas key to reaching the common destiny of the union, especially in financial, economic and social policy. Countries must be willing to cede more authority to the center. Mechanisms must be redesigned to give them the incentives to reform.Progress is being made on a number of fronts, but we are still some distance away from an effectively functioning economic union—the missing E in EMU! Many issues revolve around budgets. The most ambitious solution—extensively discussed in the academic literature—would be to create a centralized fiscal authority, with political independence comparable to that of the ECB. The authority would set each member’s fiscal stance and allocate resources from the central budget to best hit the dual targets of stability and growth.Such a leap toward European political integration appears unlikely in the foreseeable future, but we should exploit other ways of moving in this direction. There are at least two ways.

One is to shift the main responsibility for enforcement of fiscal discipline and key structural reforms away from the Council. This would minimize the risk of narrow national interests interfering with effective implementation of the common rules. Within the existing institutional context, the Commission—as the guardian of Europe’s treaties—could play such a role. A separate, independent, institution could work as well.Finally, it would make sense to increase the size of centrally-allocated budgetary resources. This means going beyond the current EU budget, strictly limited by the Treaty, to a system that uses more transparent EU-wide instruments—such as a European VAT, or carbon taxation and pricing.

Conclusion

Let me conclude this morning by taking you back where I started. After a calamitous half century, the people who rebuilt Europe were determined do to things differently, to set sail on a new course of cooperation and integration. In doing so, they banished the specter of conflict from the continent, something that had seemed impossible. As Robert Schuman, one of the founders of the European Union, said in 1949, We are carrying out a great experiment, the fulfillment of the same recurrent dream that for ten centuries has revisited the peoples of Europe—creating between them an organization putting an end to war, and guaranteeing an eternal peace.And with this peace came rising growth and prosperity, and a degree of social cohesion that is the envy of the world. These gains are now under threat from low growth, poor employment prospects, and growing economic divergences. These fault lines have been around for a while, but the earthquake of the global financial crisis ripped them wide open.The only answer is more cooperation, and greater integration. Now is the time to fortify the economic foundations of the union. None of this will be easy. But was the single market easy when first proposed? Was the single currency easy to design and implement? Europe has faced these kinds of challenges before, and overcame them. It can do so again. It’s time to finish the job, to finally realize the common destiny of Europe.Thank you.

BANK FOR INTERNATIONAL SETTLEMENTS-Central bankers analyse market structure developments in the clearing industry and the implications for financial stability
10 November 2010

In a report published today by the Committee on Payment and Settlement Systems (CPSS), central bankers examine developments in the clearing industry's market structure, their drivers and the implications for financial stability. The report, Market structure developments in the clearing industry: implications for financial stability, first provides a broad overview of the clearing industry in CPSS countries, covering both traditional markets and OTC derivatives markets. Market structures can be classified in two dimensions: vertical versus horizontal structures, and integrated versus fragmented structures.

Second, the report assesses how far these developments have given rise to new risks. It further outlines practical issues that regulators and overseers may wish to consider, either as part of their oversight role or in the context of their broader financial stability remit. Furthermore, the report examines to what extent changes in market structure or ownership might affect the expansion of central clearing services. Finally, the effect of ownership on CCPs' incentives to manage counterparty risk is considered.The report shows that different types of market structure have developed over the last decade. Specific market structures may create specific risks and amplify interdependencies between systems and markets. These warrant careful consideration by both market participants and the authorities. However, there is no evidence that the industry is settling on one particular structure. Nor is evidence found to suggest that one market structure is superior to another, either in terms of CCP risk management or in terms of wider systemic risk. In fact, many risks occur in several types of structures.Nevertheless, central banks, regulators and overseers may usefully pay attention to specific risks that are more likely to occur in some market structures than in others. These include incentives to weaken the robustness of CCP risk controls that may in turn reduce the CCP's ability to manage a member default. Although some of the risks considered in the report have yet to materialise, CCPs and their regulators or overseers face significant future challenges, in particular as market structures in many countries continue to evolve. Hence, public authorities will need to continue applying rigorous and consistent oversight. For each type of market structure, the report provides a checklist of questions that central banks, regulators and overseers could use to that end.The clearing industry's structure also has a bearing on how far central clearing will be used in different market segments, and hence on the resilience of the financial system as a whole. In fact, the broader risk-mitigating benefits of central clearing may be diluted if changes in market structure affect access to CCPs, raise the cost of central clearing or hamper the process of creating new CCP services.

Notes
The report Market structure developments in the clearing industry: implications for financial stability has been prepared for the CPSS by a working group comprising representatives of CPSS member central banks plus the ECB. The working group was chaired by Anne Wetherilt of the Bank of England.As the central clearing industry has experienced a large number of changes during the last decade that have profoundly affected both its own market structure and its role in the broader financial infrastructure, the working group was commissioned by the CPSS to investigate these developments in the clearing industry, their drivers and the implications for financial stability. The working group was also asked to assess whether different market structures give rise to new risks that may affect CCP robustness and to outline some practical thoughts for central banks, regulators and overseers with an interest in the stability of CCPs.

Macro-prudential oversight and the future European Systemic Risk Board
Keynote address by Jean-Claude Trichet, President of the ECB,
at the European Banking Congress, Frankfurt am Main, 19 November 2010
Ladies and Gentlemen,

It is a pleasure for me to participate in the European Banking Congress.

We are meeting at a very important time for Europe’s financial system, of which so many senior representatives are assembled here. This is also a very important time for the European economy and for the governance of the euro area.Looking at the current situation, we have to be very clear as to what the issues are and where the solutions lie.As its name suggests, Economic and Monetary Union has two attributes: one is Economic and one is Monetary.The Monetary attribute refers to the ECB, its mandate and its independence. I will come to this in a moment. The Economic attribute comprises the fiscal regime enshrined in the Stability and Growth Pact; the national frameworks of economic policy; and the system of mutual surveillance.

The developments we are currently witnessing in Europe’s economy have to do with its Economic functions. They have essentially three origins: unsound fiscal policies in a number of member states; inappropriate macroeconomic policies in a number of member states; and overall an inadequate system of surveillance by all member states. This is the triangle that provides the perimeter of the current situation.
There is a solution to these three elements, and this consists in: first, ensuring sound fiscal policies in each and every member state; second, setting responsible macroeconomic policies; and, third, designing and adhering to a far more effective system of surveillance.The ECB stands alongside the citizens of Europe. We understand their concerns about the governance of the euro area because, just like them, we are focused on the medium term.That is why we call for a very ambitious reform of euro area governance – a reform that will address the root causes of the current situation and make it simply impossible to happen again.I also have good news. This good news is that all the efforts to strengthen the economic attribute of our union will be supported by a monetary policy that will ensure price stability or, as you say in German, Geldwertstabilität.

As I mentioned, the Monetary attribute of EMU refers to the ECB, its mandate and its independence. By now, after almost 12 years, we also have a track record. As you know, the most important issue for a currency is to keep its value. There is one single measure for this, which is the average inflation rate over a medium or long-term horizon. This is how we measure price stability. I will be very precise. The average annual inflation rate in the euro area since the inception of the euro almost 12 years ago has been 1.97%. The European Central Bank has therefore been fulfilling its mandate, which is to keep inflation below, but close to, 2% over the medium term.With all the challenges we have faced since 1999 – the cash changeover, the oil price spikes, the internet bubble, the turbulences in the aftermath of 11th September and, of course, the global financial crisis – maintaining price stability is a notable achievement.What is more, looking ahead, inflation projections and inflation expectations are well anchored in line with price stability.

The launch of the ESRB
My main topic for today is macroprudential oversight and the new body that the European Council and the European Parliament have decided to create: the European Systemic Risk Board or ESRB. The legislation has been finalised yesterday and the ESRB will soon become reality.I am honoured to speak to you today not only as president of the ECB but also in my future role as Chair of the ESRB.The new European body will be part of the new European System of Financial Supervision and it will be located here in Frankfurt. The city can therefore be proud to host three European authorities: the ECB, the European Insurance and Occupational Pensions Authority (EIOPA) and the ESRB.The function of the ESRB will be to provide macro-prudential oversight of the European Union’s financial system. It will bring together the governors of the national central banks, the new European Supervisory Agencies (ESAs), the European Commission and the national supervisory authorities of all 27 member states.The establishment of the ESRB was first recommended in February 2009 in the report of a high-level group chaired by Jacques de Larosière. The new institution is backed by a remarkably strong consensus between the European Commission, the European Council and the European Parliament. In the Parliament, the legislation underpinning the establishment of the ESRB was approved with an overwhelmingly large majority of 80%. This gives a strong backing to the ESRB and its mission.The ECB will contribute to establishing the ESRB as a credible and effective body. Concretely, the ECB will host the Secretariat of the ESRB, thereby making it operational and providing analytical, statistical, logistical and administrative support.

But whilst the ESRB Secretariat will be located at the ECB, the ESRB will be a separate body, distinct from the ECB. The establishment of the ESRB will not affect the mandate and the functioning of the ECB’s statutory role in monetary policy. The establishment of the ESRB will be a landmark event in how Europe deals preventively with systemic risk. It forms part of wider developments across the globe, including in the US with the newly created Financial Stability Oversight Council (FSOC). Very much like the ESRB, this council is a collaborative body bringing together the relevant US authorities with the aim of identifying systemic risk and responding to threats. We will aim for close cooperation with the FSOC and other authorities for macro-prudential oversight.

The case for macro-prudential oversight
So what exactly is macro-prudential oversight? In many respects, it is the missing link between the different approaches of a central bank – which has such an important stake in stability at a macro level – and a financial supervisor – concerned with the financial soundness of individual market participants.The de Larosière report argued pointedly that before the crisis, supervisory arrangements, whilst concentrating on the supervision of individual firms, were placing too little emphasis on the stability of the financial system as whole. Indeed, until the late 1990s, the dominant view in policy circles was that if individual institutions were financially sound, the financial system as a whole would also be necessarily sound.

We now know that relying only on micro-prudential supervision to ensure financial stability suffers from the fallacy of composition. What is true for a part, or even for all parts, is not necessarily true for the whole.Amongst other elements of systemic risk, inter-linkages between institutions, correlated and concentrated exposures to risk, as well as herding behaviour may contribute to a destructive dynamic between institutions, markets and infrastructures. This would ultimately threaten the stability of the whole system.

Putting macro-prudential oversight into practice
Putting macro-prudential oversight into practice raises two questions: who should be charged with macro-prudential oversight and how it should be performed? Let me start with the question of who. In most countries central banks play an important role in financial stability. Because of their monetary policy function, central banks have an in-depth knowledge of the financial system. They are independent anchors for monetary stability. They also have a clear interest in financial stability because of its beneficial impact on the macroeconomic environment. And, last but not least, central banks are the ultimate source of liquidity.For all these reasons, central banks often have an explicit mandate in the area of financial stability. But typically this mandate is formulated in very general terms, and it would have been written before growing recognition of the key role of macro-prudential oversight.

Financial stability is not and cannot be exclusively an issue for central banks, namely the ECB and the European System of Central Banks. It must be shared with micro-prudential supervisors. They have a key role, because stable institutions are an essential and necessary condition for achieving financial stability. This is also the reason why the ESRB and the ESAs will form together a European System of Financial Supervision (ESFS).So in the analysis of systemic risk, the three ESAs will also have an important role to play, both on their own and within the ESRB. In collaboration with the ESRB, they will develop a set of indicators to identify and measure systemic risk. On their own, they will further draw up guidelines and recommendations for individual financial institutions to take account of the systemic risk they pose. And they will need to ensure that they have the capacity to respond effectively to emerging systemic risks.On the question of how to do macro-prudential oversight, the main tools that the ESRB will have at its disposal are warnings and recommendations. As we know, the strength of the so-called soft law can be quite significant, notwithstanding the lack of direct enforcement power. When risks have been identified and appear to be large, the ESRB will issue precise risk warnings. When appropriate, it will complement warnings with recommendations for remedial action and indications of the risks of inaction. We assume that the addressees will give careful consideration to the measures the ESRB will propose.I am confident that the ESRB will quickly develop its credibility through its work, its warnings and its recommendations. Its authority will draw on the quality of its analysis and its deep understanding of the functioning of the financial sector.

Implications for the financial industry
I have described the rationale for macro-prudential oversight and the practicalities of establishing the ESRB. What are the implications for the financial industry? The national supervisory authorities will remain the direct interface for financial firms on micro- as well as macro-prudential issues. As mentioned in the EU regulation, the ESRB’s warnings and recommendations will be directed – I quote from the Regulation – to the Union as a whole, or to one or more member states, or to one or more of the ESAs or to one or more national supervisory authorities. Recommendations can be also directed to the European Commission, in the area of the elaboration of new EU legislation. Nowhere do the legal texts mention that the ESRB will address individual firms in its warnings and recommendations. But the industry also has to be aware that with the ESRB and the overall European System of Financial Supervision we will be in a different environment. Following deliberations by the ESRB, competent authorities may decide to utilise the tools that are designed to counter the build-up of risk in the financial system. Their tools, as you know, include possible capital add-ons, countercyclical capital buffers or maximum loan to value ratios.One of the first tasks of the ESRB could be to review existing instruments and those that are being created at the global and the European levels. More generally, micro-prudential instruments that are well known in the banking sector, would be calibrated and used with a macro-prudential orientation.I want to refer here to the concrete example of counter-cyclical capital buffers. In July, the Basel Committee on Banking Supervision released its proposal for countercyclical capital buffers. The aim of such buffers is to make banks build up capital when system-wide risk is increasing following excessive credit growth. The buffers can then be drawn on when risks materialise and credit losses occur. The case of counter-cyclical buffers is particularly interesting, first because it is one of the tools with a clear macro-prudential orientation and second, because the ESRB and the European Banking Authority (EBA) could join forces for implementing the framework in Europe. This is suggested by the European Commission in its recent consultation paper on the potential role of the ESRB and the EBA in defining policies and standards that national authorities should follow.

Concluding remarks
Let me conclude. I see three reasons to expect relevant changes with the start of macro-prudential oversight in Europe. The first and most important reason is that better supervision should contribute to a more stable financial system. This is as much to the advantage of all players in the industry as it is to everyone in the wider economy.Second, integrating a macro-prudential perspective should lead to better regulation. In essence, systemic risk is the outcome of the actions of individual market players for the system as a whole. Regulation, which traditionally focuses on individual market players, can be improved by taking account of this potentially disastrous side-effect. Initiatives such as the counter-cyclical buffers and possible capital surcharges or other equivalent measures for systemically important financial institutions fall into this category.The third reason for welcoming the ESRB is that macro-prudential supervision could improve financial firms’ own risk analysis. I trust that it will provide an incentive to internalise the system-wide dimension in the industry’s own risk models and stress-testing.

Ladies and gentlemen, less than two years after the publication of the de Larosière report, Europe will have its own macro-prudential authority up and running. This is a remarkable achievement. We are now moving from designing the framework to implementing it. We have to make the enhanced resilience of the financial system our highest priority.I thank you for your attention.

IMF Managing Director Strauss-Kahn Calls for Broad Reforms in Europe to Revive Growth Press Release No. 10/446 November 19, 2010

Managing Director Dominique Strauss-Kahn of the International Monetary Fund (IMF) today called on Europe to implement far-reaching reforms in a collaborative effort to restore dynamic and long-lasting economic growth and safeguard the European social model.Europe must break the shackles of low growth, and stop settling for second best, Mr. Strauss-Kahn said in a speech at the European Banking Congress in Frankfurt.This is the only way to save the social model and fulfill the common European destiny. Europe has done better before, and it must do better again.Mr. Strauss-Kahn outlined a number of areas for action, ranging from fixing the financial sector—which he said must surely come first—to a single labor market initiative and rebalancing growth within Europe. More fundamentally, only a collaborative approach driven by the center can forge the reforms that are needed to secure stability, create jobs, and ensure long-term growth, Mr. Strauss-Kahn said. When the agenda is left with Member States, things stall. It’s time to change course. The center must seize the initiative in all areas key to reaching the common destiny of the union, especially in financial, economic and social policy. Countries must be willing to cede more authority to the center. Mechanisms must be redesigned to give them the incentives to reform,he said.The only answer is more cooperation, and greater integration, Mr. Strauss-Kahn said. Ultimately, we need to preserve the achievements of Europe. Now is the time to fortify the economic foundations of the union.

Interview with Dominique Strauss-Kahn IMF DIRECTOR by Stern
Published in Stern Magazine on November 18, 2010

Stern: Mr. Strauss-Kahn, actually we could simply conduct this interview in German ...

Strauss-Kahn: (In fluent German)... it was so long ago. As a child I used to speak German at home with my nanny.

Stern: So you discuss the world situation with Mrs. Merkel in German?

Strauss-Kahn: Don’t worry, we get along quite well in English.

Stern: Three years ago, when you took over as the Managing Director of the International Monetary Fund, nobody wanted to hear much about the IMF. Yet today you are considered one of the most powerful men in the world - feels good, doesn’t it?

Strauss-Kahn: That's not quite fair. We've been carrying out our task for more than 60 years. Naturally, the crisis moved us more into the focus of attention.

Stern: People seem to regard the IMF and its Managing Director as having benefited from the crisis. Your war chest is now almost $900 billion, more than three times compared to before the financial crisis. And you are involved everywhere, even in Europe, where you are rescuing Greece – and soon probably Ireland as well.

Strauss-Kahn: Yes, we’re currently in the headlines now and then. Yes, our assistance programs and our financial support helped millions of people keep their jobs. Millions of people have been spared the fate of poverty. That was our biggest achievement. And as to fame – it's like the situation with a doctor. When you're healthy you don't need him. When you're sick, you cannot wait for him to come. The global economy was very sick, and it still is.

Stern: What lessons did the world learn? Did it listen to the doctor and his diagnosis?

Strauss-Kahn: At first it did. Everybody was scared stiff then, nobody wanted to be the black sheep or make a blunder. So everybody pulled together, looking for common interests. And the most important lesson learned is cooperation.

Stern: But we don’t see much left now. The times when heads of state made a pledge to cooperate are already gone.

Strauss-Kahn: Why are you so pessimistic?

Stern: The U.S. Federal Reserve, for example, just announced that it's going to print $600 billion to boost the American economy. We are at risk of being inundated with cheap dollars, and the rest of the world is hopping mad.

Strauss-Kahn: It's not that easy. The U.S. economy still accounts for about a quarter of the world's gross domestic product after all. When America is doing badly, the rest of the world is really doing badly. The economy is in such a state that we have to take all conceivable measures to boost demand in the United States.

Stern: But all those dollars are pushing the U.S. currency down artificially. This way other currencies become more expensive, including the euro. That's bad for exports. Are we now facing a currency war?

Strauss-Kahn: I don't like the expression…currency war.

Stern: You could put it another way: the Brazilian Finance Minister complained that it's like throwing money from a helicopter. His colleague Wolfgang Schäuble thinks the United States have been living on credit for too long. And Chancellor Merkel read President Obama the riot act.

Strauss-Kahn: The truth is that many countries use currencies as a political weapon. That's a real danger, as it threatens the recovery of the global economy.

Stern: Does the rest of the world have to pay for the fact that the United States have been living on credit for so many years?

Strauss-Kahn: That’s right. But the United States were the dominant economy for decades. They also used the dollar as a political instrument. We all know the expression, the dollar is our currency and your problem.

Stern: Nixon’s Treasury Secretary John Connally made that statement when he tried to get other countries to share the cost of the Vietnam War.

Strauss-Kahn: Yes, and that has not changed in the past three years of the crisis. The United States have a dominant position, still.

Stern: And can thus use the money-printing press as the ultimate weapon?

Strauss-Kahn: Well, after all, even in the crisis, which as we know started in the United States, the dollar has remained strong. Why? Apparently the dollar still is the most important reserve currency, and the currency people trust in the end. We would be better off, of course, if we developed a system with several reserve currencies: the euro, the yen, perhaps even the Chinese yuan or the IMF’s Special Drawing Rights...

Stern:... which are considered the IMF's currency...

Strauss-Kahn: Such a system would be better. But reality looks rather different.

Stern: The economy in Germany is booming. People even start talking about an economic miracle. Is the major crisis over now?

Strauss-Kahn: Although some politicians want to declare an early end to the crisis, my answer is no. A clear No. The economic recovery is unfolding very unevenly. It's going well in Asia and South America, and surprisingly well even in Africa. The problems are in the United States, and in Europe. Germany may be doing well for the moment. But Germany is not going to achieve a high economic growth rate if other EU countries are doing poorly. More than 75 percent of German exports go to other countries in the euro zone. The German economy depends on the purchasing power of people in other EU countries. And as long as the economic recovery there is dragging, you can be sure the German economic miracle will not last all that long. Europe has to recover as a whole. And so far I don't see such a recovery for the coming year.

Stern: Is Ireland at the brink of bankruptcy?

Strauss-Kahn: Ireland is in a difficult situation. Of course we are always ready to help any member country looking for assistance by the IMF. But there are still a lot of other unresolved problems. The great crisis began in the U.S. financial sector, as we all know. Why? Because there were too few rules, but above all, because of lacking supervision. Many new regulations have been issued in the meantime. But enforcement is still poor. We are still miles away from the goal. Unfortunately the political will to persevere here is dwindling now.

Stern: But the G-20 leaders are constantly telling us they want to keep a tighter rein on the banks and tame Wall Street.

Strauss-Kahn: That's exactly what was promised. The fact is that this is not just an economic or a financial problem. Indeed, it's a potential threat to democracy. For the next crisis is sure to come. And then, when the banks have to be bailed out again, will the citizens, the taxpayers, be ready to fork over the money once more? I have my doubts.

Stern: Why should they? The banks are making fat profits again, paying out billions in bonuses to their employees.

Strauss-Kahn: Yes, and that’s the problem. This way another crisis may happen any time. The system is still far too unstable.

Stern: Banks are dealing mainly in other people's debts, in fact with some €120 trillion. Should the financial sector shrink and be made smaller?

Strauss-Kahn: I share that view. Because of the crisis trillions have been written off already. But overall the finance sector – banks, hedge funds and so on – should be doing much more to serve the real economy and not just exist for its own sake. What we need is a kind of reinsurance against crises. Banks should pay a tax, and the proceeds should go to a fund...

Stern:... yet all attempts in that direction have been utter failures. And we heard Josef Ackermann, the President of the IIF and CEO of Deutsche Bank, just a few days ago, warning politicians against heaping further burdens on the banks.

Strauss-Kahn: With all due respect for Mr. Ackermann, I can well imagine that, as an affected party, he is not crying out for more taxes and more supervision. Nevertheless, we do need such a contribution, a tax.

Stern: How should this work around the world?

Strauss-Kahn: The financial sector has to make a fair and substantial contribution toward the cost of crises. This levy could be a contribution to financial stability based on banks’ balance sheets, and there could also be a financial activities tax.

Stern: Last week's G-20 Summit showed how the world is at loggerheads once again. The talk is about protectionism and a clash of the giants, the United States versus China.

Strauss-Kahn: The G-20 discuss the tricky issues, which is a good thing. On the other hand the fear of the crisis is fading, cooperation has become more difficult. This reminds me of the early days of the European Union - countries understanding that they need to cooperate for the common good, but worrying about their own immediate interests when it comes to putting this into practice.

Stern: Criticism does not only focus on the United States but on China as well. Experts say the Chinese currency is undervalued by 30 percent and kept artificially low. So cheap Chinese goods are swamping the world without any competition.

Strauss-Kahn: We have been warning for some years that China cannot base its growth on exports alone. There are limits to how far that model can work. You have to promote the domestic economy. China is now trying to boost internal consumption through massive economic stimulus programs. I am sure the Chinese leadership understands that something has to change. But it takes time. It’s about the exchange rate, but not exclusively about the exchange rate.

Stern: At the same time you are warning against a new colonialism, a colonialism of the emerging countries, imposed mainly on Africa. Whom do you have in mind here, if not China?

Strauss-Kahn: There is a danger of domination by new powers which can create unfair trade advantages for themselves by their sheer size. China can no longer hide behind its status as an emerging country. China must change its growth strategy. But that's true for the United States and Europe, too, where we must say goodbye to the traditional growth model.

Stern: So your criticism applies to Germany as a leading world exporter as well. U.S. Treasury Secretary Timothy Geithner is calling for limits on trade surpluses, and he was sent packing by Mrs. Merkel and the German government.

Strauss-Kahn: But the principle is right. Trade balances should be evened out somewhat – that is something Mrs. Merkel and Mr. Schäuble could think about.

Stern: Why? The German economic model has been considered a success for decades.

Strauss-Kahn: Of course. And no one is reproaching the Germans for that. But you can't just defend your own surpluses while condemning others' deficits. Business as usual – that doesn't work anymore.

Stern: What do you see, then, as a new growth model for Germany, for example, or for Europe?

Strauss-Kahn: Europe needs strong, dynamic growth. Europe must break the shackles of slow growth, and stop settling for second best. We need a comprehensive change across all areas and in every country. This is the only way to save the social model. Europe must return to success.

Stern: What role should the IMF and its Managing Director play?

Strauss-Kahn: The IMF could commit itself to monitor the implementation of the G-20 resolutions. Otherwise, the same thing will happen as always – commissions are set up with weighty titles in the hope of problems vanishing.

Stern: The IMF is regarded as an early warning system, one that nobody listens to until it is too late.

Strauss-Kahn: Yes, everybody wants an alarm bell. Chancellor Merkel, President Obama, or President Hu Jintao, they're all the same in that regard. But when the alarm goes off in front of your own door, then woe to you! You'd rather shut your ears. Or you'll try to muzzle us. But our greatest strength is still that we tell the unvarnished truth, no matter to whom. That was the idea of the IMF, from the very beginning. And for that, the IMF needs more teeth.

Stern: You mean, more money still?

Strauss-Kahn: Not necessarily more money. We need to have the clear mandate to carry out the research and analysis that may expose developments, practices, and policies that some members may not want to hear in public.

Stern: For many people, your influence already goes too far. Take the participation in the rescue package for Greece, for example. In Europe, the IMF is now playing a bigger role than many would like to see, just to mention the head of Deutsche Bundesbank.

Strauss-Kahn: We know this is not appreciated by everyone in Germany. But there is no such thing as a homemade solution for a global crisis.

Stern: Speaking of the unvarnished truth: you are deemed one of the most popular politicians in France. And we must ask you the same question everyone is asking you: are you going to run against Sarkozy in the next presidential election?

Strauss-Kahn: And I will tell you what I tell everyone: I'm going to see my term as IMF Managing Director through to the end. And the term ends in 2012.