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Why QE2 Failed: The Money All Went Offshore

Why QE2 Failed: The Money All Went Offshore

On June 30, QE2 ended with a whimper. The Fed’s second round of “quantitative easing” involved $600 billion created with a computer keystroke for the purchase of long-term government bonds. But the government never actually got the money, which went straight into the reserve accounts of banks, where it still sits today. Worse, it went into the reserve accounts of FOREIGN banks, on which the Federal Reserve is now paying 0.25% interest.

Before QE2 there was QE1, in which the Fed bought $1.25 trillion in mortgage-backed securities from the banks. This money too remains in bank reserve accounts collecting interest and dust. The Fed reports that the accumulated excess reserves of depository institutions now totals nearly $1.6 trillion.

Interestingly, $1.6 trillion is also the size of the federal deficit – a deficit so large that some members of Congress are threatening to force a default on the national debt if it isn’t corrected soon.

So here we have the anomalous situation of a $1.6 trillion hole in the federal budget, and $1.6 trillion created by the Fed that is now sitting idle in bank reserve accounts. If the intent of “quantitative easing” was to stimulate the economy, it might have worked better if the money earmarked for the purchase of Treasuries had been delivered directly to the Treasury. That was actually how it was done before 1935, when the law was changed to require private bond dealers to be cut into the deal.

The one thing QE2 did for the taxpayers was to reduce the interest tab on the federal debt. The long-term bonds the Fed bought on the open market are now effectively interest-free to the government, since the Fed rebates its profits to the Treasury after deducting its costs.

But QE2 has not helped the anemic local credit market, on which smaller businesses rely; and it is these businesses that are largely responsible for creating new jobs. In a June 30 article in the Wall Street Journal titled “Smaller Businesses Seeking Loans Still Come Up Empty,” Emily Maltby reported that business owners rank access to capital as the most important issue facing them today; and only 17% of smaller businesses said they were able to land needed bank financing.

How QE2 Wound Up in Foreign Banks

Before the Banking Act of 1935, the government was able to borrow directly from its own central bank. Other countries followed that policy as well, including Canada, Australia, and New Zealand; and they prospered as a result. After 1935, however, if the U.S. central bank wanted to buy government securities, it had to purchase them from private banks on the “open market.” Former Fed Chairman Marinner Eccles wrote in support of an act to remove that requirement that it was intended to keep politicians from spending too much. But all the law succeeded in doing was to give the bond-dealer banks a cut as middlemen.

Worse, it caused the Fed to lose control of where the money went. Rather than buying more bonds from the Treasury, the banks that got the cash could just sit on it or use it for their own purposes; and that is apparently what is happening today.

In carrying out its QE2 purchases, the Fed had to follow standard operating procedure for “open market operations”: it took secret bids from the 20 “primary dealers” authorized to sell securities to the Fed and accepted the best offers. The problem was that 12 of these dealers – or over half — are U.S.-based branches of foreign banks (including BNP Paribas, Barclays, Credit Suisse, Deutsche Bank, HSBC, UBS and others); and they evidently won the bids.

The fact that foreign banks got the money was established in a June 12 post on Zero Hedge by Tyler Durden (a pseudonym), who compared two charts: the total cash holdings of foreign-related banks in the U.S., using weekly Federal Reserve data; and the total reserve balances held at Federal Reserve banks, from the Fed’s statement ending the week of June 1. The charts showed that after November 3, 2010, when QE2 operations began, total bank reserves increased by $610 billion. Foreign bank cash reserves increased in lock step, by $630 billion — or more than the entire QE2.

In a June 27 blog, John Mason, Professor of Finance at Penn State University and a former senior economist at the Federal Reserve, wrote:

In essence, it appears as if much of the monetary stimulus generated by the Federal Reserve System went into the Eurodollar market. This is all part of the “Carry Trade” as foreign branches of an American bank could borrow dollars from the “home” bank creating a Eurodollar assets at the smaller [U.S.] banks remained relatively flat…. Thus, the reserves the Fed was pumping …

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Offshore Banking in Gibraltar

Offshore Banking in Gibraltar

Gibraltar is small in size but big on tax savings. The country of Gibraltar covers just 2.642 sq. miles of land, an area roughly half the size of Rhode Island. For a small country it is a dynamic financial center for investors world-wide.

This self-governing British territory located near the entrance of the Mediterranean, overlooks the Straites of Gibraltar, on the southern end of the Iberian Peninsula and Europe. It shares it’s northern border with Spain.

Gibraltar has close historical ties to Britain’s military and is the home of one of England’s Royal Naval bases. The country has an economy supported by shipping and offshore banking, with tourism adding even more to its coffers via the estimated 7 million tourist who make it their destination each year. These 3 industries added an estimated 25%-30% each to Gibraltar’s GDP. Support from the British military alone adds another 7% to the total economy.

The population of Gibraltar is estimated at over 28,000 people, with a per capita GDP of $38,200 (2005 est.), with a large number of them employed in the service and industrial sectors. The official currency of Gibraltar is the Gibraltar Pound (GI, GIB). The Gibraltar Pound is divided into 100 pence.

The wealth management and private banking sector of Gibraltar has attracted many big name players like Barclays, ABN Amro, and IDT Financial. Due to the high regulation and low taxation this country offers, it is one of the more ideal offshore banking locations and offers attractive tax conditions to those investing in it. Asset management is primarily what the offshore sector focuses on for individuals who are of a high net worth. There is no taxation on wealth, inheritances and gifts, and becoming a resident of Gibraltar requires no physical presence, so it might be wise to consider not only offshore investing in Gibraltar, but living there as well.

Quite often the banks here will cater to the rich and those of a higher net worth. They will offer special rates, and feature their private banking services in the lime light. “Customer Relationship Management” is a specialty of many of the offshore banks in Gibraltar. However, some care needs to be taken when approaching the private banking sector here, as well as in many other countries. Keep in mind to do your due diligence and look at how the bank is structured. Many are simply front ends for investment funds, which may be fine, or it may not. If a bank is offering personal attention, bear in mind exactly why it is doing this and what it hopes to gain from you depositing your money.…

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How to Avoid Online Banking Problems

How to Avoid Online Banking Problems

Many people think that using Internet bank services is a risky thing to do. There have been so many internet scams and frauds that people think that the internet is the most dangerous place to handle your money. But is this really true? Is your money going to be stolen from your internet bank account? Well, not if you make the right choices and use a little common sense.

Bank internet services are extremely safe, allowing you to make, alter and cancel transactions whenever you need to do so. The benefits completely outweigh the disadvantages of internet banking services. You are able to bank at anytime of the day, at anyplace on the globe, provided you have internet in that place. It will save your time and will surely make your work a lot less.

The amount of people who use bank internet services has grown quite a bit in the last year. This is because people are now realizing how advantageous online banking is and how safe it is.

Here are a few tips to help you have a safe banking experience:

1) The most important thing you need to know while using bank internet services is NEVER to give your online bank username and ID to anyone. You may think that giving these details to the bank may be alright, but its not.

2) You may at times receive an email that has a link to your banks website. This website that you are directed to is actually a fake website that is designed to look exactly like your banks website. Many people click these emails and login on the page they are directed to. NEVER do this. Always type in the URL yourself. These emails are known as phishing emails.

3) Only use your personal computer to use bank internet services. Using a shared computer or one at an internet caf?� must never be done.

4) Remember to clear the history, cookies and cache after using your online bank. Also remember to never save your password and username or ask the computer to remember it. It is better that you have the username and password stored in your head rather than writing it somewhere.

5) Another very important thing you must do, which a lot of people forget to do, is LOG OUT. If you do not log out, all the other precautions you’re taking will be of no use.

These tips will help you to have a smoother Online Banking experience. You will have to trouble at all if you follow these simple tips. Bank internet services themselves are very safe and you will have nothing to worry about. You will find that using these services will make life a lot easier thanks to all the features they have to offer.…

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Halifax Internet Banking – Bringing Revolution in Banking

Halifax Internet Banking – Bringing Revolution in Banking

Halifax is an insurance and finance company in the United Kingdom. It is an extension of Lloyds banking group. Halifax is considered to be the UK’s biggest provider of saving accounts and residential mortgages. But, keeping these aside, no one likes to stand in the bank queue for long hours. In fact, nobody has the time to do so. In order to make things easier, Halifax has started its own internet banking. Halifax internet banking has enabled its customers to make most of their transactions online, by logging on to its official website.

Through internet banking, Halifax has brought all the accounts of its customers to a single portfolio. It can include share dealing and credit cards also, if those services are chosen. There is an attractive as well as innovative service known as the websaver which is exclusively available in Halifax internet banking, which draws a high interest rate while allowing the customers to monitor their accounts. It is useful for saving money for the future. The user has access to mortgage calculator to find the right option. Another feature in this type of banking is that the customers can see a large number of transaction statements. It gives the freedom to transfer money to any bank in the UK which includes paying bills also. It is possible to schedule the transactions to any date. Another feature provided is, the holiday money service in which the customers can order currency of any country online. It also provides travel insurance. These benefits have helped its customers from getting away from the tedious form-filling procedure. But there are some loop holes also. There is a limit to viewing transactions and it has no option for downloading data. The website is fully protected from hacking and frauds and there is no financial risk in using the services. While logging into the online account, the user is asked for three types of information. The first two are the username and password. The third information changes from time to time. For example, the user may be asked to enter his birth date or birthplace. There is a help button in the website, where the user can clear any query.

The Halifax internet banking has indeed proved to be an easy way for money transactions, getting loans, etc. In today’s world, the internet has reached even the inaccessible regions thereby making online banking a boon for the banking sector for the mundane.…

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Role of SMS in Banking

Role of SMS in Banking

Recession in the economy has forced banks and other financial industry to seek different ways in which they can increase their business. With the help of technology like SMS communication they are increasing monetization. Most of them uses web based SMS communication system with which they send million of messages quickly.

Mobile banking facility is offered by almost all the banks and financial transactions that are being done on ones’ account is notified to the account holder by an SMS alert. Previously this web based SMS communication technique had lots of limitations as it was one way-alerts. Banks were able to sent alerts to the customers but they were not able to respond for any clarification required.

But now it has all changed. Customers too can send SMS for a balance inquiry check. There are unique codes usually alpha numerals, specified by the bank for this purpose. These codes have to be send as a message to the given number to receive the services that are requested. This Mobile banking facility is password protected, to login, a unique User name and Password is provided, this can also be changed as per the customer’s request. Salary updation and other credits in the account are being sent as an alert to customers. These SMS services offered by the banks are outlined as Push & Pull services.

Push services include insufficient funds notification (sent when requested funds are not available in the customer’s account), large or small withdrawals from ATMs’, cheque payments, password authentication (one time password change), credit card notifications (all purchases made using credit or debit cards are immediately intimated to the customer) etc.

Pull services includes balance inquiry check, e-payment options, stop payment requests, Deactivation of a credit cards or debit cards (in case of emergencies such as theft or lost). Additional benefits such as foreign currency exchange rates and interest rates on different accounts are also intimated to customers as SMS Alerts.

SMS has now become a legitimate marketing technique because of its easy accessibility, less time consuming factor. This mode of communication is cheaper compared to other channels. The increased use of mobile phones because of its user friendliness has made this possible. The compatibility of mobile phones has also enabled the client to reach their customers as and when required. This is where internet banking even though has broader functionalities, lacks as it is limited to users who have access to computers and internet connection. SMS alerts are less time consuming compared to other mediums of communication such as tele-calling, mailing, etc. The dominating and overriding factor for those who are concerned about the security reasons is the immediate alerts on mobile phones about account transactions.

SMS Channels also helps their clients’ to tackle some emergency situations too, fraud alerts & abnormal transactions. Banking sector widely uses this technology as this requires less human resources. This enables to automatically process requests and data too. SMS gateway plays very important role in Mobile Banking, by offering quality and API based Internet SMS Gateway.…

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In today’s world, applications are everywhere. An application also known as an app is software with instructions that helps the user to complete tasks. There are millions of apps out there in the digital world. Platforms such as the android play store and the app store have millions of apps.

A few years ago, we could only rely on computers to do simple tasks such as sending emails. Today computing power has been transferred to the mobile device and we rarely need computers as much.

Mobile apps have made our life simpler since now we can use the apps for almost everything. Here are 5 ways you can use applications to make your life less stressful. has lots of information on other applications you can take advantage of.

  • Online shopping.

Ever tried going to the supermarket only to discover that the product you wanted is out of stock? The feeling is so frustrating because you have wasted your time and money traveling there.

You could easily avoid this next time by shopping online from the comfort of your home. The best part of it all is that you can check if the product is available. Delivery to the destination of your choice is also available.

Some of the most popular online shops are flip kart, snap deal, jabong, Jumia, Amazon, Alibaba, and eBay.

  • Communication.

The terminology communication is key is very popular in any business that wants to thrive. In the old day’s businesses only relied on emails for communication but times have changed.

Today your business can engage more with customers and employees on different platforms such as Facebook, Twitter, and YouTube. These applications enable you to enlarge your pool of potential customers and provide feedback from both your customers and employees.

  •  Education.

The education system is expensive and outdated. Student debt is also very high and a huge burden for most graduates.

The good news is that you can educate yourself online on different websites. You can learn from E-books, E-library, or subscribe to an educational YouTube channel.

  • Entertainment.

Remember when television was the only means of entertainment? Not only was this so limiting but also frustrating since you could only view your program once a week.

To make matters worse if you missed an episode good luck on viewing it. Netflix and other apps such as amazon prime have made this much simpler and now you have unlimited high rating shows.

You can view it by just using your mobile phone. Face book, twitter, snap chat, Instagram, and YouTube are other platforms for entertainment with funny memes and videos.

  • Banking.

This is the safeguarding of your money with a financial institution. Banking was very frustrating in the past. The only way for you to deposit or withdraw your hard-earned income was by visiting the bank. Imagine having to do this when you have an emergency.

Today most banks have realized the importance of having their banking apps. The apps are so fast in conducting transactions saving time for both the customer and the bank.

Such apps include M-pesa a mobile app that can transact money transactions from on phone to another in seconds. Online transactions have been simplified by the use of PayPal.

To sum everything up, we are living in a digital era. Life can be very complex with the ever-increasing technology updates. The good news is that as technology becomes more complex developers update applications to be more simple and easier to use. The core reason for having apps is to make life easier. Join the digital world and have a simpler better life.