Gold gains on hopes Fed will delay interest rate hike

19 Feb4:21 PM

[SINGAPORE] Gold extended gains to a second straight session on Thursday as minutes of the Federal Reserve's meeting showed US central bank officials were cautious about raising interest rates too soon, hurting the dollar.

Spot gold rose 0.1 per cent to US$1,214.10 an ounce by 0716 GMT. The metal closed up 0.3 per cent on Wednesday, after dropping to a six-week low of US$1,197.56 earlier in the session.

Fed policymakers expressed concern last month that raising rates too soon could pour cold water on the US economic recovery, and fretted over the impact of dropping "patient" from the central bank's rate guidance.

The minutes from the Fed's Jan 27-28 policy-setting meeting, released on Wednesday, show officials grappling to square solid US economic growth with the weakness in international markets, as well as worrying about falling inflation expectations in the United States.

"Bullion's move up after the FOMC minutes may be attributed to an easing of investors' rate hike concerns," said HSBC analyst James Steel, referring to the Fed's Federal Open Market Committee.

Gold had come under pressure in recent months from expectations the Fed will raise interest rates as early as June, potentially lifting the dollar and hurting non-interest-yielding assets like bullion.

"While an eventual rate hike is bearish for gold, the decision by the Fed to remain patient provided some relief to the bullion market," said Steel.

Global equity markets advanced while the dollar pulled back following the release of the Fed minutes.

Gold's failure to hold losses below US$1,200 could mean some consolidation was in the offing, said some chart analysts.

Traders were also keeping an eye on developments in Europe, where Greece is negotiating with its creditors to resolve a debt crisis.

Greece is expected to ask on Thursday for an extension to its "loan agreement" with the eurozone as it faces running out of cash within weeks, but it must overcome resistance from sceptical partners led by Germany.

With Greece's bailout programme due to expire in little more than a week, the government of leftist Prime Minister Alexis Tsipras urgently needs to secure a financial lifeline to keep the country afloat beyond late next month.

A failure to reach an agreement could see Greece exiting the eurozone, potentially triggering safe-haven bids for gold, although markets believe a last-minute agreement will be negotiated.

Liquidity is likely to be thin in Asia as several markets are closed for the Lunar New Year holiday.

REUTERS

      

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US jobless claims fall below 300,000 level

New claims for US unemployment insurance benefits dropped below 300,000 last week, pointing to an overall decline in the pace of layoffs, according to Labour Department data released Thursday. 

PHOTO: AFP

19 Feb9:58 PM

[WASHINGTON] New claims for US unemployment insurance benefits dropped below 300,000 last week, pointing to an overall decline in the pace of layoffs, according to Labour Department data released Thursday.

Would-be workers filed 283,000 initial jobless claims in the week ending February 14, a drop of 21,000 from the prior week's unrevised level of 304,000, the department reported.

The decrease was stronger than analysts expected, with the average estimate at 295,000 claims.

The Labour Department said there was no special factor affecting the seasonally adjusted claims numbers.

The four-week moving average of initial jobless claims fell by 6,500 to 283,250. The average, which smooths week-over-week volatility, has fallen fairly steadily over the past 12 months. A year ago the average was 336,500.

The unemployment rate edged up in January to 5.7 per cent from 5.6 per cent in December as more people returned to the labour force amid strong job growth.

AFP

      

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Oil prices fall after another rise in US inventories

20 Feb7:47 AM

[ NEW YORK] Oil prices fell Thursday after the US government reported crude inventories increased again to record highs, adding to concerns about the global supply glut.

US benchmark West Texas Intermediate (WTI) for delivery in March dropped 98 cents to close at US$51.16 a barrel, after shedding nearly US$1.40 on Wednesday.

In London, Brent North Sea crude for April delivery settled at US$60.21 a barrel, down 32 cents from the prior trading session.

WTI futures dropped sharply in early trade, sinking below US$50, but erased much of the losses after the Department of Energy reported US crude inventories increased by nearly eight million barrels in the week through February 13.

"We obviously saw this coming as we had a large (price) decline yesterday, so a part of it was already priced in and the market is now trying to find a fair value," said Carl Larry of Frost & Sullivan.

Even though crude inventories were at their highest level on record, and the increase was larger than analysts expected, the gain was only half that of the number announced Wednesday by the American Petroleum Institute in its weekly report.

The DoE report was delayed a day to Thursday because of Monday's public holiday.

Crude prices have lost about 50 per cent since June owing to an oversupply in world markets, a weak global economy and a strong dollar.

And while prices have risen from their lows in recent weeks on news that the number of US oil rigs in operation has fallen and energy giants are cutting back on investment, market-watchers say volatility is likely to continue for some time.

"An interesting thing is the US production is at a record high on a week-to-week basis, despite the fact we've laid down a lot of rigs and cut a lot of expenses," Larry said.

AFP

      

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Canada unveils new tax measures to boost LNG investment: PM

Canada is introducing substantial new tax measures that will allow investors in new liquefied natural gas facilities to recover their costs more quickly, Prime Minister Stephen Harper said on Thursday 

PHOTO: REUTERS

20 Feb7:28 AM

[OTTAWA] Canada is introducing substantial new tax measures that will allow investors in new liquefied natural gas facilities to recover their costs more quickly, Prime Minister Stephen Harper said on Thursday.

Mr Harper told a televised news conference in British Columbia that the tax relief would encourage investment in the LNG industry and boost employment.

The measures could help companies move forward with stalled developments in Canada, even as they cut spending around the world in response to plummeting oil prices. "The business of shipping natural gas is capital intensive. The bar for entry is high," Mr Harper said.

Ottawa will establish a capital cost allowance rate of 30 per cent for equipment used in natural gas liquefaction and 10 per cent for buildings at a facility that liquefies natural gas, Mr Harper announced.

LNG facilities in Canada can currently write off 8 per cent of their total capital investment each year.

Mr Harper said the tax relief would be available for capital assets acquired after Feb 19 this year and before 2025.

Last week, Reuters revealed that the government was studying the idea of new tax breaks in the upcoming budget for companies that build LNG plants.

More than a dozen LNG terminals have been proposed in Canada, mostly in the West Coast province of British Columbia. Backed by energy giants like Malaysia's Petronas, Royal Dutch Shell and Chevron Corp. The projects would ship cheaper North American gas to Asian markets.

REUTERS

      

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Your Family’s Largest Expense May Surprise You - Charles Lammam, Milagros Palacios, and Sean Speer

If you asked average Canadian families what their largest expense is, many would probably say housing. And you can’t blame them. Mortgage and rental payments are a painful monthly reminder of how much we pay for this basic necessity. But what if we told you that the average family’s largest expense is, in fact, taxes? When we say taxes, we don’t just mean income taxes. We’re talking about all the taxes you pay to all levels of governments (federal, provincial, and local). This includes a combination of both visible and hidden taxes— everything from income taxes, which are less than a third of the total, to payroll taxes, health taxes, sales taxes, property taxes, profit taxes, fuel taxes, vehicle taxes, import taxes, alcohol and tobacco taxes, and much more.


With more money going to the government, the reality is that families have less to spend on things of their own choosing whether it’s a new car, technological gadget, or family vacation.




For 2013, we estimate that the average Canadian family earned $77,381 in income and paid $32,369 in total taxes or 41.8 percent of income (the average family here includes single people). In the same year, just 36.1 percent of the average family’s income went to food, clothing, and shelter combined. Indeed, Canadian families spend more on taxes than on the basic necessities of life.

 But it wasn’t always this way.

 Back in 1961 (the first year for which we have calculations), the average family earned approximately $5,000 and paid a much smaller portion of its household income in taxes (33.5 percent) while spending proportionately more on the basic necessities (56.5 percent).

 In Taxes versus the Necessities of Life: The Canadian Consumer Tax Index, 2014 edition, published by the Fraser Institute, we track the total tax bill of the average Canadian family from 1961 to 2013. Since 1961, we find that the total tax bill increased by 1,832 percent, dwarfing increases in shelter costs (1,375 percent), clothing (620 percent), and food (546 percent). Even after accounting for inflation, which is the change in overall prices, the tax bill shot up 147 percent over the period.

 Over the past five decades, the total tax bill grew much faster than the cost of basic necessities and now taxes eat up more income than any other single family expense.

With more money going to the government, the reality is that families have less to spend on things of their own choosing, whether it’s a new car, technological gadget, or family vacation. They also have less money available to save for retirement or their children’s education, or to use to pay down household debt.

While there’s no doubt that taxes help fund important government services, the real issue is the amount of taxes that governments take compared to what we get in return. With almost 42 percent of income going to taxes, Canadians should ask whether they get the best value for their tax dollars.

 Are we paying too much, too little, or just the right amount? That’s up to you and your family to decide.

 But to make an informed assessment, you must have a complete understanding of all the taxes you pay. Unfortunately, it’s not so straightforward because the different levels of government levy such a wide range of taxes, many of which are buried in consumer prices and hard to discern. Therein lies the value of our calculations.

 Armed with this knowledge, we can hold our governments more accountable for the resources they extract and continue a public debate about the overall tax burden, the amount and scope of government spending, and whether we’re getting our money’s worth.



 CHARLES LAMMAM MILAGROS PALACIOS SEAN SPEER Charles Lammam is Associate Director of Tax and Fiscal Policy, Milagros Palacios is Senior Research Economist in the Fiscal Studies Department, and Sean Speer is Associate Director of Government Budgets and Fiscal Policy at the Fraser Institute. Their study, Taxes versus the Necessities of Life: The Canadian Consumer Tax Index, 2014 edition is available at www.fraserinstitute.org

Debt Interest Risks Crowding Out Government Spending on Other Priorities

Debt Interest Risks Crowding Out Government Spending on Other Priorities 

Sean Speer, Charles Lammam, and Milagros Palacios NEW RESEARCH FRASER INSTITUTE fraserinstitute.org FRASER RESEARCH BULLETIN 1 Sean Speer, Charles Lammam, Milagros Palacios, Hugh MacIntyre, and Feixue Ren FRASER RESEARCH BULLETIN August 2014


 A major theme of this year’s federal and various provincial budgets is continuing deficit spending and growing government debt. The result of recent deficits and debt accumulation is that the combined federal and provincial net debt has increased from $823 billion in 2007/08 to over $1.2 trillion (or $34,905 for every man, woman, and child living in Canada) in 2013/14.

This type of debt accumulation has costs.

One major consequence is that governments must make interest payments on their debt similar to households who pay interest on borrowing related to mortgages, vehicles, or credit card spending. Spending on interest payments consumes government revenues and leaves less money available for other important priorities such as spending on health care and education or tax relief. Canadian governments (including local governments) collectively spent an estimated $61.7 billion on interest payments in 2013/14.

  To put that in perspective, it is more than Canada’s public spending on primary and secondary education ($61.0 billion, as of 2011/12, the last year for which we have finalized data), or more than the three major federal-to-provincial government transfer programs comprising Equalization, the Canada Health Transfer and Canada Social Transfer ($58.6 billion).


 Summary
 FROM THE CENTRE FOR FISCAL STUDIES

The Cost of Government Debt in Canada Interest payments on government debt Your tax dollarsWinter 2014 | 11 cents of every tax dollar they collect simply to service past debt obligations.

 These interest payments leave fewer resources available for important priorities such as tax relief and spending on public programs such as health care, education, and social services.

 Consider the following examples from Canada’s two largest governments whose interest payments are now comparable to key revenue sources and spending programs. In 2013/14, interest payments on the federal debt totalled $29.3 billion, which roughly equals the $29.9 billion collected in GST revenue and the $32.3 billion spent on Old Age Security benefits for Canadian seniors. In the same year, the Ontario government spent $10.6 billion on interest payments—more than the entire $10.1 billion budget for the ministry of community and social services and close to the $10.8 billion the government spent on infrastructure (roads, hospitals, schools, etc.).

Collectively the story is equally sobering. Canadian governments (including local governments) cumulatively spent $61.7 billion on interest payments in 2013/14, outpacing all public spending on K-12 education ($61.0 billion as of 2011/12, the last year for which we have data) and the three major federal-to-provincial government transfer programs ($58.6 billion).

 Interest payments clearly aren’t trivial when compared to other major revenue and spending items. If governments dig deeper into debt, interest payments could grow and eat up more government resources, displacing spending on things that Canadians care about and adding to the burden of repayment on future generations.

 Although debt levels are important, higher interest rates (or the costs of borrowing) pose a real threat to indebted governments. Governments have been borrowing at historically low interest rates; if rates rise, the cost of carrying debt will increase. Governments that maintain relatively high and growing debt levels, such as Ontario and Quebec, are especially vulnerable to interest rate hikes.

Bottom line: deficit spending and growing government debt is not without costs. Rising government debt can result in more resources going to interest payments and not public priorities that benefit Canadian families or improve the country’s economic competitiveness.

 Some may try to justify deficits and debt in certain circumstances, but they can’t ignore the immediate and future consequences. Five years after the recession, now is a good time to reverse the trend and rein in government debt.

The Cost of Government Debt in Canada 11%  of your tax dollars . . . . . . is $62 billion burned on interest payments .



SEAN SPEER CHARLES LAMMAM MILAGROS PALACIOS Sean Speer is Associate Director of Government Budgets and Fiscal Policy, Charles Lammam is Associate Director of Tax and Fiscal Policy, and Milagros Palacios is a Senior Research Economist in the Fiscal Studies Department at the Fraser Institute. They are co-authors of The Cost of Government Debt in Canada, which is available at www.fraserinstitute.org.

U.S. Announces Third Bitcoin Auction

By SYDNEY EMBER

 FEBRUARY 18, 2015 1:12 PM February 18, 2015 1:12 pm

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A Bitcoin sign is seen in a window in Toronto.Credit Mark Blinch/Reuters

The United States Marshals Service announced on Wednesday that it would auction 50,000 Bitcoins, worth nearly $12 million, seized in connection with the online marketplace Silk Road.

The Bitcoin auction, to be held on March 5, comes more than two months after the service’s second Bitcoin auction in December, when it also sold 50,000 Bitcoins.

The latest auction is for Bitcoins seized from the computer hardware belonging to Ross Ulbricht, who was convicted in Federal District Court in Manhattan this month on charges related to the operation and ownership of Silk Road. The website was shut down in October 2013 after the authorities said it was online bazaar for illegal drugs and other illicit activities.

The timing of the latest auction comes as investors and even Bitcoin enthusiasts are questioning whether the virtual currency is a desirable investment. In the last year, Bitcoin’s price has slid, from a high of around $1,150 at the end of 2013 to about $235 on Wednesday afternoon. At the time of the second auction, Bitcoin was trading at about $370. The service said 11 registered bidders took part in its December auction.

Video

PLAY VIDEO|2:21

Bitcoin Believers

Bitcoin Believers

While regulators debate the pros and cons of bitcoins, this volatile digital currency inspires the question: What makes money, money?

Video by Channon Hodge, David Gillen, Kimberly Moy and Aaron Byrd on Publish DateNovember 25, 2013.

Bidders in the third Bitcoin auction will have a six-hour period on March 5, from 8 a.m. to 2 p.m., to submit sealed bids for the coins, which have been broken into several lots. The first series contains 10 blocks of 2,000 Bitcoins, while the second series contains 10 blocks of 3,000 Bitcoins. Bidders can participate in both series and can bid on multiple blocks.

Registration for interested parties to participate in the auction was scheduled to began on Tuesday at 9 a.m., but federal offices in Washington were closed for weather-related reasons, said Lynzey Donahue, a spokeswoman for the Marshals Service. The registration period, which began instead on Wednesday, will end at noon on March 2. The Marshals Service will notify eligible bidders on March 3, with the winner, or winners, notified on March 6.

To be eligible to participate in the auction, bidders must prove their identities and show that they have a required amount in cash. They also have to certify that they are not affiliated with Silk Road or Mr. Ulbricht.

Including 144,336 Bitcoins found on computer hardware belonging to Mr. Ulbricht, the government has recovered 173,991 Bitcoins. After the auction next month, the Marshals Service will have sold about 130,000 Bitcoins.

SecondMarket, an upstart exchange based in New York, nearly swept the government’s Bitcoin auction in December, winning 48,000 of the 50,000 Bitcoins for sale. The venture capitalist Timothy C. Draper, who won all of the nearly 30,000 Bitcoins in the government’s first auction in June, won the remaining 2,000 Bitcoins in the second.

A version of this article appears in print on 02/19/2015, on page B4 of theNewYork edition with the headline: New Bitcoin Auction.

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