Tuesday, August 2, 2011

Apple holding more cash than US

29 July 2011 Last updated at 12:55 GMT President Barack Obama with iPad US President Barack Obama is known to be an iPad owner, along with 28 million other people Apple now has more cash to spend than the United States government.

Latest figures from the US Treasury Department show that the country has an operating cash balance of $73.7bn (?45.3bn).

Apple's most recent financial results put its reserves at $76.4bn.

The US House of Representatives is due to vote on a bill to raise the country's debt ceiling, allowing it to borrow more money to cover spending commitments.

If it fails to extend the current limit of $14.3 trillion dollars, the federal government could find itself struggling to make payments, and risks the loss of its AAA credit rating.

The United States is currently spending around $200bn more than it collects in revenue every month.

Apple, on the other hand, is making money hand over fist, according to its financial results.

In the three months ending 25 June, net income was 125% higher than a year earlier at $7.31bn.

Spending spree

With more than $75bn either sitting in the bank or in easily accessible assets, there has been enormous speculation about what the company will do with the money.

"Apple keeps its cards close to its chest," said Daniel Ashdown, an analyst at Juniper Research.

Industry watchers believe that it is building up a war chest to be used for strategic acquisitions of other businesses, and to secure technology patents.

Bookstore Barnes and Noble and the online movie site Netflix have both been tipped as possible targets, said Mr Ashdown.

The company may also have its eye on smaller firms that develop systems Apple might want to add to its devices, such as voice recognition.

Apple dipped into some of its reserves recently when it teamed-up with Microsoft to buy a batch of patents from defunct Canadian firm Nortel.

The bidding consortium shelled out $4.5bn for more than 6,000 patents.


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US Congress split over debt issue

30 July 2011 Last updated at 02:03 GMT John Boehner: ''I stuck my neck out a mile to get an agreement with the president"

The US Congress has split along party lines as it seeks a solution to an ongoing deadlock over raising the nation's debt limit.

The House of Representatives passed a Republican bill proposed by Speaker John Boehner, but that was quickly killed by the Democratic-led Senate.

Senate leader Harry Reid is now seeking a vote on a rival plan he proposed.

The US risks defaulting on its financial obligations if a federal budget deal is not struck by 2 August.

Continued disagreements Harry Reid: ''It's time to come to together and compromise''

The Boehner plan includes some $900bn of spending cuts and would raise the debt ceiling by a similar amount.

However it would require another vote during mid-2012 and includes language in support of a so-called "balanced budget amendment" to the US constitution - both rejected by the White House and the Senate leadership.

The House vote was delayed from Thursday after Mr Boehner struggled to win over a number of staunchly conservative Republicans, including newly elected representatives who back the Tea Party.

The plan eventually passed the House by 218-210, with 22 Republicans and every Democrat voting against.

Before the vote, Mr Boehner said the plan advanced the "great cause" of a balanced budget amendment.

Mr Boehner appeared heated in front of his colleagues in the House, slamming his fist on a podium on Friday evening and calling for lawmakers to pass his proposal.

Mr Boehner said Republicans had tried their "level best" to reach a deal.

"I stuck my neck out a mile to get an agreement with the president of the United States," Mr Boehner said, referring to negotiations with President Barack Obama that twice broke down.

"My colleagues, I can tell you I have worked with the president and the administration since the beginning of this year to avoid being in this spot," he added.

Continue reading the main story
It's odds-on the president won't have to veto the Republican plan, as the Tea Party seems to have done the job for him”

End Quote image of Mark Mardell Mark Mardell BBC North America editor "A lot of people in this town can never say yes," Mr Boehner said.

Shortly after the House passed its bill, the Democratic-led Senate voted to reject the Boehner plan in a late-evening vote on Friday.

Senate Majority Leader Harry Reid accused the Republicans of seeking to filibuster, or delay, proceedings by forcing a vote on his rival plan to achieve a 60-vote "supermajority" before passing.

Speaking after the Senate adjourned for the night, he accused his Republican counterpart of not being willing to negotiate.

"Unless there is a compromise, or they accept my bill, we're heading for economic disaster," he said.

The US government will start running out of money to pay all its bills unless a $14.3tn (?8.79tn) borrowing limit is increased by Tuesday.

Democrats say the Republican bill as passed would cause immeasurable damage to the economy because it would force Congress to vote on another extension of the debt ceiling early in 2012, a time when presidential election campaigns will be in full swing.

'Out of time'

The White House quickly responded to the passage of Mr Boehner's bill, calling for a "compromise that avoids default and lays the basis for balanced deficit reduction".

Continue reading the main story
The time for putting party first is over. The time for compromise on behalf of the American people is now”

End Quote Barack Obama US President Earlier, the White House said Mr Boehner was taking a dangerous approach with his proposal.

"Amend the constitution or default is a highly dangerous game to play," White House spokesman Jay Carney said.

Meanwhile, Mr Obama accused House Republicans of pursuing a partisan bill that would force Washington into another debt limit fight within months.

"There are plenty of ways out of this mess, but we are almost out of time," Mr Obama said.

"The time for putting party first is over," he added. "The time for compromise on behalf of the American people is now."

Analysts predict a last-minute scramble for a compromise and razor-edge votes in both chambers, with the high-stakes game of legislative brinkmanship expected to continue all weekend.

The president backs Mr Reid's proposal, which would cut $2.2tn from deficits and raise the debt ceiling by $2.7tn.

The Boehner and Reid plans overlap in key ways, such as trimming spending over 10 years and shunning President Obama's call for tax increases on the wealthy and corporations.

Analysts have said international markets would be shaken if the US defaults and runs out of money to pay its bills.

Graphic

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Starbucks profits rise by a third

28 July 2011 Last updated at 21:46 GMT Cup of Starbucks coffee Starbucks wants to earn half its revenues from outside the US US coffee giant Starbucks has reported a sharp rise in profits and increased its full-year forecasts as global sales continued to grow.

Net income for the three months to 3 July was $279.1m (?170.5m), up 34% on the $207.9m the company made a year earlier. Revenue was up 12% at $2.93bn.

Like-for-like sales, which strip out the impact of new stores, rose by 8%.

The results were better than analysts had expected and Starbucks' shares rose in after-hours trading.

"Starbucks record third quarter results reflect both the underlying strength and continuing momentum we have been experiencing across all of our business segments and around the world," said chief executive Howard Schultz.

"Starbucks has never been healthier."

International revenues rose by 20%, while those in the US were up 9%.

Earlier this month, Starbucks unveiled a reorganisation of its global operations as aims to raise half of its revenues from outside the US.

The company currently earns less than 25% of its revenues from non-US operations.


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Search for new 2014 Games chief

29 July 2011 Last updated at 10:31 GMT John Scott John Scott resigned after breaking the rules on accepting hospitality and gifts Organisers of Glasgow's Commonwealth Games have begun a worldwide search for a new chief executive following the resignation last month of John Scott.

John Scott stood down after accepting, but failing to declare, an offer from a potential supplier.

His replacement will be appointed by a nominations committee, comprising Glasgow 2014 chairman Lord Smith and members from partner organisations.

The salary will depend on the experience of the individual selected.

Track record

Lord Smith said: "We have started our global search to get the best candidate possible to deliver an athlete centred, sport focused Commonwealth Games.

"With three years to go, we need someone with a proven track record at an international level and passion for sport.

"We are starting with an open book here and will consider anyone from home or away who meets the criteria.

"We want the best for Glasgow and the best for Scotland, and that's why we're looking as far and wide as we can to bring the best person to the table to make Glasgow 2014 the success we want it to be."

Short-listed candidates will be invited to take part in an interview process before the final decision is made by the nominations committee.


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HMRC sorry for 'poor performance'

30 July 2011 Last updated at 08:15 GMT HMRC chairman Mike Clasper: "We were simply overwhelmed for a period of time"

The chairman of HM Revenue & Customs has apologised for the treatment of taxpayers after the service was attacked by a committee of MPs.

Mike Clasper said: "We are not happy with our performance in 2010."

The Treasury select committee said dissatisfaction risked undermining public confidence in the tax system.

The worst problems were in getting tax offices to answer phone calls at peak times and "endemic" delays in replying to letters.

Mr Clasper told BBC Radio 5 live: "It simply wasn't good enough on post and telephone and I'd like to take the opportunity to apologise to the people who had to take a long time to get through, or we didn't get back to them quick enough with the post."

HMRC says it has recruited 1,000 extra contact centre advisers to handle calls during "exceptionally busy periods".

'Disturbing' Continue reading the main story
We're handling the calls immediately much more frequently than we did in 2010 and as far as individual customers are concerned you know the post levels have dropped in half.”

End Quote Mike Clasper Chairman, HMRC The MPs report blamed bad management, demoralised staff, excessive job cuts, and increasingly complex tax laws for the poor level of service it had discovered.

"The evidence we have received in this inquiry has been disturbing," the MPs said.

"HMRC's delivery of services to the general public has fallen to unacceptable levels in several areas.

"There is considerable dissatisfaction among the public and tax professionals with the service provided by the department," the MPs added.

Mr Clasper said: "In 2011 we've been working very very hard to improve things. We're handling the calls immediately much more frequently than we did in 2010 and as far as individual customers are concerned you know the post levels have dropped in half.

"That's not where we want to be but it's a lot better than where we were in 2010."

Frank Haskew, of the Institute of Chartered Accountants of England and Wales (ICAEW), doubted that the situation would improve.

"Given the necessity to reduce the current 70,000 staff by a further 10,000, we are not convinced that HMRC have the resources or the capability to deliver on improving service standards," he said.

This concern about the future was echoed by the MPs. They said that the HMRC did a good job in collecting taxes.

But they were worried that the quality of service for taxpayers could become even worse.

They pointed to:

excessive reliance on the internet for filing tax returns, or giving information, to the disadvantage of those without good internet connections "overly ambitious" computer projects such as the forthcoming plan to make employers submit "real-time" data for the PAYE systemthe continuing legacy of unresolved tax discrepancies from past years still affecting millions of tax payerssenior management's approach to running HMRC which the MPs described as "very disturbing"increasingly complex tax lawsthe possibility that further job and spending cuts could undermine the department's ability to do its job properly.the use of 0845 phone numbers by HMRC for customer queries. The committee suggested that cheaper 0345 numbers are used.

"We are concerned that HMRC's performance will continue to deteriorate if further reductions in resources are badly managed," the MPs said.

"There was near unanimity among our witnesses that the reductions made so far have had a damaging impact."

Other tax advisers agreed with this diagnosis.

Chas Roy-Chowdhury of the Association of Chartered Certified Accountants (ACCA) warned: "If reduced funding leaves HMRC unable to address the basics of maintaining a service for compliant taxpayers, the potential damage to the economy and reputation of the United Kingdom is immense."

Robin Williamson, of the Low Incomes Tax Reform Group (LITRG), said: "If HMRC want to improve taxpayer compliance and reduce error levels, they need to make it easier for people to contact them and get advice that is prompt, accurate and understandable."


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Northern light

By Justin Rowlatt
BBC News, Reykjavik
(File photo 2008) Shoppers in Reykjavik

Nearly three years after the Icelandic economy imploded, the country appears to be recovering, and some believe its approach may offer a possible solution to Europe's debt problems.


Iceland does not seem like a country in the grip of a crisis.

On my first day the sun was shining brightly and out in Reykjavik's main shopping area the shops and boutiques, the cafes and restaurants were busy. Indeed, Reykjavik seemed pretty much like any other prosperous northern European city.

Yet Iceland was hit hardest by the credit crunch in 2008. Its current recovery is why Iceland is being held up as the model for an alternative way to deal with the debt that plagues so many economies.

That is because when Iceland's banks went spectacularly bust, instead of pouring in billions of taxpayers' money to shore them up, Iceland just closed them down.

Their debts were so huge that, in truth, the country had little choice. Nevertheless, it was a radical strategy. Iceland effectively said "stuff you" to the banks' creditors.

Foreign debts were written off - including $8bn (?4.9bn) of deposits from savers in the UK and Holland. "Bankrupting your way to recovery," it has been called.

Iceland President Olafur Ragnar Grimsson

Iceland's president is certainly convinced the strategy is working. Olafur Ragnar Grimsson reels off a series of impressive economic statistics when I meet him in his stark mansion on a forbidding spit of land jutting out into the bay outside Reykjavik.

He tells me how the economy is now growing faster than that of most other European countries and with a lower public sector deficit. Unemployment is falling and Iceland has just raised a billion dollars at favourable rates on the international market.

But Iceland's approach is about much more than just getting its banking sector in order, the president tells me. It is also about affirming the will of the people over the financial institutions.

"In Europe there is a conflict between the democratic will of the people and the interests of the financial markets," he tells me earnestly, leaning forward over his antique desk.

He believes if Europe is not about democracy then the European project means nothing.

Iceland ignored the dire warnings of disaster from the ratings agencies and other institutions, says the Icelandic president, and the country is doing OK.

The implication is clear - other countries should follow the Icelandic example.

But Iceland had a key weapon in its armoury that is not open to the indebted eurozone nations - Iceland had its own currency, the krona. And, when the banks collapsed, the krona did too.

That is a key reason why Reykjavik is now so busy. Prices have effectively halved for most tourists. From being one of the most expensive cities on earth, Reykjavik has become, well, just a bit pricey.

But, as Gunnar, the taxi driver who drove me back from the presidential mansion explained, the collapse in the krona has cost many Icelanders dear.

Virtually everything here is imported and when the currency devalued, prices for everything from cars, to building materials, to food, soared. And at the same time wages fell.

It has been a very painful squeeze, Gunnar says, made considerably worse by the fact that during the boom years many Icelanders were encouraged to take loans in foreign currencies and now they have doubled - sometimes even tripled - in value too.

"I'll never pay my loans back," Gunnar tells me. "Better just to walk away from it - let them have my house."

Debt trap

Gunnar seems resigned to the loss but he is just one of thousands of Icelanders in a similar situation. In a modest office on the outskirts of Reykjavik I met another of them, Guomundur Andri Skulason.

Guomundur Andri Skulason Mr Skulason believes Iceland's financial problems are far from over

He is much less sanguine than Gunnar. He set up an Association of Debtors to fight for debtors' rights.

Mr Skulason quotes central bank figures showing that 25,000 households are in arrears on their debts - that is nearly a quarter of all households in Iceland. Last March the minister of finance put the figure at more like 40% of households, he tells me.

Mortgages and other loans are a huge part of the assets of the new banks that Iceland formed out of the wreckage of the old.

Mr Skulason believes that when the Icelandic people realise that they can never pay off their debts they will - like Gunnar - just walk away from them. Then the real reckoning will come.

"Don't believe that Iceland has escaped its problems," he says. "This country and its banks are still bankrupt."

Back in town I wander up a windswept hill in the centre of Reykjavik to look at the magnificent statue of Ingolfur Arnarson, Iceland's first settler. He stands tall in full Viking regalia up against the prow of his longship, a huge sword by his side.

Once he would have had a clear view away over the fierce waters of the north Atlantic, out towards the coast of Greenland. Not any more.

The mighty Viking now stares down upon a square black fortress of an office block. This ugly building houses the Icelandic central bank.

It seems that, despite Iceland's best efforts, there is no easy way to escape the debt trap. Ingolfur's Viking vigil over the central bank is, I reflect, perhaps more appropriate than it first seems.

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Monday, August 1, 2011

Eurozone inflation slows in July

29 July 2011 Last updated at 10:26 GMT Giant euro sign near the European Central Bank in Frankfurt Some economists now think the ECB will leave interest rates unchanged at 1.5% for the rest of 2011 Eurozone inflation unexpectedly slowed in July to 2.5%, raising questions about when the European Central Bank (ECB) might raise interest rates again.

The preliminary estimate is down from 2.7% in June, according to the European Union statistics office Eurostat.

The July reading comes as a surprise after data earlier this week suggested inflation in Germany, Europe's largest economy, edged up to 2.4%.

The ECB has raised rates twice so far this year to try to control inflation.

The central bank wants to keep inflation below 2%.

'Compelling case'

No change had been expected in the inflation rate in July.

It is not clear what drove the decline, as Eurostat's initial estimate does not give a breakdown of the numbers - that is only released with the final estimate.

Economists said that the chance of the ECB raising rates from the current 1.5% before the end of the year now appeared less likely.

"While a further interest rate hike in the fourth quarter is clearly very possible, we suspect that slowing eurozone growth and recurrent sovereign debt problems will present an increasingly compelling case for the ECB to hold off from further monetary policy tightening this year," said Howard Archer from IHS Global Insight.

"We also anticipate that the case for further ECB action in 2011 will be diluted by mounting evidence that the second-round inflationary effects from higher energy and commodity prices are being contained.

"We currently expect the ECB to keep interest rates at 1.5% through the rest of 2011, then lift them gradually further to 2.25% by the end of 2012."


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