The new commitment replaces the statement that economic conditions were likely to keep rates at the historic low range of 0% to 0.25% until at least mid-2013. The Fed made no policy steps, leaving the Fed’s key interest rate where it has been for three years.

In making the new projection, the central bank said the low rate of resource utilization and the subdued outlook for inflation over the medium term are likely to warrant the low rates for almost two more years.

In 2012 the world economy is expected to expand 3.25 percent, down from the 4 percent projected by the IMF in the fall.

That figure includes 8.2 percent growth in China, the world’s fastest expanding economy, and 7 percent in India. U.S. Growth is forecast at 1.8 percent, the same as the fund projected in the fall.

For the rest of the world, the IMF said growth was being crimped by what remains the world’s major economic risk, the ongoing financial crisis in the euro zone.

In order to know if the providers of services are incorporated, you should hand them a W-9 prior to paying for their services. The provider completes the W-9, by which they can be indicated if they’re a corporation and therefore not subject to receiving a 1099. The W-9 also gives you the tax ID number, without which you cannot file a 1099. This is why you ask for a completed W-9 prior to payment or prior to receiving services, to avoid the sort of conflicts wherein one party asks for the information in order to comply with the IRS regulations and the second party refuses to provide it, while they’ve already received their payment.

What do you do if a subcontractor refuses to provide a W-9 after receiving payment for a service? If they refuse to provide the W-9, you issue form 1099-Misc with writing “Refused” in the Tax ID box of the form and send it off to the IRS and the subcontractor as usual. It’s up to the IRS to deal with the subcontractor, but you’ve fulfilled your responsibility.

In December S& P warned that it might downgrade many of the 17 nations that share the euro, largely because it said European politicians were moving too slowly to strengthen the monetary union and because the euro zone’s problems were propelling Europe toward its second recession in three years. Read more about S&P cutting credit ratings for 9 Euro Zone Nations.

The action may have more symbolic than fundamental financial impact but served as a reminder that Europe’s economic woes were far from over. The downgrades may also be a blow to the euro zone’s ability to fight off a worsening debt crisis.

Accurate bookkeeping is required by both federal and local tax agencies. A company’s books are used to determine the amount of taxes the company must pay. They are also used in preparing income tax returns. Sometimes, the Internal Revenue Service (IRS) or a tax agency may decide to investigate the information reported on a income tax return or other type of tax-related document. In such cases, business owners are required to present accurate records for the tax agency’s inspection. In the U.S, for example, the Internal Revenue Service requires business owners to keep financial records that are complete and up-to-date. State and city tax agencies may require businesses to maintain accurate records as well. Failure to perform acceptable bookkeeping practices may lead to significant monetary fines or in severe cases, imprisonment.

Surely bookkeeping is also necessary and beneficial to business owners. Businesses can effectively manage cash flow, stay well-informed on company performance, and develop plans for the future by perform proper bookkeeping.

Online sellers who have $20,000 or more in gross sales and 200 transactions or more in the calendar year will receive the 1099-K from their third-party payment networks such as PayPal. Sellers will need to check the information on the form to ensure the reported income is correct.

Sellers will also be responsible for documenting expenses that were associated with that reported income, so that they only pay taxes on the profit, not the gross sales as reported on the 1099-K form. That’s important because the gross sales totals do not exclude expenses like transaction fees or returns, which are important deductions to a small businesses’ net income.

To prevent duplicate reporting to the IRS, the form 1099-MISC form from the small business owner must now exclude the payments types listed above; however, it must still include Cash, Check, EFT, ACH, and Direct Deposit payments.

Wednesday’s reaction to the Fed announcement was muted, although it was enough to send the Dow up 26.41 points on Wednesday to its highest close in two years. On Thursday, as investors absorbed the impact of the announcement, financial markets in Europe and Asia rose, and the dollar weakened.

Equities have rallied strongly since early September, partly in anticipation of action by the Federal Reserve.The Dow Jones industrial average has gained more than 14 percent in the last two months while the Standard & Poor’s index is up 16 percent.

The pace of the Fed’s purchases was outlined as $75 billion a month for eight months. When combined with an earlier program announced in August, in which the Fed will be buying Treasury debt of about $250 billion to $300 billion by the end of June, the total purchases will be $850 billion to $900 billion.

The Federal Reserve policy makers, by buying government bonds, will increase demand for them and by raising their prices, push long-term interest rates down. Ultimately, the Fed wants to address the dual issues of extremely low inflation and high unemployment at a time when it has few other policy options available. ~ SmartInMoney ~

]]> http://powerofspeech.wordpress.com/2010/11/05/stocks-surged-to-2-year-high-after-fed-decision/feed/ 0 powerofspeech http://powerofspeech.wordpress.com/2010/11/04/fed-decision-to-pump-money-is-criticized/ http://powerofspeech.wordpress.com/2010/11/04/fed-decision-to-pump-money-is-criticized/#comments Fri, 05 Nov 2010 00:50:02 +0000 powerofspeech http://powerofspeech.wordpress.com/?p=72 ]]> ~ SmartInMoney ~  Emerging markets criticized the Federal Reserve for its decision to pump more money into the U.S. economy, a measure that they fear could escalate the worrisome flood of cash into fast-growing economies. Officials from countries like Brazil and Thailand threatened more measures to curb the flood of money that has pushed up currency values and fueled concerns that asset price bubbles might be in the making.

While long-term investments, are welcome ways of bolstering economic development, the capital influxes into emerging market stocks, bonds and property have increased rapidly in recent months, totaling more than $2 billion a day, according to estimates by DBS in Singapore.

The Fed said it will buy $600 billion of Treasuries between now and next June, at about $75 billion a month, although it also said it could adjust the amount and timing if need be. That was about what markets expected but far less than the $1.75 trillion of debt it bought between early 2009 and early 2010 in its first round of quantitative easing. Yet the second round seems already to have exceeded the low expectations it has aroused. Since Ben Bernanke, chairman of the Fed, hinted at it at Jackson Hole on August 27th, markets have all done exactly what they should.

Under the decision to pump more money into the U.S. economy the Fed buys long-term bonds with newly created money. This lowers long-term yields and chases investors into riskier, alternative investments. The real yield on ten-year, inflation-indexed Treasury bonds has fallen from 1.05% to 0.5%, a result of relatively flat nominal yields and a rise in expected inflation. The yield on their five-year cousins is negative. Share prices are up by 14% in the same period. Lower yields make the dollar less appealing: it has duly fallen by 5% against the Japanese yen, by 9% against the euro and by 5% on a trade-weighted basis.

With a bit of a lag, these easier financial conditions are supposed to boost growth through three channels. First, lower real yields spur borrowing and investment. This channel is bunged up: many households cannot borrow because their homes have fallen in value and because banks are less willing to lend. But the remaining two channels remain open. Higher share prices have raised household wealth by some $1.4 trillion, which will spur some spending. And the lower dollar should help trade. American factory purchasing managers reported a sharp jump in export orders in October and a drop in imports.

Other countries complain that the Fed pumping more money is merely bringing them overvalued currencies and bubbly asset markets by pushing investors to seek higher returns elsewhere. But that may be unavoidable given their divergent growth paths. Both India and Australia raised interest rates this week despite rising currencies.

Many emerging-market countries and Japan have been intervening in the foreign exchange markets in an effort to slow the rise in the values of their currencies, which they fear could harm export industries by making exported goods and services more expensive for overseas consumers.

Many other currencies, especially in Asia and in emerging markets like Brazil, are soaring as a result of the dollar’s fall. Those nations’ domestic economies are attracting floods of speculative capital seeking higher interest rates and are at risk of overheating.

The dollar’s decline is being driven by what everyone in global markets is now expecting: another round of so-called quantitative easing by the United States. In the next few weeks, the Federal Reserve is expected to inject vast sums of money into the economy in another attempt to spur growth.

While such policies may benefit the convalescent United States economy, they are also drawing criticism that Washington is deliberately devaluing the dollar at others’ expense.

~ SmartInMoney ~ The recession officially ended in June 2009, according to the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), a group charged with determining when recessions officially begin and end.

This official end date makes the most recent downturn the longest since World War II. This recent recession, having begun in December 2007, lasted 18 months. Until now the longest postwar recessions were those of 1973-5 and 1981-2, which each lasted 16 months.

Recession and expansion dates are based on various economic indicators, including gross domestic product, income, employment, industrial production and wholesale-retail sales. The Business Cycle Dating Committee typically waits to declare that the economy has turned until well after the fact, when it has a longer track record of economic data to confirm a new trend.

The NBER said the economy bottomed out in June 2009, followed thereafter by a slow expansion, and its determination of the recession’s end does not mean the U.S. is now healthy. The bureau took care to note that the recession, by definition, meant only the period until the economy reached its low point — not a return to its previous vigor.

“In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity,” the NBER said. “Rather, the committee determined only that the recession ended and a recovery began in that month.”