Like a
not-quite-dead villain in a horror film, the Eurozone crisis raised its ugly
head again last week, scaring investors and causing many stock markets to close
flat or slightly down for the week, according to Barron’s. Investors’ worries
strengthened demand for Treasuries, pushing the yield on the benchmark 10-year bond
lower.
The hero of last
week’s drama might have been the United States which delivered a plethora of
stronger economic data that included a steady decline in unemployment claims,
an increase in factory activity, and a rise in existing home sales. The
positive news suggested that the U.S. economy was gaining momentum. In
addition, Federal Reserve Chairman Ben Bernanke reiterated the Fed’s commitment
to accommodative monetary policy. He set the expectation short-term interest
rates will stay at exceptionally low levels until unemployment falls to 6.5
percent. Some believe that could happen in 2015.
Signs of strength
in the U.S. economy were overwhelmed by another crisis in the Eurozone. This
time the issue was Cyprus, an island nation that accounts for a tiny portion of
the Eurozone’s economic production. Cyprus has relatively robust growth and
boasts a small budget deficit, so why did it ask for a bailout? According to The Economist, the issue is the
country’s banks are bigger than its domestic economy. Since a bank deposit
guarantee is only as good as the country providing it, Cyprus needed assistance.
Cyprus is a microcosm of the Eurozone which has about “€8 trillion of deposits
and only €4.5 trillion of annual government revenues,” according to BCA
Research cited in The Economist.
Eurozone leaders
responded to the Cypriot bailout request by suggesting the country impose a tax
on bank deposits. The Cypriot parliament rejected the suggestion and the
European Central Bank responded with an ultimatum: accept a bailout by Monday
or else. The government’s decision will affect Cyprus’ largest banks and, possibly,
the country’s participation in the Euro.
All eyes will be
on Cyprus on March 25.
you may hate
filing taxes, but identity thieves don’t. That’s probably because they expect
to get refunds. The Internal Revenue Service (IRS) reports tax refund identity
fraud is a rapidly growing crime. During fiscal year (FY) 2011 (which started
October 2010), 276 investigations were initiated. For FY2012, that number had increased
to 898. During just the first three months of FY2013, 542 investigations have
been opened.
How does it work?
According to the IRS, identity thieves use stolen personal information to file
fake tax returns and collect undeserved refunds. In one case, a criminal filed
false returns in the names of deceased taxpayers. In another, criminals broke
into a tax preparation office, stole files containing personal information, and
filed tax returns claiming fraudulent refunds.
The IRS reports
it is taking steps to protect taxpayers. They suggest taxpayers take basic steps
to protect themselves, as well:
- Don’t carry
your Social Security card with you
- Don’t give
your Social Security number or Individual Taxpayer Identification
Number to businesses (verbally or
in writing) unless it is required
- Check your
credit report at least once each year
- Protect your
personal computers with firewalls, anti-virus software, and updated
security patches
- Choose
hard-to-break passwords and change them frequently
- Don’t provide
personal information to anyone unless you know them well and understand
how they plan to use it
If you have aging
parents, it’s important to discuss identity theft and encourage them to take
necessary precautions. Developing good habits – such always keeping your
personal identification numbers and financial documents in a secure place – can
go a long way toward keeping personal information safe.
Weekly Focus – Think
About It
“When
you are courting a nice girl, an hour seems like a second. When you sit on a
red-hot cinder, a second seems like an hour. That's relativity.”
--Albert
Einstein, theoretical physicist
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