Accountability-Central.com AC Alert for November 15, 2011 Are They Driving the Bus from Across the Pond?

Alan has worked on Wall Street for the past 24 years. His days start very early, long before sunrise, and, like most workers on the "street" he has experienced some wild and chaotic days, given the recent volatility of the stock market. Some of that is clearly caused by the uncertainty surrounding the state of the US economy. What's even more interesting, however, is the influence our friends and neighbors in Europe and elsewhere around the world are having on each day's transactions in the USA.

At one time the market was driven primarily by events on this side of the Atlantic, that’s not necessarily the case anymore. As we have seen quite frequently, developments and concerns from halfway around the world -- and especially on the European continent -- have had a major impact on the performance of the market.

That’s why Alan always listens to the all-news and business radio stations when he first heads into Manhattan, to get the latest “futures” of the day.  The "futures," estimates of how the three major indexes that investors (and Wall Street) closely follow, will open at 9:30 am each day. These barometers tend to be accurate and provide Wall Street’s workers with a pretty good idea of whether it is going to be an up day or a down day, at least at the start.

It wasn't always this way, but the global economy we are experiencing now has had a profound impact on the manner in which financial markets respond to worldly events. AC editors have been monitoring this shift towards a more global economy and taking special efforts to include relevant news and data in our Accounting/Disclosure/Financial Reporting Section. It’s a perfect match of information for Accountability Central.

“Accounting…and…accountability” – these are clearly linked terms with common meaning that emerged along with the modern capitalist system, deriving from Middle European languages and cultures.  “Accounting,” is derived from the medieval, “to tell…”  as today’s accounting systems are designed to “accurately tell the story” of an organization’s financial condition. The term, “accountability” emerged at the same time; by definition “to consider or judge the value of a specific entity”. Important elements of organizational and individual accountability are based today on the quality of the story told by the accounting practices, policies and procedures of the organization (whether in the corporate, social or public sector). 

Accounting practices tell a story about an organization’s culture! Accounting has become very sophisticated, as business and financial markets innovate and create ever more complex ways to go to market. 

All of these factors play into the manner in which Wall Street responds to the news of the day, and we continue to present timely news, views, research findings and other relevant information related to accounting and financial reporting in Accountability Central. Quite frequently, that news comes from abroad. Consider these recent excerpts:

Euro Falls as Italian Borrowing Costs Increase; Franc Weakens
(Source: Business Week)  The euro dropped for the first time in three days versus the dollar and yen as Italy’s borrowing costs increased at a five-year note sale today, stoking concern its new government will struggle to contain debt turmoil.
                                                                                                        
Italy Poised to Install Austerity Measures
(Source: New York Times)  Italy’s lower house was expected to pass austerity measures sought by the European Union, paving the way for the planned resignation of Prime Minister Silvio Berlusconi after the vote, when the cabinet was set to meet. Saturday’s vote follows an equally speedy approval for the economic measures from the Senate as Parliament moved to stay a step ahead of market pressures that sent borrowing rates on Italian bonds skyrocketing last week to levels that have required other Euro zone countries to seek bailouts.

Europe’s Banks Found Safety of Bonds a Costly Illusion
(Source: NY Times)  Paris — As the bets that European banks made on United States mortgage investments went bust a few years ago, bankers piled into what they saw as a safe refuge: bonds issued by countries in Europe’s seemingly ironclad monetary union.

Japan's Olympus admits wrongdoing in accounting scandal
(Source: Los Angeles Times) A scandal continues to evolve at Tokyo-based Olympus Corporation. In the latest in a series of admissions, company officials, reversing earlier denials of any wrongdoing, acknowledged that they hid massive losses over more than two decades by covering them up with a series of acquisitions.

Don't count on China to rescue Europe: ex-lawmaker
(Source: Reuters) China is willing to help Europe -- its largest export market -- to deal with its debt crisis and get back on a recovery path, but there are limits to what it can actually deliver, according to Cheng Siwei, a former top Chinese lawmaker.

Greek PM scraps referendum, seeks unity government
(Source: USA Today) Greek Prime Minister George Papandreou has scrapped plans for a debt bailout referendum, averting a political and economic showdown with the European Union. He has also opened emergency talks with opposition leaders.

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COMMENTARY

Sad Proof of Europe’s Fallout
(Source: New York Times) Commentator Gretchen Morgenson notes that MF Global, the brokerage firm run by Jon S. Corzine, was felled by over-the-top leverage and bad derivative bets on debt-weakened European countries. She offers this as proof of Europe's fallout on the rest of the world, especially the US.

The goal of AC's Accountability/Disclosure/Financial Reporting section is to be the clearinghouse for news, intelligence, insight, perspective, opinion, and advice on financial reporting activities now being grouped under the umbrella of "accountability."  At the end of the day, it is our hope that the information contained here will help individuals running corporations, public sector agencies and social sector organizations understand what is happening to the economy throughout the world, and urge them to do the right thing for the right reasons!  We also hope our contributions will help leaders know more about accountability in all its dimensions. As always we welcome your thoughts and contributions. Send them to news@accountability-central.com.

This is just a sampling of the information in our Accountability-Central.com Alert. Go here for the full text of this alert, and more information on Sustainability, and other Accountability related topics.