The European Commission said on Thursday (25 June) it was taking Luxembourg to court over concerns the Grand Duchy is breaching EU rules on savings revenues and using a so-called non-domiciled status for tax avoidance. The commission is accusing Luxembourg of using the status in order to get around the EU Savings Tax Directive on savings interest payments. Luxembourg has repeatedly been criticised for its bank secrecy rules Under the EU directive, member states must exchange information on non-resident savings revenues. Those countries who have not signed up to it - namely Belgium, Luxembourg and Austria - can tax the income at source. But the commission considers Luxembourg to be breaching that rule as well by not applying the directive to people who benefit from the "non-domiciled resident" status in their country of residence.
The European Commission said on Thursday (25 June) it was taking Luxembourg to court over concerns the Grand Duchy is breaching EU rules on savings revenues and using a so-called non-domiciled status for tax avoidance.
The commission is accusing Luxembourg of using the status in order to get around the EU Savings Tax Directive on savings interest payments.
Luxembourg has repeatedly been criticised for its bank secrecy rules
Under the EU directive, member states must exchange information on non-resident savings revenues. Those countries who have not signed up to it - namely Belgium, Luxembourg and Austria - can tax the income at source.
But the commission considers Luxembourg to be breaching that rule as well by not applying the directive to people who benefit from the "non-domiciled resident" status in their country of residence.
Luxembourg simply works in favour of an efficient growth-producing market economy, and is not cruel to hamsters banksters.
Fixed.
Ford is ahead thanks to stronger design and government programs that pay cash for gas guzzlers. Now, that stimulus may be about to dry up. Ford has benefitted from Europe stimulus programs. There's little doubt that Ford Motor's European unit is coming through the global auto slump better than most rivals. But even Ford of Europe boss John Fleming concedes that luck has played a role in that success. Four years ago, Ford scheduled an autumn 2008 launch for redesigned versions of its Fiesta and Ka small cars. That, as it turns out, was exactly when governments from Germany to Serbia started showering cash on citizens who trade in older gas-guzzlers for new, fuel-efficient vehicles. "We knew there was huge pressure on fuel economy and CO2 emissions," Fleming says. "But to get the Fiesta and Ka out right at the bottom of the recession-we didn't plan that." The happy combination of government stimulus and spiffy new compacts has sheltered Ford from the worst of the industry's woes in Europe. As rival General Motors tries to sell beleaguered Opel to a consortium backed by the Kremlin, Ford is gaining market share. Ford models accounted for 9 percent of the Western European market in the first five months of 2009. That was up from 8.5 percent the year before and second only to Volkswagen, with 11.7 percent. True, Ford of Europe lost $550 million in the first quarter, vs. a profit of $739 million in the year-earlier period, and Ford sales were down 6.7 percent through May. But the European auto market slumped by nearly twice that. "Fundamentally, Ford is bearing up well," says Neil King, an auto analyst at IHS Global Insight in London.
Ford is ahead thanks to stronger design and government programs that pay cash for gas guzzlers. Now, that stimulus may be about to dry up.
Ford has benefitted from Europe stimulus programs. There's little doubt that Ford Motor's European unit is coming through the global auto slump better than most rivals. But even Ford of Europe boss John Fleming concedes that luck has played a role in that success. Four years ago, Ford scheduled an autumn 2008 launch for redesigned versions of its Fiesta and Ka small cars. That, as it turns out, was exactly when governments from Germany to Serbia started showering cash on citizens who trade in older gas-guzzlers for new, fuel-efficient vehicles. "We knew there was huge pressure on fuel economy and CO2 emissions," Fleming says. "But to get the Fiesta and Ka out right at the bottom of the recession-we didn't plan that."
The happy combination of government stimulus and spiffy new compacts has sheltered Ford from the worst of the industry's woes in Europe. As rival General Motors tries to sell beleaguered Opel to a consortium backed by the Kremlin, Ford is gaining market share. Ford models accounted for 9 percent of the Western European market in the first five months of 2009. That was up from 8.5 percent the year before and second only to Volkswagen, with 11.7 percent. True, Ford of Europe lost $550 million in the first quarter, vs. a profit of $739 million in the year-earlier period, and Ford sales were down 6.7 percent through May. But the European auto market slumped by nearly twice that. "Fundamentally, Ford is bearing up well," says Neil King, an auto analyst at IHS Global Insight in London.
Saying they have gone as far as they can, agricultural ministers from the EU and France say they will not make any more concessions to reach a deal at the WTO talks. Using language that does not allow for much negotiation, France and the European Commission said that they would not make any more concessions in order to reach a deal at the World Trade Organization's (WTO) Doha talks. "We have tried our very best and we don't move," said the European Union Agriculture Commissioner Mariann Fischer Boel. "We went to the absolute limit of what was acceptable to the agricultural community. We won't go any further," echoed French farm minister Bruno Le Maire.
Using language that does not allow for much negotiation, France and the European Commission said that they would not make any more concessions in order to reach a deal at the World Trade Organization's (WTO) Doha talks.
"We have tried our very best and we don't move," said the European Union Agriculture Commissioner Mariann Fischer Boel.
"We went to the absolute limit of what was acceptable to the agricultural community. We won't go any further," echoed French farm minister Bruno Le Maire.
State and local governments have been forced into draconian budget cuts, firing workers who are among the most reliable in making their mortgage payments-when they have jobs: firemen, policemen, teachers, civil servants. Yet the Obama administration won't spend even a small fraction of what it has wasted on the banks to cover state shortfalls. The guarantee of $5.5bn in short term notes for California was deemed to be fiscally irresponsible, yet hundreds of billions have already been allocated to the likes of Citigroup, AIG, and Goldman Sachs, all of whom have already beefed up salaries and bonuses as they emerge from the embrace of the federal government. -Skip- In one sense, it is pointless blaming Wall Street for exploiting a system heavily rigged in its favour. They know that the game is stacked in their favour, so they are rationally taking advantage. But the sickest part about the whole episode is that the casino rule makers, Obama, Geithner and Summers, are perpetuating a flawed game that they had in their power the chance to end..... It's almost as if this was planned deliberately so as to provide the anti-government folks with a cudgel with which to beat back supporters of activist government. My issue with Obama and his fiscal package is the same as Rob Johnson's: taxpayer money is being deployed in hugely inefficient ways like Citi, BofA, AIG, and GM and discrediting fiscal policy in the process. -Skip- Bank bonanza must end ...the current bonanza for banks is neither economically efficient, nor politically sustainable. What is driving the change in portfolio preference shifts is not only a misguided paradigm, but also an inability for the Obama administration to make a sensible, coherent case in what they are doing and why they are doing it. Their actions, in fact, seem to suggest that everything is ad hoc and that they are operating out of their depth, in effect continuing the same policies of the Bush/Paulson period, but on a much greater scale. Ironically, this ultimately will also prove highly inimical to the interests of finance itself. When most of the home owning voters cannot pay their major debt or have no incentive to pay their mortgage debt, there will either be a debtors revolt that society will sanction or there will be a bailout of such a magnitude that mega moral hazard will affect private lending forever. Once these things happen, you will no longer have the social rules for private risk based lending. In other words, financial markets will be unlike anything ever seen before in private economies. Is this really what Wall Street wants, let alone American society as a whole? -Skip- The current crisis could have been mitigated if increased household consumption had been financed through wage increases and if financial institutions had used their earnings to augment bank capital rather than employee bonuses. The current system has failed because it was built on an incentive system that did just the opposite.
-Skip-
In one sense, it is pointless blaming Wall Street for exploiting a system heavily rigged in its favour. They know that the game is stacked in their favour, so they are rationally taking advantage. But the sickest part about the whole episode is that the casino rule makers, Obama, Geithner and Summers, are perpetuating a flawed game that they had in their power the chance to end..... It's almost as if this was planned deliberately so as to provide the anti-government folks with a cudgel with which to beat back supporters of activist government. My issue with Obama and his fiscal package is the same as Rob Johnson's: taxpayer money is being deployed in hugely inefficient ways like Citi, BofA, AIG, and GM and discrediting fiscal policy in the process.
Bank bonanza must end
...the current bonanza for banks is neither economically efficient, nor politically sustainable. What is driving the change in portfolio preference shifts is not only a misguided paradigm, but also an inability for the Obama administration to make a sensible, coherent case in what they are doing and why they are doing it. Their actions, in fact, seem to suggest that everything is ad hoc and that they are operating out of their depth, in effect continuing the same policies of the Bush/Paulson period, but on a much greater scale.
Ironically, this ultimately will also prove highly inimical to the interests of finance itself. When most of the home owning voters cannot pay their major debt or have no incentive to pay their mortgage debt, there will either be a debtors revolt that society will sanction or there will be a bailout of such a magnitude that mega moral hazard will affect private lending forever. Once these things happen, you will no longer have the social rules for private risk based lending. In other words, financial markets will be unlike anything ever seen before in private economies. Is this really what Wall Street wants, let alone American society as a whole?
The current crisis could have been mitigated if increased household consumption had been financed through wage increases and if financial institutions had used their earnings to augment bank capital rather than employee bonuses. The current system has failed because it was built on an incentive system that did just the opposite.
H/T to Yves Smith for the link. Yves titles her blog Will America's Besieged Middle Class Snap? with a quote from Amitai Etzioni's, The Moral Dimension: Toward a New Economics:
A paradox arises to the extent that it is true that the market is dependent on normative underpinning (to provide the pre-contractural foundations such as trust, cooperation, and honesty) which all contractural relations require: The more people accept the neoclasical paradigm as a guide for their behavior, the more the ability to sustain a market economy is undermined. This holds for all those who engage in transactions without ever-present inspectors, auditors, lawyers, and police: if they do not limit themselves to legitimate (i.e. normative) means of competition out of internlized values, the system will collapse, because the transaction costs of a fully or even highly "policed" system are prohibitive. This holds even more so for the regulators that every market requires. If those whose duty it is to set and to enforce the rules of the game are out to maximize their own profits, a-la-Public Choice, there is no hope for the system.
I predicted over 2 years ago that the Chinese stock markets would implode dramatically, much to everybody's disbelief and skepticism. It began a few months sooner than I thought, but, that is exactly what has happened. Now for the last year or so, I have predicted that things will get VERY bad in the Chinese real estate markets over the next several years. Again, most people I have talked to about this (especially Chinese) have almost universally dismissed this notion as absurd. -Skip- The news here is actually worse than I realized. One very alarming thing is that the Chinese banks have avoided writing down bad debt. I should have assumed this would happen, since it is hard to see how it could be avoided, given the nature of the Chinese culture. This is NOT a good idea. It is like pretending that defaults and bad debt simply don't exist, and this is very bad for the financial sector in the long run. This is exactly what the Japanese banks have done, and it is partly because of this that their stock markets have imploded over the last 20 years, and their economy has been stagnant for many years---the Nikkei collapsed in late 1989 after peaking at about 39,000. Now, a full 20 years later, it is only trading at around 8800, and would have to rise another 450% just to equal the old highs, and that would not even consider the effects of the reduced buying power of the yen today vs. 1989. When you take that and inflation into consideration, the Nikkei would probably have to rise more like 700% or 800% or more from current levels to equal the equivalent of 1989 values. This is actually not very atypical for an imploded bubble. And that is exactly what the Shanghai and Shenzhen markets are looking at, since you have the exact same lethal combination in 1989 Japan as you do now in China: dual bubbles in real estate and stocks (one has imploded), and a decided reluctance to face facts and write down bad debt and defaults. In contrast, in the US in March 2000, we had a bubble in the stock market but not the real estate sector. And even though 7 trillion dollars in stock equity disappeared after March 2000, there was an increase in value of the real estate markets of 8 trillion dollars that more than offset those losses. That is a major factor that allowed the economy to expand in subsequent years, but that is not possible in China, just as it was not possible in 1989 Japan. This is a singularly ominous combination that makes China's economic future outlook over the next 25 years very grim. And that, in turn, will lead to acceleration of civil unrest. In fact, that has already happened: incidents of violent civil unrest have accelerated markedly all across China over the past year or two. But I think this could well get far more noticeable and disruptive. Some economists have said that in order to avoid disruptive amounts of civil unrest (as opposed to the more manageable baseline levels of unrest that are a constant), China's economy must grow by 8.5% per year or more, just to keep enough people quiet. I suspect that is probably more or less approximately true in principle, although I don't know where they came up with that number. But regardless of what that magic number might be, when that economy gets really bad---watch out. That's the seeds of civil war, if you ask me. If you have a very large group of desperate people coupled with an extreme polarization of wealth, you have a classic "haves" vs. "have nots" Marxian confrontation that is the underpinning of most if not all major revolutions. Then, the only missing ingredient is a charismatic leader (like Mao, for example.....).
The news here is actually worse than I realized. One very alarming thing is that the Chinese banks have avoided writing down bad debt. I should have assumed this would happen, since it is hard to see how it could be avoided, given the nature of the Chinese culture. This is NOT a good idea. It is like pretending that defaults and bad debt simply don't exist, and this is very bad for the financial sector in the long run.
This is exactly what the Japanese banks have done, and it is partly because of this that their stock markets have imploded over the last 20 years, and their economy has been stagnant for many years---the Nikkei collapsed in late 1989 after peaking at about 39,000. Now, a full 20 years later, it is only trading at around 8800, and would have to rise another 450% just to equal the old highs, and that would not even consider the effects of the reduced buying power of the yen today vs. 1989. When you take that and inflation into consideration, the Nikkei would probably have to rise more like 700% or 800% or more from current levels to equal the equivalent of 1989 values. This is actually not very atypical for an imploded bubble. And that is exactly what the Shanghai and Shenzhen markets are looking at, since you have the exact same lethal combination in 1989 Japan as you do now in China: dual bubbles in real estate and stocks (one has imploded), and a decided reluctance to face facts and write down bad debt and defaults. In contrast, in the US in March 2000, we had a bubble in the stock market but not the real estate sector. And even though 7 trillion dollars in stock equity disappeared after March 2000, there was an increase in value of the real estate markets of 8 trillion dollars that more than offset those losses. That is a major factor that allowed the economy to expand in subsequent years, but that is not possible in China, just as it was not possible in 1989 Japan.
This is a singularly ominous combination that makes China's economic future outlook over the next 25 years very grim. And that, in turn, will lead to acceleration of civil unrest. In fact, that has already happened: incidents of violent civil unrest have accelerated markedly all across China over the past year or two. But I think this could well get far more noticeable and disruptive. Some economists have said that in order to avoid disruptive amounts of civil unrest (as opposed to the more manageable baseline levels of unrest that are a constant), China's economy must grow by 8.5% per year or more, just to keep enough people quiet. I suspect that is probably more or less approximately true in principle, although I don't know where they came up with that number. But regardless of what that magic number might be, when that economy gets really bad---watch out. That's the seeds of civil war, if you ask me. If you have a very large group of desperate people coupled with an extreme polarization of wealth, you have a classic "haves" vs. "have nots" Marxian confrontation that is the underpinning of most if not all major revolutions. Then, the only missing ingredient is a charismatic leader (like Mao, for example.....).
Some economists have said that in order to avoid disruptive amounts of civil unrest (as opposed to the more manageable baseline levels of unrest that are a constant), China's economy must grow by 8.5% per year or more, just to keep enough people quiet.
Inability to understand dynamics strikes again.
Growing by 8.5% doubles China's economy every 6 years.
Not on this globe; not in this Universe.
Given the resulting cost of labor, which is vanishingly low, compared to western labor costs, they have been able to claim double digit growth rates since the late '80s, I believe. That seems to be coming to an end. I have long thought that a severe downturn in China would be explosive. We may be about to see. As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
Explode, or fall over....?
Interesting that buildings can fall over, rather than collapsing into their own footprint. No doubt the 9/11 types will have something to say.... "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
Taibbi nails what they did with one of the best descriptions I've read of the sub prime mortgage toxic assets mess. Imagine a meat company that bred ten billion rats, fattened them on trash and sewage, ground their bodies into chuck, and then sold it all as grade-A ground beef to McDonald's and Burger King, right under the noses of the USDA: this is exactly the same thing, only with debt instead of food. We're eating it, they're counting the money.
Taibbi nails what they did with one of the best descriptions I've read of the sub prime mortgage toxic assets mess.
Imagine a meat company that bred ten billion rats, fattened them on trash and sewage, ground their bodies into chuck, and then sold it all as grade-A ground beef to McDonald's and Burger King, right under the noses of the USDA: this is exactly the same thing, only with debt instead of food. We're eating it, they're counting the money.
100% right! and they've already got the next bubble cooking with carbon credits... ~"When an inner situation is not made conscious, it appears outside as fate." Karl Jung~
