Tag: economics

A straightforward industrial policy would be vastly preferable to abstract arguments with no means of holding corporations accountable for their failure to follow through on the theory:

In the 2017 fiscal year, FedEx owed more than $1.5 billion in taxes. The next year, it owed nothing. What changed was the Trump administration’s tax cut — for which the company had lobbied hard.

The public face of its lobbying effort, which included a tax proposal of its own, was FedEx’s founder and chief executive, Frederick Smith, who repeatedly took to the airwaves to champion the power of tax cuts. “If you make the United States a better place to invest, there is no question in my mind that we would see a renaissance of capital investment,” he said on an August 2017 radio show hosted by Larry Kudlow, who is now chairman of the National Economic Council.

Four months later, President Donald Trump signed into law the $1.5 trillion tax cut that became his signature legislative achievement. FedEx reaped big savings, bringing its effective tax rate to less than zero in fiscal year 2018 from 34{f18bb1fdf52d98bded86883b9be18028c561f8992f79c47739bf349fa8a297cc} in fiscal year 2017, meaning that, overall, the government technically owed it money. But it did not increase investment in new equipment and other assets in the fiscal year that followed as Smith said businesses like his would.

Nearly two years after the tax law passed, the windfall to corporations like FedEx is becoming clear. A New York Times analysis of data compiled by Capital IQ shows no statistically meaningful relationship between the size of the tax cut that companies and industries received and the investments they made. If anything, the companies that received the biggest tax cuts increased their capital investment by less, on average, than companies that got smaller cuts.

From free trade to immigration to corporate tax cuts, the more one examines economic theories in practice, the more obviously false one observes them to be.

Usury eventually kills every company that grows through debt, and sooner or later, it will kill the economy too:

There were tears at Thomas Cook’s Peterborough headquarters today as 9,000 UK staff lost their jobs and 12,000 more around the world are also of work after the world’s oldest and most famous travel operator officially went bust at 2am.

The company’s check-in desks at the 20-plus UK airports the business flew from are shut today with all customers with holidays and flights told they are cancelled – but many will not get their money back for months. 600 high street store are also locked up today.

 Last-minute talks to try and rescue the ailing firm collapsed last night with nobody willing to service its £1.7billion debt, and the Civil Aviation Authority announced the end for the 178-year-old company in the early hours of this morning.

Boris Johnson today said that the Government had been asked to bail-out the business with £150million of taxpayers’ money but they had refused.

He said: ‘Clearly that’s a lot of taxpayers’ money and sets up, as people will appreciate, a moral hazard in the case of future such commercial difficulties that companies face.

The math of usury is clear and impossible. Real growth can never keep up with compounding interest. This is why debt is evil and why regular debt jubilees are necessary, even though the usurers use all of their power to try to prevent their victims from escaping.

Think about how many of these historical, century-old companies that are suddenly collapsing almost overnight. There isn’t any saving them. There isn’t any way out. And the catastrophic consequence of these inevitable failures is why these companies should not be permitted to grow so big in the first place.

Remember, corporations are NOT capitalism. They are government interventions in the economy, artificial creations in which the government absolves the normal legal responsibilities of the shareholders and executives.

Is GE the new Enron?

An accounting expert who raised red flags about Bernie Madoff ’s Ponzi scheme has a new target: General Electric Co.

In a research report posted online Thursday, Harry Markopolos alleges the struggling conglomerate has masked the depths of its problems, resulting in inaccurate and fraudulent financial filings with regulators. The report, which numbers more than 170 pages and was reviewed by The Wall Street Journal, is a mixture of detailed financial analysis and sweeping claims.

Mr. Markopolos said, in an interview ahead of the report’s release, his group found GE’s insurance unit will need to bolster its reserves by $18.5 billion in cash and faulted the way the company is accounting for its oil-and-gas business. All told, he said, the accounting problems amount to $38 billion, or 40{0b837c000488b51cdb5548ae5fd7a9dd09188a2c542ead0ccc6c9432c63dc0eb} of the conglomerate’s market value….

The report claims that policy premiums paid to GE are low compared with what rivals typically receive and that GE isn’t receiving any premiums at all on more than a quarter of policies, because those contracts are considered paid in full. The group says that, even after the $15 billion boost, GE’s reserves are well below what would be expected for such a troubled group of policies. GE in the early years front-loaded gains from the long-term-care business by collecting premiums when policyholders were young, the group claims, but failed to properly record reserves as the covered population aged and claims ran at higher levels than originally expected.

As we pass the recent stock market peak and enter a new correction or bear market, a lot of fraud is going to be uncovered. This is almost certainly just the start of an ongoing series of accounting revelations.

Economically speaking, you understand, by lowering the value of the Yuan against the USD:

“The wait is over for those wondering how Beijing would respond to Trump’s recent tariff announcement,” BMO said. “The result: the yuan was allowed to depreciate well beyond 7.0.”

Krueger called China’s retaliation “massive,” adding that “on a scale of 1-10, it’s an 11.” He cited the Chinese government calling on state buyers to halt U.S. agricultural purchases, while there’s “increased anecdotal evidence that the Chinese government is tightening its overview of foreign firms.”

“While there were measures that could have been chosen with larger direct effects on supply chains, the announcements from Beijing represent a direct shot at the White House and seem designed for maximum political impact,” Krueger said. “ We expect a quick (and possibly intemperate) response from the White House, and consequently expect a more rapid escalation of trade tensions.”

This doesn’t matter to the real economy. The US economy will only benefit from a reduction of trade with China. But it does matter quite a bit to the financial economy, hence all of the sturm und drang and falling stock markets.

It’s interesting that they resorted to this so quickly. It appears things are a little shakier over there than everyone except Nate suspected.

Readers here are well familiar with my rejection of Keynes and his General Theory, which unlike most economists, I have actually read. Twice. And the fact that it is a piece of Freudian lunacy applied to economics means that it is less than astonishing to be told that the lunatic economist was, as the English put it, a paedophile:

Students of economics know Keynes as arguably the most influential economist of the 20th century. His prescriptions for stimulus spending and active government intervention in economic affairs have become go-to-strategies for governments across the world.

However, one lesser known aspect about his life was his pedophiliac activity. Economist Saifedean Ammous’ book, The Bitcoin Standard, details some interesting factoids about Keynes’ life.

Ammous started off by detailing how the family unit is destroyed by government largesse:

Substituting the family with government largesse has arguably been a losing trade for individuals who have partaken in it. Several studies show that life satisfaction depends to a large degree on establishing intimate long-term familial bonds with a partner and children. Many studies also show that rates of depression and psychological diseases are rising over time as the family breaks down, particularly for women. Cases of depression and psychological disorders very frequently have family breakdown as a leading cause.

The economist then transitioned his analysis into Keynes’ life, which revealed his pedophiliac tendencies:

It is no coincidence that the breakdown of the family has come about through the implementation of the economic teachings of a man who never had any interest in the long term. A son of a rich family that had accumulated significant capital over generations, Keynes was a libertine hedonist who wasted most his adult life engaging in sexual relationships with children, including traveling around the Mediterranean to visit children’s brothels.

Keynes was one of the important architects in the construction of Satandom. His work was integral to the inversion required to create the modern financial system that is built on a foundation of usury.

I did a Darkstream just last night on France enacting a new tax on the big tech companies to prevent them from accounting their way out of taxes. Now the UK has followed suit:

Britain is on a collision course with Donald Trump today after unveiling a ‘digital services tax’ to grab £400million-a-year more from global tech firms such as Amazon, Google, Apple and Facebook. The UK is pushing ahead with plans for a proposed two per cent levy on sales starting next April targeting online giants with global sales of more than £500million and at least £25million in UK revenue.

Amazon, Google, Apple and Facebook would pay an extra £300million-a-year to the Treasury based on their current revenues, MailOnline has calculated, with up to 30 companies set to be hit.

Britain wants more cash from major search engines, social networks and online marketplaces who use legal loopholes to ensure their UK profits are taxed in countries such as Ireland, Luxembourg and the Netherlands at a lower rate than in London.

These revenue-based taxes are an absolutely necessity given the global nature of these businesses. There is no reason global corporations should be permitted to be active in a jurisdiction if they’re not going to pay any taxes there. And before you get all libertarian-indignant about this, remember, corporations are a) even less accountable to the nations in which they are not based than the national government and b) they are literally government agents themselves.

Whether Venezuela follows through on this or not, I would expect other countries to do so in the not-too-distant future. The US-based payment systems are no longer reliable.

The central bank of Venezuela will develop an independent national payment system to get rid of international giants Visa and Mastercard in response to US sanctions, according to local media citing the regulator.

The document, which also separately mentions multi-national debit card service Maestro owned by Mastercard, orders a suspension of debit card operations starting November 2019 and payments via credit cards from January 2020.

The joint order was reportedly issued on May 16 by the central bank and Superintendency of the Institutions of the Banking Sector of Venezuela (SUDEBAN), responsible for ensuring the country’s banks comply with local regulations. It instructs the banks to create a “sovereign” system to process financial operations that will use clients’ biometric data.

The attempts to exert control over who can, and who cannot, utilize the monetary system is transforming the Internet economy into something resembling a South American economy, with all the uncertainty and chaos that one would expect.

And the current system is falling apart anyhow. When Deutsche Bank is laying off 18,000 people around the world, that’s a pretty strong indication that change is coming.

When traditionally stable institutions like Deutsche Bank find themselves in trouble, it’s a signal that the world’s financial system will face big problems down the road, legendary investor Jim Rogers has told RT.

On Monday, the German multinational investment bank –and the world’s 15th largest bank by total assets– started cutting thousands of jobs as part of an $8.3 billion overhaul announced one day earlier. The bank’s workforce is set to be reduced by 18,000 to around 74,000 employees by 2022, as Deutsche Bank scraps its global equities and trading operations. The move has already impacted the bank’s shares, which started to fall after initial 4 percent gains on Monday.

“The financial system is in trouble and this is just one sign of what is going on. This has happened in previous financial problems in the 1930s or the 1960s or the 1990s,” Rogers said in a phone interview with RT. He explained that central banks around the globe drove interest rates “to crazy levels,” and now we have to pay the price for that.

Poland is getting serious about shutting down labor mobility:

Polish lawmakers have approved a measure that would exonerate most workers under the age of 26 from income taxes as the country seeks to stem the flow of its young people to other EU nations in search of better paying jobs.

The lower house of parliament approved the measure introduced by the ruling conservatives in a vote late Thursday by an overwhelming majority.

The bill would exonerate workers under the age of 26 from Poland’s 18 percent personal income tax for those whose gross earnings don’t surpass 85,500 zlotys (20,000 euros, $22,500) per year.

That level is higher than Poland’s average income, estimated to be around 60,000 zlotys per year before tax.

The approval of the measure by the upper house of parliament and its signature by the president is widely expected.

Some two million people could benefit from the measure, according to supporters of the legislation, which should enter into force from August 1.

Despite the inevitable whining from the Open Borders crowd, it’s a great idea. Now they should do something similar for married couples with children. Incentivize the behavior that benefits the nation. De-incentivize the behavior that harms the nation.

It’s not a difficult concept.

Yet another reason to ignore Boomer advice, particularly as it regards the housing market:

Recently, however, we’ve lost the plot on the classic life arc of yesteryear. Places where real estate is cheap don’t have many good jobs. Places with lots of jobs, primarily coastal cities, have seen their real-estate markets go absolutely haywire. The most recent evidence of this remarkable change comes in a new report by the real-estate firm Unison. The company, which provides financing to homebuyers by “co-investing” with them, calculated how long it would take to save up a 20 percent down payment on the median home in a given city by squirreling away 5 percent of the city’s gross median income per year.

Nationally, the gap between income and home value has been rising. Using Unison’s methodology, it took nine years to save up a down payment in 1975. Now it takes 14.

But the aggregate numbers make the decrease in access to the real-estate market seem gradual, albeit troubling, and underplay the spikiness of the country. In Los Angeles, it would take 43 years to save up for a down payment. In San Francisco, 40. In San Jose and San Diego, 31. In Seattle and Portland, 27 and 23, respectively. In the east, New York and Miami topped the list, requiring 36 years to save up that down payment. Only Detroit, at seven years, was under the national average from 1975.

For young people in high-opportunity metro areas, the route to home ownership is basically blocked without the help of a wealthy family member or some stock options. Meanwhile, older people who bought under much more favorable circumstances have seen their equity stakes grow and grow and grow.

It’s really astonishing to review how many markets are fundamentally broken. I finally understand why some consider my 2033 timeframe to be optimistic. From my Gen-X perspective, the housing market was fairly reasonable until about 1997. That’s when everything took off like a rocket and essentially locked first-time buyers out.

Some researchers have managed to provide supporting evidence for the basic economic principle that increasing demand in excess of supply increases price.

19.21: immigrants as a share of population
17.71: 10-year percentage increase in housing prices

Keep in mind that these numbers are lower than they should be due to being artificially suppressed by the statistical artifacts of two debt-based housing crashes, as the researchers show both US and Spain showing a reverse correlation thanks to the big real estate crashes in 2008 and whenever the Spanish one took place.

Anyhow, the point is that the reason there are housing crises everywhere from Australia to the United Kingdom is immigration. It’s just one more piece of evidence that mass migration is catastrophic for a national economy.