“We’re engaging in trench warfare,” proclaimed Alain Afflelou, head honcho and founder of an eyewear company with 1,200 stores in France and other countries. He was talking about the tax fiasco that split France in two. He was done with his country. He’s moving to London. One of France’s so-called fiscal exiles. And now there are “unprecedented waves” of them.
Contributed by George Dorgan. Eurocrats claim that Greece and other periphery countries are on track to gain competitiveness because wages are falling. But wages are only part of the competitiveness story. Cost of labor contains pension schemes, taxes, etc. that might increase with austerity measures. And other production factors, notably capital, are missing.
On Friday before Christmas when nobody was paying attention, when people were elbowing their way through department stores or heading out for vacation, the European Commission issued its report on bank bailouts in the European Union—a dry document with mind-boggling numbers that left out the most important fact.
Corporate subsidies, in an era of fiscal-cliff attacks on Social Security and Medicare, have dodged attention despite their magnitude and absurdity. Take the renewable-fuels subsidy ecosystem—and a train of tankers filled with biodiesel that shuttled back and forth across the US-Canadian border, twelve times, without unloading its cargo. It generated millions of dollars in profits.
Contributed by Chriss Street. Last week, Governor Rick Snyder signed Michigan’s first right-to-work law, which makes it illegal to require workers to join a union or pay union dues. The law was scorned by liberals as destroying jobs at good wages. Yet, GM just announced that it would move production of the iconic Camaro from Canada to Michigan.
One of the pillars of the Japanese economy has been its exports. That pillar has been crumbling for years, but the deterioration this year has progressed at a phenomenal pace. At fault: China and Europe. But beyond the noise, Japanese companies have been investing their valuable yen overseas, and it’s making the deficit structural. An ugly combination.
Contributed by Oilprice.com. We are in an amazing energy boom, but by sweeping the idea of "peak oil" under the rug we are ignoring a fact: the relationship between hydrocarbon reserves and flow rates are not the same as they used to be—reserves have increased but flow rates are not as high or sustainable. An "entirely new world."
“Paradox” is what the New York Times called France’s ability to attract more foreign investment than any country other than China and the US. A paradox because it shouldn’t. Investors should be scared off by labor laws, tax rates, the cost of labor, and mud-wrestling bouts over nationalizing some industrial plants. But turns out, multinational corporations pay practically no income taxes in France. And it has reached the boiling point.
At a yearend Bonenkai party, an official from the Ministry of Finance, the most powerful entity at the core of Japan Inc., let slip that the Bank of Japan wasn’t doing its job; it was just giving money to the banks which bought Japanese government bonds instead of channeling it into the economy. “That’s why the Ministry of Finance is trying to gain control over the Bank of Japan,” he said.
“I’m wondering how much this society can endure before it explodes,” said Georg Pieper, a German psychotherapist who specializes in treating post-traumatic stress disorders following catastrophes, large accidents (including the deadliest train wreck ever in Germany), acts of violence, freed hostages.... But now he was talking about Greece.
I love steaks. Rare. So I’m biased. But now there is the report of a year-long investigation into the potentially deadly industry practice of mechanical tenderization. It has been going on for decades, with innumerable victims. The risks have been known since at least 2003. Yet the industry resists even the most basic labeling requirement that would save lives.
Hans-Werner Sinn, President of the German Ifo Institute and a thorn in the side of bailout politicians and eurocrats: The longer you delay the needed “radical measures,” the more banks and other private investors will be able to sell “their toxic paper without haircut to governmental bailout funds, and then hightail.” Taxpayers, retirees, and savers “in sound countries” will pay the price.
As the Eurozone flails about to keep its chin above the debt crisis that is drowning periphery countries, and as the European Union struggles to duct-tape itself together with more “integration,” that is governance by unelected transnational eurocrats, Sweden is having second thoughts: never before has there been such hostility toward the euro.
Contributed by Lee Adler, The Wall Street Examiner. The Fed decided to print $45 billion a month via purchases of Treasuries. In addition to the $40 billion it's printing via MBS purchases. And it will reinvest the proceeds of maturing MBS, $35-$40 billion. So $120 billion a month! And it might have created a nightmare scenario.
Contributed by Charles Kennedy of Oilprice.com. Mongolia was the world’s fastest growing economy last year, driven by foreign investment and rapid developments in its coal, copper, and gold mining sectors. Now all that development could fall apart and the nation’s economy could collapse, due to an ill thought-out law.
The National Federation of Independent Business tried to shock the world with its report that small-business owner optimism had plunged below the level of apocalyptic post-Lehman November 2008. A huge setback; small businesses are job creating machines. “Something bad happened, and it wasn’t Sandy,” said NFIB chief economist Bill Dunkelberg. “It was the election.”
Flamboyant threats of nationalizations and vociferous demands for protectionism in France have run into a buzz saw. Just days ago they were seen as a cure for the unemployment fiasco, rampant deindustrialization, and ballooning poverty. Now they’re in pieces.
Contributed by Chriss Street. State Controller John Chiang announced that revenue for November fell $806.8 million, or 10.8%, below budget. Democrats thought they could hammer “the rich” by convincing voters to pass Proposition 30 to create the highest state income tax in the nation. But it appears high-income earners have “voted-with-their-feet”, resulting in a $1 billion shortfall in taxes, and the beginning of a new financial crisis.
Friday’s plunge in consumer sentiment was hastily ascribed to the Fiscal Cliff. Like Sandy, it's recruited to explain everything that goes wrong. But over the last few days, one monkey wrench after another has been thrown into the hope machinery, including the collapse of small-business hiring plans to the record low set during the catastrophic post-Lehman days.
Contributed by George Dorgan. Fearing their own economic principles, leading economists and politicians drive Europe into years and maybe decades of austerity, transfers from the north to the south, worsening European and global imbalances, and economic uncertainty. Uncertainty, however, is the worst thing for business leaders and the European economy.