February 25, 2008
Elaine Meinel Supkis
As the US slides into a major depression with a currency devaluation, media analysis is still unable to cope with examining this due to a refusal to look at all the intricate aspects of this mess as it evolves. This refusal to look simultaneously at the Japanese carry trade, offshoring of profits to hide them from taxes, the trade deficit and the budget deficit is epidemic. Our political mouthpieces running for office refuse to do this, our media as well as many economics professors refuse to do this. It is very hard wrapping one's brain around 10 different things at once but we must all do this or die. The tangle of woes that are bringing down the G7 nations is self-generated and it makes money for the wrong people. They, in turn, use this money to bribe or pay people into either looking the other way or assisting the rich in their tax evasions and ex-national activities. So once again, we must look into the dark pool of the Caves of Wealth which are now mostly offshore.
Tax authorities pay for Britons' bank details
The British tax authorities have paid an informant for the bank details of scores of wealthy Britons. The records were stolen from one of the world’s most secretive tax havens.HM Revenue & Customs paid £100,000 for data that it is using to launch investigations of up to 100 British citizens who have accounts at Liechtenstein’s biggest bank.
British authorities regard it as a coup to have penetrated accounts that have been beyond their reach for decades. “There will be many frightened people who thought Liechtenstein was secure,” said a City accountant.
Anyone found to have evaded tax faces fines of up to 100% of the money owed to the Revenue and, where deliberate deception is proved, a jail sentence of up to seven years.
I heard that the anonymous person who has gotten access to the tax files at this Habsburg mini-empire, was offered to France and the US as well as Germany and England. The US and France declined to pay for this information. I am utterly baffled by this. The FBI pays for informers all the time. Ask the Mafioso! This is an old tool, in fact. So why the reluctance here? I would suggest the US government, far from going after tax evaders, has been enabling them. This is disastrous for US funding. Since anyone can evade taxes easily, everyone with the ability to do this is now doing this! While they sit in their fancy office towers in Manhattan, they all pretend they are really based in various tiny pirate coves or miniature kingdoms in the mountains. One tax cheat, the governor of Mass. ran for President using his tax cheat profits! He even laughed at us and said, 'This is perfectly legal!'
And that is the problem: tax evasion has been legalized. And this is why our government has also been running in the red. Our Vice President's own corporation, Halliburton, has moved to the pirate cove in Dubai in order to evade taxes. The people evading taxes are now infesting the uppermost levels of our government. And they and their friends pour into our political system, billions of dollars in bribes. One of the fastest growing industries in the US has been the K Street Lobbying groups in DC. The story of McCain sleeping with a lithesome lobbyist who was hired due to her prostitutional attractions is but a tiny part of this massive wave of corruption. All of our top politicians sleep with lobbyists. Many lobbyists are the husbands and wives of top politicians, after all. They are hired for this reason! Ask Hillary Clinton about that. She was able to not only get massive funding from bribery-minded folk, her husband has been able to 'earn' several million, we have no idea yet how much, sitting his ass on various boards and then carting the money home to his Senator wife. Which she used to run for an even more lucrative office.
McCain married into money. He wants power. So he can protect his buddies who are tax evaders and reckless spenders. The party must go on! I have suggested for some time, using our military which is very expensive and is losing taxpayer money, to use them to sail off to these tax havens and at gun point, seize all the financial records there and use them to catch these tax evaders. Our worsening financial condition is screaming for this to be done! There is little time to waste.
Britain is also being ravaged by these pirate coves that are the Queen's properties. They fought an extremely expensive war for the Falkland Islands. At that time, there were mostly sheep and penguins there. Now, there is a nifty pirate cove. The navy should go back there and re-invade. And retake Jersey Island and the Cayman Islands as well as Bermuda, etc. Put them under the control of Parliament. After all, Britain as well as the US invaded Iraq on far less just cause!
Now it is time yet again to talk about Japan. I focus on this a lot because of the grave danger Japan's economic choices are creating. We can't ignore this nor evade it since it lies at the very roots of the tsunami of red ink that is sloshing over the world. Along with Japan are these pirate coves which are being used to funnel money from Japan to the various Hell Hound funds that keep their books offshore for tax evasion as well as no control from any governments. This 'Wild East' money flow is creating inflation everywhere. When various central banks tried to raise interest rates to cope with this inflation, this INCREASES THE JAPANESE CARRY TRADE. Australia, for example, is being destroyed by this. China is raising rates and Japan is merrily flooding China with this money. It doesn't come directly from Japan. It comes out of the Forex markets. The offshore financial houses rush to Japan and play this currency/lending game where by they can get loans from Japan and translate this into various currencies which are rising against the yen. When the dollar fell against the yen, this killed the US$/Japan ¥ carry trade. But it simply moved to the Aussie, for example. Or the Canadian dollar. And spectacularly, to the euro. The ¥ and $ both have fallen against the euro. So the flood of money sloshed over everything in Europe. This is one reason why housing there shot up in value just as it did here in the US when the ¥ was cheaper than the dollar. Note how the US housing market collapsed the minute the ¥ began to strengthen against the dollar. Mortgages, for example, are actually rising in interest rate costs here, rather than falling. Despite a frantic Fed attempt at lowering this.
Japan's budget deficit is over $7.5 trillion. The US has a $9.5 trillion deficit. This is important to remember at all times as we look at the news. I harp on this because the media likes to overlook these facts. Many Americans are totally unaware of the Japanese debts. Another important piece of information we always have to keep in mind when reading any news about Japan and the US is, Japan's massive FOREX reserves. During a 'depression' they managed to squirrel away an amazing amount of money. So has China, to an even greater degree. Only they are not pretending they are in a depression. The third thing we must always remember is the Japanese trade surplus. China has the biggest surplus in the world. But up until this last year, Japan had the biggest trade profits for corporations. Now, Germany has this. But the top three nations here are always Germany, Japan and China these days. This dynamic cannot be ignored when talking about US financial problems. Or Japan's 'depression'.
Our political representatives, bribed like crazy by tax evaders and corporate raiders seeking to translate Japanese easy loans into buy-outs in the business world all want us to think we can spend our way to prosperity. This childish belief that Santa Claus will give us all a huge hunk of money so we can spend it is being peddled as the solution to the grave economic problems besetting us today. The tax evaders, cheaters, hell hounds and other offshore pirates are all leaning forwards while rubbing their hands with glee. They want us to believe the solutions offered by politicians will work. This desire causing them to tremble with fear, too. For they are all facing bankruptcy. This is due again, to the Japanese carry trade. To play that game, one doesn't need profits or savings. To do this, all you need is to collect an IOU. They love to call this 'leverage' but it is really a shovel.
They are digging our economic graves. This debt shovel means they can take all the dirt they dig up and dump it on top of something that has 'equity.' If someone isn't deep in the debt grave, they have 'equity.' For example, my property here has lots of 'equity'. This is because I built the house and did all the improvements mostly by myself or with family members. Mostly, myself. So there are no loans based on this property. If this were a company, say, the hell hounds and pirates could arrange to use my business as a collateral for a big multi-billion dollar loan! And then using this money, take over via buying of stocks. This is why stock markets shot up. This getting of loans from Japan and using them to buy up stocks so they could take over and then dismember the corporations they took over is what our 'economic activity' was all about for the last 10 years!
Meanwhile, in Japan, this was NOT HAPPENING. No one could come in and raid Toyota. The government and the businessmen there made absolutely certain, this would not happen. They have many barriers to this which is why the Nikkei didn't rise hardly at all for many years. But in the last year, this has floundered and the Nikkei began to rise and people on the outside began to notice. So, Japan's corporations have expanded markets and are now even more powerful than ever but are not burdened by a mountain of debts generated out of the Bank of Japan! Isn't that a sweet little trick?
But now, after more than three decades in the wilderness, Keynesian-style fiscal policy seems to be staging a comeback. On February 13th George Bush signed into law individual tax rebates and temporary investment incentives worth $152 billion (just over 1% of GDP) this year, and $168 billion in total. Passed in record time by the normally sluggish Congress—and before recession is even a certainty—the stimulus is aimed at cushioning America's downturn by getting cash into consumers' pockets and encouraging firms to invest.
*snip*
Judging by fiscal deficits alone, it is America and Britain that should fret. In 2000 America ran a structural surplus; in 2007 it had an underlying deficit of 3% of GDP. At 3.1% of GDP, Britain's was slightly bigger (see chart).Although cyclically adjusted budget positions give a better picture of a country's fiscal health than headline surpluses or deficits, they tell only a partial story. Countries have varying underlying debt burdens and face differing pressures from ageing populations. Japan has a big deficit, a large debt and the oldest population in the OECD. Britain has a bigger structural budget deficit than Italy, but much less debt (43% of GDP versus 105%).
This chart shows debts as GNP. This is a nice way to do things because it evades the real costs of deficit spending. The various nations overspending look like they are not in hot water due to the fact that their 'economies' are big. Indeed, Japan's overspending is exaggerated by this. Their GDP has been depressed for quite a while. The US is wrong due to our overspending domestically which makes our economy look much bigger than it really is. For example, the latest injection of money by increasing our Federal Debt will make the GDP look good. If we switch this to comparing government overspending to trade deficits or surpluses, the US looks like Italy in 1990!
Both Japan and the US are increasing their debts even as they claim they want to lower interest rates. Horribly enough, Japan intends to drop rates lower despite inflation, government overspending, everything! And the US is equally determined to do the same! This cannot work in the long or possibly, even the short run. Below is yet another major article about Japan's 'depression' that refuses to take into account all the factors I have been discussing here:
Lessons for the United States in 2008
By John H. Makin
Despite a tightening credit squeeze that is resulting in a sharp slowing of U.S. growth to recession levels, there is no reason to suppose that the United States is headed for a lost decade like Japan's. Prompt, aggressive easing by the Fed, along with a clear recognition that deteriorating credit and economic conditions may require further easing, constitutes a vital first step toward avoiding a prolonged recession that brings with it the danger of deflation. It is deflation that was immensely damaging to Japan after 1998 and continues to be a threat there today. Fed chairman Ben Bernanke was clear in his February 14 testimony before the Senate Banking Committee on the economy and financial markets that he recognizes the risks posed to the economy by deteriorating credit markets: "It is important to recognize that downside risks to growth remain, including the possibilities that the housing market or the labor market may deteriorate to an extent beyond that currently anticipated or that credit conditions may tighten substantially further."Beyond prompt Fed action to reduce interest rates, prompt enactment of a fiscal stimulus package (equal to about 1 percent of GDP), including about $100 billion of tax rebates to households at midyear and an estimated $50 billion of investment incentives, will help--other things being equal--to add as much as half a percentage point to 2008 growth. The risks are to the downside for the growth boost because households, unnerved by falling house prices and stocks and by curtailment of available credit, may choose to save their rebates.
Far from a 'lost decade' we will have a 'lost century.' If a sudden drop of interest rates can save us from the sort of depression Japan is enjoying, why bother with all the in between baby steps? Why not just jump off the cliff? As I keep saying, if the point here is to up spending, why have interest rates? Japan has gone a long time with basement level rates, after all. Just like a weak yen encourages exports, why bother having a currency that is useful? We should have the dollar be worth a penny and no interest charged on loans? Right?
The logic of this system is obvious. It works only if we want to commit mass suicide. Japan is busy with this right now. They have the highest average age due to lack of children. Gradually, grannies will outnumber babies until there are no babies left. The Japanese suicide rate is double the US rate, for example. And most of these are young people. In the US, the bulk is still middle aged men. Both the US and Japan are following the same toxic formula in some areas: cut wages, make lending for the lower classes very expensive while making lending to corporations ridiculously cheap. Debase the currency and force the lower classes to pay more and more for food and fuel while the debased currency increases exports.
And of course, run up government deficits and charge them against the poorer parts of the population. This noxious mix means destroying the country but it makes people rich. The US has made this worse by also allowing and encouraging tax evasion and allowing corporations to outsource and offshore their business while competing within businesses based with the country. One huge difference here: Japan's corporations do not allow invaders to come into Japan and overturn their rule there! This is very significant. I read in the Nikkei that India is probing Japan to see if they can undersell Japanese IT services within Japan itself. This means the Japanese will use whatever crude tools they have at hand to hammer the invading Indians. Unlike the US.
The post-1989 collapse of Japan's equity bubble was, at first, welcomed by the Bank of Japan. Even though stock prices were falling rapidly, land prices continued to rise for another year at least, and the Bank of Japan remained concerned about inflation pressures. The Bank of Japan actually boosted the discount rate from 4.75 percent to 6 percent in August 1990 and held it at that level until June 1991. As the collapse of equity prices intensified and land prices began to fall, the Bank of Japan reversed course and cut its discount rate rapidly by 275 basis points in the year following June 1991. Subsequent additional cuts of 150 basis points in 1993 brought the discount rate down to 1.75 percent by September 1993. Simultaneously, Japan pursued three major fiscal stimulus packages totaling 6 percent of GDP between August 1992 and September 1993.The effects on the economy of these extraordinary stimulative measures were limited. Growth recovered only slightly--to just over 1 percent in 1994--for several reasons. First, the Bank of Japan was late to initiate its easing. By the time of the first rate cut in June 1991, Japan's nominal GDP growth, which in the long run should not be allowed to fall below policy interest rates, had dropped to about 2.5 percent, headed down to a negative level by 1994. That level was far below the 6 percent discount rate in place. Simultaneously, falling land and equity prices were erasing household wealth and resulting in a sharp curtailment of credit because of the heavy exposure of Japan's banks to the commercial land bubble. This was especially damaging because Japanese companies are far more reliant on banks for financing than American companies, which have access to broader credit markets.
Japanese businesses went into a tailspin because they were mostly focused exporting to the US. And the US got to drop the value of the dollar via the Plaza and Louver Accords during the 1980s. Articles discussing Japanese trade and finances must mention all this. But often don't. Due to this, the Nikkei plunged. 50% of the US trade deficit back then was with Japan. Today, only 12% of our trade deficit is with Japan. China has surpassed Japan in this regard. In 1991, stocks fell and then properties fell. Today, with the US, it is the reverse. Why is this? Japan's stocks plunge every time it looks as if the US won't be spending like fiends on imports. This is why the Nikkei collapsed by 2,000 pts during the time when it looked like the wild US spending was ending. And has climbed 1,000 pts ever since the 'rescue' operation was launched. Obviously, the know that much of this money will flow to Japan.
No one can rescue the Japanese property markets because no one has any reason to buy any of it. Except in Tokyo. Tokyo, like London, is growing while Japan withers and dies. For the same reasons. The statistics are warped by this process. Tokyo has had a huge building boom and a rise in property values while the rest of Japan dies. So it can look like a depression when we are really seeing a bubble there....in Tokyo. Just like Manhattan's real estate boomed while the hinterlands collapsed. The banks of Japan fell apart when the US markets dried up during the 1990 recession. Since then, the consolidation of the banking systems there and the rise in power of the Bank of Japan has changed the landscape utterly. Japan knows perfectly well that flooding markets with easy loans at whatever rate leads to bubbles that break. The cynicism of the bankers is obvious. So what if they create many bubbles across the planet? It isn't in Japan so they are safe. Only a central bank can be this uncaring.
The offshore hell hounds also don't give a damn, either. So they blithely create these bubbles.
More recently, the post-mortems on America's 2001 fiscal boost have been positive. By luck more than design, the income-tax rebate was well timed (Mr Bush had promised to cut taxes long before the recession hit). It also seemed to work. One study suggested that people spent between 20-40% of their rebate in the quarter in which it was received, and over 60% of it within six months. Poorer, more credit-constrained people spent a higher share of their rebates.Such studies have informed America's recent debate. Politicians have been urged to act quickly and keep the stimulus “targeted and temporary”. Two-thirds of the boost will come from tax rebates, which 130m American families are due to receive starting in May. If people spend roughly the same share of their rebate as they did in 2001, Morgan Stanley reckons output could grow at an annual rate of more than 4% in the third quarter of 2008.
This stupid man is published by a major corporation. One can see why. He is beyond stupid here! The post-mortems on the 2001 'boost' are positive???? On what planet? Jupiter? The boost is a bust! It is directly responsible for increasing our messes and destroying our economy even more! It increased sales of IMPORTS. The US trade deficit was bad before 2001 but absolutely shot upwards when this free money was passed out like candy. In 1990, our deficit with the world was less than $50 billion and much of this was with Japan. By 1999, it shot up to $331 billion. Clinton had balanced our national budget. We were supposed to tackle this matter, too. Then Bush took over and the flood of red ink was incredible. We jumped from $300 billion to over $700 billion and then almost to a trillion in trade deficits! This is a major catastrophe. The flood of red ink in both trade and budget over-runs together are well over $10 trillion dollars we cannot afford! All, since the tax cuts by Bush!
Keeping the tax cuts targeted means sending all this new government-based red ink to Asia! That is the target! It is not going to flow to America. Proof is that both China and Japan's stock markets went up on this news.
Buyout Executives Meet in Germany as Takeovers Vanish
Carlyle Group founder David Rubenstein and TPG Inc.'s David Bonderman will join a meeting of about 1,500 executives from the leveraged buyout industry in Germany this week, as funding for takeovers vanishes and returns deteriorate.At last year's Super Return conference, executives toasted an unprecedented $713 billion of acquisitions with a reception at the Frankfurt Zoo, where they were entertained by a dance troupe and challenged to find the glass of champagne containing a real diamond.
That was four months before the U.S. subprime mortgage market started to collapse, leaving banks with a backlog of about $230 billion in buyout loans and reducing their appetite to fund any new takeovers. Two preferred routes to generate quick returns, selling assets to other buyout firms or taking dividends from investments, also withered in the credit drought.
The poor babies are glum, aren't they? On top of all this, they are wondering if governments will raid more offshore tax havens and hammer them with more bills due. David Rubenstein, his buddy, David Bonderman and all their buddies should be arrested now that they are gathered in one place. But the Bushes helped create the Carlyle monster. They protect this creature. Look at how, last year, they made an extra $700 billion appear out of thin air! If ever dollar of every trade surplus in the world flowed into these guys hands to be used as buy out capital, it would not be possible to raise that much money. We know that a good hunk of all trade surpluses come back home to the nations selling to the US which is the chief source of surplus funds. In the form of dollars. And which is why the Gulf nations selling oil as well as China and even now, Japan, are complaining about inflation. So much more than half of this money is funny money from the carry trade. I would say, a good proportion like around 80%+.
``It will be harder for firms to achieve profitable exits, as would-be buyers from private equity funds won't find it as easy to finance purchases or pay high prices,'' Marks wrote. ``And IPOs will be an uncertain route to realizations.''
*snip*
Still, executives see one advantage for private equity firms after 18 months of unprecedented political scrutiny of their employment record and tax arrangements.``The debate has moved on,'' said Adrian Johnson, chief executive of British insurer Legal & General Group Plc's private equity unit, in a Feb. 21 interview. ```The big firms are not doing transactions now and there aren't things going on that remind people of private equity.''
Note how they wish to operate in the dark! Note how pleased they are that all the nations of the world, as they all slide into the pits of hell due to the flood of funny money which is causing inflation, won't notice them! They hope to hide in pirate coves and caves until this all blows over and they can bribe the politicians to stay silent and not hunt them down. They hope the inflation they caused by going to the Bank of Japan's carry trade will be eaten by the masses of the poor of this planet. They hope the food and fuel inflation will destroy this money, eat it up, literally. If this kills millions of people, they don't care. They won't be starving or freezing to death!
What is really funny here is the article was written before the revelations out of Liechtenstein. Just as they thought they could slither off, someone yanks them by the tail.
Bernanke, Bush Fail to Build Better Economy With Cuts, Stimulus
Even if Ben S. Bernanke, George W. Bush and Congress win the battle to avert a recession this year, they risk losing the war to strengthen the economy for the long term.
*snip*
Consumers, until now the driving force behind the expansion, are feeling the squeeze. While households will get a short-term boost from the coming tax rebates from Washington, their longer-run finances look shakier.Households reduced their savings rate to virtually nil in December from close to 10 percent of disposable income 15 years earlier. That trend may reverse as credit becomes scarcer and home prices fall.
Credit-card companies are adopting stricter lending standards and making it harder for consumers to borrow, says Robert McKinley, president of Ft. Myers, Florida-based Cardweb.com, a research organization that tracks the industry.
*snip*
Allen Sinai, chief economist at Decision Economics in New York, calls the pullback by consumers ``a seismic shift. For several years, the growth of consumer spending is going to be significantly below its long-run average of 3.5 percent.''Consumers have also been pinched by the rising cost of food, fuel and other necessities. Inflation, as measured by the personal consumption price index, clocked in at a 3.5 percent year-over-year rate in December, the highest for that month since 1990..
The above article is at least covering some of the truth. The long term mess is made worse by this money give away. It corrupts all our morals. It pretends we can spend our way out of this mess which is not a lack of loans but due to too many loans on too many levels. We all need a pay raise, not another IOU tacked onto our collective bills. US savings began to really collapse when our trade deficit began to soar. This is due entirely to outsourcing and cheap debts. Why save when going into debt is so much easier? I remember the same media outlet were calling for us to go into debt due to a global savings glut, supposedly.
The fabled 'productivity gains' of the last 20 years have nearly entirely been due to exporting jobs and importing the goods once made in the US. This reduces wages at home as well as prices. Workers ate inflation this way. Now the outsourcing is nearly done. We have only a few more industries to evaporate and it will be all over. Then all inflation will hammer us directly. We compete now with Europe and Asia for all resources that used to flow here. They will cease flowing here. Asia to Asia and Europe to Europe trade is growing and after we go off this financial cliff here, there will be a global depression and then world trade will readjust like it always does. But it will no longer flow mainly to the US.
Lowe's Net Falls; Earnings Forecast Trails Estimates
Net income decreased 33 percent to $408 million, or 28 cents a share, from $613 million, or 40 cents, a year earlier, Mooresville, North Carolina-based Lowe's said today in a statement. Profit exceeded the average estimate of analysts by 3 cents, according to a Bloomberg survey. Sales fell less than 1 percent to $10.4 billion.
*snip*
Sales of previously owned homes, which account for about 85 percent of the market, fell more than forecast in December, capping the biggest yearly slump in more than a quarter century and the first decline in prices probably since the Great Depression, the National Association of Realtors said last month.
Unlike Japan's property bubble bust, stocks rose while housing fell first. And all the politicians are desperately seeking some nonsensical way to boost property values. The banks want this and home sellers want this. But it may be impossible. All articles I read about Japan criticize Japan for not dropping interest rates fast enough to zero to keep property values sky high. But when there is a bubble, there are only two choices: debase the currency so the expensive housing become 'cheap' or to let housing drop over time while keeping the currency stronger. Japan chose the housing drop/no inflation. We are choosing the housing dear/great inflation route. The US is a mirror opposite for Japan. Not a shadow of Japan.
This is why I think it is very important to understand deeply what is going on. We must compare ourselves brutally. Japan has no trade deficit. They have trade surpluses. Japan has inflation only in things needed by the poor. The US still has inflation all over the place. Japan has a powerful central bank controlled by the government. The US has a decentralized banking system that works for offshore tax evaders. Japan protects its home base. The US pays to protect Japan.
Just the other day, one of our most expensive jet planes on earth crashed in the Pacific islands we use as our outward bases. It costs over $2 billion dollars to replace. We, not Japan, will pay for this. Just as we pay for invading Iraq. Which cost us $3 trillion or more so far. And which cost Japan a few billion dollars. All wars cause inflation. All wars cause government overspending. The US is at war with the world or acting as if we are at war. And this is the ultimate cause of our collapse in financial power.
And using this to invade people who are destroying our finances is laughably easy. How about it? Storm the beaches of the Cayman Islands! 'From the Halls of Montezuma to the shore of Tripoli...to fight in Cayman Islands, we are happy as can be....'
More information in next story...US agents used the Liechtenstein data.
Posted by: Elaine Meinel Supkis | February 25, 2008 at 04:27 PM
Now i dont have to worry no more.
Posted by: cash for gold | March 07, 2011 at 02:54 AM