Analysis https://thenextrecession.wordpress.com/2016/09/29/global-turbulence-ahead/
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New World Economic Crash On The Way!
SEE Michael Roberts Blog(Marxist Economist)- Predictions for 2016,2017
https://thenextrecession.wordpress.com/2016/01/05/predictions-for-2016/
WILL THOSE ON LOW AND MIDDLE INCOMES PAY FOR ANOTHER CAPITALIST CRISIS?
Trump targets Irish jobs with ‘America First’ policy
“But we’re going to be getting a lot of companies moving back and we’re going to get very few companies leaving the United States,” he said.
As a rich Irish hotel owner, he notes that, unlike the general population, he wasn’t required to pay any extra tax during the recession!!!
“ I own great property in Ireland that I bought during their downturn. And I give the Irish a lot, a lot of credit,” Mr Trump told ‘The Economist’. “They never raised their taxes. You know you would have thought when they were going through that really … they would’ve double and tripled their taxes. They never raised it a penny.”
Irish Independent EDITORIAL
May 12 2017 2:30 AM
A pat on the head and a knife in the back.
The Donald thinks Ireland did an “amazing job” in handling the financial crisis. He said he gives Ireland “a lot, a lot of credit” for not raising taxes during the downturn period.
The US president said that as a result the country is “thriving” and a lot of companies have moved here.
“You look at Ireland. I own great property in Ireland that I bought during their downturn. And I give the Irish a lot, a lot of credit,” Mr Trump told ‘The Economist’. “They never raised their taxes. You know you would have thought when they were going through that really … they would’ve double and tripled their taxes. They never raised it a penny.”
Mr Trump has his own difficulties now with reducing taxes and his plan appears to have stalled before even getting out of the traps.
Nonetheless, he is adamant he will target US firms who have moved abroad or are intending to do so.
And he warned he will actively lure American multinational companies home from Ireland.
“But we’re going to be getting a lot of companies moving back and we’re going to get very few companies leaving the United States,” he said.
Whether he’s talking about firms engaged in tax inversion or companies operating in Ireland to serve the European market is not clear.
However, Mr Trump is adamant he’s going to push ahead with his ‘America First’ policy on jobs going abroad.
Irish Independent
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International Monetary Fund WARNS OF “UNCERTAINTY” in Irish Economy Due To On-going Changes in Corporation Tax at International Level-Recommends Increase in Unfair Dwellings Tax (LPT)
On-going changes in corporate taxation at the international level and discussion of further reforms in the US and the EU are contributing to “uncertainty”.
This is due to “the sizable role of multinationals in the economy and their substantial contribution to the tax base”.
Among potential tax changes in the US is President Donald Trump’s wish to reduce the American corporate tax rate from 35pc to 15pc.
Irish Independent 13/05/17
“Brexit represents the most pressing and far-reaching challenge for Ireland.
“While the impact to date has been modest, the overall effects over the medium term are expected to be negative and significant.”
Risks are said to be most acute for traditional sectors depending on trade with the UK such as agri-food and tourism.
The report says that the special issues related to the border with Northern Ireland have also been recognised and “The authorities are actively engaging with partners in the UK and across Europe, and working domestically to develop a set of measures to respond.”
“Ensuring timely and well-targeted action will be key,” the IMF advises.
Ongoing changes in corporate taxation at the international level and discussion of further reforms in the US and the EU are contributing to “uncertainty”.
This is due to “the sizable role of multinationals in the economy and their substantial contribution to the tax base”.
Among potential tax changes in the US is President Donald Trump’s wish to reduce the American corporate tax rate from 35pc to 15pc.
The uncertainty “further reinforces the need for a broad tax base, large fiscal buffers, and continuing efforts to reinforce the dynamism of the domestic economy,” the IMF found.
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Drift to New World Economic Crash and Inter-Imperialist Conflict Continues
The office of the US Director ofNational Intelligence (DNI) reckons that things are not going to get better. “The next five years will see rising tensions within and between countries. Global growth will slow, just as increasingly complex global challenges impend.”–More further down
New Line Up In Inter-Imperialist Economic Conflict Begins to Emerge at Group of Top Twenty Capitalist Countries ( G20)
-US and Japan on One Side, EU and China on the Other
From Financial Times-Printed in Irish Times March 20,2017
http://www.irishtimes.com/business/economy/us-stance-on-trade-forces-rest-of-g20-to-wait-1.3017269
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Richest 20 Capitalist Countries Retreat From Free Trade !!!
Drift to New World Economic Crash and Inter-Imperialist Conflict Continues
The office of the US Director ofNational Intelligence (DNI) reckons that things are not going to get better. “The next five years will see rising tensions within and between countries. Global growth will slow, just as increasingly complex global challenges impend.”
The Global Paradox by Michael Roberts Marxist Economist
Most people missed it but America’s intelligence services also looked recently at developments in the world economy. The Office of the Director of National Intelligence (DNI) published its latest assessment, called Global Trends: The Paradox of Progress, which “explores trends and scenarios over the next 20 years”.
The DNI concludes that the world is “living in paradox – industrial and information age achievements are shaping a world both more dangerous and richer with opportunity. Human choices will determine whether promise or peril prevails.” The DNI praises capitalism over the last few decades for “connecting people, empowering individuals, groups, and states and lifting a billion people out of poverty in the process.”
But American capital’s eyes and ears are worried about the future. There have been worrying “shocks like the Arab Spring, the 2008 Global Financial Crisis, and the global rise of populist, anti-establishment politics. These shocks reveal how fragile the achievements have been, underscoring deep shifts in the global landscape that portend a dark and difficult near future.” All these developments are bad things for global capital and American supremacy, it seems. And the DNI reckons that things are not going to get better. “The next five years will see rising tensions within and between countries. Global growth will slow, just as increasingly complex global challenges impend.”
What is the answer? Well, this comment from the DNI report is unvarnished: “It will be tempting to impose order on this apparent chaos, but that ultimately would be too costly in the short run and would fail in the long. Dominating empowered, proliferating actors in multiple domains would require unacceptable resources in an era of slow growth, fiscal limits, and debt burdens. Doing so domestically would be the end of democracy, resulting in authoritarianism or instability or both. Although material strength will remain essential to geopolitical and state power, the most powerful actors of the future will draw on networks, relationships, and information to compete and cooperate. This is the lesson of great power politics in the 1900s, even if those powers had to learn and relearn it.”
In other words, while it would be better to just crush opposition and “impose order” in America’s interests, this is probably not possible with a weak world economy and lack of funds. Better to try “draw on networks, relationships and information” (ie spy and manipulate) to get “cooperation”.
But it is not going to be easy to sustain America’s dominance and the rule of capital, the DNI report concludes, as globalisation “hollowed out Western middle classes (read working classes) and stoked a pushback against globalization.” Moreover, “migrant flows are greater now than in the past 70 years, raising the specter of drained welfare coffers and increased competition for jobs, and reinforcing nativist, anti-elite impulses.” And “slow growth plus technology-induced disruptions in job markets will threaten poverty reduction and drive tensions within countries in the years to come, fueling the very nationalism that contributes to tensions between countries.”
You see, the problem is that the population of America and its capitalist allies are getting older and the new powers have younger, more productive populations. Yet capitalism cannot deliver for these growing populations in the so-called ‘developing countries’. Meanwhile, “automation and artificial intelligence threaten to change industries faster than economies can adjust, potentially displacing workers and limiting the usual route for poor countries to develop.” And then there is climate change and environmental disasters that will entail. This is all going to “make governing and cooperation harder and to change the nature of power—fundamentally altering the global landscape.”
So it is not a pretty picture beneath all the optimistic talk and fanfare we heard from the rich elite at Davos only last month. Instead, the DNI reckons “challenges will be significant, with public trust in leaders and institutions sagging, politics highly polarized, and government revenue constrained by modest growth and rising entitlement outlays. Moreover, advances in robotics and artificial intelligence are likely to further disrupt labor markets.” The DNI tries to sound hopeful at the end of this litany of dangers to global capitalism but they are not convincing.
I have posted before about the clear signs that the age of globalisation and capital’s expansion at the expense of labour everywhere appears over. Another indicator of this was a report from the US-based Global Financial Integrity (GFI) and the Centre for Applied Research at the Norwegian School of Economics. The report found that trade misinvoicing and tax havens mean the world’s givers are more like takers. The GFI tallied up all of the financial resources that get transferred between rich countries and poor countries each year: not just aid, foreign investment and trade flows but also non-financial transfers such as debt cancellation, unrequited transfers like workers’ remittances, and unrecorded capital flight (more of this later). What they discovered is that the flow of money from rich countries to poor countries pales in comparison to the flow that runs in the other direction.
In 2012, the last year of recorded data, developing countries received a total of $1.3tn, including all aid, investment, and income from abroad. But that same year some $3.3tn flowed out of them. In other words, developing countries sent $2tn more to the rest of the world than they received. If we look at all years since 1980, these net outflows add up to $16.3tn – that’s how much money has been drained out of the global south over the past few decades.
Developing countries have forked out over $4.2tn in interest payments alone since 1980 – a direct cash transfer to big banks in New York and London, on a scale that dwarfs the aid that they received during the same period. Another big contributor is the income that foreigners make on their investments in developing countries and then repatriate back home. But by far the biggest chunk of outflows has to do with unrecorded – and usually illicit – capital flight. GFI calculates that developing countries have lost a total of $13.4tn through unrecorded capital flight since 1980.
Most of these unrecorded outflows take place through the international trade system. Basically, corporations – foreign and domestic alike – report false prices on their trade invoices in order to spirit money out of developing countries directly into tax havens and secrecy jurisdictions, a practice known as “trade misinvoicing”. Usually the goal is to evade taxes, but sometimes this practice is used to launder money or circumvent capital controls. In 2012, developing countries lost $700bn through trade misinvoicing, which outstripped aid receipts that year by a factor of five.
But now global trade growth has slowed to a trickle and capital flows are also falling back. It has become just that more difficult for multi-nationals and banks to exploit the global south as a way to boost profitability from its decline in the global north.
The ratio of import growth to real GDP growth in the major economies has fallen back sharply.
The DNI report suggests that increased rivalry over the spoils of imperialism in the 1900s led to a world war. The DNI reckons that “Although material strength will remain essential to geopolitical and state power, the most powerful actors of the future will draw on networks, relationships, and information to compete and cooperate”. Compete and cooperate? And Trump in the presidency?
Italy Increasingly Likely To Abandon The Euro
By David on 6 February 2017
‘An analysis of the political setup in Italy shows eurosceptics are on the verge of taking control of the country.
The only missing ingredient is an early election. And early elections are now the odds-on favorite.
Let’s back up a bit to fill in the pieces as to how things got to this point.’
https://www.davidicke.com/article/402334/italy-increasingly-likely-abandon-euro
TRUMP TIME!
Right Wing Pro-Capitalist Economists Prof Colm McCarthy, Dan O’Brien Highlight Economic Risks to Irish Economy and European and Strip Away the Government Spin!
All The Conditions for A Perfect Storm are on the Horizon-O’Brien
Trump card could see off Ireland’s run of good luck-McCarthy
President-elect’s policies threaten our position in the transatlantic economy
If Trump governs as he campaigned, Irish jobs will be lost, tax revenues will fall and fears for debt sustainability could emerge
Dan O’Brien, Sunday Indepandent PUBLISHED13/11/2016 | 02:30
Donald Trump got fewer votes not only than Hillary Clinton in last week’s election, but fewer votes than Republican candidate Mitt Romney in 2012. Although he did better than I expected, or predicted, there was no surge in support for the president-elect, as much of the media narrative has suggested.
The reason he won, despite losing Republican votes on four years ago, is because the Democratic vote collapsed. Barack Obama garnered four million more votes in 2012 than Clinton did this year.
As is often the case in elections, turnout explains outcomes. With just over half of the eligible electorate going to the polls – the lowest in 16 years – it was the collapse in the Democratic vote that handed Trump the presidency, not a “redneck revolution”, as has been said so often since the results started coming in.
But despite losing the popular vote, Trump won the electoral college. Four years of President Trump loom. Both his stated policies and his personality pose real threats to Ireland.
Already the issue of corporation tax has received much attention in Ireland. There is good reason for the huge attention that is focused on this issue when anything that is perceived as a threat to it arises. Although some people don’t like to hear it, corporate American is the most dynamic, innovative and export-oriented part of this economy. It was the surge of US companies into Ireland in the 1990s that powered the explosive growth of the Celtic tiger.
There are tens of thousands of people employed by US companies in Ireland. Anything that threatens the continued presence of US multinationals here threatens the foundations of Irish prosperity.
The most important reason for those companies to be here is access to Europe’s single market of 500 million people – Ireland is a platform for pharmaceutical, technology and financial firms to sell to their European customers. But they also use Ireland as a base to sell into their own market. US companies here export huge quantities of goods and services back to their home country.
Protectionists such as Trump, and others besides, ask why American companies do not employ Americans to make stuff that is sold in America.
And there is a lot of stuff. Last year, goods worth €27bn were shipped from Ireland to the US, while Ireland bought just €10bn from the US (for the protectionist-minded, such a huge imbalance is a sure sign of “unfair” trade). The value of services sold from here to there stood at €8.5bn in 2014, the most recent year for which figures are available.
Although a detailed breakdown by the nationality of exporting firms is not available, many, if not most, of these exports are likely to be accounted for by US companies given that US companies dominate the Irish exporting sector.
Trump said repeatedly during the campaign that he wanted to bring jobs home. The jobs of people employed here in US companies to produce goods and services for Americans would appear to be most at risk of being targeted. And they are at risk not only as a result of things that the new US administration could do to bring them back, but also from the danger of transatlantic trade disputes.
As a member of the EU, the terms of all of Ireland’s trade with non-EU countries is not determined nationally. That means, for instance, that import taxes on American goods coming into Ireland and restrictions on things such as genetically modified foods are decided in Brussels collectively. US imports come into Ireland on identical terms as they enter every other EU member country.
The arrangement is underpinned by EU and US membership of the World Trade Organisation. Last July, Trump threatened to withdraw the US from the WTO, which he called a “disaster”, if membership were to prevent him sanctioning US companies which invest abroad.
But even if that does not happen, the terms of transatlantic trade could be disrupted. There are already some serious EU-US disputes, most notably on – yet again – the taxing of US multinationals. These could widen and deepen. Retaliatory measures hindering transatlantic trade cannot be ruled out given the sort of anti-trade rhetoric Trump used repeatedly during the campaign, his temperament, his penchant for seeking revenge against those who cross him (read his Twitter feed) and the hard-ball nature of his negotiating style.
But it is not only transatlantic trade that is at risk. The logic of the calls to bring jobs home extends more widely.
Instead of servicing the European market from Europe, why don’t American companies do so from their home base?
There are lots of reasons – from avoiding existing tariffs to time zone issues – for US companies to be based in Europe. But one of them is the US corporate tax rate, which is the highest in the rich world. Because of this high rate, it makes more sense to book profits in lower-tax Europe, and very low tax Ireland, than in the US.
The chances of the tax rate falling sharply have risen following the outcomes of both the presidential and congressional elections (but it is by no means a done deal because Republicans are far short of the 60 seats in the senate which prevents the minority from blocking legislation).
If a big cut is agreed, it would certainly impact Ireland. The incentive for new firms to come here would be reduced, as would the incentive for firms already here to invest more. That alone is unlikely to lead to a “flood” of companies leaving Ireland, as one of Trump’s economic advisers told Newstalk radio on Friday. But it would change the dynamic in the future, and not in a good way, for Ireland.
But tax is not the only concern. If Trump wants or needs to be able to point to concrete evidence of how he is bringing jobs home, he may lean on companies – as the Obama admiration did earlier this year when it changed rules retroactively to block a (legal) tax manoeuvre by drugs company Pfizer to redomicile itself in Ireland.
It is also worth making the point that one of the many ways Trump is different from his recent predecessors is that he is not beholden to corporate interests. As he did not seek campaign contributions from business over the past 15 months, he doesn’t owe favours to donors – something that is often highly significant in executive decision-making and the formulation of legislation in the US.
Yet another impact of a change in the rate and rules around US corporation tax is how much revenue is raised here. Last year, the amount of profit tax paid to the Exchequer rose by 50pc, or €2.4bn in hard cash terms. This windfall, which almost certainly came from US corporates, was spent by the Government. That spending is now locked in to future spending commitments. If the €2.4bn were to disappear as fast as it appeared, a huge hole would open in the Government’s finances.
A final point. The jump in Irish GDP last year of 26pc – dubbed leprechaun economics – appears to have been caused by US multinationals making changes to the structure of their global balance sheets at the stroke of a pen.
While this had no real effect on economic activity, it did make Ireland’s mountainous public debt – the most closely watched indicator of a state’s indebtedness is the amount it owes relative to GDP – seem smaller.
If congress and the White House can agree on making the US tax system more similar to other developed countries, the moves that brought leprechaun economics about could easily be reversed. That would send Ireland’s debt ratios soaring back to previous highly elevated levels.
With the domestic economy slowing, the effects of Brexit being felt already via the exchange rate, and now the potential for multiple negative consequences arising out of a Trump presidency, the prospects of the Irish economy in the short, medium and longer terms have deteriorated.
The conditions for a perfect storm are all on the horizon.
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Trump card could see off Ireland’s run of good luck
Fortune helped the Irish economy in recent years but there are signs this happy spell may end soon
Colm McCarthy
Sunday Independent PUBLISHED13/11/2016 | 02:30
Trump’s victory is the second political surprise of 2016 with negative consequences for Ireland, following the UK’s Brexit decision at the end of June. There could be further negative surprises from European electorates in 2017.
Unfortunately the response from the Irish Government has been a further postponement of budget balance in the measures announced on October 11, followed by an apparent willingness to borrow more to meet public service pay demands. If the economy slows down, the public finances could worsen again very quickly.
The recovery in the Irish economy over the past few years is due in large degree to a run of pure good luck. There have been three favourable influences, all the result of external developments rather than the fruits of domestic policy. The three are:
(i) lower energy costs – Ireland is a big importer of energy, so when oil and other energy prices fall, Ireland benefits a lot;
(ii) a lower value for the euro, until recently, against both sterling and the dollar. Ireland has substantial trade outside the Eurozone, so a weaker euro helps;
(iii) lower costs for governments as they re-borrow debt coming up for repayment – Ireland has heavy debt, so low interest rates flatter the budget numbers.
The pace of economic recovery in Ireland since the dark days of 2011 and 2012 has exceeded expectations. A recovery was always likely at some stage, but it has been faster than in most other developed countries. The lucky run could be coming to an end. Oil and other energy costs seem to have found a bottom. The euro has jumped since June against sterling. Interest rates on government borrowing have already risen a little and could head further north in 2017.
A risk-averse government, conscious of the over-borrowed state of the public finances, would have responded with a series of cautious budgets. Instead the minority administration has signalled its willingness to contemplate extra borrowing to finance budget give-aways and public service pay increases.
If oil prices stay low, the euro is weak and the Government can re-borrow at low cost, then growth could continue and everything might work out fine. But there are no guarantees and all three indicators could head in the wrong direction together.
Trump’s election makes things worse. One scenario is that a Trump administration will opt for budget and monetary policies which will weaken the dollar, either accidentally or on purpose. A weak dollar will erode further the competitiveness of Irish firms, already hit hard by the decline in sterling. Trump has campaigned on a protectionist platform and will hardly worry too much about dollar weakness, since it complements nicely a more aggressive trade policy.
The likelihood of a big cut in corporate taxes in the USA, perhaps to 15pc, has increased and it could happen soon. That would leave Ireland’s key industrial strategy weapon, the 12.5pc tax rate, under siege from both east and west. Britain’s new chancellor Philip Hammond has been hinting at a further cut in its 20pc rate, so Ireland’s relative attractions can hardly survive, even without further action from the EU where the departing British have been defenders of member state independence in tax policy.
The official mantra that ‘the multinationals are not here solely for the tax breaks’ is about to be tested and may be found wanting. Many US firms feel they must have operations somewhere in Europe and choose Ireland because it has the best tax deal, but Ireland, it is regularly asserted, also has plentiful availability of skilled labour, low non-wage costs and a pro-business political climate.
But international comparisons of educational attainment from the OECD tell a different story. Irish schools may not be all they are cracked up to be. Energy costs are high by European standards and look way out of line relative to the USA. Particularly in Dublin accommodation is expensive and is beginning to fuel pay demands. The tax take on middle and higher incomes is more onerous than in the UK and several other European countries.
Without corporation tax advantages, how many incoming US multinationals will choose Ireland? How many will seek European locations at all if the full array of Trump’s policy proposals gets to be implemented?
Trump’s election victory could have political consequences in Europe just as significant as the corporate tax changes and the shift to protectionism. The credibility of right-populist parties has been enhanced and the first test will be in France next April and May. The National Front’s Marine Le Pen is now priced shorter (7/4 against) than Donald Trump was last Monday.
This is important for one simple reason. Marine Le Pen is committed to France’s withdrawal from the euro, on one occasion promising to quit the common currency on her first day in office. It would be rather more complicated than that, but a Le Pen victory could trigger a re-run of the ‘will the euro survive’ speculation that so destabilised European sovereign bond markets in 2010 and again in 2012. An actual French departure would spell the end of the common currency project.
For good measure there are elections in Germany and the Netherlands next year and the Italian government could fall if it loses a referendum due three weeks from today. The calm of the past few years in Eurozone financial markets should fool nobody – the fundamental strains are still there, including over-borrowed governments, fragile banks and weak economies. The soothing balm of the ECB’s easy money medicine cannot be applied indefinitely.
The objection to a new public service pay round is not that the Government is unable, currently at any rate, to borrow the extra money. It is that now is not a smart time to be letting the budget deficit, which should already have been eliminated, start to run back up again.
The recovery is proceeding, although there are some early signs of a weakening in major headings of tax revenue. It could come to an early halt for reasons beyond the Government’s control, and at a time when the sovereign debt market could have turned against heavily indebted borrowers. This adverse scenario might never happen but every month that passes seems to shorten the odds.
There is no reason why public-service trade unions should not aspire to improvements in pay and conditions in the years ahead and the ambition is a natural consequence of the pay cuts imposed in response to the 2008 financial crash. Those cuts were applied in a manner which created grievances that were bound to resurface.
The trouble is the timing, which the unions are seeking to accelerate with Friday’s deadline-setting intervention from SIPTU.
A public service pay commission has been established tasked with a comprehensive fact-finding review. There is something a little suspect about the unseemly haste on the trade union side: it looks like a rush to agree an across-the-board pay round before this commission has reported.
The minority Government has every incentive to talk tough and capitulate. Better to threaten a general election unless the public-service unions agree to await the findings of the pay commission.
Global turbulence ahead-Michael Roberts, Economist
The (world economic growth) spiral is not upwards, it is downwards. Downwards on trade, downwards on productivity, downwards on global growth.”-OECD
World Debt Hits 152 trillion,a record breaking level of debt, says International Monetary Fund (IMF)
This coming week sees the start of the semi-annual meeting of the IMF and World Bank in New York. This is an opportunity for the world’s economic strategists to review the state of the major world economies. And it’s not good news. Earlier this month, the OECD, which looks after the world’s top 30 economies, reported in its ‘interim economic forecast’ that global GDP growth (including India and China) would be flat around 3% in 2016 with only a modest improvement projected in 2017. Overall, the OECD reckoned that the world economy “remained in a low-growth trap with persistent growth disappointments weighing on growth expectations and feeding back into weak trade, investment, productivity and wages.” Catherine Mann, chief economist at the OECD, said: “Action was needed to lift the global economy out of a low-growth trap”, she said. “The spiral is not upwards, it is downwards. Downwards on trade, downwards on productivity, downwards on global growth.”
As for world trade, prior to this weekend’s IMF meeting, its economists published a chapter from its upcoming World Economic Outlook in which they argued that one of the features of the current slow growth (depression) was the unprecedented decline in world trade growth. “Since 2012, growth in the volume of world trade in goods and services has been less than half the rate during the preceding three decades. It has barely kept pace with world GDP and the slowdown has been widespread. The IMF economists calculate that this slow trade is mostly a symptom of the sluggish economic recovery. “Indeed, up to three-fourths of the shortfall in real trade growth since 2012 compared with 2003–07 can be traced to globally weaker economic growth, notably subdued investment.”
Full Analysis by Michael Roberts, Marxist Economist
https://thenextrecession.wordpress.com/2016/09/29/global-turbulence-ahead/
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World Debt Hits 152 trillion,a record breaking level of debt, says International Monetary Fund-Finacial Times 05/10/2016
-GERMAN BANKING CRISIS REDUCED IRISH GOVERNMENT OWNED BANK ASSETS BY 700 Million Euro
ITALIAN BANKS IN DEEP TROUBLE
SundayIndependent 02/10/2016
“With an estimated €360bn of bad loans – about a fifth of their entire loan books – most of the major Italian banks need to raise fresh capital. With Italian bank shares on the floor, the share price of the largest Italian lender Unicredit is down by almost two-thirds since the start of the year – this fresh capital can only come from the government.”
“The ECB and the Commission want Italy to follow the example of Cyprus in 2013 and “bail in” (that is, impose a haircut) depositors as part of any bank rescues. The Italian government is fiercely resisting these demands. Further complicating matters is the constitutional referendum scheduled for December 4, which has become a proxy vote on the Italian government’s economic policies.”
“The woes of the German banks is one of the major reasons the Euro Stoxx index of leading European bank shares is down 30pc since the start of the year. Not alone has the fall in bank shares shaved €700m off the value of the Irish Government’s remaining 14pc stake in Bank of Ireland, it has also put the kibosh on its plans to sell down some of its 99.8pc AIB shareholding.”
Is Deutsche Bank about to become the next Lehman-The American Bank Collapse which Triggered the last Recession?
US fine of $14 billion has plunged pillar bank into crisis that could go beyond German borders
The woes of the German banks is one of the major reasons the Euro Stoxx index of leading European bank shares is down 30pc since the start of the year. Not alone has the fall in bank shares shaved €700m off the value of the Irish Government’s remaining 14pc stake in Bank of Ireland, it has also put the kibosh on its plans to sell down some of its 99.8pc AIB shareholding.
Irish Times Derek Scally Berlin 30/09/2016
TWO BIGGEST GERMAN BANKS IN DEEP TROUBLE. CHINA- BIGGEST PROPERTY BUBBLE IN HISTORY TO BURST
COMMERZBANK TO CUT NEARLY 10,000 JOBS
DIVIDEND SCRAPPED “FOR THE TIME BEING” in LATEST UPHEAVAL IN GERMAN BANKING
DEUTSCHE BANK:For the question of whether or not Deutsche Bank can survive without a bail-out by the German Government is the only topic most other European bankers want to converse upon.
The thorny issue of whether the mooted $14bn (£10.7bn) fine from American regulators for mis-selling US mortgages will bring the German lender to its knees is, unsurprisingly, a hot topic right now.
HEDGE FUNDS PULL BUSINESS FROM DEUTSCHE BANK
-setting up a potential showdown with German authorities
China’s richest man, real estate magnate Wang Jianlin, has warned the country’s property market is the “biggest bubble in history” — the latest alarm bell to be sounded on the faltering giant economy-Beijing, China-Buisness Inquirer
Wang, the owner of real estate and entertainment conglomerate Wanda, said property prices continue to rise in the country’s big metropolises but fall in smaller cities, which are saddled with huge inventories of unsold new homes.
BRITISH EXPOSURE:British banks have $530bn worth of lending and business in China, including Hong Kong. That is about 16% of all foreign assets held by UK banks.-Financial Times
Read more: http://business.inquirer.net/215723/china-property-tycoon-warns-on-real-estate-bubble#ixzz4LeqEWYP5
Follow us: @inquirerdotnet on Twitter | inquirerdotnet on Facebook
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China —Calamitous Slump on Way?
Huge Exposure of British Banks
Kamal Ahmed Economics editor BBC World Service
China slowdown is global economy’s biggest threat, Rogoff says
The former chief economist of the International Monetary Fund, Ken Rogoff, has told the BBC a slowdown in China is the greatest threat to the global economy.
Ken Rogoff said a calamitous “hard landing” for one of the main engines of global growth could not be ruled out.
“China is going through a big political revolution,” he said.
“And I think the economy is slowing down much more than the official figures show,”
Mr Rogoff added: “If you want to look at a part of the world that has a debt problem look at China. They’ve seen credit fuelled growth and these things don’t go on forever.”
British exposure
Last week, the Bank of International Settlements, the global think tank for central banks, said that China’s debt to GDP ratio stood at 30.1%, increasing fears that China’s economic boom was based on an unstable credit bubble.
The figure was described as “very high by international standards” by the Financial Policy Committee of the Bank of England, which will now test British banks’ exposure to a Chinese slowdown.
British banks have $530bn worth of lending and business in China, including Hong Kong. That is about 16% of all foreign assets held by UK banks.
‘A worry’
“Everyone says China’s different, the state owns everything they can control it,” Mr Rogoff, now Professor of Economics at Harvard, said.
“Only to a point. It’s definitely a worry, a hard landing in China.
IMAGES
“We’re having a pretty sharp landing already and I worry about China becoming more of a problem.
“We’ve taken it for granted that whatever Europe’s doing, Japan’s doing – at least China’s moving along and there isn’t really a substitute for China.
“I think India may come along some day but it’s fallen so far behind in size it’s not going to compensate.”
‘Nervous’
Mr Rogoff said that European economies and the US had to ensure they were “on their feet” before any slowdown started to bite.
“The IMF has marked down its forecasts of global growth nine years in a row and certainly the rumour is they’re about to do it again,” he said.
Beyond China, Mr Rogoff said there was a good deal of uncertainty in the world over issues such as whether Donald Trump or Hillary Clinton will win the US presidential election.
He argued it was difficult to judge what Mr Trump would do if he won, and that a victorious Mrs Clinton might have her plans for infrastructure spending, for example, blocked by the Republican House of Representatives.
“I am certainly nervous, probably much more about a Trump victory, just because of not knowing what’s next,” Mr Rogoff said.
“I don’t like the [protectionist] trade policies of either candidate. I think free trade has benefitted the States immensely in its leadership position. So watching as an economist, this has been a painful election.”
Brexit impact
Mr Rogoff said it was unclear what the impact of Brexit would be on the UK economy as it was not yet possible to define the trade model that would be agreed or judge how well the European economy would be performing at the time Britain leaves the European Union.
Despite praising the Bank of England’s pro-active response to the referendum result, Mr Rogoff said that central banks were in an increasingly invidious position.
Image copyrightAP
“Monetary policy has its limits – it is not a panacea,” he said.
“It is a little bit the fault of central bankers for allowing themselves to take too much credit when things are good, and [then] getting blamed too much when things are bad.
“But monetary policy doesn’t make an ageing economy young, it doesn’t make an economy which is having little innovation suddenly innovate, it doesn’t make an economy with a Zombie banking sector somehow miraculously healthy.
“I have a concern about monetary policy at the moment – that it is being asked to take on roles that it’s not built for. It is being asked to do helicopter money where you just print money and hand it out to people.
“In Europe, central banks are buying up a significant proportion of the corporate debt market – that’s what you do in China, in India, they’re doing that in Japan also.
“There are all sorts of other pressures and I worry in the long run that central banks are losing their independence.”
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Bank of International Settlements warns: China banks risk crisis within three years
Irish Times 19/09/
Excessive credit growth is signalling an increasing risk of a banking crisis financial watchdog says
People’s Bank of China (PBOC), the central bank, in Beijing. Debt has played a key role in shoring up China’s economic growth following the global financial crisis.
Excessive credit growth in China is signalling an increasing risk of a banking crisis in the next three years, a report from the Bank for International Settlements (BIS) says.
An early warning of financial overheating – the credit-to-GDP gap – hit 30.1 in China in the first quarter of this year, the financial watchdog said in a review of international banking and financial markets published on Sunday. Any level above 10 signals a crisis “occurs in any of the three years ahead,” the BIS said.
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Prof Colm McCarthy Confirms Huge Crisis for 26-County Elite and mainstream Irish Political Parties after Apple Tax Ruling in the context of Brexit- Ireland isolated in the EU
As I pointed out on this blog some weeks ago (see below), the UK has already announced a reduction of its corporation tax rate to 20% and the Adam Smith Institute has recommended a UK rate of zero after Brexit.
As pointed out by Colm McCarthy, this makes it more urgent for the EU to clamp down on anything resembling a tax haven such as Ireland
Colm may be exaggerating the common interests of the UK and Irish elites. The UK has come out in favour of the EU commission on the Apple Ruling. When the United States, the Franco-German Alliance and the UK come to a final decision on corporation tax in the OECD BEPS Process, the interests of the Irish elite will count for little. The interests of the Irish People will count for even less!
Recovery of Irish sovereignty is the only protection for the Irish people
Extracts from McCarthy Article 11/09/2016
“This (Brexit) matters greatly for both economic and political reasons. Britain remains Ireland’s most important trading partner, shares concern in the peaceable resolution of the Northern Ireland conflict and is the only major European country with a narrow self-interest in the success of the Republic of Ireland.
The EU without Britain will become once again a continental and essentially Franco-German political project, as it was at its inception.
Ireland has ended up in a framework for its external relations, with no currency and in membership of a Britless EU, which it would hardly have chosen as the most congenial outcome.
To make matters worse, the European Commission’s target in the corporate tax war is the United States, Ireland’s principal source of foreign investment and another country with self-interested reasons to accommodate Irish interests.”
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Is the OECD an independent expert international body which can be relied upon to deal fairly with the national interest of the Irish People in taxation and other economic matters?
Fine Gael, “Endapendents”, Fianna Fáil, Labour are all supportive of the OECD Corporate Taxation Initiative: Base Erosion and Profit Shifting (BEPS). Even Sinn Féin included the following in its Dáil amendment rejecting the Government decision to appeal the Eu ruling on illegal state aid to Apple: (Sinn Féin) “strongly supports the ongoing work of the Organisation for Economic Co-operation and Development (OECD) and others to tackle aggressive tax planning and harmful tax practices and in combatting the negative impact of tax avoidance on the global economy and the developing world in particular;”
The material carried below shows that the OECD is an economic self-interest organisation of pro-western capitalist countries dominated by the US, Japan, UK, Australia and the major EU countries including Germany and France. 23 of the 35 are either NATO Members or have other Mutual Defence treaties with the US. A further 5 including Ireland are members of EU only. Russia and China are not members. South Africa is not a member and there are no “third world” countries in membership
The proposition that the economic interest of the Irish people and of “third world” countries should be placed in the hands of such a body is, at best, foolhardy and, at worst, treacherous. Clearly, the big capitalist powers are using the OECD to enable them to “corner” a much bigger share of corporation tax in the now extremely globalised economy.
The Corporation Tax: Base Erosion and Profit Shifting (BEPS) proposals of the OECD will soon force multi-national companies to pay tax on their activities in each country including profits on sales of their products in each country, to that country. As sales in Ireland are but a tiny fraction of world-wide sales of multi-national companies based in Ireland, the corporation tax revenue of this state is under serious threat. The 12.5% rate will not change but it will apply to a much smaller share of profits!
Worse still!! The incentive for multi-national companies to stay in Ireland or to set up in Ireland will be much reduced. This has huge implications for employment in Ireland and for revenue from PAYE and VAT. Already, many countries, including the UK have announced reductions in their corporation tax rates in a race to the bottom.
At a recent two day meeting in Bratislava, EU finance ministers including Minister Noonan discussed the implementation of the OECD proposals in the EU. A document introduced by the EU President includes a proposal for “further cross-border harmonisation of tax rules”, binding tax rulings by the EU, and advance pricing agreements. According to Irish Times the document states that while recent changes in international tax rules by the OECD process were much needed, “coherent implementation of such measures in the form of hard law within the EU” eliminates uncertainty and possible double taxation (of multi-nationals). It is not surprising that Noonan is increasingly isolated. Successive governments have put Ireland totally in the hands of big capitalist powers and multi-nationals.
EU Economics Commissioner,Mr Moscovici has warned that the commission will “go further” in its fight against tax avoidance, as European finance ministers gathered in Bratislava for the first time since the commission’s ruling on Apple
Speaking on his way into the meeting, at which new proposals for further harmonisation of tax rules across the European Union will be discussed, the French commissioner said he fully supported his colleague Margrethe Vestager in her finding against Ireland.
“We are not a politicised commission we are a political commission with a political will, and this political will is clearly to fight tax evasion, tax fraud and aggressive tax planning,” he said.
“We are going to go further, with proposals such as a relaunch of the CCCTB (common corporate tax base) and the establishment of a European black-list of tax havens.”-Commissioner Moscovici
The only TD to draw attention to the danger to Ireland from the OECD BEPS process in the Dáil debate was Seamus Healy TD. His speech is carried below.
The policy of successive Irish governments of relying to a huge extent on Foreign Direct Investment by multi-national companies over decades for economic development has placed the Irish People in an extremely vulnerable position. The payment of 64 billion to large international investors in Irish Banks has enhanced this vulnerability. Control of the economic affairs of the 26-counties has been ceded to the EU under the Fiscal Treaty. The state is forbidden even to borrow the money required to house our people by the fiscal rules!!! The refusal of the establishment parties to accept 13 billion Euro in back tax awarded by the EU is an indication of the determination of these parties to continue a disastrous economic development policy which is sure to fail.
Already the London government is imposing public expenditure cuts in the six counties and the new right-wing government of Theresa May can be expected to impose further severe cuts possibly using the vote in the “Brexit”referendum as a pretext.
The ability of Ireland to respond to this huge threat has been weakened by the privatisation of companies such as Eircom, Aer lingus and Eireann Foods.
The Nokia mobile phone company was developed in Finland from a nationalised wood company. We need to do likewise but on a much greater scale.
Above all we will have to recover our sovereignty in order to allow us cope with coming developments. If Ireland cannot borrow money to provide homes, what chance is there that the state would be allowed by the EU to borrow for capital investment including the development by the state of modern industry to replace total dependence on multi-nationals? Italy, France and Spain are flouting the Fiscal Treaty and other EU laws when it suits them. We should do likewise, particularly, when the very livelihoods of the Irish people are at stake.
Dáil Debate:Government ( Endapendents+Fine Gael) ,Fianna Fáil and Labour Vote
to Send Back 13 Billion in Unpaid Tax + Interest over 25 years to Apple!!
Deputy Seamus Healy (Tipperary) I will vote against the Government’s proposals on this issue. Mr. Martin Shanahan, the chief executive officer of IDA Ireland, stated in a recent radio interview that the ruling “does not call into question Ireland’s tax regime and does not call into question Ireland’s 12.5% tax rate”. The European Commissioner, Mr. Phil Hogan, subsequently agreed with Mr. Shanahan. Both Mr. Hogan and Mr. Shanahan are correct that the Commission’s ruling does not affect Ireland’s corporation tax rate or sole competency to set that rate. Why then is the Government, by which I mean the Fine Gael Party, the Independents supporting Enda or “Endapendents”, Fianna Fáil and the Labour Party, stressing its militant opposition to any change in the 12.5% corporate tax rate? This fake militancy is in total contrast to the grovelling support shown by these parties for the bailout and fiscal treaty, which fly in the face of the 1916 Proclamation and Irish sovereignty.
Sweetheart deals and allowing corporate entities to avoid paying their fair share of tax have serious consequences for ordinary people. We have, for instance, a serious housing emergency, with more than 100,000 families on housing waiting lists, and a growing homelessness problem, with 2,000 children living in emergency accommodation. Families continue to be evicted from their homes by banks owned by the State. Hundreds of thousands of people are on hospital waiting lists and chaos prevails in hospital emergency departments. Home help services, home care packages and education are being cut and the list goes on. Low and middle income families are also being fleeced by the universal social charge, house tax, inheritance tax, VAT, student fees and the water tax.
Fine Gael, the “Endapendents”, Fianna Fáil and the Labour Party are betraying the Irish people by refusing to accept €13 billion with interest from the €228 billion which Apple has resting in subsidiaries with no tax residence. The same politicians meekly gave €64 billion of citizens’ money to large international investors who gambled on Irish bank bonds. They now want to give back the guts of €19 billion to one of the largest companies in the world.
We heard a great deal in this debate about the Organisation for Economic Co-operation and Development, OECD, and base erosion and profit shifting, BEPS, a concept to which the Minister referred and which is referred to in many, if not all, of the amendments to the motion. BEPS, it seems, will be our saviour. Nothing could be further from the truth, however, because if the current proposals are implemented, Ireland’s position will worsen as corporations will pay each country tax on the profits they make from sales of their products in that country. As sales in Ireland account for only a tiny fraction of worldwide sales, corporation tax revenue will come under serious threat from these proposals. While the 12.5% rate will not change, it will apply to a much smaller share of profits, which will have serious implications for employment here. Many countries, including the United Kingdom, have announced reductions in their corporation tax rates in a race to the bottom. For this reason, the fake militancy of supporters of this motion is a smokescreen to cover up the effects of their current policies and the economic development policies they pursued over decades, including, above all, the ceding of all effective economic sovereignty to the European Union and multinational companies.
Ireland’s ability to respond to this serious threat has been weakened by the privatisation of various companies, including Eircom and Aer Lingus. The Finnish Government, through a nationalised wood company, created thousands of jobs in an indigenous company, Nokia. We must do likewise by creating tens of thousands of jobs in indigenous industries in the high-tech, energy and agricultural sectors, as well as in public works programmes. Above all, we must recover our sovereignty to allow us to cope with future developments. Italy, France and Spain flout the fiscal treaty when it suits them and we must do likewise.
The Organisation for Economic Co-operation and Development (OECD) (French: Organisation de coopération et de développement économiques, OCDE) is an intergovernmental economic organisation with 35 member countries, founded in 1961 to stimulate economic progress and world trade. It is a forum of countries describing themselves as committed to democracy and the market economy, providing a platform to compare policy experiences, seeking answers to common problems, identify good practices and coordinate domestic and international policies of its members.
There are 35 member states- all developed capitalist countries
The top 10 capitalist countries contribute over 67% to the funding of the OECD
Ireland contributes 1.05%
China with the second biggest economy in the world is not a member. Russia, Brazil, India and South Africa are not members.
In March 2014, the OECD halted membership talks with Russia in response to its role in the 2014 Crimean crisis
On 16 May 2007, the OECD Ministerial Council decided to open accession discussions withChile, Estonia, Israel, Russia and Slovenia and to strengthen co-operation with Brazil, China, India, Indonesia and South Africa through a process of enhanced engagement.[21] Chile, Slovenia, Israel and Estonia all became members in 2010.[22][23]
In 2011, President Juan Manuel Santos of Colombia expressed the country’s willingness to join the organisation during a speech at the OECD headquarters.[24]
In 2013, the OECD decided to open membership talks with Colombia and Latvia. It also announced its intention to open talks with Costa Rica and Lithuania in 2015.[25] Latvia became a full member on 1 July 2016.[26]
Other countries that have expressed interest in OECD membership are Argentina, Peru,[27] Malaysia,[28] and Kazakhstan.[29]
In March 2014, the OECD halted membership talks with Russia in response to its role in the 2014 Crimean crisis.[30][31]
The Organisation’s member countries fund the budget for Part I programmes, accounting for about 53% of the consolidated budget. Their contributions are based on both a proportion that is shared equally and a scale proportional to the relative size of their economies.
Member Countries’ percentage shares of Part I budget contributions for 2016
Member Countries % Contribution
UNITED STATES 20.93
JAPAN 10.79
GERMANY 7.52
FRANCE 5.49
UNITED KINGDOM 5.34
ITALY 4.20
CANADA 3.84
AUSTRALIA 3.26
SPAIN 3.02
Korea(South) 2.96
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Total 67.35
IRELAND 1.05
Developing Countries are not members
Related Documents
Financial Statements of the Organisation for Economic Co-operation and Development as at 31 December 2015
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AS “ENDAPENDENTS” CAVE IN ON APPLE
Minister Zappone Gives Outrageous Interview to RTE
Appeal will give other countries an opportunity to appeal to the EU court for some of the 13 Billion!!
Zappone also caved in to Labour Burton’s cuts in Lone Parent Entitlements
Full Interview http://www.rte.ie/news/player/six-one-news-web/2016/0902/
Minister Zappone said though she agreed with the EU Commission she also supported
the decision to appeal! This was “above all” because this would allow other countries including the US to apply to the EU Court for some of the 13 billion!!
She conveniently forgot that the EU and a grovelling Irish government forced Irish Citizens to pay 64 Billion to citizens of these other countries who had invested in Irish Banks!
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Government is now quoting former Competition Commissioner, in support of its rejection of EU Apple ruling. She is being described as an “independent outside expert”
BUT ACCORDING TO THE GUARDIAN–“Neelie Kroes, the Dutch former politician, who headed the commission’s competition directorate from 2004 to 2010, now sits on the public policy board of the taxi-hailing business Uber, a technology group headquartered in California. Uber uses subsidiaries in the Netherlands to shield its overseas income from United States taxes.
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Bell Tolls For Total Reliance on Multi-Nationals for Irish Economic Development and Job Creation
Restoration of All-Ireland Sovereignty Needed to Protect Irish people in New Crisis
The European Commission Have Sparked a Revolution Against Corporate Tax
Avoidance – The Irish Economy Blog
http://www.irisheconomy.ie/index.php/2016/08/31/the-european-commission-have- sparked-a-revolution-against-corporate-tax-avoidance/ Irish Examiner Sept 1, 2016 "Multinationals with aggressive tax planning strategies can expect to pay more tax,” Sarah Jane Mahmud, a Bloomberg Intelligence analyst, wrote in a recent research note.
“EU reforms will require income to be taxed where generated through, among other things, new restrictions on use of controlled foreign companies,” she said.-Irish Examiner Sept 1, 2016
Government wishes to forego 13 Bn Euro+Interest in an attempt to preserve a policy which will shortly become totally ineffective .
FG, FF and LAB have put our livelihoods in the hands of other countries.
EU RULING ON ILLEGAL IRISH STATE AID TO APPLE SHOWS THAT THE IRISH PEOPLE HAVE BEEN PLACED in MORTAL DANGER by FF, FG and LAB in GOVERNMENT over PAST DECADES THROUGH OVER-RELIANCE on INVESTMENT BY MULTI-NATIONAL COMPANIES
BRITISH RULE IN THE NORTH AND THE EFFECT OF EU TREATIES INCLUDING THE MOST RECENT FISCAL TREATY IN THE SOUTH ENSURE THAT THE IRISH PEOPLE LACK THE FUNDAMENTAL SOVEREIGNTY TO PROTECT AGAINST THESE MORTAL DANGERS
Over decades, FF, FG, Lab have made Irish economy massively over dependent on
location of multi-national companies in the 26-counties. The use of a low
corporate headline tax rate of 12.5% and a real effective rate of 4% was central
to this strategy. In addition indigenous state owned companies were privatised.
This over-dependence on multinationals was already placing the Irish people and
their livelihoods in danger due to new international agreements by the big powers
on company taxation notably, the move to make profits tax on sales in each
country payable in that country. When this regime is fully in place the attraction
of Ireland as a location for multi-nationals will be substantially undermined.
After the Brexit vote, the British Chancellor (Minister for Finance) advocated a
major reduction in British Corporation tax with a view to attracting multi-national
investment to Britain.
Now the EU Commission has clamped down on the Irish decision to allow APPLE to
locate its international headquarters in cyberspace for tax purposes. This enabled APPLE to pay a tiny amount of tax on its sales and other activities outside North and South America. Full EU Determination on Illegal Aid to Apple; http://europa.eu/rapid/press-release_IP-16-2923_en.htm
The great majority of Irish exports are produced by multi-national companies.
Employment in multi-national companies is a very large factor in generating the
demand on which employment in indigenous companies depends.
In summary, the degree of openness of the Irish economy makes it hugely vulnerable
to changes in international tax rules and changes in trade agreements. Massive job losses and increased bankruptcies of small traders are in prospect due to changes in international tax rules for multinational companies combined with the new bigger world recession which is on the way.
THE TERRIBLE TRUTH IS THAT THE IRISH PEOPLE HAVE NO SAY IN THESE MATTERS
BRITISH RULE IN THE NORTH AND THE EFFECT OF EU TREATIES INCLUDING THE MOST RECENT FISCAL TREATY ENSURE THAT THE IRISH PEOPLE LACK THE FUNDAMENTAL SOVEREIGNTY TO PROTECT AGAINST GROWING MORTAL DANGERS
Many years ago the then Finnish government tackled this problem by setting up the state owned Nokia mobile phone company. Why can Ireland not set up modern state owned science and engineering based companies? We have thousands of post-graduate(including post-doctoral researchers). Tens of thousands of graduates are still emigrating. The EU says the 13 billion +interest can be used for capital investment. That would be a start but it would not be enough. The scale of capital investment required is incompatible with the Fiscal Treaty in the context of the huge debt of the Irish state.
The restoration of sovereignty is required not only to protect the livelihoods of our people in the immediate future but, also, to provide them with a secure future in the medium and longer term.
APPLE RULING:Professor Joseph Stiglitz (American Nobel Laureate in Economics) on RTE:MINISTER (Bruton) TALKING BOLDERDASH!
TOMMY COOPER NOONAN STRIKES AGAIN!
“The Minister(Bruton) is talking bolderdash ! There is no reason why Ireland should not take the money and use it to relive severe hardship”-Professor Stiglitz
Minister Brutons justification of appealing the Apple ruling was a misleading but more sophisticated version of the case made by Michael “Tommy Cooper” Noonan who had said: “I have an Apple iPhone which has designed in California written on the back and manufactured in China underneath. Do you think that these activities should be taxed in Ireland?”
What the EU Commission found was that Ireland accepted the APPLE arrangement that it would have a second headquarters in addition to that in Cork. The vast bulk of its profits for all activities outside the UNITED STATES would be declared at the second headquarters. This second headquarters would not be located anywhere for tax purposes. It existed only in cyberspace or “only on Paper” as the EU Commissioner stated in the ruling.
This means that the profit on the manufacturing activity on Minister Noonan’s phone would not be declared in any jurisdiction and therefore no tax would be paid on it anywhere! “Tommy Cooper” Noonan Strikes Again
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Tory Think Tank Urges Movee to Corporate Tax Rate of Zero in UK
In the wake of the Brexit referendum, then Tory Chancellor Osborne announced move to reduce the UK corporate tax rate down to 15%. Now a Tory think tank urges further reduction to zero.
Over decades, FF, FG, Lab have made Irish economy massively over dependent on location of multi-national companies in the 26-counties. The use of a low corporate headline tax rate of 12.5% and a real effective rate of 4% was central to this strategy. In addition indigenous state owned companies were privatised. This over-dependence on multinationals was already placing the Irish people and their livelihoods in danger due to new international agreements by the big powers on company taxation. Notably, the move to make profits tax on sales in each country payable in that country. When this regime is fully in place the attraction of Ireland as a location for multi-nationals will be substantially undermined.
But now developments in post Brexit UK is making the danger more immediate with a move to a zero rate being considered.
To deal with this situation in the context of the disastrous effects of the Fiscal Treaty in the 26-counties and the British cuts in the 6 -counties requires a recovery of real Irish sovereignty north and south.
Threat to FDI as UK urged to slash its corporation tax to zero
Irish Independent PUBLISHED21/07/2016 | 02:30
Colm Kelpie
The UK should consider scrapping corporation tax over time to massively boost the country’s attractiveness to global business, a British think tank has said.
It comes as Ireland’s competitiveness watchdog warned that while our 12.5pc corporate tax rate remains competitive, we’re under pressure internationally.
The London-based Adam Smith Institute said corporation tax in the UK should be abolished as part of a reboot of the country’s tax system in the wake of the Brexit vote.
It said the move could be phased in, with an initial cut to 12.5pc, to bring the country in line with Ireland, then further chops to 6.25pc and, ultimately, zero. Such a move would put Ireland under pressure in terms of foreign direct investment (FDI).
New UK Chancellor Philip Hammond has so far not committed to plans announced by his predecessor, George Osborne, to cut Britain’s corporation tax rate to below 15pc.
The Adam Smith Institute said there is a “false belief” that corporation tax is paid by companies. “It is paid by the employees of companies, by their customers, and by their shareholders,” the institute said, in a note from its president, Madsen Pirie.
“Without corporation tax, businesses would have more money to distribute to shareholders in dividends, to increase the pay of their employees, and to keep prices keen for their customers.
“Although the government would forego the amount it receives in corporation tax, it would receive more income tax from the higher dividends to shareholders and from the increased wages to employees, and more VAT from the extra spending power the lower prices put into the pockets of customers.”
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Gold Price Soars! Sure Sign of New Recession
Restoration of Irish Sovereignty, North and South, Required to Protect our People!
Goldcore Advertisement-Gold Essential Due Growing Risks to Depositors and Investors-August 26,2016
Extracts
“Interestingly, Noonan himself diversified into gold in March,2015”—–
“Gold has seen a gain of 23% in euro terms so far in 2016 after rising from 975Euro per ounce at the start of the year to just below 1,200 Euro per ounce in recent days. It has risen sharply in all currencies including the US dollar in which it is up 26.4%”
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Biggest bond bubble in history’ is about to burst-Cantillon Irish Times 19/08/2016
Hedge fund manager Paul Singer who manages 28 Billion Dollars in assets says downturn likely to be “surprising, sudden, intense, and large”
He said he believed we were in “the biggest bond bubble in world history”, and advised investors to avoid sub-zero yielding debt.”
“Hold such instruments(bonds) at your own risk; danger of serious injury or death to your capital!” he wrote, according to CNBC.
Some $13,000 billion of bonds worldwide are now trading at negative interest rates, including short-term Irish Government debt. But with central banks pumping billions into the world economy (often by buying bonds), (world economic) growth remaining at record lows and official interest rates on the floor, we are told, yet again, that the fundamentals are supporting all this (as we were during the Irish property boom)
Explanation by Paddy Healy: If an investor loans money to a bank or a government by buying a bond, the investor will get a low or negative interest rate on the money invested. By contrast if an investor buys a bond from the existing holder of that bond on the bond market, the price the investor will pay to the existing bondholder for the bond is at an all time high or nearly so. This appears to defy all reason.
The reason is that investment in almost anything else including the manufacture of goods is perceived to be much more risky and/or is likely to give an even worse return. This can only continue while there is a hope that world economic growth will resume at healthy levels.
Paul Singer (not the Irish swindler of the 1960’s !!) is saying that the price of bonds (like Irish house prices during the boom) will crash dramatically as the requisite world economic growth will not happen. His investing clients should get out of bonds now and buy no more bonds, he says. His words are:“Hold such instruments at your own risk; danger of serious injury or death to your capital!” he wrote, according to CNBC.
As bond buying is an international phenomenon, the inevitable crash in bond prices will give rise to a massive international recession.
Capitalist media peddle the narrative that all rich people suffer big losses in a crash. This is not so. Let us say that A buys a site for building from B during the boom for 20 million euro . After the crash the site is worth only a million euro and A becomes bankrupt. A has lost 9 million but B has the 10 million in cash in the bank-a net gain of 9 million euro. With prices now at rock bottom, B can buy up a multiple of the assets sold to A. When the recession ends, B has become fabulously wealthy. Paul Singer is applying this line of thinking to a specific asset-bonds
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IS IRELAND’S ABSENCE FROM INTERNATIONAL ANTI-AUSTERITY CONFERENC DUE TO IRISH GOVERNMENT SUPPORT FOR GERMAN IMPOSED AUSTERITY?
“Now the leaders of France, Italy, Spain, Portugal, Cyprus and Malta are planning to meet in Athens next month to forge a new anti-austerity alliance with the aim of wrestling back control of the ECB, which sets Eurozone fiscal policy, from Berlin.”
‘Brussels CAN’T drag us into recession’- Italy in fightback against German-led EU austerity-Daily Express
ITALY is planning to launch a fightback against the EU policy of austerity being led by Angela Merkel’s Germany.
Full Articlehttp://www.express.co.uk/news/world/700298/European-Union-Italy-prime-minister-Matteo-Renzi-Brussels-austerity-Merkel-ECB
By Nick Gutteridge Daily Express August 16,2016
Matteo Renzi has warned Brussels over continuing austerity
The country’s president Matteo Renzi insisted he would not let Brussels “drag us into recession” as he pleaded for European leaders to loosen the purse strings.
Mr Renzi, who is facing a crunch referendum which will decide his political future, issued a dire warning that Italy is facing its “toughest moment” in 50 years due to the euro crisis.
And he had the German dominated European Central Bank (ECB) in his sights as he called for “more flexibility” to pump cash into his country’s ailing economy to spark it into new life.
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Brexit will ‘force EU rethink’ as France gangs up on Germany in ant…
His comments came after it emerged a coalition of Mediterranean countries is forming a new alliance with the aim of forcing Mrs Merkel into a U-turn on interest rates and spending.
Germany – the EU’s biggest economy – has kept a close eye on eurozone finances and was behind restrictive Brussels rules on spending and budget deficits which is squeezing the life out of southern European economies.
As a result Mr Renzi is fighting off a growing eurosceptic movement in Italy, whose economy has floundered for decades and is the same size now as was when the country joined the euro 15 years ago.
GETTY
The Italian PM urged Angela Merkel to loosen the purse strings
Italy is in the grip of a growing eurosceptic movement
The Italian prime minister is struggling to constrain a surge in anti-Brussels feeling which could cost him his premiership when Italians vote in a referendum on domestic reforms in October.
Mr Renzi has said he will resign if he loses the vote amid fears the weary Italian public will use it to give the establishment in Rome and Brussels a kicking.
If he goes there will likely be a fresh general election with the right-wing, eurosceptic Five Star movement set to make huge gains in such an eventuality, according to the latest polls.
Brussels can’t drag us into an economic recession
Matteo Renzi
In a desperate plea to Mrs Merkel and EU chief Jean-Claude Juncker to ease their iron grip of austerity, Mr Renzi said today: “Brussels can’t drag us into an economic recession.
“We want more flexibility to change and expand our budget law.”
His comments were echoed by Italy’s chancellor, Carlo Calenda, who added: “We will ask Europe for more flexibility. This is the toughest moment we have faced in the last 50 years.”
Italy’s economy has been in the doldrums for decades like many other Mediterranean countries, with job creation and living standards being suppressed by a euro currency which has fuelled a German exports boom.
The latest GDP figures from Rome show the country’s economy did not expand at all in the second quarter of this year, after growth of just 0.3 per cent between January and March.
Brexit aftershocks: Who’s next to leave the EU?
Wed, June 29, 2016
After Britain voted to leave the EU, we look at which European countries want to hold their own EU referendum.
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Italian manufacturing has slumped due to decreasing domestic demand whilst the country’s banks, which are teetering on collapse, have been badly hit by the financial contagion following the Brexit vote.
Meanwhile, Italy’s public finances are in a dire state following years of Berlin-imposed austerity, with government debt running at an astonishing 2.48 billion euros (£2.15bn), which is 135 per cent of GDP.
Mr Renzi’s arguments against Brussels austerity are finding an increasingly sympathetic audience across the continent, where falling living standards, spiralling unemployment and growing poverty are fuelling anti-EU sentiment.
Now the leaders of France, Italy, Spain, Portugal, Cyprus and Malta are planning to meet in Athens next month to forge a new anti-austerity alliance with the aim of wrestling back control of the ECB, which sets Eurozone fiscal policy, from Berlin.
It is being headed up by Greek premier Alexis Tsipras, who has frequently clashed with both Mrs Merkel and Brussels over the crippling austerity which has brought his country to its knees.
ALSO SPUTNIK NEWS
Italy Set for EU Showdown Amid Pledge to Scrap Austerity
http://sputniknews.com/europe/20160815/1044291854/italy-eu-scrap-austerity.html
WILL THOSE ON LOW AND MIDDLE
INCOMES PAY FOR ANOTHER CAPITALIST
CRISIS?
SEE Michael Roberts Blog(Marxist Economist)- Predictions for 2016
https://thenextrecession.wordpress.com/2016/01/05/predictions-for-2016/
Irish People Have Been Placed in Mortal Danger by FF, FG, Lab in Government over past decades
Tory Think Tank Urges Movee to Corporate Tax Rate of Zero in UK
In the wake of the Brexit referendum, then Tory Chancellor Osborne announced move to reduce the UK corporate tax rate down to 15%. Now a Tory think tank urges further reduction to zero.
Over decades, FF, FG, Lab have made Irish economy massively over dependent on location of multi-national companies in the 26-counties. The use of a low corporate headline tax rate of 12.5% and a real effective rate of 4% was central to this strategy. In addition indigenous state owned companies were privatised. This over-dependence on multinationals was already placing the Irish people and their livelihoods in danger due to new international agreements by the big powers on company taxation. Notably, the move to make profits tax on sales in each country payable in that country. When this regime is fully in place the attraction of Ireland as a location for multi-nationals will be substantially undermined.
But now developments in post Brexit UK is making the danger more immediate with a move to a zero rate being considered.
To deal with this situation in the context of the disastrous effects of the Fiscal Treaty in the 26-counties and the British cuts in the 6 -counties requires a recovery of real Irish sovereignty north and south.
Threat to FDI as UK urged to slash its corporation tax to zero
Irish Independent PUBLISHED21/07/2016 | 02:30
Colm Kelpie
The UK should consider scrapping corporation tax over time to massively boost the country’s attractiveness to global business, a British think tank has said.
It comes as Ireland’s competitiveness watchdog warned that while our 12.5pc corporate tax rate remains competitive, we’re under pressure internationally.
The London-based Adam Smith Institute said corporation tax in the UK should be abolished as part of a reboot of the country’s tax system in the wake of the Brexit vote.
It said the move could be phased in, with an initial cut to 12.5pc, to bring the country in line with Ireland, then further chops to 6.25pc and, ultimately, zero. Such a move would put Ireland under pressure in terms of foreign direct investment (FDI).
New UK Chancellor Philip Hammond has so far not committed to plans announced by his predecessor, George Osborne, to cut Britain’s corporation tax rate to below 15pc.
The Adam Smith Institute said there is a “false belief” that corporation tax is paid by companies. “It is paid by the employees of companies, by their customers, and by their shareholders,” the institute said, in a note from its president, Madsen Pirie.
“Without corporation tax, businesses would have more money to distribute to shareholders in dividends, to increase the pay of their employees, and to keep prices keen for their customers.
“Although the government would forego the amount it receives in corporation tax, it would receive more income tax from the higher dividends to shareholders and from the increased wages to employees, and more VAT from the extra spending power the lower prices put into the pockets of customers.”
AFTER BREXIT REFERENDUM
Ireland North or South has no sovereignty to deal with imperialist-imposed austerity and future deadly dangers
Inter-Imperialist Conflict Developing-It gave rise to 2 world wars but then as now nobody noticed (or pretended they didn’t notice) until it was upon us!
Yet Sinn Féin, Tony Coughlan, AAA-PBP took sides on whether Imperialist UK should leave imperialist EU!!!
It is Time to Concentrate on the issue of Irish Sovereignty -Paddy Healy
The Militarisation of Europe is a far greater threat than Brexit -Prof Ray Kinsella Irish Independent 11/07/2016
See Post on this Blog Defend Irish Neutrality, Reclaim our Sovereignty
Ireland Must Resist New Pressures To Give Up Military Neutrality
Recovery of All-Ireland Sovereignty of Irish People More Vital than Ever!
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EU COULD BREAK UP-“EU in EXISTENTIAL CRISIS”-
Prof David Farrel-The Week In Politics
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New Element in World Capitalist Crisis-TTIP PUT ON HOLD
FG(Brian Hayes wants TTIP(Proposed New US-EU Trade Agreement) hurried up
https://thenextrecession.wordpress.com/…/brexit-ttip-and-t…/
But Marxist Economist Michael Roberts says Brexit vote will put it on hold
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Risk of new European banking crisis as ‘kick and hope’ strategy runs out of road
Prof Colm McCarthy Sunday Independent 10/07/2016
Brexit has hit Europe’s recovery and the biggest casualty will be banking
The combination of weaker (European) recovery prospects and political instability flowing from Brexit has made the kick-and-hope strategy for the banks look increasingly inadequate. The result could be a re-run of the 2012 eurozone crisis.
The acute phase of the eurozone sovereign debt crisis in 2012 was triggered in Italy, not in Greece or one of the other small peripheral economies. The European Central Bank eventually took action – an Italian collapse would have threatened the survival of the common currency – and crisis was deferred. But the eurozone banking system has not been fixed, and the extend-and-pretend tactic is facing another challenge. UK Prime Minister David Cameron’s referendum gamble has not merely come unstuck, it has gone wrong at the wrong time.
Europe’s fragile recovery is threatened by the Brexit decision. Sterling has fallen sharply and surveys of business confidence have turned suddenly negative in Britain and elsewhere in Europe. There is a risk that corporate investment, weak before the vote, will dip further and consumer confidence has also taken a knock. There is greatly increased volatility in asset markets, and forecasts of economic performance across Europe have been trimmed back. The uncertainty stemming from the Brexit decision will persist until the new relationship between Britain and the EU is clarified, which could take several years.
The biggest casualty in Britain and the eurozone has been confidence in the banking sector. Bank share prices have weakened as investors fret about further loan losses and inadequate loan-loss provisions. Shares in Deutsche Bank, the eurozone’s largest, trade at 30pc of book value. The most acute problem is in Italy, where the banking system has yet to deal decisively with non-performing loans. Since the extent of the banking crisis began to emerge in 2008, eurozone policy has insisted on a ‘too little, too late’ approach to fixing bank solvency. Stress tests on bank balance sheets have been too lenient and too little fresh capital has been raised.
Banks will lose the confidence of depositors and other lenders unless their assets are believed to exceed their liabilities by a comfortable margin. The stock market should value bank shares roughly in line with their net worth, the excess of assets over liabilities shown in the books. If share prices fall well below the book value this means that the market does not believe that the assets (mainly loans) are worth as much as the bank maintains. They are factoring in concealed loan losses which the banks, and their supervisors, have failed to acknowledge.
Once declining share prices raise the red flag, the next phase is deposit flight. Banks own mainly illiquid assets (loans) but have demandable deposits and can quickly find themselves unable to meet outflows.
Central banks can step in and provide temporary liquidity but this is a stop-gap. Ultimately, loan losses have to be confronted and dealt with through re-capitalising the stronger banks and closing the lost causes. One way to re-capitalise is to write down bondholders in failing banks but this is politically toxic in Italy, where the banks have been permitted to sell bond-like instruments to retail investors, many of whom think they are holding guaranteed deposits.
The textbook recommendation on banking crises is to recognise losses and re-capitalise quickly. This advice has been ignored consistently in the eurozone’s dangerous tactic of extend-and-pretend and the endgame is looming in Italy. Over the year to date, some Italian bank shares have halved and the weakest banks are priced in the market at under one-fifth their book value. This should mean curtains, unless fresh equity capital, adequate to absorb the concealed losses, is mobilised quickly.
The Italian state is heavily indebted and is still running a sizeable budget deficit. It can, however, borrow at low interest thanks to the ECB’s support for eurozone bond markets. The Italian sovereign could borrow more and subscribe for extra shares to recapitalise the weakest banks, supplementing the inadequate rescue fund cobbled together pre-Brexit. But there are problems with eurozone rules on bank recovery and resolution, and the new rules, agreed with much fanfare as the key step in creating a proper banking union, appear unsuited to dealing with the first serious challenge to follow their adoption. The EU’s Bank Recovery and Resolution Directive has equipped policymakers with the tools needed to handle various contingencies, except the one which has actually arisen.
If the eurozone functioned as a proper monetary union the central authorities would take the lead in dealing with the Italian crisis. The ECB is spending €80bn each month supporting the eurozone market in sovereign and corporate bonds, the so-called quantitative easing, or QE programme. It has been estimated that just one month’s spending on QE would be more than enough to fix the Italian banks if the money was devoted to direct re-capitalisation, with the ECB acquiring share stakes in the weakest lenders. This is not allowed under existing rules. Setting up a Nama-style operation to buy the dud loans at a discount is not enough either. It would crystallise the concealed losses, as it did in Ireland, and make transparent the capital shortfall. Expect lengthy late-night sessions some Friday in Brussels when another ingenious fudge will be sought.
The list of indebted countries in the eurozone facing early elections or struggling along with minority governments is lengthening.
The Irish and Portuguese governments lack a durable parliamentary majority, there has been no government in Spain for seven months despite a second election, while the Italian government trails a populist opposition party in the polls and could lose a critical constitutional referendum in October.
The party now leading the Italian opinion polls, the Five Star movement, favours departure from the eurozone.
National elections are also due in France, Germany and the Netherlands next year, with the National Front, keen to exit the euro and the EU itself, gaining ground in France.
The Brexit shock will feed into these important elections, with incumbent politicians reluctant to be seen making concessions to the deserting British in the exit negotiations. One possibility is that no progress will be made until these elections are out of the way, pushing the exit timetable back, prolonging the period of uncertainty and exacerbating the risk of a prolonged economic slowdown.
More generally, the Brexit vote has encouraged Eurosceptic parties around Europe, including parties opposed to the common currency, to EU membership, or both.
A sharp recession in Britain would cool their ardour, a high price to pay from an Irish perspective.
A period of steady economic recovery, especially in the more indebted eurozone countries, was always the vital component in a policy based on hoping the banks would repair themselves without surgery.
The combination of weaker recovery prospects and political instability flowing from Brexit has made the kick-and-hope strategy for the banks look increasingly inadequate. The result could be a re-run of the 2012 eurozone crisis.
There is a limit to what the Irish Government can usefully be doing until Britain clarifies its negotiating position, and the focus for now should be on securing the improvement in the condition of the banking system and in the public finances.
Irish bank shares have weakened substantially, the concerns about non-performing loans have not gone away and plans to offload the Government’s shares into the market are off the agenda. The temptation to loosen Irish budget policy will have to be resisted – it just got riskier.
Sunday Independent
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As Ireland must Keep Deficit below 3% of GDP
Britain to Disregard Fiscal Treaty Norm on Budget Deficit
–(Britain is not a party to the Fiscal Treaty as it is not in Eurozone)
Business Minister Mr Javid said he did not think the current deficit it could be brought down to zero by 2020.
“Does it mean 3% becomes 4% or 5%? I don’t think anyone can say at this point.”
“The (British) government should introduce a raft of corporate and personal tax cuts”-he said
British minister calls for tax cuts to ease Brexit blow RTEWednesday 06 July 2016 08.01
Sajid Javid said he did not think the deficit could be brought down to zero by 2020
British business minister Sajid Javid has said the government should introduce a raft of corporate and personal tax cuts to soften the blow from an expected lowdown in the wake of Britain’s vote to leave the European Union.
Mr Javid told the Financial Times newspaper the government needed to switch its focus from reducing the deficit to stimulating economic growth.
Finance minister George Osborne last week dropped his policy of turning Britain’s budget deficit into a surplus by 2020 and Mr Javid said this morning that it was now hard to predict what would happen to the deficit.
Mr Javid said he did not think it could be brought down to zero by 2020.
“Does it mean 3% becomes 4% or 5%? I don’t think anyone can say at this point.”
UK to set new corporation tax below 15%
Rate cut part of Osborne’s five-point plan to woo investment to post-Brexit Britain
Could a New Inter-IMPERIALIST WAR Emerge?
Irish Employers Demand Massive Move to The Right
IBEC says: “We need to slash capital gains tax, cut the marginal tax rate to attract mobile talent and bring the tax treatment of share options into line with the UK and other competitor economies. Now is not the time to sit on the sidelines and see what happens.”
INTER-IMPERIALIST CONFLICT?
Concern about the effect on Ireland North and South of the Further British reduction in UK corporation tax is well grounded.The lack of any significant Irish sovereignty north or south puts the Irish people in great danger.For example TORY BREXIT LEADER GROVE SEES GOOD FRIDAY AGREEMENT AS OBSTACLE TO SUPER-COMPETITIVE ULTRA-NEO LIBERAL UK (including Northern Ireland)
“What Gove was really worried about was that the Belfast Areement was, as he put it, “a Trojan horse” for democratic reform across the UK. It introduces proportional representation. Horrifically, “it enshrines a vision of human rights which privileges contending minorities at the expense of the democratic majority”. Even worse, “it offers social and economic rights””. Fintan O’Toole, Irish Times 05/07/2016
But there is a wider and even more threatening aspect of the British decision affecting the whole world including Ireland.
There has been an unstated non agression pact between major capitalist countries on the matter of corporation profits tax in recent decades. There has,of course, been a degree of tax competition. However the proposal by a major capitalist country such as Britain to move below 15% is a huge step which cannot be ignored by Germany, France, US,Japan.
Gewerkschaftler(commentator on Cedar Lounge Blog) is right when he says it is a further step towards an extreme neo-liberal/extreme capitalist Britain. But it is also a step towards an even more neo-liberal world.
The response of the Irish employers (through IBEC below) sets out the new “Super Competitive” model-Negligible tax on business, lower taxes on large incomes, lower pay,lower welfare, higher indirect taxes on working and unemployed people etc
Late capitalism is becoming even more damaging to human well being than heretofore
There is an aspect of the new moves by the British ruling elite- Brexit followed by lower corporation tax- which is even more worrying. It is the inherent conflict involved between large capitalist powers. The battle for markets led to the Battle of the Somme 100 years ago.
Could the new inter-imperialist war be about the location and taxation of global investment?
World capitalism needs to be eradicated and soon!
Financial Times Article-UK to reduce Corporation Tax below 15%
George Parker Financial Times 03/07/2016
Chancellor George Osborne said he wanted a leading role in shaping Britain’s new economic destiny, laying out plans to build a “super competitive economy” with low business taxes and a global focus.
Britain’s chancellor George Osborne is planning to cut the UK’s corporation tax to less than 15 per cent in an effort to woo business deterred from investing in a post-Brexit Britain as part of a new five-point plan to galvanise the economy.
While the chancellor did not backtrack on his warning that leaving the EU could push the country into recession, he said: “We must focus on the horizon and the journey ahead and make the most of the hand we’ve been dealt.”
Mr Osborne said he wanted a leading role in shaping Britain’s new economic destiny, laying out plans to build a “super competitive economy” with low business taxes and a global focus. Mr Osborne wants to set the lowest corporation tax rate of any major economy, announcing a target of less than 15 per cent, down from 20 per cent now.
He said Britain should “get on with it” to prove to investors that the country was still “open for business”.
Irish corporation tax
Such a sharp cut in business taxes would take Britain close to Ireland’s 12.5 per cent corporation tax rate and would anger EU finance ministers who fear a race to the bottom.
Employers’ lobby group Ibec said the proposal reinforces the needs to significantly reform the Irish offering in the upcoming budget to make Irelandmore attractive for foreign investment. Its chief executive Danny McCoy said: “Ireland has had very limited control over major recent political and economic developments. However, we must act decisively in areas where we do have control. The next budget should include bold moves to support investment and job creation.
“We need to slash capital gains tax, cut the marginal tax rate to attract mobile talent and bring the tax treatment of share options into line with the UK and other competitor economies. Now is not the time to sit on the sidelines and see what happens.”
The head of tax at the Organisation for Economic Co-operation and Development warned, in an internal memo cited by Reuters, that the fallout from Brexit “may push the UK to be even more aggressive in its tax offer” but that further steps in that direction “would really turn the UK into a tax haven type of economy”.
Beside the tax cut, Britain’s chancellor said his five-point plan included focusing on a new push for investment from China; ensuring support for bank lending; redoubling efforts to invest in the Northern powerhouse; and maintaining the UK’s fiscal credibility.
Challenging time
Mr Osborne accepted that Britain faced a “very challenging time” and urged the Bank of England to use its powers to avoid “a contraction of credit in the economy”, reminiscent of the squeeze during the height of the financial crisis in 2008.
The Bank of England will publish the results of its financial policy committee meeting tomorrow. It has many options available to maintain the flow of credit to companies and households even if many are reluctant to borrow in current circumstances.
The chancellor said Britain would aggressively seek new bilateral trade deals and that he would lead an extended visit to China this year, in an attempt to keep inward investment flowing.
On the public finances Mr Osborne promised to “maintain the consolidation that we put in place last year” and said a review of the structural damage caused by Brexit would be conducted in the autumn.
– Copyright The Financial Times Limited 2016
May 9,2016
Scary movie – Brussels style
By Sean Whelan, RTE, on Tuesday 03 May 2016 15.02
Full Article http://www.rte.ie/news/business/2016/0503/785860-sean-whelan-blog/
Holy Moly – the latest economic forecast from the European Commission is one of the scariest I have seen from any major forecaster for some time. You want me to be more precise – OK, what about 2009? That’s the last time the global economy was growing as slowly as it is now.
As for the risk of something bad blowing up, like it did back then, well have a look at this line from Marco Buti, the top Eurocrat in charge of the European Commission’s Economic directorate General: “Policy makers need to stand ready to react swiftly and decisively to the potential materialisation of multiple, large and inter-related downside risks”
So fasten your seatbelts, this could be a rough ride. Don’t be fooled by the China-busting 7.8% GDP growth Ireland had last year, or the Europe-leading 4.8% forecast for this year – the potential for things to turn really bad, really fast hasn’t been this high since Lehman Brothers was open for business.
April 14, 2016
Bank of America first-quarter profits fall 18% on weak trading
Russian Economy Shrank by 3.75% in 2015
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Associated Press Thursday 14
Bank of America also reports trade revenue is down significantly from a year earlier, as it made less money from investment banking fees
Bank of America’s first-quarter profit fell more than 18% from a year earlier, hurt by weak performance in its trading unit. Associated Press Thursday 14 April 201614.28 BSTLast modified on Thursday 14 April 201615.29 BST
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Irish banks , Bank of Ireland and Permanent TSB( owned by the state), recorded double-digit(over 10%) declines in their share prices.
Where are all the election promises now? Where are the ridiculous government promises to protect Ireland from world recession?
In Dublin the Iseq share index, which had already lost more than €10bn this year, closed down 2.65pc.
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European banks reeling amid global slowdown concerns-Irish Times Feb 12
Volatility hits Irish banks, with questions raised on AIB flotation
Irish Times Ciarán Hancock
In the red: European banks head toward their lowest prices since August 2012. Photograph: Danish Siddiqui/Reuters
It was almost like 2008 all over again for the global financial sector this week as shares were routed.
On Thursday, France’s Société Générale became the latest group to report earnings that missed estimates, dragging the sector down. Credit Suisse Group joined Germany’s Deutsche Bank and Italian and Greek counterparts trading at or near record lows. Nor have Irish banks been immune with Bank of Ireland and Permanent TSB recording double-digit declines in their share prices.
European banks are heading toward their lowest prices since early August 2012 – the point when they started rallying after European Central Bankpresident Mario Draghi pledged to save the euro by whatever means necessary.
Irish Independent Feb 12
In Dublin the Iseq share index, which had already lost more than €10bn this year, closed down 2.65pc.
Gold, traditionally seen as a safe haven in bad markets, surged more than 4pc yesterday to its highest in a year.
“Banks are seen as the front-line, but the sell-off is driven by the sense that global growth is not happening, and the US could even go into a recession,” said Eugene Kiernan of Appian Asset Management.
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Large German Bank Takes Hit Feb 10
Deutsche Bank’s shares slump as fears build over outlook-Irish Times Feb 10
4 Billion Wiped Off Irish Shares—Feb 8
WHERE ARE THE ELECTION PROMISES NOW????
The Iseq Overall Index fell by 5.5 per cent in Dublin, its biggest one-day fall since August 24th, 2010.
Bank of Ireland had €906 million wiped off its market value as its shares fell by just under 10 per cent.
Permanent TSB, which is 75 per cent owned by the State, experienced a 9.4 per cent drop in its share price, shedding €155 million in value.–Irish TIMES Feb 9
Japan Shares Tumble by 5% Feb 9
Japan and Australia track European market rout
Tuesday 03.03 GMT Japanese and Australian financial markets were in a spin on Tuesday, with bank shares tumbling after a global sell-off,…Financial Times
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Irish Stock Market Drops by 10%
Shane Ross Sunday Independent Jan 24
Scepticism about Ireland’s ability to go it alone is not confined to overseas observers. Even the Irish stock market does not believe Enda’s promise to “insulate” us from the global dangers. Last Wednesday saw Irish shares fall 10pc from their December highs. The falls were in response to the slide in overseas markets. Oil and China affect the Irish economy as much as they make Wall Street wobble. Traders in Ireland’s leading shares were heading for the exits. They had no room for sentiment, patriotism or electoral bull from Fine Gael, Labour, Fianna Fail or the smaller parties. They were giving the thumbs down to an Irish economic fairytale that would make an ostrich blush. They never bought the narrative that Ireland could sustain a growth rate far superior to the US, the UK and all European countries. They knew the score. They even put the knife deep into the Irish Government’s ribs. They sold shares in Irish banks, the flagships of our recovery. They dumped AIB stock, the Government’s big white hope for a bonanza later this year.
TAOISEACH ACTS THE LEPERACHAUN IN DAVOS!
Taoiseach Kenny has said in Davos That the government “had put in place a strategy to insulate Ireland from world financial volatility TO THE EXTENT THAT THAT IS POSSIBLE (Note the “get out” clause). This is a bad joke.
The Irish economy, one of the more open in the world, is like a cork on the water.
The inequitable recovery, such as it is, is due to a fortuitous congruence of external factors-weak euro, greater implantation in better performing UK and US markets than other EU countries, low oil prices etc. For the same reason, any strategy to insulate Ireland from a world economic downturn, would be like a childs sandcastle in the face of a TSUNAMI. A few years ago he told the world super-rich at Davos that the Irish all went mad borrowing. Now he is the Performing Leperachaun fantasising about beating back the hurricane !
GLOBAL STOCKS SLIDE INTO BEAR MARKET (SLUMP) TERRITORY
IRISH STOCK EXCHANGE INDEX (ISEQ) FALLS FOR FIFTH DAY IN A ROW
THE GLOBAL EQUITY ROUT ACCELERATED TODAY WEDNESDAY JAN 20, SENDING FINANCIAL TIMES STOCK EXCHANGE (FTSE) All-WORLD INDEX INTO BEAR MARKET(Slump) TERRITORY AS OIL PRICES SLIDE TO NEW LOWS….
Royal Bank of Scotland warns of ‘cataclysmic’ year with slumps in shares and oil and advises clients to shift to bonds
Investors face a “cataclysmic year” where stock markets could fall by up to 20% and oil could slump to $16 a barrel, economists at the RBS have warned.
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Jan 11 CHINA MARKETS Slide Lower in Morning Trading-Equities fell across the board- Financial Times
Jan 7 1 pm Irish time -Billions wiped off Stock Markets in DUBLIN, LONDON, PARIS, FRANKFORT as NEW GLOBAL CAPITALIST CRISIS DEVELOPS EVEN FURTHER!—RTE NEWS
Gold in high demand as investors seek safe haven!
George Soros, the legendary investor, is reported today forecasting a markets crisis along the lines of 2008.
It is important to realise that the developments outlined below are not merely due to some local difficulties, in China for example, but are part of a world-wide phenomenon . Western spokespeople including RTE Economic Reporters attempt to portray what is happening as a local dysfunction of the Chinese Economy. The reality is that the world recession which began in 2007-2008 would have been far worse if China had not continued to boom until recent times. There are fundamental systemic problems in the global economy as explained by Michael Roberts at the link above.
Jan 7 FINANCIAL TIMES
Markets Hit by China’s New 7% Plunge
Thursday 08.00 GMT. Global equities are continuing their miserable start to 2016, sliding to three-month lows
Over €700m wiped off Irish exchange equities and Euro Stoxx 600 has worst start ever-Irish TIMES-Jan 5
CHINA STOCK MARKETS CLOSED AS SHARES Fall 7.6%
Global Stock Markets Affected
German Stocks Fall 4.5% 04/01/2016
SHANGHAI, China 04/01/2016— Trading on the Shanghai and Shenzhen stock markets was halted for the day on Monday after shares fell seven percent.
The drop in the CSI300 index, which covers both bourses, triggered an automatic early closure for the first time under a new system to curb volatility, after an earlier 15-minute trading halt failed to stem the declines.
Trading was initially suspended after shares fell more than five percent under the new system.
Financial Times -China Stock Plunge triggers “Circuit Breaker” trading Halt -Shenzen market suffering its worst day in nine years
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Global Shares and Oil hit by China Data-FT December 28
Equities across the globe were undermined on Monday by losses in mainland China- Financial Times Dec 28
Paddy Healy: GLOBAL is the key word in the Financial Times Report. The fact that shares were hit ACROSS THE GLOBE shows that developments are taking place which affect the CAPITALIST SYSTEM AS A WHOLE. This adds weight to the analysis below, carried in the Guardian on Oct 12
The world economic order is collapsing and this time there seems no way out–THe Guardian OCT 12
“ Global banks now make profits to an extraordinary degree from doing business with each other.”
The refugee crisis is paralleled by the savage fallout from a global financial system running out of control
Refugees arriving on Lesbos, Greece, last month: the billions of dollars fleeing emerging economies are not accompanied by harrowing images.
Sunday 11 October 2015 00.05 BST Last modified on Sunday 11 October 2015 00.09 BST
Europe has seen nothing like this for 70 years – the visible expression of a world where order is collapsing. The millions of refugees fleeing from ceaseless Middle Eastern war and barbarism are voting with their feet, despairing of their futures. The catalyst for their despair – the shredding of state structures and grip of Islamic fundamentalism on young Muslim minds – shows no sign of disappearing.
Yet there is a parallel collapse in the economic order that is less conspicuous: the hundreds of billions of dollars fleeing emerging economies, from Brazil to China, don’t come with images of women and children on capsizing boats. Nor do banks that have lent trillions that will never be repaid post gruesome videos. However, this collapse threatens our liberal universe as much as certain responses to the refugees. Capital flight and bank fragility are profound dysfunctions in the way the global economy is now organised that will surface as real-world economic dislocation.
The IMF is profoundly concerned, warning at last week’s annual meeting in Peru of $3tn (£1.95tn) of excess credit globally and weakening global economic growth. But while it knows there needs to be an international co-ordinated response, no progress is likely. The grip of libertarian, anti-state philosophies on the dominant Anglo-Saxon political right in the US and UK makes such intervention as probable as a Middle East settlement. Order is crumbling all around and the forces that might save it are politically weak and intellectually ineffective.
Analysis IMF’s emerging markets warning is timely
Larry Elliott Economics editor
An interest rate increase from the US Federal Reserve is a likely catalyst for the crisis in emerging markets the International Monetary Fund clearly fears
Read more
The heart of the economic disorder is a world financial system that has gone rogue. Global banks now make profits to an extraordinary degree from doing business with each other. As a result, banking’s power to create money out of nothing has been taken to a whole new level. That banks create credit is nothing new; the system depends on the truth that not all depositors will want their money back simultaneously. So there is a tendency for some of the cash banks lend in one month to be redeposited by borrowers the following month: a part of this cash can be re-lent, again, in a third month – on top of existing lending capacity. Each lending cycle creates more credit, which is why lending has always been carefully regulated by national central banks to ensure loans will, in general, be repaid and sufficient capital reserves are held. .
The emergence of a global banking system means central banks are much less able to monitor and control what is going on. And because few countries now limit capital flows, in part because they want access to potential credit, cash generated out of nothing can be lent in countries where the economic prospects look superficially good. This provokes floods of credit, rather like the movements of refugees.
The false boom that follows seems to justify the lending. Property prices rise. Companies and households grow overconfident about their prospects and borrow freely. Economies surge well above their trend growth rates and all seems well until something – a collapse in property or commodity prices – unravels the whole process. The money floods out as quickly as it flooded in, leaving bust banks and governments desperately picking up the pieces.
Andy Haldane, Bank of England chief economist, describes the unfolding pattern of events as a three-part crisis. Act one was in 2007-08 in Britain and the US. Buoyed for the previous decade by absurdly high inflows of globally generated credit that created false booms, they suddenly found their overconfident banks had wildly lent too much. Collateral behind new fangled derivatives was worthless. Money flooded out, leaving Britain’s banking system bust, to be bailed out by more than £1tn of liquidity and special injections of public capital.
Act two was in Europe in 2011-12, when it became obvious that the lending had been made on the incorrect assumption that all eurozone countries were equal. Again, money flooded out and Europe only just held the line with extraordinary printing of money by the European Central Bank and tough belt-tightening measures in overborrowed countries such as Portugal, Greece and Ireland. It might have been unfair, but it worked.
Now act three is beginning, but in countries much less able to devise measures to stop financial contagion and whose banks are more precarious. For global finance next flooded the so-called emerging market economies (EMEs), countries such as Turkey, Brazil, Malaysia, China, all riding high on sky-high commodity prices as the China boom, itself fuelled by wild lending, seemed never-ending. China manufactured more cement from 2010-13 than the US had produced over the entire 20th century. It could not last and so it is proving.
China’s banks are, in effect, bust: few of the vast loans they have made can ever be repaid, so they cannot now lend at the rate needed to sustain China’s once super-high but illusory growth rates. China’s real growth is now below that of the Mao years: the economic crisis will spawn a crisis of legitimacy for the deeply corrupt communist party. Commodity prices have crashed.
Money is flooding out of the EMEs, leaving overborrowed companies, indebted households and stricken banks, but EMEs do not have institutions such as the Federal Reserve or European Central Bank to knock up rescue packages. Yet these nations now account for more than half of global GDP. Small wonder the IMF is worried.
The world needs inventive responses. It needs a a bigger, reinvigorated IMF whose constitution should reflect the global balance of economic power and that can rescue the EMEs. It needs proper surveillance of global finance. It needs western governments to launch massive economic stimuli, centred on infrastructure spending. It needs new smart monetary policies that allow negative interest rates.
None of that is in prospect, vetoed by an ideological right and not properly championed by the left. If there is no will to deal, collectively, with the refugee crisis, there is even less to reorder the global economy. We may muddle through, but don’t bet on it.
Oct 4
(Reduced)Growth of just 3pc in China could knock US and Eurozone growth rates, leaving them as low as 1.7pc and 0.8pc respectively in 2016
Chinese ‘hard landing’ fears see biggest capital flight since 1988
Investors are on track to pull €485bn out of the emerging markets this year in flight for safety.
Peter Spence Sunday Independent 04/10/2015 | 02:30
Investors are on track to pull €485bn out of emerging markets this year, as fears that China is headed for a ‘hard landing’ have prompted the greatest flight for safety since 1988.
The amount being pulled out of emerging markets is the equivalent of almost three times the value of Ireland’s GDP, or almost the size of oil rich Norway’s entire economy.
The Institute of International Finance (IIF) said that the net outflows would most likely continue next year, as the prospect of US interest rate rises threaten to dampen the emerging market outlook further.
Charles Collyns, managing director and chief economist at the IIF, said that “emerging markets have seen sharp losses in recent months”. The IIF’s forecasts came as economists warned that emerging markets could face a brutal slowdown over the next 12 months.
The carnage in investments marks a huge reversal from 2014, when investors poured a net $32bn (€28.5bn) into emerging markets
“Unlike the 2008 crisis, the reasons for the outflows are largely internal rather than external – related to rising concerns about economic prospects and policies in China, coupled with broader uncertainties about EM growth prospects,” said Mr Collyns.
Credit ratings agency Fitch said that it expected China to grow by 6.3pc next year, but cautioned that if the current turmoil continues, a collapse in public and private investment could cause growth to drop to less than half that pace.
“A Chinese contraction would intensify deflation risks . . . especially in the eurozone, where demand has remained persistently weak and inflation low,” the ratings agency said in a report.
Growth of just 3pc in China could knock US and eurozone growth rates, leaving them as low as 1.7pc and 0.8pc respectively in 2016, Fitch predicted.
It is feared that those who rely on China for trade may be caught off guard. Asian economies, including Hong Kong, South Korea and Japan, as well as commodities producers such as Brazil and Russia, would be worst hit by a hard landing.
Hung Tran, the IIF’s executive managing director, said that “one major, underlying reason to expect sustained pressure on EM asset prices is the high level of non-financial corporate debt in relation to GDP.
“As monetary policy continues to diverge and the Fed begins lift-off, countries with large amounts of corporate debt, especially in USD, will face difficulties, with rising prospects for corporate distress, weakening capital investment and growth,” he said.
The IIF’s notes of caution followed similar warnings from the International Monetary Fund earlier in the week, which said that “emerging markets should prepare for an increase in corporate failures”.
Dario Perkins, an economist at Lombard Street Research, said that there was now an “obvious parallel” with the late 1990s, when a string of emerging market crises sparked fears of a global downturn.
“While the emerging crash did have a negative impact on growth in the US and Europe, those fears were overdone,” Mr Perkins said. “But back then, the emerging economies were less significant and central banks had room to respond.”
The prospect of higher US interest rates has already pulled capital away from emerging markets, while China has pivoted away from a credit-fuelled investment binge.
This has triggered market turbulence twice over the last year, Mr Perkins said, as investors had been alerted to the ever-growing risks of a global downturn
While emerging markets may have represented a small chunk of the global economy in the 1990s, their share of activity is now much larger.
“We may have entered part three of the global crisis that started in 2008,” Mr Perkins warned, following the Lehman Brothers crash and the subsequent eurozone debt crunch.
“Even if the US and European economies prove resilient to the EM downturn, the global backdrop is certain to become more deflationary,” Mr Perkins added.
Sunday Indo Business
Global Financial Melt-Down Resumes Sept 1
Stocks and Commodities Hit By Weak China Data
Financial TimesToday. Equities are sliding, industrial commodities are relapsing and investors are seeking Treasuries and the yen as fresh…
China Worries Leave Global Stocks Bruised
Financial Times Tuesday 17:30 BST. World stock markets suffered another bruising session as concerns about the outlook for global growth were rekindled by…
GLOBAL CAPITALIST CRASH INTENSIFIES -August 24
From Irish Times First published:Sat, Aug 22, 2015, 01:00
World markets suffer worst one-day falls in nearly four years
US and European shares tumble and commodity prices slide amid growth concerns
World stock markets will open on Monday seeking to recover from the worst one-day falls in nearly four years.
US and European shares tumbled and commodity prices slid further yesterday, with US markets closing last night down by more than 3 per cent, reflecting similar losses in European markets earlier in the day.
The Standard and Poor’s 500 Index capped a weekly loss of 5.8 per cent, its worst drop in almost four years.
- Signs of growth key for nervous world markets
- Stocks post worst week of 2015 after China data
- US, European shares suffer worst one-day fall in nearly four years
The turmoil in the markets is highlighting concerns amid investors that the US, UK and Europe may not resume growth quickly enough to make up for the slowdown in emerging markets.
It has also increased speculation that the US Federal ReserveBoard might hold off on increasing interest rates next month, as had been expected.
The collapse was triggered by fresh data from China suggesting its manufacturing sector shrank at its fastest pace in more than six years in August as domestic and export demand dwindled.
This comes just a week after the devaluation of the renminbi and in the wake of a sharp plunge in the Chinese stock market, adding to mounting concerns about the health of the Chinese economy.
Emerging market assets also took another hammering and oil prices headed toward their longest losing streak in almost 30 years, threatening to dip below $40 (about €35) a barrel for the first time since the financial crisis.
Dublin’s Iseq
Dublin’s Iseq also fell by 3 per cent, with notable losses for index heavyweights such as CRH, Ryanair and Smurfit Kappa
Figures released yesterday showed growth in the US manufacturing sector slowed unexpectedly to its weakest pace in almost two years in August.
Traders said the falls in US stocks were driven by fears that China’s worst domestic slowdown since the global financial crisis could spread to both developed and other emerging markets.
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Michael Roberts, Marxist Economist, is good on the ’emerging market’ crash here.
He notes the increase in private corporate debt by a third since 2007:
Investment bank JP Morgan reckons that the debt of non-financial corporations in emerging economies has surged from about 73% of GDP before the financial crisis to 106% of GDP as of 4Q14. This 34%-point increase is enormous, averaging nearly 5%-points per year since 2007. In previous research, the IMF has found that an increase in the ratio of credit to GDP of 5%-points or more in a single year signals a heightened risk of an eventual financial crisis. Many emerging market economies have registered such an increase since 2007. Hence the conclusion of the credit analysts, S&P, that “we have reached an inflexion point in the corporate credit cycle”.
At the same time time the Chinese rate of profit has dropped from around 13.5% to about 9% since 2011.
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Germany’s record trade surplus is a bigger threat to euro than Greece
Daily Telegraph Friday August 21
| From Financial Times To-Day
Stock Sell-off Deepens after weak China Manufacturing Reading Friday 08:30 BST. Stocks, commodities and emerging market currencies are under the cosh as disappointing China manufacturing data add to… |
Daily Telegraph’s Ficenec: ‘Only Matter of Time Before Stock Markets Collapse’–NEWSMAXFINANCE
Global central bank easing has run amuck, and the results won’t be pretty, says London Daily Telegraph columnist John Ficenec.
“From China to Brazil, the central banks have lost control, and at the same time the global economy is grinding to a halt,” –he writes.
“It is only a matter of time before stock markets collapse under the weight of their lofty expectations and record valuations,” he warns. “Time is now rapidly running out.”
He claims that the central banks are rapidly losing control.
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This prediction is not coming from some wild-eyed socialist but from the right-wing British Daily Telegraph news service!
Doomsday clock for global market crash strikes one minute to midnight as central banks lose control
China currency devaluation signals endgame leaving equity markets free to collapse under the weight of impossible expectations
By John Ficenec
PUBLISHED17/08/2015 | 13:37 in Irish Independent from Telegraph.co.uk
It is only a matter of time before stock markets collapse under the weight of their lofty expectations and record valuations.
WHEN the banking crisis crippled global markets seven years ago, central bankers stepped in as lenders of last resort. Profligate private-sector loans were moved on to the public-sector balance sheet and vast money-printing gave the global economy room to heal.
Time is now rapidly running out. From China to Brazil, the central banks have lost control and at the same time the global economy is grinding to a halt. It is only a matter of time before stock markets collapse under the weight of their lofty expectations and record valuations.
The FTSE 100 has now erased its gains for the year, but there are signs things could get a whole lot worse.
1 – China slowdown
China was the great saviour of the world economy in 2008. The launching of an unprecedented stimulus package sparked an infrastructure investment boom. The voracious demand for commodities to fuel its construction boom dragged along oil- and resource-rich emerging markets.
The Chinese economy has now hit a brick wall. Economic growth has dipped below 7pc for the first time in a quarter of a century, according to official data. That probably means the real economy is far weaker.
The People’s Bank of China has pursued several measures to boost the flagging economy. The rate of borrowing has been slashed during the past 12 months from 6pc to 4.85pc. Opting to devalue the currency was a last resort and signalled the great era of Chinese growth is rapidly approaching its endgame.
Data for exports showed an 8.9pc slump in July from the same period a year before. Analysts expected exports to fall only 0.3pc, so this was a huge miss.
The Chinese housing market is also in a perilous state. House prices have fallen sharply after decades of steady growth. For the millions who stored their wealth in property, it makes for unsettling times.
2 – Commodity collapse
The China slowdown has sent shock waves through commodity markets. The Bloomberg Global Commodity index, which tracks the prices of 22 commodity prices, fell to levels last seen at the beginning of this century.
The oil price is the purest barometer of world growth as it is the fuel that drives nearly all industry and production around the globe.
Brent crude, the global benchmark for oil, has begun falling once again after a brief rally earlier in the year. It is now hovering above multi-year lows at about $50 per barrel.
Iron ore is an essential raw material needed to feed China’s steel mills, and as such is a good gauge of the construction boom.
The benchmark iron ore price has fallen to $56 per tonne, less than half its $140 per tonne level in January 2014.
3 – Resource sector credit crisis
Billions of dollars in loans were raised on global capital markets to fund new mines and oil exploration that was only ever profitable at previous elevated prices.
With oil and metals prices having collapsed, many of these projects are now loss-making. The loans raised to back the projects are now under water and investors may never see any returns.
Nowhere has this been felt more acutely than shale oil and gas drilling in the US. Tumbling oil prices have squeezed the finances of US drillers. Two of the biggest issuers of junk bonds in the past five years, Chesapeake and California Resources, have seen the value of their bonds tumble as panic grips capital markets.
As more debt needs refinancing in future years, there is a risk the contagion will spread rapidly.
4 – Dominoes begin to fall
The great props to the world economy are now beginning to fall. China is going into reverse. And the emerging markets that consumed so many of our products are crippled by currency devaluation. The famed Brics of Brazil, Russia, India, China and South Africa, to whom the West was supposed to pass on the torch of economic growth, are in varying states of disarray.
The central banks are rapidly losing control. The Chinese stock market has already crashed and disaster was only averted by the government buying billions of shares. Stock markets in Greece are in turmoil as the economy grinds to a halt and the country flirts with ejection from the eurozone.
Earlier this year, investors flocked to the safe-haven currency of the Swiss franc but as a €1.1 trillion quantitative easing programme devalued the euro, the Swiss central bank was forced to abandon its four-year peg to the euro.
5 – Credit markets roll over
As central banks run out of silver bullets then, credit markets are desperately seeking to reprice risk. The London Interbank Offered Rate (Libor), a guide to how worried UK banks are about lending to each other, has been steadily rising during the past 12 months. Part of this process is a healthy return to normal pricing of risk after six years of extraordinary monetary stimulus. However, as the essential transmission systems of lending between banks begin to take the strain, it is quite possible that six years of reliance on central banks for funds has left the credit system unable to cope.
Credit investors are often far better at pricing risk than optimistic equity investors. In the US while the S&P 500 (orange line) continues to soar, the high yield debt market has already begun to fall sharply (white line).
6 – Interest rate shock
Interest rates have been held at emergency lows in the UK and US for around six years. The US is expected to move first, with rates starting to rise from today’s 0pc-0.25pc around the end of the year. Investors have already starting buying dollars in anticipation of a strengthening US currency. UK rate rises are expected to follow shortly after.
7 – Bull market third longest on record
The UK stock market is in its 77th month of a bull market, which began in March 2009. On only two other occasions in history has the market risen for longer. One is in the lead-up to the Great Crash in 1929 and the other before the bursting of the dotcom bubble in the early 2000s.
UK markets have been a beneficiary of the huge balance-sheet expansion in the US. US monetary base, a measure of notes and coins in circulation plus reserves held at the central bank, has more than quadrupled from around $800m to more than $4 trillion since 2008. The stock market has been a direct beneficiary of this money and will struggle now that QE3 has ended.
8 – Overvalued US market
In the US, Professor Robert Shiller’s cyclically adjusted price earnings ratio – or Shiller CAPE – for the S&P 500 stands at 27.2, some 64pc above its historic average of 16.6. On only three occasions since 1882 has it been higher – in 1929, 2000 and 2007.
Telegraph.co.uk
Analysis by Michael Roberts on his Blog
New post on Michael Roberts Blog |
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News of Crash Reaches RTE and Irish Front Pages after more than 1 week delay!
Irish “Recovery” in Danger? FG/Lab PLaced Ireland’s Interests in the Hands of Global Capitalism
Analysis by Marxist Economist
-Michael Roberts-https://thenextrecession.wordpress.com/2015/08/24/market-turmoil/
Shanghai shares dived 9pc to a six-month low, wiping out this year’s gains—-Against this gloomy backdrop, spreadbetters forecast a sharply lower open for Britain’s FTSE, Germany’s DAX and France’s CAC indexes. “One of the fears stalking global markets is the idea that every country wants a weaker currency. That such a state of affairs is logically impossible is reason enough to elicit worries about financial instability”.-Chris Johns, Irish Times Aug 24 “Copper, seen as a barometer of global industrial demand, tumbled with three-month copper on the London Metal Exchange hitting a six-year low of $4,920 a tonne. Aluminium also slid to its lowest since 2009 of $1,526 a tonne”.-Reuters August 24—–SCROLL DOWN FORMORE