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Monday, March 30, 2009

Stats day for the BOE...

Sectoral breakdown of aggregate M4 and M4 lending February 2009 and Lending to Individuals February 2009, were released today.

The reports speak for themselves.

M4 snipits...
The household sector’s holdings of M4 rose by £3.3 billion in February. The annual growth rate continued to fall, to 4.2%. M4 lending (excluding the effects of securitisations etc) to the household sector rose by £2.5 billion. The annual growth rate fell further, to 4.3%. Private non-financial corporations’ (PNFCs’) holdings of M4 rose by £6.5 billion; the annual growth rate was less negative, at -2.1%. M4 lending (excluding the effects of securitisations etc) to PNFCs rose by £2.9 billion in February and annual growth fell, to 3.6%. Holdings of M4 by other financial corporations (OFCs) rose by £18.4 billion and M4 lending (excluding the effects of securitisations etc) to OFCs rose by £22.4 billion in February

and... net lending snipits.

The increase in total net lending to individuals in February (£1.3 billion) was higher than the January increase, but below the previous six-month average (Table A). The twelve-month growth rate continued to fall, by 0.5 percentage points to 2.6%, and the three-month annualised growth rate was unchanged at 1.3%...

Consumer credit declined by a net £0.2 billion, weaker than the £0.2 billion net increase in January and below the previous six‑month average (Table A). Net credit card lending increased by £0.2 billion and net other loans and advances fell by £0.4 billion. The annual growth rate of consumer credit continued to fall, to 3.4%; the three-month annualised growth rate fell by 1.5 percentage points, to 0.1%.


I had to be lazy to just quote the information in the table. You can link to it to get the rest of the information. Pretty straight forward stuff.

My thing is now, seeing that net-lending is somehwat up and M$ has increased, but GDP is still shrinking, perhaps people are saving more in addition to buying smaller quantities?

Lending isn't pentrating the market by many analysts figures. So, are we in for a permanent contraction of leading consumption in industrialized economies? Is this more than just figures and the signs of a long term fad/trend?

Captain Morgan!

Encouraging signs that Captain Morgan Tsvangarai of Zimbabwe is going through with the reforms, needed to bolster the country.
FT

One thing I wishes he does not do, is allow too many foreign investors with right to the land. He should encourage local entrepreneurs as much as possible.

Yes, some foreign investors are needed. But, do as much as you can for indigenous folks.

It will only serve the country well for the future. But, this is allot better than Mugabe. And, for that, we should be thankful!

Do we really need an imposed food shortage?

This is what likely to happen, or, has happened, when the US Dept. of Agriculture gives us their periodic acreage estimate. FT

The estimate will show a sharp decline in acreage usage in the farm sector. This will increase the food shortage, which the FAO and the UN state as growing. I don't have that recent report, but they say that grains and wheat production, will go into serious decline by the end of 2009 and already in troubling decline--since late 2008. But, world food stocks are up at record levels in an earlier report by the FAO and the UN. So, what's the truth?

But, and this speaks directly to the US farm sector, I thought that they got a heft dose of stimulus in the latest 2009 American Reinvestment package passed by the US congress?

In fact, aside from green technology, farm subsidies was second on the list. In fact, if we add the local and state assistance programs within the 2009 stimulus, which was geared not for farms but for rural areas and tribal lands, agriculture, got most of the money out of the stimulus.

What do US farms go and do now? They are cutting their production--like OPEC and oil-- to raise the prices. They cite in the FT article the rise in prices in fertilizer and low market prices. the low market prices is believable, only if you didn't know that they set the initial prices in the market. Also, the financial market for commodities they have no hand in--it's the financial firms that make the value added profit from the derivative prices and not them.

Now, we can say that derivatives trading raised the future price, from month end to month end and hence, as a sub-sequence, farmer profits go up automatically. However, there is a market for food and with stockpiles decreasing, the US and UN should encourage stock piling and reduced purchases and off selling, at a time of global crisis.

Secondly, the market for fertilizers should not be increasing, if everything else in the commodities market is increasing. I find it hard to believe off of the cuff that high fertilizer prices is a problem now.

There has been many reports about the volatility of the fertilizer market--most noting that the boom between 07-08, but the bust between the end of 08-09. Global demand is down, so the argument that demand being high while fertilizer demand is weak and hence, pushes up the price, is a non starter on the other end of the price volatility debate.

Saturday, March 28, 2009

Down...AGAIN!

I can't seem to keep my PC up and running. I was down for the last three days. Apparently, my jump drive, caused the issue this time too.

The first time it was the jump drive, having a virus--well two viruses-- on it. So, when I put my jump drive in the PC, after I cleaned it again due to overall viruses, the viruses, downloaded to my PC.

This time, I forgot to dislocate my jump drive from running on my PC. Causing the system to register the jump drive as active. And, since it was active and I shut my PC down without the proper dislocation, the PC was trying to load up from my jump drive...therein lies the issue. The PS was trying to boot-up from the jump drive, rather than from it's own operating system.

Will never do that again. But, it is such a bummer having to be down and then, having to upload all of the stuff I need on my PC all over again.

I have to re-download MS office, Adobe and a whole host of other stuff that makes using a computer, fun.

Ah well...it's a learning experience.

Tuesday, March 24, 2009

Misick is finally gone...

Here...he had a longer resignation period than the Bishop Gomez had a retirement circuit.

I guess it's for the better. If I were him, I would just be quiet about it. He should just sit it out and then come back after a few years or so.

People may forget. Perhaps not. But, try anyways.

Monday, March 23, 2009

Over the last 2 weeks...

I just want to give a little heads up on some of the things that happened over the last 2 weeks, which I didn't have a chance to discuss but want to mention...

1. Madagascar had a coup. The opposition leader, Andry Rajoelina, is in. His cause; he couldn't win the government fair and square, in order to save the country from the monopolizing former leader, Marc Ravalomanana.

2. The British took the Turks and Caicos Islands into administration. Suspended the constitution for 2 years. (More on this from me as the week goes on) The TCI folks are pissed-- more hurt and embarrassed, than anything. But, it's not really about them, personally.

3. The French are rioting, again. This time the labour unions are stirring it up--higher minimum wages, is the big issue, among other things.

4. Morgan Tsvangirai's wife died in a car crash about three weeks back. Mugabe has offered condolences. He didn't do it. But, what do the people think?

5. Argentina is showing signs of more instability. Over the last few months, the government bought the private pensions market. This time, an election is in the air. I wonder who's doing is this, really? They say, Kirchner, the wife of the former president and current president of Argentina, wants it.

Ah well....it was a pretty dead week in news, otherwise.

Oh, yea!! Plane crashes in Tokyo and Montana. A FEDEX plane and a personal jet, respectively.

Geithner ain't goin no where!

Why does everyone, well, liberals, want to get rid of Tim Geithner? It just seems so odd that they want to get rid of Obama's man?

I guess they really don't see Geithner as one of them. But, who else do you put on to runt he Treasury?

Also, I don't see any harm he's doing. It's not as if he has the heavy part of the economic portfolio. Thus far, Pres. Obama has three key figures, outside of Geithner, who he has reporting to him directly-- Summers, Romer and Orszag (LSE Grad).

The liberals just need to chill for a minute. The plan is to buy the bad assets. Simple. Not my best choice, but it appears to be the choice we can bear to live with--all of us. As we all know, some of us have greater social rights than others. **Hint Hint** Wall Street.

Friday, March 20, 2009

Double whammy for China?

Not only are they losing job's due to a weak export sector. They have also been getting hit with losses on the investment front.

Apparently, this FT article notes that before the global wide collapse, China, had changed it's investment strategy into Corporate Bonds and other Global Equities.

The Chinese just can't get a break. Read the article yourself. It appears that China, has more tough times ahead.

I hope that giant economy does not collapse and send the people into mass panic.

SIGI Ranking 2009...

The table shows the ranking of 102 non-OECD countries, based on the 2009 Social Institutions and Gender Index (SIGI). To access individual country notes, click on each country's name.

I normally take these kinds of studies after I read the methodologies. But, when I saw how it played out, I was like; What!?!? Russia has more respect for women than Jamaica or Trinidad?

Then, I reviewed the rest of the list and it had no other industrialized country on the list. But, still, read the methodology section to see how they get to these conclusions.

Gender Ranking Chart

Well, the Sudan and Afghanistan rank last. So, I guess it has some merit.

No China...

I have just went back through my postings, and have said not a dern thing about China!

China has a huge economy and deserves to be monitored from all angles. My apologies.

But, also, I have neglected every other country for the sake of the USofA and the UK.

I very rarely post about Caribbean issues and certainly have forgotten about Latin American issues and other Asian/Middle Eastern Issues.

That will change.

You see, it's not that I don't follow the news of these other areas. It's just that I don't post about it.

I know Madagascar just had a coup. I know Argentina is still in the middle of a crisis. I also am quite aware of the turmoil in Japan--they just pumped 1 bn yen into small commercial bank's-- and am certainly quite aware of the issues in the Middle East- Israel included, with new foreign minister, in all.

I am more than conversant on these issues and I promise, to get better information on other hot spots.

Regards,

Youri

Thursday, March 19, 2009

Capital Issues down....UK!

Well, no one has any money, so, I guess capital market issuance would be down--if you know demand would be weak, why would you put out an IPO? Also, you do not want to send out signals that your company, is in need of cash through IPO. In addition, and more importantly, stocks are being devalued so the prices are lower and hence, the net total of issuance is and would be down. Among other things.

Shareholders are losing value, ever increasingly. Another sign of devaluation. In fact, it is already happening. I don't know why Economists just don't admit it and get it over with. They most likely put a muzzle on the Doomsdayer, Roubini.

Tables and graphs from the BOE on gross and net capital issues for UK residents...






What would also be nice is if we could have seen the amount of purchasers by ratio of the purchases? For example, if 20 thousand people bought $100 billion worth of shares last month, compared to 10 thousand people who bought $20 billion shares.

The way figures like that and in particular the example I just explained, would show us the concentration in the market for people who have the money, compared to the people who don't have the money--ie, if 10 thousand persons less are buying 20% of the bonds/shares than from the previous month, this would show that a select few investors are snapping up deals and cornering the markets.

This would be as much of a problem as inflationary pressure on stocks, moving forward.

The BOE has to do more to support business. I for one appreciate the depreciation of those grossly overpriced stocks, anyways. A correction was more than needed. But, there must be a way to stop it, rather than just letting the bottom hit the floor--so to speak.

What do you suggest? Can't be just a liquidity problem for the companies, it's a purchase and investment issue. Perhaps they can court investment in UK companies to Chinese and other emerging market investors?

US to buy Treasuries!

I don't have time to put up the link from any article in from the daily business journals or from the FED itself, but the plan is to buy up $300 bn worth of long term treasury bonds, in an attempt to inject liquidity to the market.

If you can remember the FED forced banks to take treasuries last year, in order to buy them back at a later date (now) and also as an attempt to back these bank's, with FED securities, but not to overtly inject the banks with excess capital at that time--inflation risks in the long term, probably prompted this move.

I guess the situation keeps on getting worse for the credit situation. No rate cut was decided, however.

But, last weeks information on the continually tightening credit, was an indicator to buying back some of these FED bonds.

UK Unemployment at 2m!

I can't believe that UK unemployment is so high. Is this Brown's fault or is this really one of those things to do with the global economy?

Conversely, the BOE put out an agents' summary on business conditions yesterday that states that--among other things-- that investment intentions are still down and manufacturing output, is still contracting.

Well, considering that every other country is grappling with unemployment and the issues that are fueling it, he can't be made to blame. In addition to this, public sector jobs have now, in the FT report, outstripped private sector jobs--due to the job losses in the financial services sector.

But, in any event, 2m is pretty high.

The FT article does not state how that unemployment amount is deduced percentage wise, but it does show other information about; the amount of people now requesting unemployment assistance and; how many people are at the Job Centre plus..etc.

Will Gordon Brown still call for an election?

It appears so....

Wednesday, March 18, 2009

WSJ: In defence of tax havens!

Interesting article in the WSJ today from Richard Rahn from the Cato Institute.

No one probably cares. The world's free market governments, have gone not just socialist--but dictatorial.

Here is a first excerpt, which sets up a main point by him and my main point on this issue:
"Nevertheless, Sens. Carl Levin (D., Mich.), Bryon Dorgan (D., N.D.), and Max Baucus (D., Mont.), as well as officials of the Obama Treasury, want to make it more onerous and costly for American companies to do business around the world and for Americans to invest elsewhere. They would even make it more difficult for non-Americans to invest in the U.S.

Mr. Levin's bill is a hodgepodge of tax increases, more regulations and penalties on American taxpayers doing business in targeted low-tax jurisdictions. Mr. Dorgan's bill would prevent certain American companies that operate and are incorporated outside the U.S. from being treated as nondomestic corporations, thus denying them the right of tax deferral until their income is brought back to the U.S. Mr. Baucus, chairman of the Senate Finance Committee, is circulating a draft bill that, among other things, would extend the statute of limitations from three to six years for tax returns reporting international transactions. The Treasury Department is proposing expanded regulations on foreign financial institutions that bring needed investment funds into the U.S."


I think this pretty much sums up the government's cash grab. They always need more of your money, indeed.

This, while not the worst thing they have done in the past, should be a call to all out war from the business class against the government.

To some extent, these money laundering measures are warranted as we do have to clamp down on money laundering. But, the langauge has to be in a sense where it is not smattered with HIGHER taxes in any legislation that is moving forward and, secondly, what exactly is tax evasion must be defined.

Mr. Rahn's final point:
"The proposals by Messrs. Dorgan, Levin, Baucus and the Treasury will almost certainly have the unintended consequences of driving more U.S. businesses elsewhere, discouraging foreign investment in the U.S., and actually encouraging more U.S. investors to move their funds (either legally or illegally) not only out of the country, but to places in Asia or the Mideast that tend to be less cooperative with U.S. tax authorities than are the European and British low-tax jurisdictions."
Is something offshore jurisdictions should HOPE and PRAY for. Unintended consequence, indeed.

Any country that adopt a high tax structure on rellocating business from the US and the EU, will miss the critical opportunity from this dilema.

AIG kickbacks?

It just occurred to me what's going on with AIG and these bonuses, the American government can't seem to get their minds around.

This reeks of kickbacks. There is no other possible explanation as to why the government, put in it language--after all of the hullabaloo about bonuses for failed company execs-- for bonuses to be so high at AIG.

Sen. Chris Dodd is at the centre of it again. He should be investigated. The Dem's won't crucify one of their own. It has to be a Republican to do it....

I guess the party is over for an all democratic government. Tell Keith Olberman to go ahead and talk that!

Monday, March 16, 2009

Deviation: Why I blog?!?!

I decided to post a little deviation from the regular mundane issues I normally post to this little corner of cyber space.

Some may have wondered, well, Youri, why DO you blog? A song comes to mind....

"I blog because I'm happy...I blog because I'm free"...hehehehhe..

Serious:

I blog, truly, because I love to blog. I am such a stuffy boring house boy, that this Internet thing, has taken up most of my time.

I, literally, can sit in front of this PC all day and read and post topics here as well as post topics, to my favourite blogs and communities.

If there was a job to blogging, I would be a happy worker.

Alas, there is no money in blogging--no matter how hard I have looked. Perhaps someone can share with me tips on how to make some bloggy money?

Be a political hit man? Put up ad's? You need traffic for that...and traffic, is what I'm trying to increase.

In any event, other than for the sheer heck of it, blogging, came as a result of a few friends telling me that instead of lurking and domineering other folks sites, I should do my own on what I'm interested in.

I thought it would have been difficult--especially putting in those hyper links, which took me weeks to even find let alone figure out-- but, everything has a learning process I guess.

So, in a nutshell, this is why I blog...the residuals of putting up your intellectual capacity to the world and for comment, is also a good thing. I love, LOVE the debate--when folks dare to step into the zone!

LOL....

Youri

UPP wins Antigua and Barbuda elections!

Incumbent UPP wins controversial elections in Antigua-Barbuda

This election was so incredibly funny, that if you were to have dressed all of the candidates up in clown suits, you would have had a full three ring circus.

Most elections have such utter craziness in the middle of the "issues"...

PM Baldwin Spencer, has another term to fill his mandate. His Party, the United Progressive Party (UPP), won the government again by a margin of 9 to 7 seats, beating the Antigua Labour Party (ALP), led by by former PM Lester Bird.

Bird had said that if he would have won, he would have not taken the top job and in turn, handed it over to his second in command.

Bad mistake and could have cost them the election. When you go to the polls, you vote for leadership in present and not leadership to be assumed.

In addition, Mr. Bird is a little old for the job. Born in the 1920's I think. Time to move on.

Also, the Allen Stanford scandal had the tiny little country rank with speculation and controversy. The ALP got most of the blame for having greater dealings with Sir Standford, but they all had some interaction with the financier from Texas.

I wish all the best for Antigua and Barbuda. Truly. The polls were relatively fair and even. I always welcome results when the people speak en masse.

Besides, both men are great men.

Industrial Production shrank...AGAIN!

US figures from the FED today indicate that Industrial Production shrank by 1.4%.
FED Industrial Production Report/

The big stimulus plan, will seek to address this. As new roads and bridges will need to be built, so too will the need for raw product--iron ore, coal and minerals-- and with the increase in demand in raw material, products from those raw materials will need to be produced.

Also, machines to manufacture those goods, will need to be used; people to man these machines...etc...

The only issue is, if that the raw materials and products, be American only. The buy America provisions in the stimulus plan "may" address that (I would have to review that). Good for the USofA and bad for the rest of the world if it [buy America provisions] get to the centre of manufacturing.

Sunday, March 15, 2009

Tax Havens: The handwriting is on the wall!

The OECD has put out a press release about the events that happened over the last week and weekend, in regards to countries moving forward in reforming their tax structures--many by end of August, 2009.

If you remember that earlier I wrote an article about the LGT group in Liechtenstein and how they, in no better term, "got out" of the trust and fiduciary business. This time, every other major offshore tax jurisdiction of note has announced that they will move ahead with sweeping legislation in regards to tax transfer transparency in 2009 without inanition.

Singapore; Hong Kong, China; Andorra; The Isle of Man and; The Cayman Island's, have decided to move forward with adopting the OECD's framework transparency and exchange of information on tax matters.

Liechtenstein, while already being apart of tax exchange agreement with the USofA, will also move forward with legislation in regards to transparent tax information exchange.

The Isle of Man and The Cayman Islands--I think through the virtue of their being UK protectorates-- have already signed, over the course of the last 5 years, tax and transparency agreements with other jurisdictions.

The days of offshore trust administration, as we know it, are over. Other jurisdictions that do not have such agreements, should try their best to adopt the OECD's mindset on transparency and then implement it to distinctively suit their current position within the global economy, or face certain repercussion, more severe than idle threats.

A 1998 report by the OECD "Harmful Tax Competition - An Emerging Global Issue", laid out what the group's leadership at the Ministerial level, decided upon what was "harmful tax competition".

In a nutshell, they admit that there is no one set criteria for a harmful tax evasion. In my opinion, this is because the criteria depends on the individual country that it aggrieved. Rightfully so!

More importantly however, a statement from the International Economic Agency (IEA) by Kristian Niemietz on their blog, liken this tax haven crackdown to that of governments using tax havens as "scapegoats", because those governments have no control over their spending in the bad times and, even worse control during the good times.

They make a compelling case, using the case of Austrian spending in correlation to their overall theme of wasteful spending to link that to a false call against so called "tax evaders":

"Furthermore, it is wrong to maintain, as the adversaries of tax havens implicitly do, that the amount of revenue a government “needs” is somehow “given” and that evaded money reduces the provision of essential public services. If this was the case, why do we often observe budget deficits in years when tax revenues are high?

For example, the government of Austria predicted a balanced budget for 2007. But even though that was a year of exceptional economic growth and buoyant tax revenues, the government stayed in the red. It had spent the windfall as quickly as it had earned it. With governments facing strong incentives to push spending well above optimal levels, the existence of loopholes like tax havens can act as an important check against spending excesses
."


But, what is also interesting, conversely, especially upon review of the US/Bahamian joint tax treaty on transparency and money laundering, the provisions indicate that the Competent Authority in the USofA, can only ask for information regarding tax evasion in regards to the counterpart Competent Authority, if it is accepted that there are no other means of obtaining the information, during a criminal proceeding into tax offences.

That sounds fair enough!

The criteria, however, is based on the premise that the criminal prosecution in regards to what constitutes tax evasion and money laundering, is exhausted in the aggrieved country. Then they would begin to go offshore and ask for tax cooperation for their court procedings.

This can provide a slippery slope into blatant witch-hunting in regards to criminal proceedings into tax evasion and, leave the constitution of the criteria, up to the country the tax law was breached and, especially, under the interpretation of what a federal judge feels what may constitute a breach, to what they do or don't understand as a common or nuance tax breach. It's all just too iffy!

It is not indicated if whether or not criminal proceedings "should" follow upon an investigation, either. But this would in fact defeat the purpose of finding criminal wrong doing and it is understood, by this author, as that.

What should be examined, moving forward with any other joint information on tax evasion investigations, is a co-defined and set standard on what constitutes a tax evader in aggrieved jurisdictions.

This, would define under both parties, what would constitute an internationally understood feasible baseline, as opposed to the set criteria of one country, to which any investigation into tax fraud can be sought with no true delineation into what extent that breach of the law--except for the vagueness of the concept of total exhaustion of "their" law-- should be followed and also warranted.

This would keep both the integrity and sovereignty of foreign countries who have considerably large offshore trust industries, as well as keep industrial countries honest in regards to their pursuit, in genuine nature, of persons who have "truly" evaded taxes or money laundered, all the same, without a fear of over-reaching government intrusion into the private market.

I also think that now, as is, the ease at which the US Federal Government or any entity for that matter, can bring a lawsuit into being in the USofA, is too easy, with leaving the interpretation of the outcomes of the lawsuit, depending on the understanding of the necessity of further investigations of certain aspects of the investigations, up to a federal judge. And, considering US's lawsuit prone judicial system, this is far too frequent of an occurence, to not consider it a threat to the entire governmental systems of both the foreign and domestic country as well as the industry they govern.

The remark that some Federal prosecutors would, on the drop of a dime, "indict a ham sandwich", while cute, is dreadfully important to this issue than we can ever imagine.

Lobbying for set, joint criteria on what is a tax evader, would be beneficial to all sides.

Saturday, March 14, 2009

Big deal!

A call for an Indian and EU FTA to be signed by late this year. This is an additional window into Asia that the EU needs. The US is being outpaced and outstripped. They are missing key growth markets.

Bridges Trade Digest/

Thursday, March 12, 2009

Madoff is guilty on 11!

11 is supposed to be a lucky number. But, not for Bernie Madoff who was convicted in 11 counts of fraud.

The prosecution is done. Jail time, yes. But, what Madoff showed us is what's wrong with the current model, more than the financial collapse has.

Bernie did say that he was "deeply sorry".

He is very sorry indeed!

Mexico on the verge of collapse?

The reports from mostly all major news networks and agencies suggest that Mexico is on the verge of collapse--failed state alert. Phillipe Calderon, is trying to do what he can, but, is out manned and outgunned by the criminal elements in his country.

Perhaps this is what people would call "the throes" of the last remnants of the illegal drug lords in Mexico, in their effort to make the Mexican government lose their will against the fight against them?

Fat chance!

The drug lords, are as strong as ever. In addition, they have the support of the massive Mexican gang's like MS-13--who are even more brutal and massive in numbers, as their American counterparts the Blood's and Crip's. Maybe even more than them, combined.

It is widely reported that Mexican drug lords, have totally turned that country into a no-man's land. Particularly in the parts on the border of the USA. There is virtually no police force or proper security on their side of the border. The military has initialized and offensive within the border towns. But, the corruption of the Mexican government as well as the military, is endemic. Endemic, while American pay for illicit narcotics in record numbers.

The age old US war on drugs, as seen by many and mentioned by the president Obama, is ineffective and must be transformed. Decriminalization is the talk of the town. Something I am not in favour of. But, as we had with the alcohol prohibition, maybe, we can control it and gain revenue? (I don't imagine so)

What would this [decriminalization] do to Mexico? Perhaps nothing. But, it was a nice parry away from facing the issues at the border with illegal migrants--who are, not only, immigrants looking for a new life. But, nefarious criminals who get into the USA with ease.

The political lack of will to truly deal with the Mexican issue, is a responsibility held by both wings of the American government. Most are for good reason, but it is beyond any good reason to allow the mayhem to continue and then, spill into the lives of American's in the border towns. Regardless of liberation of the masses; cheap labour or; free trade, we have to take the Mexican crises, serious.

This issue has been spilling over at the border without a doubt. Would it be to the extent where there is a dramatic humanitarian crises, is not yet seen. But, what if there were to be a disaster, on the scale of Katrina that hit the Southern States that border Mexico and Mexico itself?

This would lead to a whole litany of issues. For example, what if the Mexican authorities lack the resources to respond effectively and in a secure manner? Refugee's would spill into the USA as well as contraband.

No doubt the US would have the national guard at the border, within a matter of hours. But, what if the response is weak and neglected--as Katrina was, in regards to some of the fundamental details on relief and security?

This raises another issue--the issue of deleterious agents, seeping into the USA at the peak of that crises? Who would be able to know and who would be able to track them?

And, then, what about Mexico? A total failed state, with mass protest and riots with the drug lords fueling the masses, could end up in a regime change in Mexico, which would make the efforts in the USA to cooperate, less favourable.

There are American citizens that live in those border states. People tend to forget that.

What can be done to ensure that now, and, even in the event that a catastrophe happens is beyond me. But, we have to take is serious. And, it is more than suggest xenophobia against Mexicans. It's a serious, global issue.

If the USA were attacked again and they were unable to truly trace their attackers for month's, the USA, may seize up as it did after the 9-11 attacks and would put the rest of the world in serious jeopardy.

Wednesday, March 11, 2009

A shift has occured!

A timely non induced financial services industry shift has been made. The LGT Group, Liechtenstein's largest bank, was reported in the Wall Street Journal, in their online edition dated March 11th, 2009 that it will quit and subsequently, sell, it's trust business for wealthy individuals.

This is a huge development in regards to offshore trust companies/countries and, the impending dangers that the Organization for Economic Co-operation and Development (OECD) and the new Obama administration present in regards to their business.

The reason why this development is so distinctive, is because it represents a first move from the private industry, with little or no direct and cosequential badgering by any larger group or organization. LGT, made the move on their own. Perhaps behind the scenes talks about what is to come, made them move at this time. But, certainly, rhetoric and with that rhetoric, the sharp negotiations in the open as well as policy dialouges, were not accompanying this sudden change in strategy by the LGT group.

Liechtenstein has been on almost every advisory/black list in regards to offshore tax evasion. It has been a continual target by the OECD and the EU in regards to its trust practices.

However, the move by this European country--with royal ties-- and a country that has, up until now, evaded any major sanctions against its offshore business due to its geography and ties to the wealthy European establishment, should be an indicator that the ride on trust companies is over. And, secondly, we should as a region that support offshore trust businesses, begin to change our strategies. This should also signify that there is little room or tolerance for lobbying against any new threat against the industry, world wide and from anyone.

In a sense, the handwriting is on the wall. And, all of the aggression by the US congress up to this date--led by Sen. Carl Levin and, President Obama when he was in the senate-- is about to meet a head and there is very little we can do about that.

What is there to do when financial services is a second pillar to many a Caribbean economy?

Mainly for economies like Barbados and the Bahamas, trust companies, which comprises a healthy proportion of its financial services sector, it is a time to diversify radcially. On the other hand, countries like the United Kingdom protectorates--Bermuda and the Cayman Islands-- it too is a time to diversify, but it should not be a cause for grave concern as they are still tied to a major economy. So, they [UK protectorates] have, if not already and if only by their relationship with the UK, buffered themselves in regards to mitigating any negative impact on their GDP and Real GDP figures and more importantly, the impending loss in revenue's and jobs.

In any event, I see opportunity in these struggling times for the Caribbean financial services sector. Least of which is supported by the fact that we have a black man as the president of the United States of America. What this should do-- as it has done for black Americans-- is give a boost of confidence to the black Caribbean world in regards to them implementing some strong and, much needed, indigenous self preservative economic polices, which should not be rejected totally out of hand, when in the face of world advisory bodies like the OECD, the World Bank and the International Monetary Fund.

I also see opportunities in regards to re-defining our financial services model, allowing for more innovation and, more importantly, shifting our tax thresholds and our varying International Business Company packages, to meet this new demand to give new and improved benefits and service to our clients.

Tax or no tax; there will always be a market for affordable cash storage--especially in light of the LGT group 'selling' it's offshore trust business. Also, with the many over-reaching mandates from the world super powers have been on many occasions, they always go too far and reach too deep and always end up doing more damage than before. What normally happens is that businesses, always find a way around greater and, in some cases, loosely regulated but unfair taxation.

What can happen is that companies, will begin to incorporate (hopefully in the Caribbean) in low tax jurisdictions and move away from larger industrialized nations for good.

With the global span of multinational corporations, this is not a far fetched idea. A prime and recent example of this--outside of the many companies that migrated to Latin America and Canada-- is with and when the Sarbanes Oxley (SOX) act on corporate governance and better accounting standards, passed in the US congress. The UK, saw a surprising rise in companies moving to their jurisdiction. The evidence on this, as seen through the eyes of many analysts, is in the rise in the listing of foreign companies in the UK's Alternative Market, primarily. Small and medium sized companies, took advantage of the opportunities the UK granted to companies--with high corporate taxes, included.

While it can be said that SOX, improved accountability in US corporations. However, with the recent financial crisis with the collapse in accounting and risk standards as well as moral standards of Wall Street financiers, the merits of SOX seems overshadowed. Also, it can also be said conversely that the UK, offers allot more than any suggested lower corporate governance structures and 'negotiable' tax structures.

Ultimately, this is not a time for fear. But, this is a time to think. And, then, put meaningful action into our pooled reserves of ideas, to impact the majority for better opportunities for the majority.

Tuesday, March 10, 2009

Inter-Governmental Organizations are doing their part!

I used to bash inter-governmental organizations and development agencies, for them being too intrusive in country decision making.

But, my outlook has changed DRAMATICALLY.... ever since working for one. You never know what you are up against, until you get involved.

Reason why? Because, I know what they are up against in trying to do good, with the framework for development that they have. In some cases, for example Africa, they have no development framework at all.

Org's like the IMF/World Bank/IADB/ADB and any other development institution, do not have it easy in regards to bringing change to the disadvantaged and developing what we have for best benefit.

This is why a good push by most org's has been towards educating professionals that are indigenous, for them to, in turn, go about and articulate what is needed on the ground, to how that may affect policy interventions and then, put that into some context in regards to their organization's development mandate.

The bottleneck's of culture; regulatory regimes and; in some cases, lack of political will, can and do kill a good initiative even before it started. Not on purpose, but because their is so much work that has to be done to get it right.

So, I can appreciate why the IMF and the World Bank, have attached to their lending practices, stipulations on what countries should do to make these interventions more effective.

Not all of the time the interventions or the regulations to facilitate the interventions are in sync with national realities of said dilemma's. But, in order to move forward, someone has to make it clear that this is the direction we must move in--even if national governments are for the intervention, to begin with.

I think, now, inter-organizations have been getting more of a bad wrap, than I think they deserve. In fact, many of them are mandated to "work" with governments.

It's more than tricky and I appreciate the work they do on alleviating poverty and regulating standards for a better world, more than I ever did right now!

Ron Kirk on course to be US Trade Rep!

Ron Kirk is the former Dallas Mayor. He is on track to become the next US Trade Representative, with the tax issues he faced.
No tax..no problem!!

I don't know why it's so difficult for Dem's to pay their taxes!?!?!

Pres. Obama cannot be pleased, at all!

Monday, March 9, 2009

Rate cut for what? BOE!?!?

The BOE, reported on this blog and all over, cut rates last week to .50%. However, the BOE put out a report that states that coins and notes in circulation increased.

Seasonally adjusted, notes and coin outstanding in February were, on average, 1.0 % higher than in January. The twelvemonth growth rate increased to 8.3% from 7.8% in January.

Report, Narrow Money (Notes & Coin) and Reserve Balances
February 2009


Is the BOE just winging it?

Looks like...hyper-inflation, on the way!

I guess the BOE, is planning to tax that increase in purchases down the line, re-adjusted to inflation, and hike rates from their historic lows.

Will this sit well with the ECB...who cares!?!?! The UK has no plans on joining the Eurozone.

But, issues will arise in regards to competition and market penetration. Because, if goods will be taxed in the future and, the UK has an advantage in low rates now, their purchasing power, will be increased. In the same token, higher taxes on import goods--which will be the assumption moving forward--will put Euro exports at risk, at least!

The last pre-budget report, analyzed on this blog, read that the assumption is based on global demand increasing in the long future--by the end of this year. This certainly factors in European competitors. Germany, France and Poland, should be concerned.

Also, taxes have not been dramatically decreased--VAT went down in the BOE pre-budget by only 2% (15% from 17%, if my memory serves me correctly) and, it is up until 2010. 2010 seems like a long way, but the BOE gave itself some rope with lowering the rates. But, money is already growing in circulation, MO, out of the BOE vault.

So, savings--by virtue of the hard currency circulation outside of the BOE-- are up as well as the assumption that bank's having money in their tills. Folks have money, or, at least access to money from their finance institutions. At least, at the face of it.

This is a gamble, based on assumptions on the global economic rebound--but, borders right on the hinge of economic pricing disaster.

OECD: Building better tax consensus!

No can't ever say that the OECD isn't consistent. They are always dreaming up ways to re-invent their tax crackdown. The latest is their tax crackdown on transfer pricing of multi-nationals--MNE's.

They recently delivered a list of public comments to their TRANSFER PRICING ASPECTS OF BUSINESS RESTRUCTURINGS: DISCUSSION DRAFT FOR PUBLIC COMMENT
19 SEPTEMBER 2008 TO 19 FEBRUARY 2009
...yes, I did just copy and paste the title of the document.

They reckon in the main report that a lack of true oversight in this area, may lead to significant uncertainty for business as well as for governments and possible double taxation or double non-taxation, in the absence of a common understanding.

Sounds fair enough. But, I thought MNE's "outsourced" to gain an advantage and, transfer pricing, comes with that benefit of outsourcing?

In any event, the report, in regards to the strength of its implications, is weak. For example, they have a criteria that would allow for MNE's to be taxed under the rational assumption of domestic businesses, that employ the same tactic. Basically, it's like a dog chasing its tail.

The practice is for an MNE and the cross border effect, is what is at the core. If you are going to set up a criteria that allows it to be taken into account as a domestic firm--along with the same concerns not being relevant-- then, you basically would have to set up a root origin and the national government, would be responsible for the taxation. Not what I think the OECD had in mind, in regards to enforcement of any laws/taxation regulation to come of it.

The comments are rather mixed. Some are weary of the report itself, citing that it's giving over-arching guidelines to governments for more taxation and reasons for it. To others, feeling that it is rather appropriate in many regards. It's hard to bead who's who...but, as more details come out about it, you will get a sense of the politics behind the effort.

The OECD, did not do all of that work, to come up with no sound move forward to tax more!

In any event...the report, is really REALLY boring--why did I read any of it, you ask!?!?!

Enjoy!

Sunday, March 8, 2009

Another round of rate cuts!

The European Central Bank and the Bank of England cut rates to 1.5% and 0.50%, respectively, last week.

Not all are thrilled. Including Prof. Willem Buiter of the LSE over at the FT in his blog.

Prof. Buiter is becoming sort of a worry wart of sorts. But, he does raise interesting points. The main point for example is that: "It is certainly not helpful from the point of view of getting the banks to use the additional reserves they hold to boost their lending, that the Bank of England has reduced the opportunity cost to commercial banks of holding large reserves, by eliminating the 25 basis points penalty on the operational standing deposit facility."

There is always a danger that when you cut a rate, it has an adverse effect on other rates and industries depending on stable rates. And, on the flip side, you counteract and do the opposite to what you have intended--like Buiter's case.

In his case, the clear issue is that when you lower rates to allow bank's to have more stand-alone capital, through discount windows and other lending agreements, you would lower the rates for the operational standing deposit facility, increasing their demand for short term capital and a cheaper rate--to then, be able to send it back at less the cost. With, still, no increased lending to the average consumer.

Misguided inflation, while not an example expressed by Buiter in this case, is also something that can have many different deflections indeed.

Perhaps the excess in short term liquidity, is supposed to tamp down long term hyper-inflation, while increasing banking confidence to lend responsibly, with increasing the exchange possibilities and avenues to greater capital and liquidity?

I think the issue is keeping the bank's moving, as opposed to keeping them stagnant--zombie-like--without risk of increasing money supply and incurring hyper-inflation.

In any event, in a nutshell, once banks are losing money and the economy the way that it is, expect the rates in the UK to go to zero.

The ECB may not go that low. But, who would have thought that we would have such a financial collapse.

Monday, March 2, 2009

UK lending down!

BOE reports that Net lending to individuals has decreased over the last month and have been decreasing since last year, on all fronts-- secured on lending and consumer credit.

I guess it was a no-brainer.

Tech issues!

Hi all,

I had some technical difficulties over the weekend. Both my dial up and my wireless went on the fritz, on top of my PC crashing.

So, from Saturday night, I had no service.

Still not out of the clear as yet as I need to update my windows. Which is a simple process, but my product key is out of date--or overused--so, I have to find another way to get me sorted out in the next two days, or else my PC will crash...AGAIN!!

Thanks.

Youri

It all's happening so fast!

Last week was a horrendous week for the banking industry in Europe and in the USofA and, believe it or not, the Caribbean. There is also some spill over into this week, but, as always, these issues are continually developing. But, while we had bad news on at least two fronts, we also had some "OK" news on one front. Read on...


First, the bad news. The Royal Bank of Scotland (RBS) went to the UK government for 25bn pounds of additional cash into the bank as well as insure up to 325 bn pounds of its existing portfolio. Allot of this comes as a shock to many, who felt that, yes, Sir Goodwin made a bad mistake at the wrong time in acquiring ABN-AMRO, but, it was minimal and his departure, was due to his overall megalomaniac style of acquisition, rather than overtly risky asset management throughout his tenure.

Some may say that this over-purchasing of financial after financial of Goodwin, was overall overt bad management. But, acquisition of good companies in good times, which Goodwin did many times over, is never a bad thing--while he sacrificed dividends on a few occasions, he paid out substantial dividends too, during his tenure.

This government intervention, however, maybe just additional security for RBS. The details are astounding, as Prof. Buiter at the LSE in an FT blog pointed out, though.

The tax payer, will not get their value for money in the first instance because, they will be repaid in B-shares and with being paid with B-shares, the interest will only be 2% of the total insured loan of 325 bn pounds (about 6 bn or so). Which, when adjusted to inflation, will result in a net zero return to investment after the loan is repaid.

All of this, amidst losses of over 9 bn pounds of RBS reported over the last month. The government owns 70% of RBS as of today and may raise the stake to 75%--but no more says officials.

What is done is done and the government, is not about to let the Queen's bank go belly-up!

HSBC on the other hand, has reported that it will be closing some of its operations as well as scaling back ventures in America. Also, they will be issuing a rights share of over 3bn USD. Raising cash in the short term, to buffer itself against possible steepening of the global financial and economic downturn. This is prudent. Although it is a bell weather for bad things to come, it is better to go to the market, rather than to the government.

The third issue--and this hits closer to home--is the ongoing CLICO debacle that started in Trinidad and Tobago and wound its way around the other CLICO subsidiaries around the Caribbean and Latin America.

The CLICO outpost in the Bahamas is in liquidation. The government had just announced that due to this liquidation, as a result of the parent company in Trinidad calling in some of its resources to pay off investors, among other things, will make sure that policy holders will be secured through another insurer as to not incur the losses of capital and money of policy holders, in the midst of this liquidation.

The CLICO branches in Belize, Cayman's and in Barbados, have already wound down and have a net customer bas of about 200--if that.

What should have happened, if it has not already happened, is that government, should insure all policy holders and then sell them to another insurer--if not buy the polices outright and re-sell them to another insurer, at face value.

There may be transaction costs and losses, but, to have policy holders lose their money out right--which in the Bahamas is about 20 thousand plus policy holders, is something no one wants on their hands.

Also, now, more breaking news is that AIG, the giant American insurer, is back to the American government for more bail-out money. The Federal reserve announced the basic terms of the package today and will release more data, as timely as it can.

But, from the outset, it appears as if a direct cash injection of 30bn, now, is a good enough amount to base your sights on.

Bad news and some not so bad news, but, it could be worse all around!