Tag: news

JPMorgan’s “Bitcoin-Alternative” Patent Rejected (175 Times)

Earlier in the week, we detailed JPMorgan's attempt to create their own "web cash" alternative to Bitcoin (and Sberbank's talk of doing the same). However, as M-Cam details, following the failure of the first 154 'claims', JPMorgan issued a further 20 claims – which were summarily rejected (making JPMorgan 0-175 for approved claims). As they note, The United States Patent & Trademark Office (USPTO)’s handling of applications like JPMorgan’s ‘984 application ("Bitcoin Alternative") highlights the need to fix a broken system – patent applications of existing inventions need to be finally rejected and not be resurrected as zombies (no matter how powerful the claimant).

 

Via M-Cam,

“BITCOIN is booming.”…?

On August 5, 2013 JPMorgan Chase & Co (JPMorgan) filed an application for an electronic mobile payment system which has eerie similarities to the popular online currency Bitcoin. Unfortunately for JPMorgan, all of the claims, totaling 175 claims, as of October 18, 2013, for published US patent application 20130317984 (the ‘984 application) have been either cancelled or rejected.

Analysis

Below is a view of JPMorgan’s ‘984 application.

After the initial 154 claims were abruptly cancelled, JPMorgan’s attorney submitted 20 additional claims which the examiner, Jagdish Patel, issued non?final rejections for all 20 of the new claims in October 2013. This makes JPMorgan 0?175 in terms of approved claims. The last 20 claims were rejected for non?patentability and indefiniteness under Title 35 United States Code (U.S.C.) Sections 101 and 112.

However, Mr. Patel might well have rejected the claims because of the ‘On Sale Bar’ rule under 35 U.S.C. Section 102(b), meaning that if the invention has been on sale for over a year then the invention is no longer patentable. Under the ‘On Sale Bar’ rule, the application could be invalid because it closely mirrors Bitcoin with features such as making free and anonymous electronic payments and Bitcoin has been in circulation since 2009.

Conclusion

The United States Patent & Trademark Office (USPTO)’s handling of applications like JPMorgan’s ‘984 application highlights the need to fix a broken system.

Patent applications of existing inventions need to be finally rejected and not be resurrected as zombies.

 

Part of the problem of a system in which one third of patents are seriously or fatally impaired is that companies are allowed to patent items that their competitors have already invented.

Obviously, large financial institutions want in on the online alternative currency action. But they would be well advised to pursue novel and non?obvious approaches that do not duplicate existing commercial options with respect to a virtual medium of exchange.

Full Patent Glossary here (PDF)


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/GNVGuhGxTvk/story01.htm Tyler Durden

New: Why Bankrupt Detroit Should Sell Off its Art Masterpieces

Detroit is
bankrupt, with billions of dollars in obligations it can’t meet.
One of the most controversial proposals is to sell of most or all
of the city’s holdings in The Detroit Institute of Arts, which
houses works by Bruegel, Picasso, Van Gogh and others that are
valued at as much as $866 million.

Reason’s Nick Gillespie says that Motown should unload its
trove, especially if the city wants people to actually see the
stuff.

Building a future around a slogan
like Detroit: Come for the Bankruptcy but Stay
for the Bruegel is no way to resurrect a city
whose population peaked back in
1950….

Selling off Detroit’s enviable art collection thus
represents a truly rare win-win on public policy: The city will get
much-needed cash that might help it reboot itself, and museums in
places that are thriving will be able to add to their offerings.
Nobody in their right mind would think of denying Motown residents
the right to flee the city in search of a brighter future. It
shouldn’t really be any different for works by Rodin, Bernini, or
Whistler.

View this article.

from Hit & Run http://reason.com/blog/2013/12/15/new-why-bankrupt-detroit-should-sell-off
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Guest Post: Who Needs The Debt Ceiling?

Submitted by Russell Lamberti of the Ludwig von Mises Institute,

US lawmakers reached a budget deal this week that will avert the sequester cuts and shutdowns. These fiscal “roadblocks” supposedly damaged investor confidence in 2013, although clearly no one told equity investors who’ve chased the S&P 500 up 26 percent this year. But even so the budget deal is seen by inflationists as only half the battle won, because it doesn’t deal with the pesky debt ceiling. Unsurprisingly, the old calls for a scrapping of the debt ceiling are being heard afresh.

Last week, The Week ran an opinion piece by John Aziz which argues that America (and all other nations for that matter) should keep borrowing until investors no longer want to lend to it. To this end, it is argued, the US should scrap its debt ceiling because the only debt ceiling it needs is the one imposed by the market. When the market doesn’t want to lend to you anymore, bond yields will rise to such an extent that you can no longer afford to borrow any more money. You will reach your natural, market-determined debt ceiling. According to this line of reasoning, American bond yields are incredibly low, meaning there is no shortage of people willing to lend to Uncle Sam. So Washington should take advantage of these fantastically easy loans and leverage up.

Here’s part of the key paragraph from Aziz:

Right now interest rates are very low by historical standards, even after adjusting for inflation. This means that the government is not producing sufficient debt to satisfy the market demand. The main reason for that is the debt ceiling.

What this fails to appreciate is that interest rates are a heavily controlled price in all of today’s major economies. This is particularly true in the case of America, where the Federal Reserve controls short-term interest rates using open market operations (i.e., loaning newly printed money to banks) and manipulates long-term interest rates using quantitative easing. By injecting vast amounts of liquidity into the economy, the Fed makes it appear as though there is more savings than there really is. But US bond yields are currently no more a reflection of the market’s demand for US debt than a price ceiling on gasoline is a reflection of its booming supply. Contra the view expressed in The Week, low rates brought about by contrived zero-bound policy rates and trillions of dollars in QE can mislead the federal government into borrowing more while at the same time pushing savers and investors out of US bond markets and into riskier assets like corporate bonds, equities, exotic derivatives, emerging markets, and so on.

Greece once thought that the market was giving it the green light to “produce” more debt. Low borrowing rates for Greece were not a sign of fiscal health, however, but really just layer upon layer of false and contrived signals arising from easy ECB money, allowing Greece to hide behind Germany’s credit status. As it turned out, a legislative debt ceiling in Greece (one that was actually adhered to) would have been a far better idea than pretending this manipulated market was a fair reflection of reality. Investors were happy to absorb Greece’s debt until suddenly they weren’t.

This is the nature of sovereign debt accumulation driven by easy money and credit bubbles. It’s all going swimmingly until it’s not. And there is little reason to think this time the US is different. Except that America might be worse. The very fact of the Fed buying Treasuries with newly printed money proves Washington is producing too much debt. China even stated recently that it saw no more utility accumulating any more dollar debt assets. If the whole point of QE is to monetize impaired assets, then the Fed likely sees Treasury bonds as facing considerable impairment risk. Theory and history are clear about the reasons for and consequences of large-scale and persistent debt monetization.

Finally, it is wrong to assert that the debt ceiling is the main reason for America’s fiscal deficit reduction. The ceiling has never provided a meaningful barrier to America’s borrowing ambitions, hence the dozens of upward adjustments to the ceiling whenever it threatens to crimp the whims of Washington’s profligate classes. America’s rate of new borrowing is falling because all the money it has printed washed into the economic system and found its way back into tax revenues. Corporate profits are soaring to all-time highs on dirt cheap trade financing. Corporate high-grade debt issuance has set a new record in 2013. Companies are rolling their short-term debts, now super-cheap thanks to Bernanke’s money machine, and issuing long, into a bubbly IPO and corporate bond market. The last time corporate profits surged like they’re doing now was during the credit and housing bubble that preceded the unraveling and inevitable bust in 2008/09.

These are money and credit cycle effects. The debt ceiling has had precious little to do with it. Moreover, US debt is neither crimped nor the US Treasury Department austere. Instead, the national debt is soaring, $60,000 higher for every US family since Obama took office and rising. Add to this the fact that the US Treasury’s bond issuance schedule is actually set to rise in 2014 due to huge amounts of maturing debt needing to be rolled over next year, and the fiscal significance of the debt ceiling fades even further.

The singular brilliance of the debt ceiling however, is that it keeps reminding everyone that there is a growing national debt that never seems to shrink. That is a tremendous service to American citizens who live in the dark regarding the borrowing machinations of their political overlords. Yes, politicians keep raising the debt ceiling, but nowadays they have to bend themselves into ever twisty pretzels trying to explain why to their justifiably skeptical and cynical constituents. Most people don’t understand bond yields, quantitative easing, and Keynesian pump-a-thons too well, but they sure understand a debt ceiling.

 

Conclusion

Those who adhere to the don’t-stop-til-you-get-enough theory of sovereign borrowing, and by extension argue for a scrapping of the debt ceiling, couldn’t be more misguided. In free markets with no Fed money market distortion, interest rates can be a useful guide of the amount of real savings being made available to borrowers. When borrowers want to borrow more, real interest rates will rise, and at some point this crimps the marginal demand for borrowing, acting as a natural “debt ceiling.” But when markets are heavily distorted by central bank money printing and contrived zero-bound rates, interest rates utterly cease to serve this purpose for prolonged periods of time. What takes over is the false signals of the unsustainable business cycle which fools people into thinking there is more savings than there really is. Greece provides a recent real-world case study of this very phenomenon in action. In these cases we are likely to see low rates sustained during the increase in government borrowing, only for them to quickly reset higher and plunge a country into a debt trap which may force default or extreme money printing.

Debt monetization has a proven track record of ending badly. It is after all the implicit admission that no one but your monopoly money printer is willing to lend to you at the margin. The realization that this is unsustainable can take a while to sink in, but when it does, all it takes is an inevitable fat-tail event or crescendo of panic to topple the house of cards. If the market realizes it’s been duped into having too much before the government decides it’s had enough, a debt crisis won’t be far away.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/rV6TPs2KS2Q/story01.htm Tyler Durden

Video: Are Democrats Really Pro-Choice? Emily Ekins Explains December Reason-Rupe Poll Results

“Are Democrats Really Pro-Choice? Emily Ekins Explains December
Reason-Rupe Poll Results” is the latest video from ReasonTV. Watch
above or click on the link below for video, full text, supporting
links, downloadable versions, and more Reason TV clips.

View this article.

from Hit & Run http://reason.com/blog/2013/12/15/video-are-democrats-really-pro-choice-em
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"Money For Nothing" And The Survival Of The Fattest

It is perhaps a testament to the ability of the oligarchy (that 1% which owns some 50% of all US assets) to distract and distort newsflow from what really matters, that a century after the creation of the Federal Reserve, the vast majority of Americans are still unfamiliar with the most important institution in the history of the US – an institution that unlike the government is not accountable to the people (if only as prescribed on a piece of rapidly amortizing paper), but merely to a few banker stakeholders as Bernanke’s actions over the past five years have demonstrated beyond any doubt. It is for their benefit that Jim Bruce’s groundbreaking movie “Money for Nothing” is a must see, although we would urge everyone else, including those frequent Zero Hedge readers well-versed in the inner workings of the Fed, to take the two hours and recall just who the real enemy of the people truly is.

A quick note on producer, director and writer Jim Bruce. While Jim has been a student of financial markets for over a decade, and began writing a newsletter in 2006 warning about the oncoming financial crisis, what is perhaps most notable is that it was his short trades in 2007 and 2008 that helped finance a significant portion of Money For Nothing’s budget.

However, most impressive is Bruce’s ability to bring together such a broad and insightful cast which includes both current and former Fed members, as well as some of the most outspoken Fed critics, among which:

  • Paul Volcker
  • Janet Yellen
  • Alice Rivlin
  • Alan Blinder
  • Richard Fisher
  • Thomas Hoenig
  • Jeffrey Lacker
  • Jim Grant
  • Allan Meltzer
  • Raghuram Rajan
  • Charles Plosser
  • Tony Boeckh
  • Jeremy Grantham
  • Todd Harrison

… and many others.

From the film’s official website:

MONEY FOR NOTHING is a feature-length documentary about the Federal Reserve – made by a Team of AFI, Sundance, and Academy Award winners – that seeks to unveil America’s central bank and its impact on our economy and our society.

 

Current and former top economists, financial historians, and investors and traders provide unprecedented access and take viewers behind the curtain to debate the future of the world’s most powerful financial institution.

 

Digging beneath the surface of the 2008 crisis, Money For Nothing is the first film to ask why so many facets of our financial system seemed to self-destruct at the same time. For many economists and senior Fed officials, the answer is clear: the same Fed that put out 2008’s raging financial fire actually helped light the match years before.

 

As the global financial system continues to falter, the Federal Reserve finds itself at a crossroads. The choices it makes will greatly influence the kind of world our children and grandchildren inherit. How can the Federal Reserve steer our nation toward a more sustainable path? How can the American people – who the Fed was created to serve – influence an institution whose inner workings they may not understand?

 

The key tenet underlying Money For Nothing is our belief that a more fully and accurately informed public will promote greater accountability and more effective policies from our central bank – no matter the conclusions any individual draws from the film.

Sadly this is where we differ, for it is Zero Hedge’s opinion that not only is it now far too late to promote any type of change at the top, but the best policy is to urge the Fed on in its ludicrous policies, in order to lead to the catastrophic culmination of 100 years of disastrous wealth-transfer policies, which unfortunately is the only possible way a cleansing systemic reset – one that would finally eradicate the scourge of central-planning – can be unleashed upon a broken and malfunctioning system in its final throes of status quo existence.

Then again, perhaps there is a chance.

Enjoy the trailer and see the movie either on Blu-Ray or in the theater:

 

Finally, as an added bonus, here are some thoughts from the creator and that supreme beneficiary of the Fed’s wealth transfer protocols, billionaire David Tepper, on how Ben Bernanke managed to, temporarily, circumvent Darwin’s laws and how it is not the fittest but the fattest that survive.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/8xgDlwyEc1o/story01.htm Tyler Durden

“Money For Nothing” And The Survival Of The Fattest

It is perhaps a testament to the ability of the oligarchy (that 1% which owns some 50% of all US assets) to distract and distort newsflow from what really matters, that a century after the creation of the Federal Reserve, the vast majority of Americans are still unfamiliar with the most important institution in the history of the US – an institution that unlike the government is not accountable to the people (if only as prescribed on a piece of rapidly amortizing paper), but merely to a few banker stakeholders as Bernanke’s actions over the past five years have demonstrated beyond any doubt. It is for their benefit that Jim Bruce’s groundbreaking movie “Money for Nothing” is a must see, although we would urge everyone else, including those frequent Zero Hedge readers well-versed in the inner workings of the Fed, to take the two hours and recall just who the real enemy of the people truly is.

A quick note on producer, director and writer Jim Bruce. While Jim has been a student of financial markets for over a decade, and began writing a newsletter in 2006 warning about the oncoming financial crisis, what is perhaps most notable is that it was his short trades in 2007 and 2008 that helped finance a significant portion of Money For Nothing’s budget.

However, most impressive is Bruce’s ability to bring together such a broad and insightful cast which includes both current and former Fed members, as well as some of the most outspoken Fed critics, among which:

  • Paul Volcker
  • Janet Yellen
  • Alice Rivlin
  • Alan Blinder
  • Richard Fisher
  • Thomas Hoenig
  • Jeffrey Lacker
  • Jim Grant
  • Allan Meltzer
  • Raghuram Rajan
  • Charles Plosser
  • Tony Boeckh
  • Jeremy Grantham
  • Todd Harrison

… and many others.

From the film’s official website:

MONEY FOR NOTHING is a feature-length documentary about the Federal Reserve – made by a Team of AFI, Sundance, and Academy Award winners – that seeks to unveil America’s central bank and its impact on our economy and our society.

 

Current and former top economists, financial historians, and investors and traders provide unprecedented access and take viewers behind the curtain to debate the future of the world’s most powerful financial institution.

 

Digging beneath the surface of the 2008 crisis, Money For Nothing is the first film to ask why so many facets of our financial system seemed to self-destruct at the same time. For many economists and senior Fed officials, the answer is clear: the same Fed that put out 2008’s raging financial fire actually helped light the match years before.

 

As the global financial system continues to falter, the Federal Reserve finds itself at a crossroads. The choices it makes will greatly influence the kind of world our children and grandchildren inherit. How can the Federal Reserve steer our nation toward a more sustainable path? How can the American people – who the Fed was created to serve – influence an institution whose inner workings they may not understand?

 

The key tenet underlying Money For Nothing is our belief that a more fully and accurately informed public will promote greater accountability and more effective policies from our central bank – no matter the conclusions any individual draws from the film.

Sadly this is where we differ, for it is Zero Hedge’s opinion that not only is it now far too late to promote any type of change at the top, but the best policy is to urge the Fed on in its ludicrous policies, in order to lead to the catastrophic culmination of 100 years of disastrous wealth-transfer policies, which unfortunately is the only possible way a cleansing systemic reset – one that would finally eradicate the scourge of central-planning – can be unleashed upon a broken and malfunctioning system in its final throes of status quo existence.

Then again, perhaps there is a chance.

Enjoy the trailer and see the movie either on Blu-Ray or in the theater:

 

Finally, as an added bonus, here are some thoughts from the creator and that supreme beneficiary of the Fed’s wealth transfer protocols, billionaire David Tepper, on how Ben Bernanke managed to, temporarily, circumvent Darwin’s laws and how it is not the fittest but the fattest that survive.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/8xgDlwyEc1o/story01.htm Tyler Durden

Shikha Dalmia Questions Rand Paul's Plan For Saving Detroit

Rand Paul

Last week, Rand Paul rushed in where Republicans fear to tread:
Detroit. He’s no fool but his idea for saving Detroit by creating
Economic Freedom Zones is simply “yesterday’s fashion in new
accessories,” notes Shikha Dalmia. It won’t work—not because it
doesn’t make sense, but because Washington won’t allow a sensible
version to come into effect.

View this article.

from Hit & Run http://reason.com/blog/2013/12/15/shikha-dalmia-on-why-rand-paul-is-not-se
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Shikha Dalmia Questions Rand Paul’s Plan For Saving Detroit

Rand Paul

Last week, Rand Paul rushed in where Republicans fear to tread:
Detroit. He’s no fool but his idea for saving Detroit by creating
Economic Freedom Zones is simply “yesterday’s fashion in new
accessories,” notes Shikha Dalmia. It won’t work—not because it
doesn’t make sense, but because Washington won’t allow a sensible
version to come into effect.

View this article.

from Hit & Run http://reason.com/blog/2013/12/15/shikha-dalmia-on-why-rand-paul-is-not-se
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Another German Steps Down From The ECB As Joerg Asmussen Leaves For Deputy Labor Minister Post

One of the more vocal members of the ECB’s governing council and executive board, 47-year old German Joerg Asmussen, surprisingly announced this morning that he is stepping down for “purely private family reasons.” Concurrently, the German who has been a less tenuous version of his far more outspoken and hawkish compatriot Jens Weidmann, announced that he would accept a job as Deputy Labour Ministry job in the new German
government. What is surprising is that the German was not appointed finance minister in Merkel’s new cabinet, although with Schrodinger Schauble determined to keep his position it is explainable. What is more surprising is that Asmussen replaced none other than Juergen Stark, who once was said to be Trichet’s successor, and who dramatically quit the ECB over disagreements on the bank’s bond monetization program. One wonders: is Joerg’s untimely departure just the latest indication that the ECB is finally preparing to unroll a blanket quantitative easing program, just as BNP predicted it would, in its desperate, last-ditch attempt to defeat Europe’s slide into outright deflation and credit-creation collapse? Certainly, if Weidmann were to quietly leave next, then whatever you do, don’t stand below the Euro.

The full details from Reuters:

Asmussen, a member of the centre-left Social Democrats (SPD), was a highly regarded deputy Finance Minister in Berlin between 2008 and 2011 before being appointed to the ECB Executive Board by Chancellor Angela Merkel in 2012.

He has since become a well-recognised face in European financial circles, giving speeches from Athens to Madrid. His surprise return to Berlin and inclusion in the government adds a dash of international flair to the right-left coalition that takes office on Tuesday.

Asmussen said he wanted to move back from the ECB headquarters in Frankfurt – and accept what is ostensibly a lesser job – in order to spend more time with his young family.

“This wasn’t an easy decision for me,” the 47-year-old said in a statement to Reuters after the appointment was announced by Labour Minister Andrea Nahles.

“I’ll be stepping down soon as a member of the ECB Executive Board. The reasons for this step are purely private, having to do with my family situation.”

He added: “It’s just not possible in the long run to reconcile having a position based in Frankfurt, with frequent business trips, and having my family and especially my two very young children in Berlin. There is definitely no other reason.”

Asmussen succeeded Juergen Stark, who stepped down from the ECB board in a row over its bond-buying programme.

Alongside Bundesbank President Jens Weidmann, but with perhaps less tenacity, Asmussen at times criticised the ECB’s expansive policies. Both defended the ECB’s last interest rate cut in November as justified, however.

ECB President Mario Draghi said Asmussen will be missed.

“Joerg Asmussen has been a tremendous help in shaping the monetary policy in the past two years while successfully addressing many other challenges,” Draghi said in a statement. “I will personally miss him.”

Merkel said she was looking forward to working with Asmussen again, and that Germany would propose a successor at the ECB.

Among the top candidates are Bundesbank vice president Sabine Lautenschlaeger, BaFin head Elke Koenig and the head of the Halle institute for economic research, Claudia Buch – all women.

Asmussen’s name had been mentioned in recent months as a possible candidate for Finance Minister if the SPD took control of the ministry that it held in the last “grand coalition” from 2005 to 2009, when Asmussen was a deputy to Peer Steinbrueck.

But Asmussen had been consistently non-committal on the issue, saying he planned to fulfil his contract as an executive board member at the ECB that ran until end of 2019.

In the end, Merkel’s Christian Democrats (CDU) retained control of the Finance Ministry with veteran Wolfgang Schaeuble, 71, staying in charge.

While Asmussen has enjoyed a sterling reputation with the SPD’s conservative wing and across the aisle in Merkel’s CDU, he was viewed with suspicion by the SPD left – which is informally led by Nahles.

Asmussen’s move to the ministry could help improve his standing on the left in the long term. Nahles told Reuters she was looking forward to working with Asmussen as her deputy.

“I’m delighted that Joerg Asmussen will be a state secretary in the Labour Ministry and bring his great executive experience and full engagement into this key ministry,” she said.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/XC9K07leOk0/story01.htm Tyler Durden

The IMF Disagrees With Zero Hedge

On Thursday, after we presented an article by Simon Black in which the author suggested that the IMF was implicitly proposing a 71% tax-rate on Americans, by “suggesting that the US government could maximize its tax revenue by increasing tax brackets to as high as 71%”, the IMF took offense to this characterization, and tweeted out the following:

Naturally, the IMF has a right to its opinion, be it retroactive revisionism, or proactive humorous predictions about the future, which incidentally we have charted in the past showing just how “accurate” the IMF’s forecasting track record has been in recent years…

… but since the topic of taxation, be it on wealth (something we warned about in September 2011, which as depositors in Cyprus banks learned about the hard way in March of this year), or income is far less humorous, we leave it up to readers to decide just what the IMF is “proposing”, using only the IMF’s own words.

Below we present the key passage from the IMF’s October 2013 Fiscal Monitor report titled “Taxing Times.”

Whether those with the highest incomes could or should pay more has become a contentious political issue in many countries. Several, given large consolidation needs, have bucked the decades-long trend by increasing top personal income tax rates quite substantially: since 2008, Greece, Iceland, Ireland, Portugal, Spain, and the United Kingdom have all done so, on average by more than 8 percentage points.

 

Assessing whether there is untapped revenue potential at the top of the income distribution requires comparing today’s top marginal income tax rate with the marginal tax rate that would maximize the amount of tax paid by top income earners. The latter depends on two things: first, how responsive their taxable income is to that marginal rate—which in turn depends on both “real” decisions (on labor supply efforts and the like) and “paper” avoidance activities; and second, the distribution of income within that upper group. Ranges of revenue-maximizing top income tax rates can be calculated by combining existing estimates of the elasticity of taxable income with the data on income distribution used above. The average is about 60 percent. In several cases, current top marginal rates are toward the lower end of the range (Figure 17), implying that it might indeed be possible to raise more from those with the highest incomes.

 

How much more? The implied revenue gain if top rates on only the top 1 percent were returned to their levels in the 1980s averages about 0.20 percent of GDP (Figure 18), but the gain could in some cases, such as that of the United States, be more significant. This would not make much of a dent in aggregate inequality, for which, if that is the objective, more dramatic change would be needed.

Figure 17:

Some additional commentary from the WSJ from before our article, picking up where we left off in September 2011 with “The Coming Global Wealth Tax“, and curiously a piece the IMF had no problems with:

What the IMF calls “revenue-maximizing top income tax rates” may be a good indication of how much further those rates could rise: As the IMF calculates, the average revenue-maximizing rate for the main Organization of Economic Cooperation and Development countries is around 60%, way above existing levels.

 

For the U.S., it is 56% to 71%—far more than the current 45% paid in federal, state and local taxes by those in the top tax bracket. The IMF singles out the U.S. as the country where raising top rates toward 70% (where they were before the Reagan tax cuts) would yield the most revenue—around 1.25% of GDP. And with a chilling candor, the IMF admits that its revenue-maximizing approach takes no account of the well-being of top earners (or their businesses).

 

…

 

Of course these measures won’t return the world’s top economies to sustainable levels of debt. That could be achieved only through significant economic growth (the good way) or, as the IMF puts it, “by repudiating public debt or inflating it away” (the bad way). In October the IMF floated a bold idea that didn’t get the attention it deserved: lowering sovereign debt levels through a one-off tax on private wealth.

 

As applied to the euro zone, the IMF claims that a 10% levy on households’ positive net worth would bring public debt levels back to pre-financial crisis levels. Such a tax sounds crazy, but recall what happened in euro-zone country Cyprus this year: Holders of bank accounts larger than 100,000 euros had to incur losses of up to 100% on their savings above that threshold, in order to “bail-in” the bankrupt Mediterranean state. Japanese households, sitting on one of the world’s largest pools of savings, have particular reason to worry about their assets: At 240% of GDP, their country’s public debt ratio is more than twice that of Cyprus when it defaulted.

 

…

 

From New York to London, Paris and beyond, powerful economic players are deciding that with an ever-deteriorating global fiscal outlook, conventional levels and methods of taxation will no longer suffice. That makes weapons of mass wealth destruction—such as the IMF’s one-off capital levy, Cyprus’s bank deposit confiscation, or outright sovereign defaults—likelier by the day.

Finally, here is the IMF on the prospect of a “one-off” financial asset tax:

A One-Off Capital Levy?

 

The sharp deterioration of the public finances in many countries has revived interest in a “capital levy”— a one-off tax on private wealth—as an exceptional measure to restore debt sustainability. The appeal is that such a tax, if it is implemented before avoidance is possible and there is a belief that it will never be repeated, does not distort behavior (and ma
y be seen by some as fair). There have been illustrious supporters, including Pigou, Ricardo, Schumpeter, and—until he changed his mind—Keynes. The conditions for success are strong, but also need to be weighed against the risks of the alternatives, which include repudiating public debt or inflating it away (these, in turn, are a particular form of wealth tax—on bondholders—that also falls on nonresidents).

 

There is a surprisingly large amount of experience to draw on, as such levies were widely adopted in Europe after World War I and in Germany and Japan after World War II. Reviewed in Eichengreen (1990), this experience suggests that more notable than any loss of credibility was a simple failure to achieve debt reduction, largely because the delay in introduction gave space for extensive avoidance and capital flight—in turn spurring inflation.

 

The tax rates needed to bring down public debt to precrisis levels, moreover, are sizable: reducing debt ratios to end-2007 levels would require (for a sample of 15 euro area countries) a tax rate of about 10 percent on households with positive net wealth

… which promptly resulted in this “IMF Statement on Taxation” clarification.

So is Zero Hedge wrong as the IMF broadly trumpets? We’ll let readers decide. However, we just wanted to set the record straight – after all the last thing we want is for the IMF to admit it is wrong once again as it did in early 2013 with the whole “fiscal multipliers” fiasco (about which incidentally the IMF would be absolutely correct if instead of “austerity” the IMF were to use the proper term in its calculations: “corruption, gross government incompetence and epic capital misallocation“).


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/pGBXSFIrYsA/story01.htm Tyler Durden