Tag: news

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

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:

@zerohedge is wrong: IMF does not propose a 71% income tax.

— IMF (@IMFNews) December 13, 2013

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

Representing numbers that would put the adoption curve of Obamacare to shame, the Bitcoin equivalents of Paypal, BitPay, announced last week that it has now processed over $100 million in BTC transactions in 2013, has increased its merchant base to over 15,500 approved merchants in over 200 countries, but most importantly, has seen a surge in the number of merchants using its BTC payment pricing plan, by 50% since October while the volume of transactions has tripled. While the surge in the currency adoption has matched the explosive rise in the USD-value of the currency, the news should comfort any lingering doubts whether Bitcoin is a credible payment system.

From the BitPay press release:

BitPay Inc, the world leader in business solutions for virtual currencies, announces it has processed over $100 million in transactions this year, and has increased its merchant base to over 15,500 approved merchants in 200 countries. Since the announcement of the new All Inclusive Pricing Plan in October, along with the integration with Shopify in November, the number of new merchants has increased over 50% and the transaction volume has tripled.

 

“This year, the 2013 holiday season was Adafruit’s biggest ever. We are delighted to offer bitcoin payments via BitPay to our community and customers. It was fast and easy, hundreds of orders and happy customers getting educational electronics, using bitcoin!” shared Limor Fried, Founder and Engineer with Adafruit.

 

Bitcoin has “clear potential for growth and could become a major means of payment for online transactions” a Bank of America analyst told CNBC. As the number of Bitcoin users continues to increase, merchants such as Adafruit, BTCTrip, Alliance Virtual Offices, and Clearly Canadian, see the value of working with BitPay to help expand their business.

Which explains why Europe, which over a year was the first entity to cry foul about Bitcoin (recall from November 2012: “The ECB Explains What A Ponzi Scheme Is; Awkward Silence Follows“) when the USD-price of one BTC was still in the double digits, is doubling down in its fight against the fiat alternative, this time as the European Union’s top banking regulator is preparing to actively supervise the virtual currency. From Bloomberg:

Trading Bitcoins could bleed you dry, the European Union’s top banking regulator said as it weighs whether to regulate virtual currencies. Thefts from digital wallets have exceeded $1 million in some cases and traders aren’t protected against losses if their virtual exchange collapses, the European Banking Authority said today in a report warning consumers about the risks of cybermoney.

 

Virtual currencies such as Bitcoin have come under increased scrutiny from regulators and prosecutors around the globe. China’s central bank barred financial institutions from handling Bitcoin transactions last week and German police arrested two suspects in a fraud probe into illegally generated Bitcoins worth 700,000 euros ($963,000).

 

“The technology is still relatively immature and lacks the infrastructure, regulation and understanding of the risks that are taken for granted in conventional financial systems,” Matt Rees, assistant director at Ernst & Young LLP, said in an e-mail. “It is not surprising then that thefts, frauds and other deceptions are currently commonplace.”

 

Since Bitcoins exist as software, the virtual currency isn’t controlled by any government or central bank. The digital money emerged in 2008, designed by a programmer or group of programmers going under the name of Satoshi Nakamoto, whose real identity remains unknown.

 

The virtual currency gained credibility last month after law enforcement and securities agencies said in U.S. Senate hearings that it could be a legitimate means of exchange. The price of Bitcoins topped $1,000 as speculators anticipated broader use of digital money.

Because, you see, it is the possibility of theft that has regulators worried, not that alternative currencies could undermine the fiat system (especially in Europe where the artificially common currency is not exactly the world’s most admired construct) the world is so hooked on.

So what does Europe propose? Simple: do more of what it truly excels at: tax stuff.

People holding virtual currencies may be subject to value-added or capital gains taxes, the EBA said.

 

The government of Norway, Scandinavia’s richest nation, said it would treat Bitcoins as an asset and levy capital gains tax on them.

 

“Bitcoins don’t fall under the usual definition of money or currency,” Hans Christian Holte, director general of taxation in Norway, said in an interview.

 

For virtual currencies to be regulated in the EU, the EBA would have to get approval from the European Commission, the 28-nation bloc’s executive arm.

 

We “support the EBA warning to consumers on the risks associated with virtual currencies,” Michel Barnier, the EU’s financial services commissioner, said in an e-mail.

In other words, it is only a matter of time before Europe does all it can to make the use of Bitcoin even more prohibitive, which in a Europe that is flooded with bad debt, with a banking sector whose credibility is non-existent resulting in loan “creation” plunging at a record pace, and a banking union “resolution mechanism” that is as improbable now as it has ever been, means more deposit bail-ins in a form that “fall under the usual definition of money” are just a matter of time.

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

Overnight rhetoric in Asia became increasingly heated when China's Ministry of Foreign Affairs expressed "strong dissastisfaction" at the slanderous actions of Abe's Japanese government over the Air Defense Identification Zone (ADIZ) and the "theft and embezzlement" of the Diaoyu Islands. "Japan's attempt is doomed to failure," China warned ominously and as we highlight below, a reflection on the possible rational reasons for China and Japan to go to war over the Senkaku/Diaoyu islands highlights the seriousness of the ongoing brinksmanship in the East China Sea. If a war is fought over these long-contested islands, it will have an eminently rational explanation underlying all the historical mistrust and nationalism on the surface. War in the East China Sea is possible, despite the economic costs.

 

The 'triangle' of doom in the East China Sea…

 

 

Via Google Translate,

Q: Japanese Prime Minister Shinzo Abe held in Japan recently – especially during the ASEAN summit, accusing China to unilaterally change the status of the East China Sea, East China Sea, said China's air defense identification zone designation is improper for the high seas against the freedom of overflight, asked China to revoke the measure. What is your comment?

 

A: We have made some Japanese leaders use international slanderous remarks China expresses strong dissatisfaction.

 

Diaoyu Islands are China's inherent territory. Japan over the Diaoyu Islands theft and embezzlement have always been illegal and invalid. Since last year, the Japanese deliberately provoked the Diaoyu Islands dispute, unilaterally change the status quo of the Diaoyu Islands issue is none other than the Japanese themselves. In this regard, the Chinese law to take the necessary measures to safeguard national sovereignty and territorial fully justified, blameless.

 

East China's air defense identification zone designation is intended to protect national defense aviation security measures, consistent with international law and international practice, do not affect the countries of aircraft overflight freedoms enjoyed under international law. Deliberate on this issue in Japan to China to launch an attack, an attempt to tamper with the concept, the implementation of double standards, mislead international public opinion, Japan's attempt is doomed to failure.

 

"Rationalist Explanations For War" In The East China Sea

Submitted by Ankit Panda of The Diplomat,

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Y1ytMiDqgLs/story01.htm Tyler Durden