Tag Archives: government

S&M or S&H?

That is the question that should be on the minds of people everywhere! You see Self-interest and Misinformation is every bit a tool of application in the Sade-Masochistic approach that politicians use, or if we use names it would be the dialogue between Alexis Tsipras and Jean-Claude Juncker where Tsipras voices: “You wash my back, I wash yours real hard!” So as we see in the Guardian the call for ‘Sanity and Humanity‘ we must ask the clear ‘why?’ part. You see, we are now getting ‘misinformed’ by laureates and by people in the industry of high economics. They most likely want their cushy job to continue. If Greece falters that is no longer an option, because the repercussions go a lot further than Greece, even the US is now getting involved because the fallout from Greece leaving is a lot more than the people are told.

First Premise: If my thoughts were wrong, then why not let Greece out of the Euro, let it float its Drachma and slowly get back on the horse? Because virtual or not, the fallout of half a trillion whilst Italy and France are so deep in debt is a massive problem!

The names calling for this are: Nobel Prize winner Joseph Stiglitz, star French economist Thomas Piketty, former Italian PM Massimo D’Alema, and America’s Jamie Galbraith. The list has more names, but you’ll have to get to the Financial Times for that.

You see, the premise of Humanity is nice (and I am all for Humanity), but when the person involved REFUSES to take decent steps towards the solution, the sanity part is to just cut them lose, but as I stated in my first premise, that is not an option, the negative consequences are scaring too many ‘profiteers’ as I see them!

The first untruth by these writers (bleeding hearts seem to be the most apt title). We see the quote: “Six months on, we are dismayed that austerity is undermining Syriza’s key reforms, on which EU leaders should surely have been collaborating with the Greek government: most notably to overcome tax evasion and corruption“. I would call this a lie of the first order! Why am I calling it that loud?

The Greek government has done close to nothing to overcome tax evasion and corruption! Which politicians from former administrations have been arrested and are investigated for squandering government funds? We saw one case of tax evasion for 1.2 million, which is 0.000028436% of the debt, it does not even cover the smallest part of the interest bill.

The next statement is: “Austerity drastically reduces revenue from tax reform, and restricts the space for change to make public administration accountable and socially efficient” the second expression of laughter! Greece has next to nothing in revenue from taxation, let alone revenue from tax reforms, in addition public administration is not holding anyone accountable, the Greek public administration is a joke no one wants to touch (let alone the Greeks), so the claim made here is nothing more than an empty sentence.

Now we get to an interesting part: “It is wrong to ask Greece to commit itself to an old programme that has demonstrably failed, been rejected by Greek voters, and which large numbers of economists (including ourselves) believe was misguided from the start“. Well, if it was misguided, then the ‘friends’ you have in Goldman Sachs and other financial pool party’s should not have borrowed them the money to begin with! There is no doubt that Syriza has a bad deal, but they wanted the bad deal! They wanted to govern at the expense of everything and everyone! New Democracy under Antonis Samaras was actually trying to sort things out. In addition, the Greek voters do not get to reject this. They voted the people in that spend the money with zero foresight or consideration of the consequences, the Greek people now get to pay for it all. You see, someone spend over 400 billion, it went somewhere. That part is due and the loans made afterwards to get things ‘rolling’ was never realistic, but the top economists were all eager to get the kickbacks that they refer to as consultancy and commission! When a bank allows for events THIS STUPID to get out of proportions, in the end, I do not deny that Tsipras and Varoufakis are playing a clever game. They are willing to let the ‘other’ players collapse. It is a ‘pay our debt or else’ approach. It is not acceptable! And I reckon it should not be tolerated on this level.

What would be acceptable, if the entire debt is paid for by banks, monitored by oversight commissions to ensure that the people (their consumers) never get any additional charges! That banks would need to come up with the money from their own profits and dividends. That I would find acceptable, but guess what? The ‘friends’ of those who signed this letter will not accept that and they will reject that in a heartbeat, so here we see Joseph Stiglitz, Thomas Piketty, et al all writing about humanity, when it should be about accountability!

Now we get the half-truth in all this “Clearly a revised, longer-term agreement with the creditor institutions is necessary: otherwise default is inevitable, imposing great risks on the economies of Europe and the world, and even for the European project that the Eurozone was supposed to strengthen“, is that so?

My second premise: Yes there will be risks, but the one I see is a more total collapse when the debt is shouldered by those already in too deep. That part is not mentioned and moreover that risk has been trivialised by several players all over the Eurozone field, including by the top of the IMF and a few top players in the US too.

And I reckon that the quote “Syriza is the only hope for legitimacy in Greece” can be discarded out of hand, they actually escalated it all, in all this, as I see it, New Democracy was the true hope for Greece.

Now we get a quote that is truly a worry “Consider, on the other hand, a rapid move to a positive programme for recovery in Greece (and in the EU as a whole), using the massive financial strength of the Eurozone to promote investment, rescuing young Europeans from mass unemployment with measures that would increase employment today and growth in the future“.

My third premise: First of all, this is not the first time that approach is used, Adolf Hitler used it in 1935; how did THAT turn out? Now, let’s not go all Nazi on this and consider the issues in Spain, Italy and France? Do you have solutions for them too? How would you like to voice this in reality? That is the problem, you see, jobs come from places that have income, that have product and that is selling, that allows for hiring and paying staff! This is the entire issue, there are no jobs, because people are not buying, because after the cost of living there is not enough money to spend.

It is not a math issue that requires a Nobel price, a mere abacus, or just common sense, paper and pen could have worked that out! In addition, the prediction I made in my article ‘An Olympic steeplechase‘ on May 26th 2015 (at https://lawlordtobe.com/2015/05/26/an-olympic-steeplechase/), two days later Deutche Welle publishes this “‘We’ve been receiving reports of a decline in bookings, especially from Germany’, says the tourism manager to DW“. I saw the writing on THAT wall! In addition there is “Andreadis quotes the latest statistics from the German Society for Consumer Research (GfK): Bookings in Germany have declined by 2 percent based on annual figures“, two percent does not seem that much, but in an economy where the Greek GDP is making another step towards 0 and lower, 2% is a lot. The issues with refugees isn’t helping Greece either. The British media reported that Kos, a Greek tourist attractor has become a ‘disgusting hellhole’, which would push tourism down further. Influx from both Russia and Scandinavia is down too, but at present unknown by exactly how much. It basically means that tourism will not bring the bacon to the outstanding invoices for Greece, apart from collecting the taxation on it all that is.

The final misrepresentation is “Like the Marshall plan, let it be one of hope not despair“, it is a misrepresentation, because the Marshall plan did the right thing, whilst the people did their part, the governments were in better control, within the Euro at present not one government has been holding pace with the expenditure and keeping a proper budget, which gets trivialised by those administering it and the extra spending is overstretched again and again.

My fourth premise: So this is not about Mr Marshall and his amazing achievement, this is about the Greek government actually doing something. Pushing the invoice out 30 days is not a solution. In addition to that, nearly every person and toddler can see that the 7 billion that is supposed to be freed up will after paying the civil servants their 2.2 billion in outstanding parts will not even cover all the bills until the end of the year and whilst Greek taxation is not being addressed, another interest invoice of 22 billion will be due in under 10 months. Yes, 22 billion just for the interest payment!

So as we are misdirected by some people hiding behind the fact that IMF payments have been overdue before, the issue here is that Greece is now TWO payments behind, totaling a little over 1 billion, part one due in two weeks! So as the Greeks vow not to leave the Euro, the question will soon become, do they actually have a choice in this, because when payments are not forthcoming, there must be repercussions, the one part Greeks are really good at denying.

I must of course also mention that there is debt restructuring document, which is regarded as being ‘hopeful’. The view comes from Peter Spiegel of the Financial Times and the quote is “The restructuring plan is ambitious, offering ways to reduce the amount of debt held by all four of its public-sector creditors: the European Central Bank, which holds €27bn in Greek bonds purchased starting in 2010; the International Monetary Fund, which is owed about €20bn from bailout loans; individual Eurozone member states, which banded together to make €53bn bilateral loans to Athens as part of its first bailout; and the Eurozone’s bailout fund, the European Financial Stability Facility, which picks up the EU’s €144bn in the current programme“.

The fifth premise: My issue on these document is that they are ALWAYS based on too positive an outlook, which is why they usually fail. In addition, Greece will at least need another 20 billion, that is if the 7.2 billion that they are trying to get their fingers on is already in the given picture, which is not a given at present.

The quote “to get back under 60 per cent of GDP” is just insanely unrealistic. You see, to do that you need to fix expenditure by a lot, the one part the Greeks utterly refused to do, in addition, they just rehired the people they had let go, so expenses are back up too!

As Peter Spiegel (@SpiegelPeter) states: “It also involves eliminating a chunk of Greece’s bailout debt“, which is fine by me as long as the BANKS pay for that part, if it comes from Goldman Sachs’s pocket so much the better! Let’s not forget that part of this entire mess was because Goldman Sachs helped Greece mask the actual debt it had (source: Der Spiegel) on February 8th 2010! How much forward momentum did Greece achieve since then (like lowering debt)? NONE!

I will say again that this is all unfair on the Greek people, but they did elect this lot into parliament, as they elected the previous bunches, how about knocking on those doors to get at least some of those funds back (which also lowers debt)?

 

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I have seen this before

It was not a pretty picture this morning. The Australian deficit is about to be blown clearly out of the waters surrounding it. Yes, there was nothing wrong with the initial assessment that Australian would no longer be in the red before 2016. The plan was bold, it was feasible and after the Australian Labor party had blown its spending in the hundreds of billions, from a 57 billion debt, Australian Labor blew the national debt and grew it in excess of 250 billion, in addition, the forward spending spree by Kevin Rudd and Julia Gillard would give the Liberals a 600 billion headache, and it is a firm headache, which is about to get a lot worse.

Whether we see it as politics, treason or just incompetence, the Labour government seems to have played an intentional game of silencing certain contracts. It is my view that there is not possible, that after only 3 weeks into the liberal government that the car industry decided to just walk away. This was planned all along and they played nice with the Labor party for the view of whatever benefit game was played. So the Liberals ended up with massive invoices and bills that Labor should never have spent, but this is not about that, this is about a second game that has been in commencement. It has been played for a little longer that the Liberals have been at the helm, but in that instance, I will state that neither party is to blame. This is not political; this is political management of another nature.

For the second game I need to take a little detour to the 80’s. When I grew up in the Netherlands, more specifically Rotterdam, I was all about harbours, ships and engineering. My work with IT systems in the harbours gave me an interesting edge. I had access, I was busy all day programming new container solutions in Clipper and I dealt with cargo of several natures. One of the things I used to see on a daily basis was an enormous mountain of iron ore. It was meant for Germany, yet at times that mountain would not shrink; it would grow and grow and grow. In those days it made no sense to me, little did I know!

Now we get back to today, the current administration is about to bleed out no less than 20 billion for the simple reason that revenue of iron has gone down 40%, not that less is produced, no, iron is worth a lot less now. So, to get even, Australia needs to ship 250%, which is not an option. So why sell it at all? Now we get to an interesting article in the Sydney Morning Herald (at http://www.smh.com.au/business/price-drop-signals-the-end-of-the-iron-ore-age-20140912-10fxr7.html), we see here that the initial rise and fall was all in the previous government, there is also a clear view that not only is this rise temporary, the overall trend shows that the previous government had a lucky break (and still overspend by close to half a trillion), yet the current government is not innocent either as their view on iron revenue should have been downgraded by at least 20%, which would have lessened the impact. Neither is to blame, but also, neither is innocent here. So as we see the solution, we need to worry what will come next?

This is where it gets to be dodgy; it is sheer speculation in my side. I think that someone is playing chipmunk here. I think that a mountain is created using all manners of non-taxation and then they will sell it all off at a massive profit when iron price suddenly makes an upturn. Between March 2010 and April 2010, the price went from 139.77 to 172.47. Even though such a jump is not conceivable, the fact is that if housing improved only a little, iron prices will grow again and it is a global market, so as one person needs more, iron will do better again. so buying and storing when prices are down, transferring to a foreign account and then selling as prices bounce back, will yield massive profits for those non-taxable entities. Is it true? No, it is speculation (from my side), yet we have seen similar acts before, so it is not inconceivable, in addition, the Australian government is bleeding deficits fast, and they are amounting to serious amounts within the next three months.

This part is all on the Liberal side, it is not their fault, but they will need to amend their budgets and forecasts accordingly. And it is not just Australia, the UK has similar issues, yet not to the same extent, but the pressure is there too. The UK will take a 30 billion dive, which is a sizeable amount. This all beckons, why were predictions not made a little less enthusiastically? You don’t skin the bastard until it is dead (and very healthy for the poacher seeking crocs). This again shows the need to take a better look at how certain items are anticipated and budgeted. If you doubt that part, then ask George Osborne and Joe Hockey on how many complications those billions bring and it is not the only worry, because there is a second downside. Whoever has these current mountains of ore, they do have a firm grip on driving prices high soon enough, then what will we do?

So, when did I see this before? Well, that is the fun part; I saw it happen around 1989, when the prices went up a little (16%) form $12 to $14. Yes a mere $2. It becomes an interesting view when we look at the data form the last 30 years. The entire mountain of increase and decrease started pretty much in December 2003, when the price was $13.82. From there it would shoot up to almost $178 (2011), now if it is going back to its foundation price. Why was this not better investigated? How come that a commodity is driven up by 1369%? The final part we see in the Economist (at http://www.economist.com/node/21564559). The quote “In the longer term, overall iron-ore demand will grow as China’s march to urbanisation goes on. Demand in the rich world may be drooping, but Wood Mackenzie, a consultancy, says steel consumption will not peak in China until 2026“. Is that a given? When we consider the site macro business with the article ‘Chinese Iron production is booming‘ (at http://www.macrobusiness.com.au/2014/08/chinese-iron-ore-production-is-booming/), we see the question I had in my mind.  “The one question that nobody in the iron ore sector (or Australia more generally for that matter) dare ask is what if Chinese iron ore production does not close as Australian miners ramp up output. The reason nobody asks it is that the outcome will be calamitous“.

It comes down to, why should China import? They have cheap labour and resources, and they have iron (at http://www.srk.com.au/en/newsletter/focus-iron-ore/iron-mineral-deposits-and-projects-peoples-republic-china), so why import when they can become a supplier themselves. It is not inconceivable that Australian iron moguls like BHP, Fortesque, Rio Tinto and Hancock will see a decline in numbers. There is no way to tell whether it will return to pre 90’s prices, but if China gets their own iron and their demand for it goes down by 70% or more, the hard news hitting us now will be nothing compared to the bash we get when an industry of 250,000 miners will shed part of their people. We thought the car industry was a nightmare, well; consider that under current conditions if 40% less minerals are needed, we might see the shedding of 100,000 people, a level of bad news Australia has never faced before.

Even though Australia mines a lot more than just Iron, the metal impact could be harshly felt in 2015, if the situation does not improve.

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Which coin?

This morning I was confronted with my own thoughts of the last few days. I am not stating anything new (at least I hope so). The American issues, the overly visible multi-billion dollar deals and a few other notions. It started earlier this week when I heard that a friend was made redundant. These things happen. It happened to me, it will happen to others too. The issue I had is that for a decent long time we have known that companies for the most are not too bothered with loyalty, for them it is about the bottom dollar, what is interesting is that they tend to DEMAND loyalty to a fault until they cut away the people who loyally served them, in some cases for decades, only to replace them with ignorant junior staff members often costing them less than 50% of whatever they are paying now. This is not new, this had been going on for some time and they do it nice and legal, at times segregating a staff member in a niche position, waiting a year, if that person had been around a long time even two year and then closing down that department, which saves them years of due income in settlements.

Weirdly enough, yesterday’s story about the bankruptcy of America is linked to all that. You see, this entire issue can be reduced to two coins. One coin is the government, on one side we see the view they have of companies and the other side is how companies really are. The second coin is how we see companies and the other side is how companies turn out to be. They are not the same coin, they are an entirely different currency all together!

That is the view the older generation does not seem to comprehend and what the younger generation takes for granted. However, the long term consequence is that companies will end up having the short stick in all this (but about that side more a little later).

Let us take a look at coin number one. The government coin!

Companies, for the most have considered themselves nationalistic, it gives them an identity and also the protection of the government branch should that ever be needed. There is Woolworths, the Australian place to get your Groceries; there is General Motors, an American Company, British Telecom a British company and so on. These are actually the old times, we and with us our governments have had this image. To some extent, an Ambassador still to some degree acts as an intermediary between cooperative businesses to promote trade. So companies get the support of a government enabling them to have easier access to business opportunities. Their importance goes back to the Italian renaissance, more notably when Vittore Carpaccio painted the ‘Legend of Saint Ursula‘ series; they are called Arrival of the Ambassadors, The Departure of the Ambassadors and The Return of the Ambassadors. Ambassadors were the dream of business as they opened doors for trade to commence and increase.

Today this is no longer the case, business has no affiliation to any government when times are good (when times are bad they whine for money and tax breaks), actually they always whine for tax breaks. You see, a company as many can see have only allegiance to their board of directors and the bottom line that they worship in a spread sheet. Today’s corporations are not linked to a nation or a location. Google seems to be the only honest one in that regard. They do not call themselves an American company, but a Global company. Their concept of location is fluid, it shapes to the need of tax relief and where the fastest servers are to acquire the data handed to them by well over a billion people on a daily basis. Yet, this is not about Google! This is about the way business is allowed to be done. In my view it has something to do with spineless politicians (not just in America by the way). As companies were allowed too many degrees of freedom, they opted personal need and gain instead of the greater good. This is not wrong or illegal, yet they use the facilities offered for them with all the freedom, which by the way is as it should be for the most and at the same time these companies syphoned billion through a multitude of tax shelter constructions, all perfectly legal. Did you know that hundreds of millions of people buy their downloads in Ireland?

An option to promote trade has for the better part of almost two decades been used to avoid taxation, not to improve trade and/or long term economic benefits (well they are, but only for the board of directors). The greed economy had been turned against the governments, most not willing to change in fear that they will walk away. This is one of the main reasons why America is basically bankrupt and not just America. Many of the commonwealth nations, amongst them Australia, United Kingdom and Canada who are feeling the effects of people buying online and these governments end up getting $0.00 in any form of taxation whilst the stores are shutting down one by one. HMV and the Virgin Megastores were likely two of the most visible victims of online retail changes, yet the online purchases ended up not having taxation of any kind, which does mean that a nation’s government is losing out.

My initial solution was to make a change that made any online purchase taxable in the land of the buyer, an idea that was never adopted, some thinking they ended up with more perhaps? But all lost out, as the e-Giants remained in tax sheltered nations. Particularly the US and UK missed out on hundreds of millions of tax dollars/pounds.

Tax administrators face greater difficulties in enforcing tax laws and maintaining their community’s legitimate revenue base when dealing with international rather than domestic transactions, particularly when dealing with a jurisdiction that combines tax haven status with bank secrecy. Increasingly, tax haven regimes with bank secrecy laws in place are accessible to almost anyone with a modem and a computer“, which comes from Mr Carmody, Commissioner of Taxation. It was an Australian Taxation Office Media Release on November 11th 1997. So, this issue has been known for over FIFTEEN YEARS! Who else is late to the party? Well, that would be the United States of America, the United Kingdom, as far as I can tell Canada (not confirmed, due to a lack of knowledge of Canadian tax laws), Australia and this prestigious list goes on for a little while longer. Yes, we were getting played in a most auspicious way by whining, crying small minded board of director members on a global scale.

There is one more side to the first coin (source: http://www.internationaltaxreview.com/Article/3252311/VAT-considerations-for-e-commerce.html). The article subtitles drew me in ‘Nehal Radia considers the VAT implications of e-commerce and how taxpayers can take advantage‘. The article has a few good sides and they are worth reading about, but for me it helps illustrate another side, partially the fact that a view given here is not as I see it to be ‘the correct one’, which by the way, thuy were never debating.

Consider your own financial situation, you the reader. If you have a job, it is more than likely that you have not been getting too many job raises since 2012, yet overall, your rent, your food, your electricity and food bills did go up, in some cases by a sizeable amount. Now consider the quote “According to Forrester Research Inc., US e-commerce spending will increase by 13.4 % to US $262 billion this year, with an expected continuation in growth to $370 billion in 2017. In Western Europe, it is estimated that 2013 e-commerce spending will reach €128 billion ($165.5 billion), up by 14.3% from last year and with expectations of €191 billion ($247 billion) by 2017)“. Really? Do YOU have that much more to spend?

I do not think that this is the case at all, yet, I know Forrester and it is likely that these are indeed the numbers (if they did not make a weighting error). What seems to be happening is that e-Commerce is growing stronger and stronger as this group is avoiding VAT payments more and more, which means that shops are getting shut down as e-Commerce is passing onto you part of the VAT savings. Consider that VAT in the Netherlands is 21% and in Sweden 25%, how can a shop compete when these savings are to some extent passed onto the customer by the e-shop, whilst they can avoid VAT and they do not need a location with rent and electricity. Business views have skewed the market and governments are now losing out massively, whilst their own economy is also suffering under unfair competition practices.

If this is the first coin, I would call this currency ‘slow and asleep at the wheel’.

We are the second coin. Our view has for the most been to work hard, to get the job done and to bring home the bacon. It is a simple view, as we aim to be the ‘return on investment’; we create a comfortable pillow where we rest. Not because we are lazy, or because we do not do our part, but because we know that as long as we get it all done, our boss needs us. He had paid us a decent amount and as we are the cause for more income then we cost, we should all be in a great position. Guess what! We were stupid! Today’s management or better stated, whoever makes the coin decision tends not to be stupid, but to some extent short sighted. You see, he can get the same person in India, or that one person just leaving University, to do almost the same at half the price. Whatever ‘loyalty’ you think your boss has had towards you is no longer there, as we are no longer people we are just part of a spread sheet, as we cost more we get replaced to cost less as to not affect THEIR bottom line, which is usually their profit (read commission). There is of course an issue we should not forget, the economy is still bad, and yes, we have to accept that trimming the fat (the most costly employees) will also happen as some companies are drowning. They are now relying on image, without the revenue to support it. Yet, this is not about that side. The coin is on how we perceive on the company and how the company really is does matter, not how they do business. Is that so?

Is their corporate soul not depending on exactly how they do business?

It is hard to stay on this without getting into the debate on how companies sometimes make hard choices to stay afloat. It is more about the changed spirit of the business soul and how they hope that youthful ignorance might get them these 1-2 deals that keep them going. Yet there is a side which we seem to ignore. It is ‘interpretation’ of business.

Consider the Corporate Image Awards 2014 (something that was brought by the Frontier Consulting Group), a company that is actually an Indonesian company. In their ‘Corporate Image Survey Methodology 2014‘ they actually had a nice twist to this story. They stated for their fourth dimension called ‘attractiveness‘ two parameters, one was called ‘Dream workplace company‘ and the second one was labelled ‘Company with high quality employees‘. Here we see the crux. What is a high quality employee? One that looks dynamic (read 22-25), fast (read slim lined) and get the job done, which reads like within six hours and however many hours of unpaid time they need to finish the job before the deadline, or the veteran can actually get it all done in 6 hours. It is ‘the’ unspoken question that is here and is loudly ignored by those not willing to answer honestly and those who are very unwilling to admit the question, is actually a massive issue. ‘What is a high quality employee?’

I am left with two coins and a question. Are we, both the people and the government too slow to change, or are companies driving us to change in too inhumane ways to protect ‘their’ profit? I feel uncertain to answer it, there are unspoken sides that have not been dealt with and there is the need for greed by board members on a global scale which is yet to be properly scaled back, even in these uncertain financial times.

 

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17 or 70 trillion?

Even though we see so many ‘stories’ on how well the US is doing, we must ask ourselves on what value these numbers are trying to convince us of.

The thoughts I am about to phrase started a little after the following had been released (at http://blogs.marketwatch.com/capitolreport/2014/06/06/standard-poors-is-concerned-about-the-u-s-debt-burden/). “Standard & Poor’s Ratings Services put out research Friday confirming the AA+ rating of the U.S.“, so the US has dropped a notch on the credibility scale. This in itself should not be a reason for direct concern. The one part that does worry is that S&P was the only one doing this. The other part we should notice is the quote “The federal debt was $16.1 trillion at the end of fiscal year 2012, according to the Government Accountability office.” why are we not seeing a 2013 number, which according to some is over 17 trillion? How interesting is it to see the numbers game whilst the numbers quoted are not up to date?

The next part is the article from Bloomberg on April 29th 2014. Here we see the following “The drop in net marketable debt will be $78 billion in the April-June period, $38 billion more than the pay down projected three months ago, with an end-of-June cash balance of $130 billion, the Treasury said today in Washington. The improvement will be short lived — net borrowing of $169 billion is projected next quarter, with $130 billion in cash Sept. 30th“. Can anyone see the issue I have with this? The debt of well over 17,000 billion is getting met with a quarterly pay down of less than 0.4588%. How is this progress and even though we see that the US still has a high credit score, is the likelihood of a continued credit score even realistic?

That part can be seen in the Market watch quote “We believe that renewed debate over the debt ceiling could resume after the midterm elections in November 2014 under certain scenarios. While we expect the discussions about the debt ceiling to be ultimately resolved as they have been, we still see risks that these debates entail.” So, not only is there no solution to the current debt levels, the chance of any serious solutions occurring within this current administration is close to zero, which means that the next administration will inherit a debt closer to 20 trillion. I do find the headline about ‘US debt level concerns‘ hilarious. Many with me had raised these dangers for well over 2 years and now as the game is up, some are ‘raising’ concerns, whilst those in charge and those on the watchdogs of economy had long known that any level of lowering the debt had been a mere myth for over 2 years.

There are of course other views. One is from Chad Stone who wrote in US News (at http://www.usnews.com/opinion/economic-intelligence/2014/05/16/too-much-deficit-and-debt-reduction-too-soon-will-wreck-the-recovery) “now about $17.5 trillion, found on the ‘debt clocks’ that are so popular with debt hysterics. Gross debt (and its close cousin, ‘debt subject to limit’) is debt held by the public plus debt internal to the government“. This is fair enough, yet there is no information, not even any indication when this debt will start to lower. There is another side to consider. When we look at the IRS data book (at http://www.irs.gov/pub/irs-soi/13databk.pdf), consider that the IRS collected a net value of taxation of 2.4 trillion dollars. A slightly more accurate number is 2,490 billion.

When we consider all the numbers thrown at us, like the ‘% of the GDP’ and so on, even if we accept that the 17 trillion dollars debt is held on multiple level, compared to what the IRS collects, we see a number that reflects the tax collected, compared to the total debt. The US gets through taxation a mere 14% of where the debt is at. How is any of that realistic? So, the total collected taxation, before any other cost is taken into account (like paying government staff and utilities), it only amounts to 14%, after all that is done 0.1% is left if the US government gets a fitting budget (something that has not been achieved since president Clinton was in office).

My issue is not just with the US debt levels, it is also about the ‘blasé’ approach economists are throwing at the people stating that things are not that bad and that it will all work out. That part is a figment of THEIR imagination, because for things to resolve, actions must be taken and none are getting taken at present (or in the near future for that matter). My biggest issue with the Article of Chad Stone is seen at the end. His quote “Lowering the debt ratio comes at a cost, not only risking the recovery if it’s done too fast but also in burdening businesses and households with larger spending cuts, higher taxes or both to stabilize the debt ratio“. There is truth in that statement, yet the issue that the money should have NEVER been spent is an issue that is ignored. The culprits of this dangerous endeavour are not named, not held accountable and many of them walked away with millions in bonuses.

We are however nowhere near the end of this debacle. The articles give another view on the matter. An article was published in 2013 stating an entirely different matter of debt. The REAL total debt is set at 70 trillion (at http://www.foxnews.com/politics/2013/08/15/california-economist-says-real-us-debt-70-trillion-not-16-trillion-government/). The quote that matters is “Hamilton believes the government is miscalculating what it owes by leaving out certain unfunded liabilities that include government loan guarantees, deposit insurance, and actions taken by the Federal Reserve as well as the cost of other government trust funds. Factoring in those figures brings the total amount the government owes to a staggering $70 trillion

Now we are off to an entirely different race, this only gets worse if we take the Bloomberg article into account from March 2014, which headlines as ‘Debt Exceeds $100 Trillion as Governments Binge‘ (at http://www.bloomberg.com/news/2014-03-10/debt-exceeds-100-trillion-as-governments-binge.html). Make sure you realise that this last article is about global debt and not about US debt.

This was already on my scope for another reason, but I will return to that shortly. I need to return to the Fox News article where it stated the view of Professor Hamilton, an economics professor from San Diego. The reason for this is because I try to stay fair and balanced (statement plagiarised from Fox News) and as such, as I found additional views from the professor, it is only fair that I mention that too. This all is linked to a paper he published in 2013 (at http://econweb.ucsd.edu/~jhamilton/Cato_paper.pdf), it is the starting quote “This paper examines the growth of federal liabilities that are not included in the officially reported numbers” which should grab your attention. Yes, we are talking about ‘off’ the book liabilities, which should make us all wonder whether ANY government should be allowed to be part of liabilities that are not on the books to begin with. If our job is to stem the tide of irresponsible spending, then keeping things ‘off the books‘ as the ‘kids’ seem to state, should not be allowed under any condition. If we look at the quote that was found in the Econ browser by professor Hamilton, we see “Similar calculations from the trustees reports for Medicare report Medicare’s net unfunded liabilities for current program participants to be $27.6 trillion. For more details see Table 4 and the accompanying discussion in my paper.” The floor should open to an entirely different debate and soon. I think it is high time that these events are properly mapped out and as such ALL governments need to adhere to a different level of ‘accounting’. Their books can no longer remain silent in regards to unfunded liabilities. Is it any wonder books are not in order in a massive amount of nations?

This now grabs back to other observations I made and more important the small revelation my data implied. On March 22nd 2013 I wrote the blog article ‘60% confiscated and counting in Cyprus!‘, here I quoted “If this is what frightens the US, then consider the consequences of a system like LIBOR being manipulated through the total value of trade. If that would have been off by 11.2%. Out of $1000T (UK and US combined) then that difference would be $112T“, I implied to some extent that not only were the percentages messed with, I had some reason to believe that someone had messed with the total trade value that LIBOR represents. Perhaps my mistake (to some extent) was thinking that it was ‘just’ manipulation. In my defence, I came up with these findings before Professor Hamilton had finished his paper, so as a non-economist I was slightly in the dark to begin with. Consider that some politicians could be overspending, whilst using the options of unfunded liabilities within LIBOR to excuse themselves for accountability? What will other governments say, when such events are brought to light (if that would be happening). More important, if my number was closer to the truth then many considered, the global economy is playing high stakes poker with debts twice the size then most realise and our cost of living is based partially upon the irresponsible spending of both Washington and Wall-Street. How are the people ever to get a fair shake at a happy life, when a group of no more than 3000 people have been spending the dreams and futures of well over 1 billion people? Most do not realise that this goes way past the borders of the US, if there is indeed an established group editing the total value of trade considering the manipulation of the LIBOR percentage, the established setting of unfunded liabilities, as well as the breaking up on loans as they might occur. For this example, I would like to point you towards www.lsta.org/WorkArea/DownloadAsset.aspx?id=2480, here we see a paper from Credit Suisse made by Julia Kingston in August 2006. The next part is just pure supposition on my side. Look at slide 35, here we see a term loan set in three parts. What happened when something falls over in 2 or 4 months? How many parts when Wall Street made its 8 trillion bungle was not written off? Is my consideration that the TOTAL LIBOR trade value has a massive amount of ‘entries’ that had remained hoping it would turn for the better? We have seen a multitude of financial advisors playing just such a card on many levels in the 2008-2011 periods. My question now becomes, was my implied 11.2% just the tip of the iceberg?

I am not claiming, nor do I pretend to have the actual answer here, My issue, as it was in the past is that ‘proclaimed’ Journalists sitting in the top newspapers have not taken a hard look at some elements. It is nice for them that Reuters does much of their work for them and many aspire, but will never come close to people like Paul Mason, Robert Peston or Deborah Hargreaves. Yet, how deep did they dig into LIBOR? Also linked (especially with the Guardian) was the claims that Jullian Assange made in regards to banking, they were never followed up (or so it seems), not even by the Guardian as far as I could tell. Consider the article the Guardian had on February 10th 2011 (at http://www.theguardian.com/media/2011/feb/10/julian-assange-wikileaks-book-claims). The quote “Asked about the ostensibly sensational bank leaks Assange keeps suggesting he is ready to release, Domscheit-Berg said the only banking documents he knew WikiLeaks had were ‘totally unspectacular’ is at the heart of this”. When it was ‘just’ about the US military there was some upheaval (especially by the US), yet when banking issues were raise (slightly mentioned in the Forbes interview in November 2010 at http://www.forbes.com/sites/andygreenberg/2010/11/29/wikileaks-julian-assange-wants-to-spill-your-corporate-secrets/). The interview gives us the following “Will we? Yes. We have one related to a bank coming up, that’s a mega leak. It’s not as big a scale as the Iraq material, but it’s either tens or hundreds of thousands of documents depending on how you define it. Is it a U.S. bank? Yes, it’s a U.S. bank. One that still exists? Yes, a big U.S. bank.

After this the hunt for Jullian Assange really takes on additional energy. I have no idea what he found, or if it is even related, the issue is that there is a recorded atmosphere of unaccountability within the banks (on a global scale) which must stop, if not, not only will governments be allowed to continue in irresponsible ways, but the additional ‘myth‘ that banks and governments apply checks and balances need to be thrown out of the nearest window. A last quote from the Forbes interview is every bit as important “We’re still investigating. All I can say is: it’s clear there were unethical practices, but it’s too early to suggest there’s criminality. We have to be careful about applying criminal labels to people until we’re very sure.

This is the part I had written about for some time, it was not just that the issue with Goldman Sachs imploded the financial industry; it was the issue that they, in black letter law, basically had not broken any laws. The people lost well over 8 trillion and no crime was committed even though their money was basically gambled away. It is that part, especially in the LIBOR sight, as well as the issue raised by Professor Hamilton in regards to unfunded liabilities. No laws are broken, but we are all kept in the dark in regards to the debts inflicted upon us, which in itself is a massive wrong.

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One debt too far?

I feel interestingly happy today. It is almost like I got the big role in the new Alice in Wonderland play. As i am a guy, some will think it is the role of the Mad Hatter or even the March Hare (there is supporting evidence that I am mad as a hatter and nuts as a Hare), but no! Those are not the leading roles. The leading role (apart from Alice) is the Cheshire cat, who was guiding Alice down the path.

The reason for these, are the events as I saw them this morning in the news. These events all took me back to my article on the 19th of June 2012 called ‘The accountability act – 2015‘. My quote ‘This is about stopping those walking out with non-existing virtual profits, turned into real money, and leaving others behind to clean the mess‘, is at the centre of that all.

This is all linked to a number of things, which by the way will have bearing on the Ukraine as well. The first is the article that we saw on Sky News (at http://news.sky.com/story/1239678/imf-warns-investors-over-rock-bottom-rates).

We see two quotes. The first gives us the warning “Investors are becoming dangerously reliant on rock-bottom interest rates, with many becoming so indebted they will face serious problems when borrowing costs rise, the International Monetary Fund (IMF) has warned“. The problem is that these investors include several governments. When we see in that same article “the amount of cash spent on leveraged loans – the high-debt instruments with financial problems – now exceeds the level in 2007 before the crisis“, we are starting to see a clear pattern. In my view this pattern is that those who were in charge are doing it again. Those who wielded certain options are now doing it behind the screens. They are servicing a ‘population’ of what I consider to be not too bright members of a government executive branch and as such the fallout will be well beyond what we considered possible before.

The last quote “The IMF said it was also concerned about the levels of debt in the emerging markets” is the one I leave in the middle for now, I will however get back to this one later in this article.

The second article comes from the IMF themselves (at http://www.imf.org/external/pubs/ft/survey/so/2014/POL040914B.htm) “Across advanced economies, the pace of fiscal consolidation is set to slow in 2014 as focus shifts to how to best design fiscal policies supportive of both further consolidation and a still uneven recovery“.

This reads as ‘In the US, EEC and Japan, the pace of reducing government deficits and debt accumulation will slow as governments are staring at designs of new fiscal plans for consolidation in the near future’. There could be other explanations, but consider that these three players have been utterly unable to close their wallets. They keep on overspending many billions (in the case of the US and Japan up to a trillion) of money they do not have. Over the last several months we have witnessed bad news management on many PRESS levels, whilst not actually looking truthfully at certain events. I will not insult the reader’s intelligence by quoting the LA Times in this case, but the headline that ‘the Global Economy is strengthening‘ reads like nothing less than a joke. The article read like a promotion page, with no real value, other than the percentages they were ‘boasting’ about. For the record, the US leading the way with less than three percent whilst Chinese growth is set at well above 7% might be correct, yet in the second part the US was leading as one of the developed nations, implying that China was not a developed nation, go figure!

The issue (as not shown by the LA Times) is that there are delays with the US for the IMF. In a quote from Australian Treasurer Joe Hockey, the following was phrased by ‘the Australian‘ “Senator Ted Cruz said that the package would unfairly raise US contributions while undermining its influence” (paraphrased).

This reads wrong in several ways. Is the IMF not supposed to be impartial in all this? The mission statement of the IMF (at http://www.imf.org) states “The IMF’s main goal is to ensure the stability of the international monetary and financial system. It helps resolve crises, and works with its member countries to promote growth and alleviate poverty“, it might just be me, but does that not require an impartial approach? If the US has too much influence here, how can stability be achieved, or is this the world according to ‘the US congress’? (I will steer away from blaming the White House here, as the IMF is supposed to be a long term planner and the White House is a short term location, in sets of 4 years).

It is however interesting how little there is to find on US Congress and the IMF, even by the larger newspapers. I was able to find http://www.reuters.com/article/2014/04/07/us-imf-reform-britain-idUSBREA361BX20140407. This article was published two days ago and it is interesting to see how many newspapers veered away from this Reuters article. Reuters had this quote “The failure of the U.S. Congress to ratify the agreed IMF reforms is bad for the institution and bad for the international community“. The additional part “A bid to get Congress to approve reforms of the IMF was dropped last month amid concerns that it could hold up a bill providing aid to Ukraine” as well as “The White House has been urging Congress for a year to approve a shift of $63 billion from an IMF crisis fund to its general accounts, as agreed by the U.S. government in 2010” are cause for concern. These payments were due for the IMF long before the Ukrainian crisis was on the map. So is this about not having any influence, or is this an early signal that the US has completely run out of money?
Yet a Chinese site (at http://english.cntv.cn/2014/04/08/VIDE1396947727947648.shtml) shows us that in their view with “The Spring gathering of the International Monetary Fund is approaching. China, Russia and other major developing nations are angry about a delay in reforms that give them more voting rights at the IMF. Now the countries are pushing forward with the reforms without waiting for the United States“, so now we get another view on the matter, Was Australian Treasurer Joe Hockey playing nice with the Chinese, or is there more? I personally do not think that he was ‘just’ playing nice. I have predicted before that the time with the US as a superpower would end. I have stated this for almost a year now. No matter where the interest of Texan Republican Senator Ted Cruz are and I have no doubt that his interest is Texas first, America second and his family third. Before you the reader thinks or even accepts the allegations by some that he is some newly formed version of the infamous McCarthy, then think again! When I did the math in a previous article called ‘Biased Journalism on USA shutdown?‘ which I wrote on October 1st 2013. Here we saw that Texas is one of only three states that could shoulder the national debt if it was evenly spread. So, to keep Texas strong, Ted Cruz has a fair point in regards to the IMF influence, but that is not what the IMF is about and it is Washington DC that went along with that, which means his hands are slightly tied.

The IMF article has set out that people are playing profit or government bail-out again (they did not state that, but the article implies it to some extent). The governments are not speaking out against these acts and as such we could face another massive economic setback in early 2015. In a minimal defence for Republican Ted Cruz it must be said that the IMF and the EEC are on a dangerous course. The Guardian is filled with messages on how the crises seems to be over and on how Greece is turning a corner towards better times. This is done at a time when it still needs another 8 billion; unemployment rates are at an all-time high and with European incomes remain dwindling down, Greek tourism is likely to remain far below levels for another 2-3 years.

It is the Catholic charity Caritas (at http://www.theguardian.com/world/2014/mar/27/europe-economic-crisis-worse-caritas-report) stating “disturbing levels of poverty and deprivation being noted among children and youth“. This is at the centre of the issues that are enveloping Spain, Italy and Greece. In addition a 114-page inquiry into the human cost of the crisis also mentions Cyprus, Ireland, Portugal and Romania. This might not be at the centre of the mission statements that the IMF goes by, yet these industrial nations rely on workers, the fact that these nations are in such a state is a clear signal that several governments are not up to speed to give the needed aid to those people. This is not in regard to the intent a government has, but the IMF signals seem to be lacking certain reporting flags at present. the Catholic report is a first clear signal that those ‘happy happy joy joy‘ reports that economies are getting better are basically skating around the issue that is holding many down and for some considering the statement that ‘these two issues are not connected‘, should consider standing in a corner staring at the wall and feeling ashamed for even considering the thought to begin with.

Now, I promised to get back to the Ukraine as I stated in the beginning. When we consider last year’s BBC article (at http://www.bbc.com/news/business-13366011), we saw that between 2009 and 2012, Germany was the ONLY nation who had its budget set correctly. The rest was short between 1% and 10% of their budgets. It is nice that these nations speak on percentages, because those shortages go into the hundreds of billions for some nations. The twelve nations represent over 53% of the entire EEC giving a summed deficit of 13.2 percent. This in itself is not a fair assessment, so let’s turn this around into a number. This number comes down to minus 546 billion, which is just the deficit for 2013. So, the governments are not keeping their balance in any way, in addition, we now see that investors are slowly playing their ‘games’ again. There was a rush on Greek bonds, because the evidence is coming that these people will get their money no matter what. So, why do we have any form of bail-outs? It is clear that overspending is not punished, so the entire Austerity posturing seems like an empty threat. I am all for helping out those in need, but it seems more and more clear that those ‘in need’ are not doing their part in cutting down on spending in any way, shape or form. So when (not if) the train goes off track, those smaller nations will be left to their own devices, ready to get exploited by all bigger companies to get their dividend. With the larger players India and China, it seems that US companies and bigger players want cheap nations for whatever market they want to get to. In such sights is it even a wonder how areas of the Ukraine are now in fear of what comes next?

That part is shown in several ways. Even though there is now such a boasted evidence of corruption in the Ukraine as the involvement of the ‘former’ president Yanukovich. Yet, if we accept and use the paper by Anna Yemelianova and is called ‘A Diagnosis of Corruption in Ukraine‘ (at http://www.againstcorruption.eu/wp-content/uploads/2012/09/WP-14-Diagnosis-of-Corruption-in-Ukraine-new.pdf), which I mentioned on March 18th, then there is no way that corruption is limited to one side of politics. Corruption in the Ukraine is too wide spread and any player above a certain level has to be tainted to some level.

It is still puzzling why the EEC and the US are so set on the Ukraine. Why set yourself up for these levels of costs? Why get in bed with the Ukraine, whilst the bulk of the EEC has overspent by well over 500 billion. Is it any wonder that some Ukrainians are frightfully running back into the Russian arms? If we believe the Russia Today, with their headline ‘US wants to destroy Ukrainian ‘bridge’ between EU and Russia – German intellectuals support Putin‘ (at http://rt.com/news/germans-support-putin-ukraine-265/), then we see the view of a struggling USA, who reports a nice number, but when payments are due, America will only be able to do so by taking another debt ceiling hike, which places them well over the edge of bankruptcy. I have some issues with the article for other reasons. Yes, the EEC wants to keep a good relationship with Russia, if only for the reason that most of Europe relies on cheap Russian Gas, which, when absent will push the bulk of the European middle class squarely into the poverty bracket. I am just wondering whether retired German Air Force Lieutenant Colonel Jochen Scholz was hoping to get a free training course in flying the Sukhoi T-50 stealth fighter, making him the first NATO officer to ever be allowed in ‘new’ state of the art Russian equipment (this is an insinuated assumption on my side). The article has a few more issues that are slightly too vague, but the sentiment is not incorrect. The American Anti-Kremlin approach in an age of non-accountability in the era of finance is an issue for too many people. So here is me, the Cheshire cat, all smiling and smirking on events currently playing out.

If the accountability act was indeed a reality on all Common Law nations, certain games would not be played and as such nations (the US, all EEC nations as well as Japan) would be in actually movement out of a ‘debt abyss’ and not at the whimsy of high stakes investor poker games where when it works they get a large bank account, if it fails they will get bailed out by the governments in some unnamed way, which does not seem to get a massive amount of press visibility.

So here we have it, what I evangelised from the very beginning or my blog. The world can be a better place, especially if people are held accountable for their actions. That part gets even more visibility when we notice a lack of press visibility ion some regards. When we see the Standard, a UK newspaper (at http://www.standard.co.uk/news/uk/press-freedom-debate-royal-charters-are-medieval-piece-of-nonsense-8898388.html) where it is all about the issue as “Media heavyweights have branded the government’s proposed royal charter for press regulation a ‘medieval piece of nonsense’“, yet only a little over a week earlier when the Telegraph reported (at http://www.telegraph.co.uk/news/worldnews/asia/malaysia/10720237/Malaysia-Airlines-crash-Suicide-mission-theory-of-MH370-investigators.html), how the MH-370 was a ‘suicide mission’. A piece that was so bad that it’s journalistic value was less than the photo that the Sun used to publish on page 3. This happened before the plane was found, without a black box, lacking in facts, but with a photo of a cabin crew member on page one of the newspaper. At the same time, the issue of the US Congress in regards to the IMF reforms, as stated by Australian Treasurer Joe Hockey has not made any non-Australian papers. So, again, as I have always stated, there should be freedom of the press, but there should also be accountability, which is exactly what Lord Justice Leveson had advocated. Perhaps some regulation would not be too far out of context as we see a lack of informative journalism and a still unhindered tsunami of paparazzi based articles.

If we are truly one debt too far, is it not time for accountability to step in?

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Biased Journalism on USA shutdown?

We have seen reports of all forms. We see information management in what I have called bad news managing. This has happened in the Netherlands. Is it Biased Journalism, or is this journalism based upon the information handed to them?

The second part would be fair enough, because the journalist is dealing with what is handed to them. However, when we look at the canons of Journalism and their codes of ethics some questions come to the front of the lines. Truthfulness, accuracy, objectivity are three of the elements and there are more than just these three. I am not willing to attack truthfulness. It is in my view an empty gesture to do so. This is all based upon information that the Journalist gets handed. Accuracy might be an issue. They might have passed on the exact information they were handed, yet how accurate was it? Was the information tested in any way? Then there is objectivity. I am not sure if that is a valid point. Let us face the fact that objectivity is in the eyes of the beholder and as such there is more than one viewpoint. In all honesty, any article would need to be viewed from more than one side and the news as we usually watch it on TV is actually not that equipped to do just that. Newspapers are!

I have illustrated in earlier blogs that some of the mentioned information seemed inaccurate to me. This happens, I do not claim to be correct, but it seemed too upbeat to me and as such I questioned it. I was not alone, but not too many public contributors were, and in more than one occasion my view was the correct one. So when I saw the NOS news today, more questions rose in my mind and it is time to ask a few more and some other questions.

The most questionable part was the news on the US Shutdown as that danger approaches within the next 24 hours. What I saw as an issue was the way some parties were illustrated. First of all, it is important to know that I am leaning strongly towards the republican view. Not stating so beforehand would be wrong in my mind. The issue I had was with the NOS newscast of the US shutdown. It was not incorrect, but there were issues that have not been mentioned, which were at the centre of it all.

I see this all as the republican move to stop the abundant of irresponsible spending by a democratic party run government. Yes, we know that this is not about the fiscal cliff this time, but the government budget is directly linked to this. The democrats have taken the debt out of acceptable proportions.

Let us not forget that the US has a 17,000 BILLION dollar debt, this comes down to 340 billion dollars per state. In addition, if we look back to the Californian change in 2003, when Arnold Schwarzenegger became governor, former governor Gray Davis was confronted with a recall because the state shortfall was only 10% of the 340 Billion. That was directly due to the dot com boom collapse and a large group of companies were suddenly in a position no longer able to pay taxation, which meant that California, one of the richest states was suddenly without cash. Now the simple logic that follows, if one of the richest states cannot pay 10% of the outstanding debt, how can the others pay at all? This is the big cake that gets layers after layer of icing. With each layer it is presented as something that can be dealt with, but both democrat and republicans have no real solution. This is at the core of it all. So it is not just about the government budget, it is the issue that the budget is not realistic and that it is only adding to the debt. So when I see the part where Democrat Nita Lowey is talking about a compromise, then I end up splitting my guts with laughter. For two administrations there has not been any decent level of compromise. The republican view is that spending MUST go down by a lot. We could view the state by state comparison, especially against the Netherlands. Most states are larger than the Netherlands and none have a realistic approach to dealing with a 340 billion dollar debt. Now compare that to the Netherlands having to cut 6 billion and the view is almost complete. We all have to tighten the belt and within the USA this would last for no less three generations. The view I am proclaiming to be correct does have issues as well. It is however the view I behold. After Detroit, which already has gone bust, almost two dozen cities are facing the same problem in the US. Fresno, Compton and Oakland are three of them and they are all in California (one of the three rich states). If we would take a deeper look at the 50+ largest cities, then we see healthcare and retirement cost issues that make Detroit look like a joke. It is the healthcare part that is at the centre of it all. The Republicans are utterly convinced that Obama Care will not solve it at all. It will just add to the massive debts. What has been propagated as a solution to all, is in the realistic view of many a non-solution that will push forward debts and invoices that cannot be paid for in the end and as such people will face even more hardship down the line. Not to mention the fact that healthcare professionals might end up seeking greener pastures outside of the US.

The budget shortage is not new. This has been going on since 1995 (at least), however, in those days former president Clinton had two advantages. The first was that the government coffers had a cash surplus. Second was that the dot com boom was going nice. Consultancy firms were going strong, the incomes were really nice and consultants were making loads of cash by selling concepts. So, people were buying ideas and not an existing product. No matter what the reason was (like 9/11), it was the spending that the Bush administration started which gave the treasury such a negative jolt. It was nowhere near the spending that President Obama did, but he did not start this, so let us be fair about it. Against the current administration it must be stated that the no true legislation has been passed stopping Wall street the way it should, so there is no evidence that this will not happen again. And we are all aware that the economic thrashing started all with the Wall Street Clam bake ‘lets go hedge funds’ that was a huge part of the predicament we have now.

The question from the NOS ‘Is there no talking with the Republicans?‘ is not the only question and the one sided part of it is not correct. The linked question is ‘Can US overspending not be contained?‘ is the side the Republicans are dealing with. That part does not seem to be addressed by anyone. We see that side when we look at all the other places, including the Netherlands, the UK and Australia. They all have their own budget ghosts to deal with.

The Dutch government has its own cross to bear trying to find solutions to a 6 billion cutting spree. Too much talking and for too long no results. If we take all these sides (in all the talked about nations), then perhaps another method should be found. The first part is to cut ALL political incomes by 20% and no overtime payment at all (not sure if they get that to begin with). That should make a decent cut in the cost to the national treasuries and might make for quicker decisions. In my view I see no solution in any way to lower taxation. I think that this approach is an unrealistic one. What might be a solution is to change it all to a two tiered tax system with only 27% and 39%. That might work, but only if ALL tax deductibility’s are removed. This has two benefits. The system becomes simpler, and over all, with no deductibility’s left it becomes a clear approach. In addition there is a need to make all commerce taxable at the point of sale (the location of the purchaser’s keyboard). This must be where the buyer physically is. This is to take a stance on that Google, Amazon, et al approach, where on-line companies seem to be selling it all from an empty office in Ireland at taxation levels which should be regarded as a joke.

The system has to be changed. We have heard so many voices that a solution can be made, whilst ZERO results have been achieved for close to a decade. When we see administrations of entire cities go bust, it is time to just end whining about a solution that remains no more than a concept.

By the way, when we look at spending it all, what has been the end result? The fact that the US, the bulk of the Commonwealth and the Netherlands are spending way too much (compared to what is coming in though taxation) is out of proportions. That is why the republicans are putting their foot down and so far there is no evidence that they are holding the wrong position.

What is the right position? That is the question and I do not know whether the Republican position will be the correct one either. Yet, staying with the Democratic view whilst we have almost a decade of evidence that it is not working seems to be a flawed point of view. That view is reinforced by the Heritage foundation where it was quoted “While federal revenues are recovering from the recent recession, spending is growing sharply, resulting in four consecutive years of deficits exceeding $1 trillion.

So the US government has been spending more than a trillion more then it received. Consider that in 2011 the total revenue was set at 2.3 trillion, spending 43% more then you get each year is not a good idea. Consider that the recession is not done by a long-shot; overspending 40% annually will have long term consequences.

If we accept that a government is not a profit based organisation then we could consider that a government would collect taxation at 105%-110% of what it needs. When you spend money and then only collect 71% you are going to need guarantees that things will go wrong. So when I stated that it will take 3 generations to get rid of the debt I was not kidding. In addition, the 17 trillion was just the national debt. The total debt is set at 60 trillion (roughly). This means that every state in the US would have to come up with 1.2 trillion dollars to deal with it. (I know it is not fair, but I need to show an example).

If we consider the three richest states and considering the 2012 numbers (from http://www.census.gov/govs/statetax) we see the following:

The collected taxation from California was 112.3, New York 71.5 and Texas 48.5, all in billions of dollars. So whether we use either the 340 billion or the larger 1.2 trillion, only 3 of the 50 states have any chance of paying it to any effect. Viewing these numbers, do the math and we see that things must change (by a lot). The Heritage foundation is also showing that current entitlements are double the defence budget. How does this relate to Obama care? Will the info they state gives us that the additional costs by 2019 which was set at 100 billion, which is a little over 12% of all collected annual taxes. So, another 100 billion needed whilst there is no income against that. The slide states “Obama care imposes numerous tax hikes which total more than $500 billion over 10 years. Obama care’s higher tax rates on income and investment will slow economic growth, leaving hardworking American families and businesses worse off.

These are the issues that the republicans are fighting. We have seen enough ‘evidence’ to know that most economic recovery for Europe will not commence until 2015. So, as the GOP (Republican Party) is watching these developments, whilst they are watching the additional entitlement costs go up even further, costs, which are pushing their sense of humour all the way to the basement of Congress. This means that there are additional issues stopping the America from regaining its status of ‘economic superpower’. So these are some of the elements that are not too ‘illuminated’ as the US government squabble goes on. The only bonus I see at present, is that when the government shuts down, they should consider not paying any of the elected Democrats and Republicans for these days either. It might at least save the treasury a few dollars.

 

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My Prediction was spot on again

On August 14th the NOS reported exactly what I expected them to do. The economy was again slightly worse of then they thought it was going to be. This time they finally go one step further, they are now stating that it will not be that good either next year. Really?

According to Minister Dijsselbloem it was a structural problem and he points at the housing market as one of the reasons and 8.7% of the population is now unemployed. They expect now a 1.25 shrinking of the economy, which is not that much of a surprise! However, they do predict a slightly better economy for 2014. Which is not really true, but as they keep on bringing the same wrong news, they will get it partially right in 2015. So, I wonder how quick the bad news will hit the Dutch population, and in addition get more bad news before the budgets have been completed. They have 2 weeks to make a decision on what happens to SNS (which is due before the governmental budget is set) and with the 6 billion in cut backs they will then, not unlike actors come with a tear on their cheeks to ‘sell’ this bad bank option and voilà! The Dutch tax payers get another added 2.4 billion Euro in debts.

This option had been on the forethought of their minds considering the confidential paper they left open on the internet (at http://www.rijksoverheid.nl/bestanden/documenten-en-publicaties/kamerstukken/2013/02/27/07-non-paper-financien/07-non-paper-financien.pdf)

The NOS did mention that the negative steps are getting smaller and smaller. They state “the worst is over“; I personally think there is pretty much nothing left to shrink at present. The Dutch must start to realise that they are getting to some extent a ‘baked’ level of information. They mention some options to finding creative solutions and interesting enough, they steered clear from pensions. According to the NOS the government is pretty much ready with a presentable solution and the Dutch present their annual budget on ‘the day of princes’, which is on the 3rd Tuesday of September, some might think soon enough, yet the options left to them might be less then they expect with the impending bad bank shifts and a possible rehash of regulations opening up pension funds for what I would negatively call ‘waisted spending’, especially when you consider that this will be the third administration that is unable to keep a budget.

Considering these facts is why I believe that the current opposition has no right to complain, especially considering the words of Sybrand van Haersma Buma (CDA). Let us not forget that cutbacks were needed in 2009 when the government was in the ‘majority’ hands of the CDA in those days and when Germany tightened the belt when needed, Dutch politicians decided not to follow, as their projected economy did not warrant it. If they had stepped up to the plate then, the Dutch would not be in this bad a predicament today. Yet, even now their bad news is not complete. When we consider the British predicament, then they should consider, that even though their economy seems to be picking up, George Osborne admitted to the quote “the chancellor accepted for the first time that the UK’s debt would continue rising until 2016/17” (from political.co.uk). This means that with a Trillion plus in debt, the economy is in for hefty austerity measures until 2020, from that view we need to realise that hefty cutting costs in the Netherlands are essential, should they consider any decent level of growth before 2015, simply because both nations have been unable to properly budget their spending.

 

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Boosting Pensions

Would you like to lose your pension? This is more than just a simple question. If you live anywhere in Europe, then the danger to your pension is a lot more realistic and will have a larger impact then you thought there would be.

Let’s take a look at a few countries.

Netherlands.
This was already under review, however, at present there are discussions going on to get a handle on accessing pensions for all kinds of reasons. The image in part is that the Dutch government needs this treasure vault to deal with more immediate issues as well as well as the application of spending to start an economy. As reported yesterday by the NOS, the issue at present is that the government thinks it is getting access to billions a year extra. The ABP comes to the conclusion that the changes will in the end cost billions, not save them. This comes as the government is presently trying to cut almost 3 billion Euro in retirement funding. The cut back was based on the fact that businesses and employees will save-up less per year, which might save 1000 euro, which would suit the government, as this gives them a taxation windfall of 2.3 billion. In the new system it is stated that not only do people lose the 1000 euro advantage, they will have to pay more. So there would be zero advantage, even worse, considering the amount of government jobs the treasury would be down a billion, so in the end no savings at all for the poor poor coffer, only additional losses to deal with. At a time when 6 billion in cut-backs are needed, this is not the bad news they want to hear. All this has a few more hooks. Especially when we consider the questions by Hachchi (D66) in regards pension premium raises that the ABP added in January 2012. The costs were raised by 300 million euro, as documented in  2012Z01310 (source: http://www.rijksoverheid.nl/bestanden/documenten-en-publicaties/kamerstukken/2012/03/06/antwoorden-inzake-de-verhoging-van-de-pensioenpremie-door-het-abp/antwoorden-inzake-de-verhoging-van-de-pensioenpremie-door-het-abp.pdf)

It is interesting that a similar issue is now appearing only one year later. There is more!

In one view we read that the ABP in 2010 was set at 105% coverage (which means that if 100% pension is paid out, 5% remains for growth). It is however interesting to read from the NRC (at: http://www.nrc.nl/nieuws/2011/12/01/abp-verhoogt-pensioenen-niet/) we read that in December 2011 the coverage was only 94%, so in one year they went down to some degree. The same can be read at http://www.pensioenbelangen.nl/label/abp/ , more interesting, the numbers state that per September 2012 is was only at 101%. So if we recall the blog I wrote a week ago “The Age of ‘no retirement left’ is coming“, it is interesting that in that case the government is stating so much wealth. As the ABP is considered to be the largest one, we should wonder whether the Dutch politicians have any clue on what they are doing. More important, is this about short sighted cutting avoidance, or is it about more. Do not worry, they are not alone, we will have some fun looking at the UK situation next.

Is there actual evidence to support my theories? Well, the sources above clearly show that the ABP is only marginally above 100%, yet they had remained below 98% for a decent amount of time, so there is a valid amount of concern. In addition, when we consider the questions as stated in

2012Z01310, then certain issues in the recovery measures of pensions were not known, yet the initial billing would have been there, so this again is a piece of evidence that reflects 11th hour budgeting. The fact that this was never completely properly addressed remains a worry and not a reflective concern considering that in part the same issues are now again in the news.

The issues are only part of the entire picture. The fact that the Dutch pension administrator PGGM, has stated that there are issues with Walmart, could have some serious repercussions. Reuters quotes that “PGGM held 2.76 million shares of Wal-Mart as of March 31” (at: http://finance.yahoo.com/news/dutch-pension-group-halts-wal-211416613.html) this was only last week. Should the PGGM pull out then there would be concerns on both isles of the Atlantic river. Those shares represent well over 200 million, which means that Wal-mart might get some renewed problems down the line. Whether this would be due to PGGM is not a given, the fact that questions from a shareholder holding almost 3 million shares are not answered is certainly matter for concern. If we consider the economic downturn the Dutch have faced over the last 2 years, considering the issues the IMF reported in 2011 on Dutch pension funds. In that time, people entering their retirement saw their funds cut and a support capital of 50 billion was needed. So when we read less than 2 years later that those finds are so rich and that they should be opened for additional means, whilst a week later we read on some of the alleged dangers, it seems to me that playing politics with pensions is a very bad and not too bright idea. The 2011 article can be found at http://www.europeanpensions.net/ep/imf-team-recommends-adjustments-to-dutch-second-pillar-system.php

United Kingdom.

So, let’s take a look at Australia’s baby brother UK (as UK is only 3% of the size of Australia). The UK is in dangers no less immediate. The Guardian reported last November that issues would impact greatest on savers and pensioners. Yet, the story behind several issues is not brought here. For that we should look at what is happening now. Part of that is set here as http://www.guardian.co.uk/sustainable-business/capital-markets-climate-change-pension-funds. Is that even a fair assessment? If we read the quote “The way pension funds invest will determine the future, which means that to thrive they’ll need to wake up to climate change” I will wonder whether this is wishful thinking of whichever politician or investor whispered to the author. When we looked at the Netherlands and other places, these nations are all looking at sustainability solutions. Yet at present the ROI of these options are not up to scrap, so WHY use pensions there. These are fields that have been ignored be several administrations. If it is SO lucrative, then why not invest in it yourself (me asking governments)? Yes, it will be the future, but at present too expensive, so getting articles out there for pension funds to invest in the future might read nice, but as ROI reports falter it will not hold a candle up to the coming rage. This view is shared by James Cameron, chairman of cleantech investor Climate Change Capital. I know that the next part sounds dodgy as hell, but when we consider the quote “Future pensioners are going to have to bear more of the investment risk themselves“. In that case Pension funds are much better of owning parts of Raytheon and Northrop-Grumman. It seems that governments all over the world are seemingly ready at the drop of any hat to buy missile technologies, and as such the ROI for pension funds are much better off going to those places. I agree that the statement is less appealing to read, but why should pensions now be put under more and more pressure whilst, those behind the scenes refused to budge when they should have done so. The investment risk reads like a joke considering the article published in May at http://www.guardian.co.uk/money/2013/may/22/one-five-poverty-line-state-pension where it states that  20% of those retiring this year will fall below the poverty line. This is in my mind the consequence of a housing issue never properly dealt with for over 27 years, whilst pensions were left alone. Taking both in the balance, then pensions might cover 80%-100% of the rent for this year, and those will come up short 2014 and later. So that is in the most positive case where people do not need to eat or drink ever. This is only for those not living in London, living there would almost amount to instant suicide. At least the Dutch can claim that their retirement issue had never been THAT bad. So, as there is a collective boost to raise the value of the RBS, that former bastion might be used to actually boost and increase value and strength of British pensions as they focus on getting back on the horse of profit (or at least try to get on that horse). Pensions are being cut in other ways too. That part can be read at: http://www.independent.co.uk/money/pensions/expats-call-for-fairer-pension-payouts-8659717.html. Some of these pensioners (almost 10%), saw the unaffordable future they saw coming their way and as such they moved to other areas. Some saw the light in time and bought a small place on Crete, some left for alternative Mediterranean locations and some went to the warmer regions of South Africa. These people saw the light, saw the non-linear growing costs and chose a better solution. It goes even further. What is less than possible in the UK becomes very affordable in India, where a week’s pension gets you a 2 bedroom secured apartment for a month, considering that rent is the most expensive part, three weeks of pension should keep a person well fed. So why not consider this? Instead of going on an exotic vacation, live in an exotic place, and of course, the Indians are all on average Cricket nut, so not the worst place to be during Cricket season. If these people are forced back because of pension issues, would the British government have the means to suddenly appoint housing to these people? They might not get an option in this as they froze pensions. In that regard, I do hope that the Exchequer George Osborne considered the consequence of even part of those 1.2 million pensioners returning to England and his 2 billion pound winter fuel allowance. That is only one post. On the other side, there is a genuine and acceptable concern of the people who are abusing that system. There had been earlier mention of the situation where UK men marrying Thai brides is a reason for the foreign pensions increase. If we voice the scenario where a pensioner marries a woman under 25 and she then gets the allowance after he is gone, then this would indeed be an unfair use of the system. We could argue that a marriage, not validated in the UK would not be seen as a marriage (I know, the legal nightmare behind this is so not nice). However, that those who never added to the British system, not being eligible for those funds would be slightly better phrased, yet the consequences for consulates to keep track of these people would be almost disastrous. Even though this would be spread over several countries, the fact that they could be required to deal with over 700,000 additional requests a year, is not likely to become a ‘relief’ to the system. Yet I must agree that something must be done. The dangers of cutting the transferred pension, if there was a marriage, could mean that these people might have a claim on humanitarian grounds to receive full Visa and transfers into the UK, which in the end might add up to be a lot more expensive. The only solution could be legislative, yet which of the ‘evils’ to choose from is not really for now. In my mind the options grows to make the pension only transferable if the marriage was longer then a certain period (5 years) or the spouse must have been a UK resident or lived, worked and paid taxes in the UK for no less than 10 years. I am just grasping the 5 years out of thin air, yet this would limit the dangers of UK pension abuse, it would also give a clear message to the valid pensioners that THEY are protected, yet that there are limits on passing over a basic state pension. In regards to those who are valid recipients of the basic state pension and their foreign setbacks there is more information at http://pensionjustice.org/.

 

Germany.

We should consider the German system, even though it is thought to be strong, secure and to some extent safe. They share the dangers those in the UK currently have. As reported by The Spiegel at http://www.spiegel.de/international/germany/germans-fear-poverty-in-retirement-even-after-life-of-work-a-855352.html, even though their economy is in a strong state, the lost investments, the futures of retirement are almost none existing. In fact, their pensions are a lot worse of then the UK ones. A person there would end up getting a mere 32% of their income. If we consider the Dutch system where 70% does not even foot the bill, the desperation of 32% is a lot less appealing. The question becomes important when we consider the required pension buffers these pension funds need to have. The interesting addition is that a report in 2012 from the labour ministry stated that “the Labour Ministry itself, which indicates about a third of current full-time employees could end up receiving social welfare unless the pension system is changed. Those who have spent 35 years working full time but earn less than 2,500 euros a month would also end up depending on welfare.

So this is the third country playing politics for non-visible short gain and massive shortages in the long term. This gives serious concern for the bill the Germans adopted that as of January 2013 “for a reduction in the statutory pension contribution rates”. And that helps your citizens…..how?

So this is not just a national issue, this is a European issue on several levels. Unless some strong actions are taken, a large part of Europe will enter living conditions worse than that of several 3rd world countries, whilst comfortable living would be found for those moving to places like India and Argentina.

Go figure!

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Exploitation fears for tax-payers

The Dutch NOS reported another go with banks in the view of business. Bernhard Wientjes has been voicing the opinion that some of the banks (ABN/AMRO and SNS Reaal) should be sold. It was brought in the air of ‘when you have no more money you start selling the silver cutlery’ would be the next step. As the Dutch government needs to cut 6 billion, the cutting spree could be a lot less. Well, in this matter I personally stand with Finance minister Jeroen Dijsselbloem who is not that eager to do that. There is logic for not doing this, as this relief would be for one year only and after that the cuttings would still need to be found next year. I am worried that certain business men are now in a state to strong hand certain political decisions. I leave it up to the reader whether those decisions are purely for the need of greed.

If business is linked to greed (often called ‘enterprising solutions’) then that would clearly fit in the views of Bernhard Wientjes. As chairman of the VNO-NCW it would be an enterprising solution that is right up his alley. The VNO-NCW is a fusion of the VNO (League of Dutch Commercial Enterprises) and the NCW (Dutch Christian Business Society). Their mission is to support and further the needs of Dutch corporations both on a National and international level. In this he is doing exactly what he is expected to do.

Yet, in this light, at a point where two banks would be sold far below value and at the expense of the tax-payers, one should clearly ask and look at the possible windfall for Bernhard Wientjes and his friends should this work out in that way.

There is a clear valid question whether the Dutch Silver cutlery is currently in a safe position. The reality of 6 billion of cutbacks will start to show a strangling result, yet, this was the danger all along when previous political alliances (2006-2010) were clearly pushing the outstanding invoice forward. Now that there are no more options, the consequences are likely to be dire, and as such in his position Bernhard Wientjes is clearly trying to look forward for Dutch corporations. I see this specific step as a dangerous one and until Dutch banks are clearly on a minimum set standard nothing should change. In addition, I am all in favour at present to keep these institutions nationalised to prevent their boards to just seek additional high risk gains at anyone’s expense to meet personal commission goals, whilst ignoring local needs (mortgages and such).

Even seeing these banks as possible training steps for younger jobseekers on the dole, to give them short term jobs whilst staying on the dole, would give them additional food for job experience. The answers that some view that this is not how it is supposed to be, I would counter, with ‘what solutions do you have?’. We need to change the way we think and operate. Instead of trying to balance which pocket the money is coming from, we should accept that the money is coming from the suit the government wears and see how far we can walk with this suit. Instead of staying on principle of keeping tabs what pocket it comes from, use the principle of it comes from us anyway and focus on instilling knowledge and experience. That will strengthen the young to get a good shot in getting something better with a decent chance. If you have any doubt, then consider that the Netherlands is only one of 3 countries where youth unemployment rates are below 10%. Many of the Southern European countries are way over 40%. If the future of youth employment is about experience, then make sure that the youth are getting a running start now is going to be important down the line. If their future could be a decent job in Germany, then giving them an edge as they compete with desperate youthful jobseekers from Spain, Italy or Greece is essential. Do not think that those kids are any less. Those who graduated from Universidad Complutense de Madrid are more than top Notch. 7 of their graduates ended up with a Nobel price and graduates from there ended up with 2 dozen of other internationally acclaimed awards. So, if we are looking at future events, getting the youth ready NOW will be an essential step.

Yet, this week has even more issues involving banks. A report that is due to be released tomorrow on advised banking changes. The ‘advice’ is to change the mortgage market. In the Netherlands it is currently possible to get a 105% mortgage so that the house and the notary costs and change of owner registration can all be covered. The commission chaired by Herman Wijfels is now advocating that the mortgage cannot be any higher than 80%. This is to prevent that the debt of selling a house at loss would end up hitting the banks. It seems that the banks are all over their need for ‘securing’ for the little man (read the average consumer). Taking into account that the average house in the Netherlands is around $350,000 the question, especially in this era of lack of funds is where on earth will a person get $70,000 in savings when the Dutch taxation system makes it almost impossible to get that kind of money saved up. They also mentioned that this should not be done until the housing market is stronger and prices are on the rise. Like that will help people to get the money. It is interesting that there is no mention of the much more reliable and fair Swedish system. Perhaps the report due out tomorrow will mention it, but I have not been privy to the full report. In the Swedish system a house often has a two tiered mortgage. You have the bottom part which envisions the gross off it (let’s say 80% for argument sake) at a low base percentage. The rest goes into the top part. Now that part (in my case) was almost 2.5% interest higher, but the mortgage was 105% covered. So instead of the unaffordable savings needs, we have a slightly higher mortgage. So, even if we have to accept a slightly cheaper house, we at least can get a house and not be looking at houses, never being able to afford any of it. The question becomes on what it was about. The fact that a report leaks is no news, but that the report leaks just around the same time Bernhard Wientjes is making a play to sell banks is a rather convenient coincidence.

These events are important to consider. This is because the same issues are playing in the UK. Consider that Lloyds is in need of an extension as they are selling 631 branches. This and the issues around the Royal Bank of Scotland do have links, as the UK government needs to cut cost by a lot more than 6 billion (having a Trillion in deficit makes that an awkward necessity). So will we see the same play as some are now seeing if they can sell banking interests at no more than tuppence on the pound? There is absolutely no known plans at present (in case you got scared or overly enthusiastic), but the issues remain, and the solution as such would be there in equal measure. To allow the young unemployed to become part of the bank on internships and training places, so that we can offer a solution where those seeking jobs will have actual work experience in their CV. These measures might seem small, yet the confidence boost that the younger jobseekers gain, could be the winning factor. In addition, extra hands, helping to boost the value of these banks would mean that when sold, they will go for a much better and more realistic value then they are currently set at. All this in a combined effort to strengthen commonwealth economy and their assets, for the simple reason that the European Economic outlook remains grim at best and relying on overly confident reports of economic prospects, that get downgraded quarter after quarter is not doing anyone any good.

 

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Are banks now too much in control?

I mentioned some of this yesterday, some people are just too unwilling to learn and they are very willing to sell you a too pretty a picture. This is what is now starting to become clear and in a dangerous way. Again, not unlike previous events, this blog was inspired by the Dutch NOS (www.nos.nl).

Political parties are now starting to ‘panic’ and are quickly grabbing to solution wherever they can. The issue is that the Dutch economy is apparently even worse then was initially predicted by the Central Bureau of Statistics (www.CBS.nl). Their initial prediction of -0.1% is now -0.4%. Interesting fact is that I predicted something like this in my blog ‘A noun of non-profit‘ on May 15th, just over a month ago. So is this bad news management? To me it seems to be more and more the case.

Diederik Samson of the PVDA (Dutch labour party) is now trying to kick-start the economy by offering alternative sources to spend from. Well, Mr Samson, there are two issues with that idea. The first one, most people do not trust bankers and politicians, now they are seemingly joining hands many have reason to trust both of them even less. The second reason is that the unreliability of the current economy is stopping people to spend anything as long as they are in debt.

The basic issue is that there is too much uncertainty for the next two years. As such people pay their mortgage and essential bills as much as possible. The people are paying off their debts as banks cannot be trusted to play nice. This is the consequence of not containing the massive wave of simply put insane investment sprees. Perhaps some will remember how SNS Reaal needed to be nationalised?

So as the Dutch need to cut 6 billion in expenses, they now seek other way to find spending options to raise the economy and next on their list is the attempt to use pension funds to do this.

Basically, quoting Arjan Noorlander from yesterday’s NOS newscast “The people managing these funds are often investing abroad to get their dividends. This does not help the Dutch economy” He then further states “These funds should invest tens of billions by taking over mortgages from banks, so that they can offer new mortgage investments“.

How is this anywhere near a good idea? Banks, remember them? They are not to be trusted at present, or anywhere in the near future for that matter!

As we have all these bad bank mortgages out and floating, relieving banks from these burdens by losing upcoming retirement funds is more than just a bad idea. Arjan Noorlander did continue and did end with the fact that this is dangerous and retirement funds might get lost in this way, and that it might be an option if the government underwrites these loans so that they will pay the losses if those occur. To me it reads that in the end that another bill will be given to the taxpayers one way or another.

The issues of keeping the retirement funds safe was also mentioned by Alexander Pechtold (D66 = Democrats 1966), he continues by saying that first and foremost there should be clarity on how and if this should proceed.

 

You see, there are two sides to that part. In the first part the Dutch officials shot themselves in the foot for a long time by keeping housing too expensive for way too long a time. It was left to certain groups to keep the prices artificially too high. I myself viewed it as an artificial push to keep housing prices beyond acceptable as it increases the capital position of banks. Then there was the issue of preferential treatment for some places, as there were ways that the ‘right’ people got into those places. I myself experienced these events first-hand. Too many issues played and in a time when incomes were good, people got what they could and as such they are now stuck in a solid position, where moving away will cost any person a fortune. To illustrate this, my former, small, 2-bedroom apartment in Rotterdam would buy me an apartment almost twice that size in Stockholm, Sweden. So considering these facts, moving is not an option for many, which means that people are paying of their mortgage as much as possible.

The second part is that up to 2005, it was way too easy to get all kinds of credits and payment deferrals. These options all come at some percentage expense and as incomes were good, no one really cared too much. Now, to not end up in a situation where these people will have to eat their mortgage, or sell their house (making them destitute), they are now all paying off their debts as much and as fast as they can.

These two factors add to the fact that people will not spend money. Not unlike the government, too much money was taken in advance, and unlike the government, they are not getting to push it forward, so there is no spending. These factors had been known for a long time (at least 3-5 years), so when politicians are all so amazed that economic infusion plans are not working, then that amazement seems somewhat disingenuous to me. The fact that the Dutch are so about housing corporations, to be given the funds to grow is tying the cat to the bacon in more than one way.

This is not allowed to become an ‘opportunity knocks’ situation, especially when they are playing with retirement funds. If they really want to do something that adds up, then give people the option to use their retirement plan to pay of a mortgage of a new house. Those young enough will then have a building future. And it should be managed by a banking branch of those who keep those funds at present. Yet, I reckon that it will raise voices that this is not opening the economy enough. So is this about the banks, the people or the economy? I wonder how quick objections will loudly rise when banks are kept out of the equation. It would give rise to my suspicions that the banks are in more control then people realise.

Again, that risk is very real in the UK as well. Instead of keeping a decent flow of affordable housing, we see an economy in neutral whilst the hill it is up against seems to be rising more and more.

This was discussed in the Guardian, April 27th (http://www.guardian.co.uk/money/blog/2013/apr/27/pensions-system-failed-what-answer) When we look at this in regards to a failing amount of retirement savings as the predicted cost of living has been incorrect for at least a decade, likely closer to 2 decades, we now see a dangerous development. This is a market where over 40% of those approaching their elderly need will have to sell their residence to afford future care.

Suddenly ‘The Best Exotic Marigold Hotel‘ doesn’t sound like the worst idea for people to consider.

This again brings me to the idea of solutions. It is always nice to kick a parliamentarian (a therapeutic form of soul food), but we should consider options and opportunities for solutions.

There was an idea in South Australia several years ago that was quite remarkable. To solve housing, the government gave away land on loan. So basically, you got to buy a plot for $1. The conditions were that you had to place a house on it, and the value of the land was payable when you sold the house. So basically you had a house on free land as long as you lived on it. This solved two parts. One, the housing issues fell away for some, second a house needed to be build, so that was good for jobs and economy. I always thought that was a good idea to get people into their first house. The second part is the retirement issue. Now many prefer to remain where they are. This is fair enough. Yet, consider that instead of eating your house, you are leasing it away or renting it out. Consider that live in places like Greece, Spain and even India could be more rewarding (and warmer) as you live in a place where the cost of living is a lot lower. Lower cost means a better quality of life. I am not stating that this is an option for all, but perhaps it could be an option for a decent amount, giving breathing space to create new ideas and options. Whatever people choose, I hope it is one people will be able to live with in a comfortable way.

 

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