Category: International Finance

Because the City of London Owns England

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Following announcements by G-7 countries about standardizing a minimum tax for trans-national corporations and cracking down on tax evasion and tax havens, the UK has decided to go to the mat for its finance industry, AKA the “City of London”, whose core competency is tax evasion and money laundering:

U.K. Chancellor of the Exchequer Rishi Sunak is pressing for the City of London to be exempt from a plan by global leaders to make multinationals pay more tax to the countries where they operate.

Finance ministers from the Group of Seven advanced economies struck a historic deal last weekend that could force the world’s biggest companies to pay a minimum corporate tax rate of 15%.

Sunak is expected to make the case that financial services, including global banks with head offices in London, should be exempt from the plan when talks move to the G-20 next month.

………

A European Union official pushed back against the idea of an exemption. The EU expects all companies to pay their fair share of taxation, the official said at a briefing for journalists on Wednesday.

If they get an exemption, the City of London will spend its time turning client companies, and their subsidiaries into finance institutions so that hey can continue to evade taxes.

The UK would be hurt by this as much as any other nation, but they are the poodles of their finance industry, they have been since at least Margaret Thatcher.

Just Shut Them Down

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The Federal Reserve has been forced to warned Deutsche Bank that it is money laundering again.

The fix for this is very simple:  Lock them out of the US, because they are not going to fix this.

This is BCCI with a German accent:

The Federal Reserve told Deutsche Bank AG in recent weeks that the lender is failing to address persistent shortcomings in its anti-money-laundering controls, according to people familiar with the matter.

The Fed’s frustration has escalated to a point that the bank could be fined, the people said.

Deutsche Bank has poured massive resources into addressing repeated shortcomings and penalties related to allowing suspect transactions. The Fed told Deutsche Bank that instead of making progress, the German lender with a large Wall Street presence is backsliding. The regulator has said that some of the anti-money-laundering control problems require immediate attention, according to the people.

………

The Fed’s harsh words contrast with the bank’s message that it has worked diligently to improve its systems and has put most of its legal troubles in the past.

The Fed’s latest warning comes four years after it classified Deutsche Bank’s U.S. operations as being in “troubled condition,” a rare rebuke for a major bank. In May 2020, it issued a fresh admonishment over the bank’s money-laundering controls.

………

Deutsche Bank is Germany’s largest lender and as a dollar clearing bank regulated by the Fed, is a major player in global financial transactions.

Shut down their dollar clearing operations.  Problem solved, and the Germans can deal with following their own “No Bailouts” advice that they foist on the rest of the Euro Zone.

Of Course They Do

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The UK, normally the United States’ poodle in all matters, is not offering its support for Biden’s global business tax plan. 

This is not a surprise.  The British financial sector, known colloquially as the City of London, has two areas where it dominates world markets: Tax evasion and currency speculation.

The US may dominate the UK, but the City of London owns the whole government, lock, stock and barrel.

Of course they are objecting to a plan with makes revenue shifting a less profitable enterprise.  It’s their profits that they are protecting.

The Front Fell Off

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The Front Fell Off?

It now appears that the Ever Given, the massive container ship which had completely blocked the Suez Canal, has been freed and traffic has resumed through the waterway.

There is still a major backlog of ships in both directions, but after a week, we should expect a return to normal shipping conditions.

The bigger issue is how this event has demonstrated the fragility of international shipping.

What’s more, it has increasingly been juxtaposed with economic fragility driven by the increasingly oligopolistic nature of shipping, which means that if one shipper fails, the entire system can seize up.

The classic Clarke and Dawe sketch, “The Front Fell Off,” (shown) is a perfect metaphor for this:

In this newsletter, I do a lot of explaining about complicated problems caused by big dumb corporate institutions. I don’t have to do that this time, because the story of the mess in the Suez is so simple. “After years of bitcoin and reddit short selling and credit default swaps and a million other things I don’t understand,” one random person put in a tweet that went viral, “it’s so refreshing to hear that global commerce is in peril because a big boat got stuck in a canal.”

That’s basically the story right there, it’s a big boat and it got stuck in a canal. The ship blocking the Suez, called the Ever Given, weights 220,000 tons, and is as long as the Empire State Building is high. Despite the hilarious nature of the problem, the disruption to world trade is large and serious, costing tens of billions of dollars. And if the ship can’t be dislodged soon, some consumers will once again experience shortages of basic staples like toilet paper.

That said, the reason this disruption to global commerce seems so dumb is because it is. It starts with the ship size itself. Over the last few decades, ships have gotten really really big, four times the size of what they were 25 years ago, what the FT calls “too big to sail.’ The argument behind making such massive boats was efficiency, since you can carry more at a lower cost. The downside of such mega-ships should have been obvious. Ships like this, which are in effect floating islands, are really hard to steer in tight spaces like ports and canals, and if they get stuck, they are difficult to unstick. In other words, the super smart wizard financiers who run global trade made ships that don’t fit in the canals they need to fit into.

The rise of mega-ships is paralleled by the consolidation of the shipping industry itself. In 2000, the ten biggest shipping companies had a 12% market share, by 2019 that share had increased to 82%. This understates the consolidation, because there are alliances among these shippers. The stuck ship is being run by the Taiwanese shipping conglomerate Evergreen, which bought Italian shipping firm Italia Marittima in 1998 and London-based Hatsu in 2002, and is itself part of the OCEAN alliance, which has more than a third of global shipping.

Making ships massive, and combining such massive ships into massive shipping monopolies, is a bad way to run global commerce. We’ve already seen significant problems from big shipping lines helping to transmit financial shocks into trade shocks, such as when Korean shipper Hanjin went under and stranded $14 billion of cargo on the ocean while in bankruptcy. It’s also much harder for small producers and retailers to get shipping space, because large shippers want to deal with large clients. And fewer ports can handle these mega-ships, so such ships induce geographical inequality. Increasingly, we’re not moving ships between cities, we’re moving cities to where the small number of giant shipping lines find it efficient to ship.

Dumb big ships owned by monopolies are the result of dumb big ideas, the physical manifestation of what Thomas Friedman was pushing in the 1990s and 2000s with books such as The Lexus and the Olive Tree and The World is Flat, the idea that “taking fat out of the system at every joint” was leading towards a more prosperous, peaceful and competitive world. Friedman’s was a finance-friendly perspective, a belief that making us all interdependent with a very thin margin of error would force global cooperation.

………

What is new isn’t the vulnerability of the Suez Canal as a chokepoint, it’s that we’ve intentionally created lots of other artificial chokepoints. And since our production systems have little fat, these systems are tightly coupled, meaning a shortage in one area cascades throughout the global economy, costing us time, money, and lives.

It’s a dumb way to organize a global supply chain system, just as it was dumb to build ships that are too big to fit into canals. And that’s why the “big boat stuck in canal” is such a great illustration of the problem, it shows our policymakers and corporate leaders couldn’t even think through what would happen if Really Big Thing Got Stuck In Important Canal.

………

The answer to addressing the problem of thinned out supply chains is to recognize that hyper-efficient globalization inherently carries the downside of unpredictable shortages, geopolitical tension, and supply disruptions. And then redesign our global trading order to make it less efficient and more resilient. There are three basic changes we’ll need.

Matt Stoller calls for a rigorous enforcement of anti-monopoly measures, a reimpositition of border friction like tariffs, and a restructuring of business so that they are less indebted and less vulnerable.

Unfortunately, this will not happen, because this system was created to benefit financial institutions and to drive wages down through labor arbitrage, so his reforms are actually a repudiation of the entire system.

I support his ideas, but I don’t think that they are politically realistic at this time.

 

SoftBank-Funded ……… Is Never a Good Start for a Sentence

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It is remarkable just how many enterprises that Softbank funds are fraudulent, criminal, or fraud and criminality adjacent.

When one looks at their investment targets, like WeWork, Uber, and DoorDash, which are basically criminal enterprises, with defrauding investors, evading transportation and safety regulations, and stealing from delivery boys (respectively) being central to their business models.

And now another SoftFank funded dodgy outfit has blown up, Greensill, which financed supply chains.

It’s model was to pay suppliers immediately at a discount, and then collect the difference when the large firms actually buying the stuff paid on a 90 day, and frequently longer, cycle. 

Its finances were sufficiently sketchy that their insurer stopped writing them policies, and then the house of cards collapsed:

Supply chain finance disruptor Greensill is undone by its own financial alchemy, putting at risk thousands of jobs in the UK, Australia and the EU. The timing could not be worse for already buckling supply chains.

Disruptor seems to be a synonym for criminality and ignoring the lessons of finance learned over more than 500 years of fractional reserve banking.

On Monday, the supply chain finance firm Greensill Capital filed for insolvency after defaulting on a $140 million loan it owes to Credit Suisse. Its parent company in Australia had already filed for insolvency there. According to UK court documents, Greensill had “fallen into severe financial distress” and can no longer pay off its debts. Over the past week many of the company’s directors have been frantically jumping ship, including its chairman Maurice Thompson, Australia’s former foreign minister Julie Bishop and former Morgan Stanley executive David Brierwood.

The firm has been in trouble for some time, as I warned in a previous NC post. A number of its client companies already collapsed in 2020. In the aftermath attention switched to the financial menage á trois Greensill had formed with its primary backer, Soft Bank, and Swiss mega-lender Credit Suisse. Greensill was also under investigation by German banking regulator BaFin and the Association of German Banks, an industry group, over its German subsidiary Greensill Bank’s huge exposure to a single client: U.K.-based steel magnate Sanjeev Gupta.

Yep, SoftBank.  

When you want to get in on a fraud, pump it up, and get out leaving suckers holding the bag.

Greensill’s fall from grace was as spectacular as its meteoric rise, writes the FT‘s John Plender:

Greensill Capital went from nothing in 2011, when Lex Greensill abandoned a big-bank career, doing global supply chain financing at Morgan Stanley and Citibank, to go it alone. By 2019 this upstart non-bank says it had extended $US143 billion ($185.5 billion) of financing to 10m-plus customers and suppliers in 175 countries. Its founder also notched up powerful contacts in government and hired former UK prime minister David Cameron as an adviser.

Yeah, hiring David Cameron as an adviser is another tell that they are relying on smoke and mirrors more than anything else. 

It turns out that the model Greensill used was “Working” in the short term because it allowed companies to cook the books:

For large companies the advantages are twofold: they get to preserve cash on-hand by extending payment terms with vendors. They can also record the amount they owe to the supply chain finance firm or bank as accounts payable on the balance sheet rather than as debt. This makes their liquidity position appear healthier than it actually is. And that can be dangerous. Companies can conceal the true size of their debt for longer, leaving investors and creditors bearing bigger losses when they finally collapse, as happened with Spanish green energy giant Abengoa in 2015, UK outsourcing giant Carillion in 2018 and NMC Health, the former FTSE 100 private hospital company, in 2020.

They then repackaged and resold the debt, but this was dependent on these bonds being insured, and when their insurer decided to stop writing policies, and the debt became profoundly unattractive to put it mildly. so the house of cards collapsed.

Once again, though, the principals of the firm will be fine, but this collapse is ricocheting around the trans-national supply chain, and we don’t know when this game of musical chairs will end.

If this sounds familiar to you, it’s because it’s rather similar like Bear Stearns in 2008.

One hopes that the repercussions are less severe.

And Now We Have Very Serious People Coming Out Against the TPP

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So, now we have a former Reagan and Clinton trade official and a retired general arguing that the Trans Pacific Partnership (TPP) is a security risk to the United States because it will hasten the hollowing out of American manufacturing, which makes the US dependent on foreign manufacturers in places like China and Vietnam for the crucial building blocks of military equipment.

This is a rather interesting counterpoint to the Obama administration’s argument that we have to pass the TPP as a counter weight to Chinese influence in the region.

The first OP/ED appeared in the New York Times. The second appeared in The Hill.

It doesn’t get any more establishment than that.

I’m actually beginning to think that Obama won’t be able to get it through during the lame duck session.

I hope that this is not irrational optimism.

IMF Internal Report Says That the Screwed the Pooch in Greece

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An internal report reveals that IMF staff gave engaged in favoritism toward the EU and the Euro in the handling of the ongoing Greek financial crisis:

The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory.

This is the lacerating verdict of the IMF’s top watchdog on the fund’s tangled political role in the eurozone debt crisis, the most damaging episode in the history of the Bretton Woods institutions.

It describes a “culture of complacency”, prone to “superficial and mechanistic” analysis, and traces a shocking breakdown in the governance of the IMF, leaving it unclear who is ultimately in charge of this extremely powerful organisation.

The report by the IMF’s Independent Evaluation Office (IEO) goes above the head of the managing director, Christine Lagarde. It answers solely to the board of executive directors, and those from Asia and Latin America are clearly incensed at the way European Union insiders used the fund to rescue their own rich currency union and banking system.

………

In an astonishing admission, the report said its own investigators were unable to obtain key records or penetrate the activities of secretive “ad-hoc task forces”. Mrs Lagarde herself is not accused of obstruction.

“Many documents were prepared outside the regular established channels; written documentation on some sensitive matters could not be located. The IEO in some instances has not been able to determine who made certain decisions or what information was available, nor has it been able to assess the relative roles of management and staff,” it said.

The report said the whole approach to the eurozone was characterised by “groupthink” and intellectual capture. They had no fall-back plans on how to tackle a systemic crisis in the eurozone – or how to deal with the politics of a multinational currency union – because they had ruled out any possibility that it could happen.

………

This pro-EMU bias continued to corrupt their thinking for years. “The IMF remained upbeat about the soundness of the European banking system and the quality of banking supervision in euro-area countries until after the start of the global financial crisis in mid-2007. This lapse was largely due to the IMF’s readiness to take the reassurances of national and euro area authorities at face value,” it said.

………

In Greece, the IMF violated its own cardinal rule by signing off on a bailout in 2010 even though it could offer no assurance that the package would bring the country’s debts under control or clear the way for recovery, and many suspected from the start that it was doomed.

The organisation got around this by slipping through a radical change in IMF rescue policy, allowing an exemption (since abolished) if there was a risk of systemic contagion. “The board was not consulted or informed,” it said. The directors discovered the bombshell “tucked into the text” of the Greek package, but by then it was a fait accompli.

………

The injustice is that the cost of the bailouts was switched to ordinary Greek citizens – the least able to support the burden – and it was never acknowledged that the true motive of EU-IMF Troika policy was to protect monetary union. Indeed, the Greeks were repeatedly blamed for failures that stemmed from the policy itself. This unfairness – the root of so much bitterness in Greece – is finally recognised in the report.

“If preventing international contagion was an essential concern, the cost of its prevention should have been borne – at least in part – by the international community as the prime beneficiary,” it said.

So, even with institutions in the tank for the Euro, the currency continues to fail.

I still say that the solution is to get the Germans out of the Euro, sooner, rather than later.

My Heart Bleeds Borscht for These Rat F%$#S

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What a surprise, since the US Treasury has started to require more disclosure in cash only real estate purchases in the United States, this market has imploded.

Seriously, there is no way that everyone involved in the process didn’t know that it wasn’t money laundering, and as the saying goes, “You f%$# with the bull, you get the horns.”

More of this:

Cash sales of homes – mostly the domain of foreign and affluent buyers – fell to 32% of total home sales in April, down 2.8 percentage points from a year ago, according to a new report from CoreLogic. For the first four months, cash sales dropped to 34%, the lowest since 2008.

In Florida, the number one destination for foreign homebuyers, cash sales accounted for 46% of sales, and in New York, for 44%, both decreasing as well. The “strong dollar” and “global uncertainty” were blamed.

In Manhattan and Miami, the luxury condo markets are already getting mauled. For example, we reported that in Manhattan, condo prices plunged 14% in just three months.

We also reported that foreign investors were pulling back, particularly Chinese investors, the most prolific of all foreign buyers. The number of homes they purchased over the 12-month period had plunged 15%.

So is it just the “strong dollar” and “global uncertainty?” Or could there be more to the story?

Today, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) announced that it would expand a program it had kicked off in January to identify and track secret homebuyers who hide behind shell companies.

The expanded program will “temporarily require US title insurance companies to identify the natural persons behind shell companies used to pay ‘all cash’ for high-end residential real estate in six major metropolitan areas,” up from the two areas designated in January, Manhattan and Miami, among the biggest destinations of global wealth:

FinCEN remains concerned that all-cash purchases (i.e., those without bank financing) may be conducted by individuals attempting to hide their assets and identity by purchasing residential properties through limited liability companies or other opaque structures.

Real estate purchases in the US have been a perfectly good way to launder large amounts of money, no questions asked. Brokers and banks and other industry professionals have played along. Everyone in the world knew it. And they came to launder their cash.

These folks don’t mind paying a little extra. So as an industry-pleasing side effect of this influx of opaque money, luxury home prices soared, from where they trickled down to the rest of the market.

The criminal activity in the real estate market is increasingly pricing ordinary people out of homes, so it’s nice that the T-men are doing this.

While at the Other Ocean………

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It appears that the elections called by Malcolm Trumbull just made Australia’s approval of the TPP next to impossible in the near future:

With a new Senate likely to be hostile to free trade deals, the road to signing the Trans-Pacific Partnership just got bumpy, writes Richard Denniss.

One thing that is certain after Saturday’s election, the Trans-Pacific Partnership (TPP) is dead, and along with it the Coalition’s economic agenda and narrative. The free trade agreements that Andrew Robb signed with China, Korea, and Japan were some of Tony Abbott’s proudest achievements, yet they are exactly the sort of deals that Pauline Hanson, Nick Xenophon, and Jacqui Lambie believe cost Australian manufacturing workers jobs.

And thanks to Malcolm Turnbull’s new Senate voting rules and double dissolution election, Hanson, Xenophon, and Lambie are now the block of votes that the Coalition will need to win over to pass their legislation when the ALP and Greens are opposed.

This may not kill the TPP, but it has the effect of making the timetable Obama that wants (he sees it as a presidential legacy issus), where there is a lame duck vote, next to impossible.

It is not clear who will win the election, but it is clear that the Colalition will not have the votes to pass TPP without significant support from smaller parties because the Senate is looking to be a complete mess, and unlike other upper houses in the British Commonwealth, the Australian Senate is much more powerful, being somewhat analogous to the US Senate in power.

Again, good news, because much like CETA and the TPIP, the TPP is a horribly flawed “trade deal.”

Looks Like the EU Just Threw a Roadblock in Front of CETA

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The Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada now must be approved by individual parliaments, and not the European Council and European Parliament:

The European Commission performed a startling U-turn on its landmark trade agreement with Canada on Tuesday, succumbing to pressure from France and Germany by deciding that national parliaments would have to ratify the deal.

 The need for approval from almost 40 national and regional assemblies not only threatens to scupper the Canadian deal itself, but delivers an ominous signal to British politicians who insist that the U.K. could negotiate a quick post-Brexit trade accord with the EU.

 Speaking in Strasbourg, Trade Commissioner Cecilia Malmström said the EU had decided to call the Canada deal a “mixed agreement.” This means that the bloc’s most significant trade deal to date is now hostage to hostile lawmakers in parliaments ranging from Romania to the Belgian region of Wallonia.

I think that this development is being driven by two things:

  • Concern that the British Brexit vote is spreading to other EU members, particularly on the periphery.
  • Setting a precedent of allowing every member of the EU to have a potential veto over the conditions over which the UK would negotiate its leaving the EU.

I think that this also means that the trade deal, which is a kind of mini-TTIP will not happen in the next 12 months or so, if at all:

The decision, taken during a meeting of the EU’s commissioners in Strasbourg, represented a surprising volte-face because the Commission had hoped to treat the accord as an EU-only deal, meaning it would require approval only from the European Parliament and national governments in the Council.

The Canadian deal has stoked sensitivities across Europe primarily because it is seen as a precursor to the far more contentious Transatlantic Trade and Investment Partnership with the U.S.

Matthias Fekl, France’s trade minister, said it was “unbelievable” that Brussels had been planning to treat the deal as an exclusively EU competence.

“I find it even more hallucinatory only a few days after the result of the British referendum that one could envisage this type of procedure at the level of the European Commission,” he told the news agency AFP in an interview.

The tortuous path to approve the deal will sound alarms in London, where politicians are pinning their hopes on a quick settlement with the EU after Brexit. Debates in national parliaments could potentially add years of delay to the Canadian accord, which has already taken seven years to finalize.

It isn’t often that you get a diplomat using the adjective hallucinatory.

This also does not bode well for the TTIP.

Considering the impacts of such trade deals, inflated pharmaceutical prices, destructive capital flows, increased financialization of economies, etc.  This is a good thing.

Yeah, This Really Inspires Support for the TTIP

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The US ambassador to Italy, a political appointee by Obama, is saying that the US and Europe need to approve the trade deal in order to prevent prosecution of the banksters at the mega-banks:

On May 7th, Deutsche Wirtschafts Nachrichten, or German Economic News, headlined, “USA planen mit TTIP Frontal-Angriff auf Gerichte in Europa” or “U.S. Plans Frontal Attack on Europe’s Courts via TTIP,” and reported that, “America’s urgency to sign TTIP with Europe has solid reason: Megabanks must protect themselves from claims by European investors who allege that they were cheated during the debt crisis. … The U.S. Ambassador to Italy has now let the cat out of the bag on this — probably unintentionally.”

In this particular case, the megabank that’s being sued isn’t American but German, Deutsche Bank, which the U.S. Ambassador to Italy has cited as his example to defend, perhaps so as to appeal to Germans to protect their megabanks against lawsuits from foreign investors (such as Italians) who complain. In that case it was investors in the Italian city of Trani, population 53,000. The smallness of the city was an issue the Ambassador raised against the suit’s having been brought there.

Reuters headlined on May 6th, “Italian prosecutor investigates Deutsche Bank over 2011 bond sale”, and reported that, “An Italian prosecutor is investigating Deutsche Bank (DBKGn.DE) over its sale of 7 billion euros ($8 billion) of Italian government bonds five years ago, an investigative source told Reuters. A prosecutor in Trani, a town in southern Italy, is investigating because Deutsche Bank allegedly told clients in a research note in early 2011 that Italy’s public debt was no cause for concern, and then sold almost 90 percent of its own holding of the country’s bonds.” The U.S. bond-rating agencies are also subjects in this suit, because Trani had relied upon their ratings of those bonds.

The Obama Administration (through its Italian Ambassador) seems thus to be saying, in effect, that unless TTIP is passed into law, Europe’s megabanks (and the U.S. bond-rating agencies, S&P, Moody’s and Fitch) will be able successfully to be sued by cheated investors, just as has been happening with such American banks as JPMorgan/Chase and Goldman Sachs in the United States, which — since TTIP hasn’t yet been in force anywhere, including in the U.S. — were forced to pay billions to cheated investors. Apparently, Obama would be happier if those suits had been impossible in the U.S. The argument here, though only implicitly, seems to be that TTIP is the way to protect megabanks and the bond-rating firms. It concerns specifically the selling of sophisticated derivative investments.

I didn’t think that there was any bit of news that would make me more opposed to the TTIP or TPP.

I was misinformed.

It Would Be My Concern Too

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The anonymous source behind the huge leak of documents known as the Panama Papers has offered to aid law enforcement officials in prosecutions related to offshore money laundering and tax evasion, but only if assured of protection from punishment.

“Legitimate whistle-blowers who expose unquestionable wrongdoing, whether insiders or outsiders, deserve immunity from government retribution,” the source, who has still not revealed a name or nationality, said in a statement issued Thursday night.

The documents, which list the true owners of thousands of companies created to hide the people behind them, expose the holdings of current and former world leaders and other prominent figures. The source, who uses the pseudonym John Doe but whose gender is not known, said that the papers could spur thousands of prosecutions, “if only law enforcement could access and evaluate the actual documents.”

John Doe noted that journalists who have viewed the papers have said they will not turn over the full archive of 11.5 million documents. “I, however, would be willing to cooperate with law enforcement to the extent that I am able,” the source wrote.

The statement, which was issued Thursday night under the condition that it not be reported until Friday morning, gave some hints about John Doe’s political views and concerns. They include income inequality, the American campaign finance system and the “revolving door” of United States officials who take jobs at banks or other companies they once regulated.

………

In the statement, the source denied being a government official or contractor, now or in the past. The confidential source was also extremely critical of the news media, suggesting that certain unnamed news organizations had declined initial offers to take and report on the documents.

I can understand “John Doe’s” concern.  There have been numerous cases where whistle blowers have been typically been sentenced to more jail time than the folks actually breaking the laws.
What’s more, when one looks at those prosecutions, and the the sentences, it becomes pretty clear that this is a feature of the American criminal justice system, and not a bug.
Prosecutors seem intent on punishing people who whistle blow on members of our plutocracy.

Your Panama Papers Update

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Bernie Sanders Predicted this in 2011


There appears to be a dearth of US money launderers reported

Rather unsurprisingly, Bernie Sanders is noting his opposition, and Hillary Clinton’s support for the trade deal in his campaign:

Responding to the 11.5 million documents leaked this week showing how a Panama law firm helped some of the world’s wealthiest people establish offshore tax havens on the Central American country — the so-called Panama Papers — Bernie Sanders on Tuesday vowed to end the Panama Free Trade Agreement, tying Hillary Clinton to the same policies that he claimed fostered the practice.

 “The Panama Free Trade Agreement put a stamp of approval on Panama, a world leader when it comes to allowing the wealthy and the powerful to avoid taxes,” the Vermont senator said in a statement released through his campaign, adding that he has been opposed to it “from day one.”

 Vowing to use his authority as president to “terminate the Panama Free Trade Agreement within six months,” Sanders said his administration would “conduct an immediate investigation into U.S. banks, corporations and wealthy individuals who have been stashing their cash in Panama to avoid taxes.”

 “If any of them have violated U.S. law, my administration will prosecute them to the fullest extent of the law,” he said.

 Sanders also said that he had correctly predicted that the passage of the trade deal “would make it easier, not harder, for the wealthy and large corporations to evade taxes by sheltering billions of dollars offshore.”

 “I wish I had been proven wrong about this, but it has now come to light that the extent of Panama’s tax avoidance scams is even worse than I had feared,” he said, before pivoting to Clinton. “My opponent, on the other hand, opposed this trade agreement when she was running against Barack Obama for president in 2008. But when it really mattered she quickly reversed course and helped push the Panama Free Trade Agreement through Congress as Secretary of State. The results have been a disaster.”

It is not an unreasonable indictment of Hillary Clinton’s and Barack Obama’s record on so called free trade agreements.

In what might be a perfect example of Chutzpah, the state of Wyoming, a shell corporation factory that has one corporation for every 4½ residents, has initiated an investigation of a Wyoming based law firm at the center of the scandal:

The Wyoming arm of the law firm at the heart of the Panama Papers global scandal is under investigation by Wyoming state officials for failing to maintain required statutory information about companies registering there, Secretary of State Ed Murray said Wednesday.

 Upon learning of the Panama Papers, a massive leak of secret offshore company data reported on by McClatchy and more than 100 other media partners around the globe, Wyoming initiated an audit of 24 companies registered in the state by the law firm Mossack Fonseca and its partners, he said.

 “The audit concluded around noon on Monday, April 4th, and determined that M.F. Corporate Services Wyoming LLC failed to maintain the required statutory information for performing the duties of a registered agent under Wyoming law,” Murray said in a statement.

 The state followed immediately with administrative action, demanding that required information be provided.

 “Subsequently, M.F. Corporate Services did provide the information,” the secretary of state’s office said, adding that Murray also briefed law enforcement that day. “This investigation of this matter is ongoing.”

This is near toxic levels of hypocrisy.

In an interesting twist of fate, Ken Silverstien, then a reporter at The Intercept was all over the story of Mossack Fonseca 14 months ago, though his employer refused to publish it, so he published on Vice.com.

And then Pierre Omidyar, the publisher of The Intercept, got in his face.

.@MarkAmesExiled FYI @pierre wouldn’t pub story but demanded my fee from VICE. Oh well, at least I’m not in Moscow https://t.co/pZT7qr14yt

— Ken Silverstein (@KenSilverstein1) April 4, 2016

I wonder if perhaps the eBay founder (Omidyar) might have some “interesting” corporate structures for his billions.

The reporting this far seems to be what Yves Smith calls, “The Intercept model, not [the] Wikileaks model“.  See also Craig Murray’s critique of the coverage thus far.

Almost all the reporting thus far, with the exception of Icelands now former PM, has been directed primarily at regimes hostile to the west, with most of the coverage being screaming about Vladimir Putin.

Also note that Suddeutsche Zeitung brought in International Consortium of Investigative Journalists (ICIJ)
Not also the picture in the tweet.

The selective nature of releases to this point also raises the issue that those in the files but not yet exposed may be likely targets for blackmail: (Moon of Alabama)

A real leak of data from a law firm in Panama would be very interesting. Many rich people and/or politicians hide money in shell companies that such firms in Panama provide. But the current heavily promoted “leak” of such data to several NATO supporting news organization and a US government financed “Non Government Organization” is just a lame attempt to smear some people the U.S. empire dislikes. It also creates a huge blackmail opportunity by NOT publishing certain data in return for this or that desired favor.

Both Murray and MoA are implying that the US/NATO state security apparatus are somehow involved in the release of this data.

I have not made up my mind, but if we don’t see some prominent western names in the releases in the next few weeks, Sigmundur Gunnlaugsson doesn’t count, then I will be much more inclined to take their view.

Pass the Popcorn

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It appears that someone has hacked into the files of Panamanian law firm Mossack Fonseca, and found a treasure trove of evidence of international corruption:

A massive leak of documents has blown open a window on the vast, murky world of shell companies, providing an extraordinary look at how the wealthy and powerful conceal their money.

Twelve current and former world leaders maintain offshore shell companies. Close friends of Russian leader Vladimir Putin have funneled as much as $2 billion through banks and offshore companies.

Those exposed in the leak include the prime ministers of Iceland and Pakistan, an alleged bagman for Syrian President Bashar Assad, a close pal of Mexican President Enrique Peña Nieto and companies linked to the family of Chinese President Xi Jinping.

Add to those the monarchs of Saudi Arabia and Morocco, enough Middle Eastern royalty to fill a palace, honchos in the troubled body known as FIFA that controls international soccer and 29 billionaires featured in Forbes Magazine’s list of the world’s 500 richest people.

Also mentioned are 61 relatives and associates of current country leaders, and another 128 current or former politicians and public officials.

The documents within the leak also expose how secretive offshore companies at times subvert U.S. foreign policy and mock U.S. regulators. When drug traffickers, money launderers or other crooks control companies, they undermine national security, and the trail of dark money flowing through them strips national treasuries everywhere of tax revenues.

………


The firm is one of the world’s top five creators of shell companies, which can have legitimate business uses, but can also be used to dodge taxes and launder money.

More than 11.5 million emails, financial spreadsheets, client records, passports and corporate registries were obtained in the leak, which was delivered to the Süddeutsche Zeitung newspaper in Munich, Germany. In turn, the newspaper shared the data with the Washington-based International Consortium of Investigative Journalists (ICIJ).

It would be nice if we actually saw some action by they criminal and tax authorities in response to the leaks, but I doubt it.

So Not a Surprise

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Global Witness, a not-for profit anti-money laundering organization, and ran a sting on lawyers who aid people in getting their ill gotten gains into the US:

With attention growing on the use of shell companies in high-end real estate, an activist organization released a report Sunday night that said several New York real estate lawyers had been caught on camera providing advice on how to move suspect money into the United States.

The report is the result of an undercover investigation carried out in 2014 by Global Witness, a nonprofit activist organization that has been pushing for stricter money-laundering rules.

The lawyers featured in the report include a recent president of the American Bar Association.

“It wasn’t hard to find lawyers to suggest ways to move suspect funds into the United States,” said Stefanie Ostfeld, a spokeswoman for Global Witness. “We went undercover because it is the only way we could show what really happens behind closed doors. The findings speak for themselves — something urgently needs to change.”

The real estate industry has been under growing scrutiny as evidence has emerged that suspect money is flowing into luxury real estate. Global Witness cited an investigation last year in The New York Times that documented numerous foreign officials and their family members buying multimillion-dollar properties in Manhattan and quantified the rising use of shell companies in real estate transactions.

This is not a surprise.

There is whole industry of unethical but (barely) legal money laundering, on Wall Street in New York, and in The City of London.

Hopefully a this additional attention will make doing this harder.

Our financial sector is aggressively complicit in the looting of the poorest societies on earth.
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Uruguay is Now My Favorite Latin American Nation

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Last year, they legalized Marijuana, and now they have regected the Trade in Services Agreement (TISA) international trade deal:

Often referred to as the Switzerland of South America, Uruguay is long accustomed to doing things its own way. It was the first nation in Latin America to establish a welfare state. It also has an unusually large middle class for the region and unlike its giant neighbors to the north and west, Brazil and Argentina, is largely free of serious income inequality.

Two years ago, during José Mujica’s presidency, Uruguay became the first nation to legalize marijuana in Latin America, a continent that is being ripped apart by drug trafficking and its associated violence and corruption of state institutions.

Now Uruguay has done something that no other semi-aligned nation on this planet has dared to do: it has rejected the advances of the global corporatocracy.

………

Earlier this month Uruguay’s government decided to end its participation in the secret negotiations of the Trade in Services Agreement (TISA). After months of intense pressure led by unions and other grassroots movements that culminated in a national general strike on the issue – the first of its kind around the globe – the Uruguayan President Tabare Vazquez bowed to public opinion and left the US-led trade agreement.

………

TiSA involves more countries than TTIP and TPP combined: The United States and all 28 members of the European Union, Australia, Canada, Chile, Colombia, Costa Rica, Hong Kong, Iceland, Israel, Japan, Liechtenstein, Mexico, New Zealand, Norway, Pakistan, Panama, Paraguay, Peru, South Korea, Switzerland, Taiwan and Turkey.

Together, these 52 nations form the charmingly named “Really Good Friends of Services” group, which represents almost 70% of all trade in services worldwide. Until its government’s recent u-turn Uruguay was supposed to be the 53rd Good Friend of Services.

………
TiSA has spent the last two years taking shape behind the hermetically sealed doors of highly secure locations around the world. According to the agreement’s provisional text, the document is supposed to remain confidential and concealed from public view for at least five years after being signed. Even the World Trade Organization has been sidelined from negotiations.
But thanks to whistle blowing sites like WikiLeaks, the Associated Whistleblowing Press and Filtrala, crucial details have seeped to the surface. Here’s a brief outline of what is known to date (for more specifics click here, here and here):
1.TiSA would “lock in” the privatization of services – even in cases where private service delivery has failed – meaning governments can never return water, energy, health, education or other services to public hands.
2.TiSA would restrict signatory governments’ right to regulate stronger standards in the public’s interest. For example, it will affect environmental regulations, licensing of health facilities and laboratories, waste disposal centres, power plants, school and university accreditation and broadcast licenses.
3.TiSA would limit the ability of governments to regulate the financial services industry, at a time when the global economy is still struggling to recover from a crisis caused primarily by financial deregulation. More specifically, if signed the trade agreement would:

  • Restrict the ability of governments to place limits on the trading of derivative contracts — the largely unregulated weapons of mass financial destruction that helped trigger the 2007-08 Global Financial Crisis.
  • Bar new financial regulations that do not conform to deregulatory rules. Signatory governments will essentially agree not to apply new financial policy measures which in any way contradict the agreement’s emphasis on deregulatory measures.
  • Prohibit national governments from using capital controls to prevent or mitigate financial crises. The leaked texts prohibit restrictions on financial inflows – used to prevent rapid currency appreciation, asset bubbles and other macroeconomic problems – and financial outflows, used to prevent sudden capital flight in times of crisis.
  • Require acceptance of financial products not yet invented. Despite the pivotal role that new, complex financial products played in the Financial Crisis, TISA would require governments to allow all new financial products and services, including ones not yet invented, to be sold within their territories.

4. TiSA would ban any restrictions on cross-border information flows and localization requirements for ICT service providers. A provision proposed by US negotiators would rule out any conditions for the transfer of personal data to third countries that are currently in place in EU data protection law. In other words, multinational corporations will have carte blanche to pry into just about every facet of the working and personal lives of the inhabitants of roughly a quarter of the world’s 200-or-so nations.

As I wrote in LEAKED: Secret Negotiations to Let Big Brother Go Global, if TiSA is signed in its current form – and we will not know exactly what that form is until at least five years down the line – our personal data will be freely bought and sold on the open market place without our knowledge; companies and governments will be able to store it for as long as they desire and use it for just about any purpose.

Obviously, in the grand scheme of things, Uruguay doesn’t count for a whole lot, the whole country has a population is less than that of Los Angeles, but it is the first time that any country involved in the negotiations has pulled out, and should make it easier for another nation to take this step, which means that that standing up to the interests of the US, which are primarily to support data brokers, pharma, IP restrictions, and the banksters.

This is a good thing for the people of Uruguay, and if it leads to more countries pulling out of this agreement, it will be a good thing for the world.

The Stupidest Analysis of the Greek Crisis so Far………

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Over at the Washington Post Max Ehrenfreund proceeds to think himself into a circle to such a degree that that his head is actually fully up his ass:

Suppose senior government officials in Greece had concluded that the euro was a failed experiment, that the rest of the continent would never extend reasonable terms to their country and would instead doom it to perpetual recession, and that the only way to save Greece from disaster — and Europe, too — was to begin the process of unwinding the common currency.

 They’d have encountered a major obstacle to leaving the euro: Greeks really like it. To get rid of it, the country’s leaders would have had just one option: sabotage negotiations with the creditors, blame them for being unreasonable, and then eventually tell voters that Greece has no choice but to go back to the drachma.

Seriously?

Greece has none of the infrastructure to even print Drachmas, because the Greeks were literally forced to smash their printing presses when they joined the Euro:

With speculation swirling that Greece might be forced out of the euro and have to print its own money after a weekend referendum, its finance minister on Thursday said the country no longer had the presses to make drachmas.

“We don’t have the capacity,” Yanis Varoufakis told Australian public radio network ABC.

In 2000, the year before Greece joined the eurozone, “one of the things we had to do was get rid of all our printing presses” as part of the bloc’s assertion that “this monetary union is irreversible,” he said.

“We smashed the printing presses — we have no printing presses,” Varoufakis said.

This is widely known, and it was a policy that was across the Euro Zone.

While it might be possible to get some currency printed up by a 3rd party (North Korea comes to mind) but they appear not to have taken any of the requisite steps to reintroducing the currency.

I am sick to death of this “too clever by half” contrarian bullsh%$.

It’s a cheap trick to make stupid pundits appear smart.

And So the Dissolution of the EU Begins

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Greek Prime Minister Alexis Tsipras will be calling for a referendum on the Troika’s proposal:

In a dramatic move that will put Europe on tenterhooks, the Greek prime minister Alexis Tsipras told his fellow citizens last night he would call a referendum on the bailout accord that international creditors have proposed to keep the debt-stricken country afloat.

Following an emergency meeting of his cabinet, Tsipras said his leftist-led government had decided a package of austerity measures proposed by the country’s creditors – made in a last-ditch effort to avert default – would be put to popular vote. The referendum will take place on Sunday 5 July.

“After five months of hard negotiations our partners, unfortunately, ended up making a proposal that was an ultimatum towards Greek democracy and the Greek people,” he said in a national address, “an ultimatum at odds with the founding principles and values of Europe, the values of our common European construction.”

The leader, who only hours earlier had rejected the proposed reforms after several days of high-stakes talks in Brussels, said Greeks now faced a “historic responsibility” to respond to the ultimatum.

He said the reforms were “blackmail for the acceptance on our part of severe and humiliating austerity without end and without the prospect of ever prospering socially and economically”.

This is actually the intention.

This is politically motivated sadism.

The Germans want it because the want to demonstrate their power and virtue, and because of memories of  a period of hyperinflation that was caused by the triumphalism of the victors in the First World War.

The French want to be sure that they are not on the losing side of this alone.

The other northern tier EU countries have been relegated to spectator status.

What would seem to be Greece’s natural allies, Ireland, Spain, Portugal, and Italy, are desperate for Greece to fail, because if Syriza succeeds, it bolsters the anti-austerity parties in their countries, which threatens their political elites’ hold on power.

So I expect that Greece will be crushed under what is largely a German boot, and that various neo-facist parties, particularly New Dawn in Greece, will gain power as the center delivers misery, and the left is systematically excluded from meaningful governance.

Tell me that this does not look like 1932.

(on edit)

I read something similar to this, but had neglected to bookmark it.

I have now found who it was who explained the politics of this, it was Paul Krugman:

As a political matter, the big losers from this process have been the parties of the center-left, whose acquiescence in harsh austerity — and hence abandonment of whatever they supposedly stood for — does them far more damage than similar policies do to the center-right.As a political matter, the big losers from this process have been the parties of the center-left, whose acquiescence in harsh austerity — and hence abandonment of whatever they supposedly stood for — does them far more damage than similar policies do to the center-right.

Obama Loses Trade Vote in House ……… and There Was Much Rejoicing

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It’s confusing, but basically the House of Representatives overwhelmingly rejected a key portion of the Fast Track process, and I am doing a happy dance.

Hours after President Obama made a dramatic, personal appeal for support, House Democrats on Friday thwarted his push to expand trade negotiating power — and quite likely his chance to secure a legacy-defining accord spanning the Pacific Ocean.

 In a remarkable blow to a president they have backed so resolutely, House Democrats voted to end assistance to workers displaced by global trade, a program their party created and has supported for four decades. That move effectively scuttled legislation granting the president trade promotion authority — the power to negotiate trade deals that cannot be amended or filibustered by Congress.

 “We want a better deal for America’s workers,” said Representative Nancy Pelosi of California, the House minority leader, who has guided the president’s agenda for two terms and was personally lobbied by Mr. Obama until the last minute.

 The vote that prevented the president from obtaining trade promotional authority now imperils the more sweeping Trans-Pacific Partnership, a proposed trade agreement with 11 other nations along the Pacific Ocean that affects 40 percent of the global economy on goods ranging from running shoes to computers.

 ………

 The Democratic revolt left Republican leaders trying to summon support from their own party for trade adjustment assistance, a program they have long derided as a waste of money and a concession to organized labor. Eighty-six Republicans voted for the program, more than double the 40 Democrats who supported it. But the trade adjustment assistance bill failed when 126 voted for it and 303 against.

 Republican leaders then passed, in a 219-to-211 vote, a stand-alone bill that would grant the president the trade negotiating authority he sought. But that measure cannot go to the president for his signature because the Senate version of the legislative package combined both trade adjustment and trade promotion.

 There is still a possibility that the House will pass the worker assistance bill early next week and send to Mr. Obama, but it would require dozens of Republicans or Democrats changing their votes, a prospect Republicans said was remote.

It’s kind of tough to understand what is going on here, but here is how this was supposed work:

  • In order to pass Trade Promotion Authority (aka TPA or Fast Track), Congress needs to pass displaced worker aid, which provides funds for transition and retraining, for people displaced as a result offshoring
  • Because the Republicans are insisting on offsets for this costs, this measure includes a minuscule cut to Medicare.
  • Fast Track is supposed to be passed.
  • Because Democrats are unwilling to cut Medicare, Democrats were promised a vote to reinstate the Medicare funding.  (but no guarantee that it would pass)

Here’s the kicker:  There were never more than 80 or so Republicans who were willing to support aid to displaced workers, which meant that something like ¾ of the Democratic Caucus need to vote for it, and it meant voting for a Medicare cut, which would have been used by Republicans in the 2016 campaign, just like they did in 2010 over Obamacare.

Additionally, as was observed by Gaius Publius, (the blogger, not the Roman Historian), “Supporting NAFTA Was the Kiss of Death for Democrats — Why Dems Should Think Twice About Voting for TPP.”

Much like Obamacare, Obama is shivving his own party in the hopes of his “legacy”, but this time, they get it, and unlike Obamacare, the TPP, TTIP, and TiSA actually make things worse ……… A lot worse.

They are designed to facilitate the privatization of government functions, encourage IP based rent seeking, and to promote the parasitic financialization of the involved countries.

I am tremendously happy that Obama has lost this, but I expect him to come back again to try and get fast track authority again.

Keep dialing your Congress critters.

I Quote the Prophet, Bear Who Swims

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Over a year ago, the Bear Who Swims predicted to me (via email, not his blog) that the Europe was on a path to another war.

If you follow the history of Europe, there seems to be one every hundred years or so.

Well, now the Shrill One, Nobel Prize winning economist Paul Krugman, is making allusions to seeing the same thing:

U.S. officials are generally cautious about intervening in European policy debates. The European Union is, after all, an economic superpower in its own right — far too big and rich for America to have much direct influence — led by sophisticated people who should be able to manage their own affairs. So it’s startling to learn that Jacob Lew, the Treasury secretary, recently warned Europeans that they had better settle the Greek situation soon, lest there be a destructive “accident.”

But I understand why Mr. Lew said what he did. A forced Greek exit from the euro would create huge economic and political risks, yet Europe seems to be sleepwalking toward that outcome. So Mr. Lew was doing his best to deliver a wake-up call.

And yes, the allusion to Christopher Clark’s recent magisterial book on the origins of World War I, “The Sleepwalkers,” is deliberate. There’s a definite 1914 feeling to what’s happening, a sense that pride, annoyance, and sheer miscalculation are leading Europe off a cliff it could and should have avoided.

………

Yet there seems to be more to it than lack of trust. Some major players seem strangely fatalistic, willing and even anxious to get on with the catastrophe – a sort of modern version of the “spirit of 1914,” in which many people were enthusiastic about the prospect of war. These players have convinced themselves that the rest of Europe can shrug off a Greek exit from the euro, and that such an exit might even have a salutary effect by showing the price of bad behavior.

But they are making a terrible mistake. Even in the short run, the financial safeguards that would supposedly contain the effects of a Greek exit have never been tested, and could well fail. Beyond that, Greece is, like it or not, part of the European Union, and its troubles would surely spill over to the rest of the union even if the financial bulwarks hold.

I generally agree with my brother, aka “Bear who Swims”, that Europe is heading back into what seems to be a once a century path to conflict, though I differ in degree:  He posits a shooting war, and I expect something analogous to a Cold War along with a dissolution of the EU.

And once again, I’ll blame the Germans.

H/T Stephen Saroff      o o  The Bear who Swims      
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                         oo    oo