Tag: International Finance

Consider the Source

The International Monetary Fund, which has never found an austerity program it didn’t like, and has consistently argued for the emasculation of worker rights, has just issued a report saying that workers rights must be restored in the US.

Seriously, this is not something that I expected from this organization.

The IMF has been on the side of the banks and the oligarchs since its inception:

Systematic erosion of workers’ power relative to their employers has suppressed US wages

Politicians in both US political parties now acknowledge wage stagnation and have adopted narratives claiming that “the system is rigged.” Some focus on the number of immigrants and on what they see as unfair trade with China. Others focus on monopolies charging higher prices and reaping huge profits. There is, however, no agreement on what, and who, rigged the system.

In fact, as my new paper with colleagues Josh Bivens and Heidi Shierholz, “Explaining Wage Suppression” shows, wages have been kept low in the United States because workers have been systematically disempowered as a result of corporate practices and economic policies that were adopted—or reforms that were blocked—at the behest of business and the wealthy. This lack of worker power has caused wage suppression, increased wage inequality, and exacerbated racial disparities. The specific mechanisms behind this shift in power are excessive unemployment, globalization, eroded labor standards and their lack of enforcement, weakened collective bargaining, and corporate structure changes that disadvantage workers. To reestablish patterns of growth that benefit the vast majority requires new policies that center on rebuilding worker power.

Coming from someone like me, this would be considered pinko ranting, but from the IMF, even publishing this paper represents a shift.


This Is Not a Bad Thing

It appears that the City of London’s position as money launderer to the world is threatened by Brexit.

Financial companies are moving their EU operations to nations that will stay in the EU.

While the PTB in the UK are freaking out about this, this is actually a good thing.

The average Briton has been harmed by the growth of the UK financial industry, much in the same way that US citizens have been harmed by the US financial industry.

Above a certain size, a bloated financial industry reduces growth and becomes parasitic.

London will become more affordable for people who do productive work, and the resources and brain power that have been devoted to financial engineering will go to productive pursuits.

If these people move to Paris, or Frankfurt, or Brussels, it will make the lives of the people there worse, and the lives of the people in south east England better.

The UK will end up a more humane and more equal place as a result.

They Will Collapse in a Major Accounting Scandal Scandal

A Kazakh “Fintech” company just debuted on the London Stock Exchange with a $6.5 billion valuation

The people hawking this company are touting it as the future of personal finance and E-Commerce of Kazakhstan.

It’s Wirecard all over again, or the third film in the Borat Sagdiyev movie trilogy, but this sets off my scam warning something fierce:

With most staff working from home, the headquarters of Kazakhstan’s fintech hero Kaspi.kz exudes a sleepiness ill-fitting for a company whose rapid rise has been accelerated by the coronavirus pandemic.

Kaspi, Kazakhstan’s payment systems and e-commerce leader, became the Central Asian country’s most valuable firm after it was valued at $6.5 billion on the London stock exchange in October in what was the United Kingdom’s second largest float of this year.

The listing took commentators by surprise, coming after a failed attempt — falling short of a $4 billon market cap valuation — the year before.

But Kaspi’s Georgia-born CEO Mikheil Lomtadze, told AFP that the company and its investors, including Goldman Sachs and CIS-focused Baring Vostok — were not fazed by the false start.

“We believe that we have a lot of space for further growth, and we were not in any hurry to do our IPO,” said Lomtadze in the company’s head offices in Almaty.

Lomtadze, sporting an open-necked shirt and jeans, told AFP that beyond China, where online payment systems Alipay and WeChat have become ubiquitous, there are few markets that have seen user behaviour so utterly transformed by mobile payments as Kazakhstan.

“We are frontrunners in digitising the country,” Lomtadze said.

I don’t know about you, but I just filled up my bullsh%$ bingo card.

Not Just the Worst Attorney General Ever, Also Corrupt

It looks like Trump’s Attorney General William Barr may have intervened to quash the tax evasion case against Caterpillar, one of Barr’s former clients, when he became AG.

Certainly, the timing is HIGHLY suspect:

Before William Barr became President Donald Trump’s choice to lead the U.S. Department of Justice, he represented Caterpillar Inc, a Fortune 100 company, in a federal criminal investigation by the department.

Much was at stake for Caterpillar: Since 2018, the Internal Revenue Service has been demanding $2.3 billion in payments from the company in connection with the tax matters under criminal investigation. The company is contesting that finding.

A week after Barr was nominated for the job of attorney general, Justice officials in Washington told the investigative team in the active criminal probe of Caterpillar to take “no further action” in the case, according to an email written by one of the agents and reviewed by Reuters.

The decision, the email said, came from the Justice Department’s Tax Division and the office of the deputy attorney general, who was then Rod Rosenstein.


Since then, a source close to the case says, the investigation has “stalled.” The order to freeze the Caterpillar investigation has not been previously reported.

Reuters was unable to determine why Justice issued the “no further action” directive. It was not issued by Barr, as it came before he was confirmed. A Justice Department spokesperson said Barr recused himself from any Caterpillar discussions once he became attorney general, but declined further comment. Barr, in testimony during his confirmation hearings, said rules of legal privilege precluded him from discussing his work for the company.


Potential conflicts of interest, whether real or apparent, often arise when high-powered lawyers switch between private practice and government service. Bruce A. Green, a former federal prosecutor who teaches at Fordham Law School, said it is not unheard of for attorney generals to have clients who had business before the DOJ. He noted that in 2009, President Barack Obama’s attorney general, Eric Holder, recused himself from a case involving Swiss Bank UBS, a prior client.

But Green said he could not recall a case where agents were told to take no further action on a matter involving an incoming attorney general’s former client without some kind of explanation. “Why would you just stop?” he asked.

Because Barr made it clear that he would be Trump’s guy, but he just needed a “little favor”, that’s why.


The government’s questions about Caterpillar’s tax structure started with a whistleblower lawsuit in 2009 that laid out what it said was a complex “tax dodge” to route Caterpillar profits on parts sales through a company in Switzerland. Then, in 2014, the U.S. Senate Permanent Subcommittee on Investigations dug into the issue, and alleged the company adopted a sales strategy that “shifted billions of dollars in profits away from the United States and into Switzerland, where Caterpillar had negotiated an effective corporate tax rate of 4% to 6%.” The Senate investigators quoted company insiders who said the system was structured for “tax avoidance.”


The next year, a federal grand jury in Illinois launched a criminal investigation. In March 2017, federal agents raided three Caterpillar offices, wheeling out evidence in large black plastic boxes. In a report written for the government, a consultant for the investigators, Leslie Robinson, called the tax strategy “fraudulent rather than negligent.”

Two weeks after the raid, Caterpillar Chief Executive Jim Umpleby announced the hiring of Barr as company counsel. Barr would “take a fresh look at Caterpillar’s disputes with the government, get all the facts, and then help us bring these matters to proper resolution based on the merits.”


This October, Robinson communicated again with the investigators. In emails reviewed by Reuters, she asked what had happened to the case, explaining that a Reuters reporter had inquired. That’s when LeBeau explained, copying other agents and a prosecutor on the email, that they had been told to take no further action a week after Barr’s nomination 20 months ago.

“We were given no additional explanation,” he wrote.

I REALLY want to see Barr lose his law license, but if he loses his license to practice law, that would be good too.

This guy is openly, and aggressively corrupt.

Headline of the Day

Banks’ Airtight Compliance Procedure Involves Laundering Money, Sending Report That Won’t Be Read, Collecting Fees, Laughing All The Way Back To Themselves


To be fair, the story was broken by Buzzfeed, but they don’t have the same attitude as Dealbreaker.

A huge trove of secret government documents reveals for the first time how the giants of Western banking move trillions of dollars in suspicious transactions, enriching themselves and their shareholders while facilitating the work of terrorists, kleptocrats, and drug kingpins.

And the US government, despite its vast powers, fails to stop it.

Today, the FinCEN Files — thousands of “suspicious activity reports” and other US government documents — offer an unprecedented view of global financial corruption, the banks enabling it, and the government agencies that watch as it flourishes. BuzzFeed News has shared these reports with the International Consortium of Investigative Journalists and more than 100 news organizations in 88 countries.

These documents, compiled by banks, shared with the government, but kept from public view, expose the hollowness of banking safeguards, and the ease with which criminals have exploited them. Profits from deadly drug wars, fortunes embezzled from developing countries, and hard-earned savings stolen in a Ponzi scheme were all allowed to flow into and out of these financial institutions, despite warnings from the banks’ own employees.
Laws that were meant to stop financial crime have instead allowed it to flourish. So long as a bank files a notice that it may be facilitating criminal activity, it all but immunizes itself and its executives from criminal prosecution. The suspicious activity alert effectively gives them a free pass to keep moving the money and collecting the fees.


But the FinCEN Files investigation shows that even after they were prosecuted or fined for financial misconduct, banks such as JPMorgan Chase, HSBC, Standard Chartered, Deutsche Bank, and Bank of New York Mellon continued to move money for suspected criminals.

This information should be routinely made public.

Name and shame the oligarchs and those who help them to launder their money.

The Vampire Squid Skates Again

Goldman Sachs, which was a conspirator in the Malaysian 1MDB scandal, will scate with a payment of a $2½ billion dollars.

As a part of this deal, the people at Goldman Sachs who personally aided, and personally profited from, the theft of billions of Malaysian state resources, will be getting get out of jail free cards.

This is disgusting:

Only Goldman Sachs. Last week, after months of public sparring and days of tough in-person negotiations, the Wall Street bank finally reached a deal with Malaysia over allegations that it had helped a former prime minister loot billions of dollars from the state investment fund, 1MDB.

Goldman will fork out $2.5bn, instead of the $7.5bn the finance minster had originally demanded, and the Malaysian government agreed to drop criminal charges against the bank and cease legal proceedings against 17 current and former Goldman directors.


Evercore’s Glenn Schorr argues that “the only thing that matters is, will this prevent Goldman from doing business in the way they need to do business? I believe it won’t.” If history — and the Malaysian result — is any guide, Mr Schorr is on to something.

Mr. Schorr means that he hopes that GS will continue business as usual.

What is left unspoken is that business as usual for the, “Great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money,” is corruption, looting, and fraud.

Oh the Huge Manatee!

The EU is going to black the Cayman Islands as a money laundering nation.

This will be a big problem for the folks working in the City of London, since a big part of their business is tax evasion and money laundering through former British colonies:

The Cayman Islands, a British overseas territory, is to be put on an EU blacklist of tax havens, less than two weeks after the UK’s withdrawal from the bloc.


The EU’s blacklist is an attempt to clamp down on the estimated £506bn lost to aggressive tax avoidance every year but member states are not “screened” in the process of drawing up the blacklist.

Territories linked to member states have also avoided the blacklist and the UK had heavily lobbied to protect its overseas territories from such scrutiny in the past.

On Wednesday, EU ambassadors judged that the islands in the western Caribbean Sea are not effectively cooperating with Brussels on financial transparency, the Financial Times reported.

The Cayman Islands will join Fiji, Oman, Samoa, Trinidad and Tobago, Vanuatu and the three US territories of American Samoa, Guam, and the US Virgin Islands, on the “non-cooperative” list.

For the love of the Flying Spaghetti Monster, think of the poor bankers, who will have to find productive work.

The horror ………

Fired for Noting the Obvious

World Bank Chief Economist Pinelopi (Penny) Goldberg has left after the organization killed a report that showed that at least 5% of aid from the organization went into overseas accounts:

When autocratic, oil-rich nations enjoy a windfall from higher crude prices, where does the money go? One place to look is Swiss bank accounts. Sure enough, an increase in oil prices is followed by a spike in deposits held by these countries in financial havens, according to a 2017 paper by Jorgen Juel Andersen of BI Norwegian Business School, Niels Johannesen of the University of Copenhagen and their co-authors.

When Mr Johannesen presented this result at the World Bank in 2015, the audience included Bob Rijkers, a member of the bank’s research group. The two of them joined forces with Mr Andersen to investigate if something similar happened after another kind of windfall: infusions of aid from foreign donors. Their conclusion was dispiriting. World Bank payouts to 22 aid-dependent countries during 1990-2010 were followed by a jump in their deposits in foreign financial havens. The leaks averaged about 5% of the bank’s aid to these countries.

Mr Rijkers is part of a unit that reports to the bank’s chief economist, Pinelopi (Penny) Goldberg. The team publishes working papers on the understanding that their views do not represent the bank’s. But Mr Rijkers’s collaborative effort, which was leaked to The Economist, is not yet among them. It passed an exacting internal review by other researchers in November. But, according to informed sources, publication was blocked by higher officials. They may have been worried about how it would look if the bank’s own researchers said that a chunk of its aid ended up in Swiss bank accounts and the like.

The bank insists a final decision on publication has not been made and that it still has legitimate concerns about the paper. A correlation between aid disbursements and offshore deposits is not proof of causation. And the 5% of “leaks” might include some innocent money, earned by aid contractors who just happen to prefer offshore havens to other financial centres. But the paper had already answered similar objections in the review process.

The recycling of foreign into western banks through corruption is a feature, not a bug.

Corrupt officials are bribable, and if they store their money in western institutions, they are far more likely to buy into the neoliberal consensus favored by the west.

If This Isn’t a Sign of Empire Collapse………

We are quite literally selling ourselves, and it is horrifying:

America is one of the only developed countries in the world that pays people to donate blood, much of it sold abroad (70% of the world’s plasma is of US origin), and as commercial blood donations have soared, blood now accounts for 2% of the country’s exports — more than corn or soya.

There’s more growth ahead for blood products, expected to “grow radiantly” according to an analyst who was cheering 13% growth between 2016-17.

One study found that the typical blood-seller derives a third of their income from selling blood. Princeton’s Kathryn Edin called the commercial blood industry “the lifeblood of the $2 a day poor.”

Mintpress’s interviews with blood-sellers reveal “a mix of disabled, working poor, homeless, single parents, and college students,” who describe a system of arbitrary and predatory payments, which fluxuate wildly from day to day.

The horror.

Keynes Noted This 80 Years Ago

John Maynard Keynes wrote about the dangers of destructive speculative capital flows, and now even the IMF is beginning to warm to capital controls:

Advanced economies have delivered a decade of woeful economic growth since the global financial crisis. The last thing the world needs is for emerging economies to be dragged down, too.

Such thinking is taking hold in some parts of Washington, where the IMF is rethinking the once rigidly “neoliberal” advice — stressing open markets and free-floating currencies — that it doles out to economies great and small.

David Lipton, first deputy managing director of the IMF, says one of its primary concerns is that low inflation in the developed world may, through capital flows, be “spreading in an undesirable way to emerging countries and causing them to stagnate”.

“Many of these countries are concerned about how spillovers from advanced world policies cause them to lose some degree of control over their domestic economies.” He questioned whether policies such as currency intervention could be used to “offset this transmission mechanism”.


Developing countries run the risk of becoming overindebted as a result of capital inflows reducing borrowing costs. For some such countries, she said, the IMF’s preliminary modelling suggested “capital controls are the appropriate instrument to tackle this overborrowing problem, and they should be imposed as prudential policy in normal times before debt limit shocks strike”.

The use of the phrase “in normal times” suggests that, for some countries at least, the IMF is moving towards endorsing capital controls on a semi-permanent basis, not just in an emergency.


One EM economist at a leading bank, who backs the rethink but asked for anonymity given the sensitivity around the subject, said that for decades the IMF “has been guilty of capital account fundamentalism”.

It only took them 74 years for them to get a clue about this sh%$.

One wonders just how many people died before they got a smidgen of a clue.

Schadenfreude Alert!!!!

It appears The House of Saud’s IPO for Aramco is going about as well as WeWork’s:

Some of the world’s top investment bankers gathered at a Riyadh palace on Saturday to deliver their final recommendations on a project that had consumed the government of Saudi Arabia for the past few years: the initial public offering of Saudi Aramco.

The financiers were there to meet Yasir al-Rumayyan, the state oil company’s chairman and the head of the country’s sovereign wealth fund, along with cabinet ministers and the company’s leadership.

Their message would disappoint the hosts: international investors were unwilling to buy shares in Saudi Aramco anywhere near the $2tn valuation long sought by the kingdom’s powerful Crown Prince Mohammed bin Salman. No amount of sweeteners — from promises of higher dividends to bonus shares for local retail investors — had managed to change that reality.

It could not happen to evern

Looks like Foreign Money Laundering is Tapering Off

At least in the New York City apartment market, where prices are falling of a cliff:

It’s a tough time to be a seller in Manhattan’s most-expensive neighborhoods, where price declines for previously owned apartments are accelerating.

In Tribeca, resale prices fell 28% year-over-year, the most for any neighborhood, to a median of $2.25 million in the third quarter, according to property listings website StreetEasy. Values in both Greenwich Village and Chelsea dropped 15%. The Upper West Side and the area that includes Soho were each down 14%.

As listings pile up across the borough, owners are starting to sense that the surest way to a deal is to lower their expectations of a hefty profit.

“Things that are selling are selling for lower prices, and expensive things, overall, are not selling,” said Grant Long, senior economist at StreetEasy.

One of the reasons for this is that people who are looking to hide overseas ill-gotten gains are looking at London, rather than the Big Apple, because they believe that a post-Brexit UK will be desperate and so will look the other way over suspicious real estate transfers.

As an aside, it took about 50 years for us to forget the lessons of the Great Depression, but we are on the path to repeat the Great Recession of 2008 11 years later.

Argentina: 1 — IMF: 0

Argentine president Mauricio Macri has decisively lost his bid for reelection, showing that the the people of Argentina have gotten sick of the myth of expansionary austerity:

Argentina’s Peronists swept back into power on Sunday, ousting conservative president Mauricio Macri in an election result that shifts Latin America’s No. 3 economy firmly back toward the left after it was battered by economic crisis.

Peronist Alberto Fernandez had 47.79% of the vote, ahead of Macri’s 40.71%, with more than 90% of ballots counted, putting the center-left challenger over the 45% threshold to avoid a runoff and win the election outright.

Macri, speaking at his election party, conceded the race and congratulated Fernandez. He said he had invited Fernandez to the presidential palace on Monday to discuss an orderly transition, seen as essential for Argentina’s shaky economy and markets.

Here’s hoping that this is the beginning of a trend.

The standard neoliberal prescriptions create little more than misery.

I’ve Seen This Movie Before, and It Does Not End Well

We Have Learned Nothing

We are repeating not particularly old, but remarkably destructive, patterns.

It appears that low and no money down mortgages are surging again:

What does the chart show?

It illustrates the growing proportion of UK mortgage lending at loan to value (LTV) ratios of 90 per cent or higher. Figures from the Bank of England last week found this type of lending had reached its highest level as a share of the total since the financial crisis, topping 18.7 per cent of all lending in the first three months of 2019.

The data appeared in a July report published by the BoE’s Financial Policy Committee, which monitors potential risks to the financial system. It is based on product sales data from the Financial Conduct Authority and the central bank’s own calculations.

Admittedly, this is the UK, which is a smaller real estate market, and is facing unique challenges **cough** Brexit **cough** at this time, so it may be an outlier, but this has unsettling echoes to the 2008 meltdown.

Tweet of the Day

I’m reading @JosephEStiglitz‘s new book, “People, Power, & Profits”.

Really appreciate this point about globalisation & wages:

It’s not just that wages are cheaper overseas, but our trade agreements give companies stronger rights if they invest overseas than at home. #ISDS pic.twitter.com/2vLq83cMBR

— Alice Evans (@_alice_evans) April 23, 2019

It’s not just market forces: We have been subsiding offshoring and labor arbitrage for years.

Because They Are a Corrupt Criminal Enterprise, and They Buy Politicians Accordingly

The good folks at Pro Publica are asking, “Why Aren’t Hedge Funds Required to Fight Money Laundering?

They do a good job of looking at what is going on, but they miss the underlying why.

According to their own description, hedge funds work by recognizing, and exploiting, “Market inefficiencies.”

Translated into normal English, this means that they win by cheating.

What’s more, they know that they win by cheating, and so they know that reductions in corruption, or increases in transparency are a direct threat to their core business model.

The hedge funds are corrupt, and corrupting, to their core, and because of this, they spend a lot of money on campaign contributions, as well as on hiring former regulators, so that people there know, if they play the game, they can cash out when they retire:

For many years, the federal government has required banks, brokerages and even casinos to take steps to stop customers from using them to clean dirty money.

Yet one major part of the financial system has remained stubbornly exempt, despite experts’ repeated warnings that it is vulnerable to criminal manipulation. Investment companies such as hedge funds and private equity firms have escaped multiple efforts to subject them to rules meant to combat money laundering.


The Financial Action Task Force, an intergovernmental organization that seeks to combat money laundering around the world, characterized the lack of anti-money laundering rules for investment advisers, such as those who manage hedge funds and private equity funds, as one of the United States’ most significant lapses in a report two years ago.


Hedge funds and private equity funds can be attractive to big-dollar launderers who prize the funds’ anonymity, the variety of investments they offer and, in some cases, their use of off-shore tax and secrecy havens, experts say. After 2001, the number of annual hedge fund launches surged more than threefold, according to one report, and investments by high net worth individuals exceeded those of institutional investors.

“They’re a black box to everyone involved,” Kirschenbaum said. “They’re sophisticated and can justify moving hundreds of billions.”

Money launderers seek to hide illicit proceeds by making it appear they come from legal sources. Laundering hides crimes as diverse as drug dealing, tax evasion and political corruption. Experts say the massive, untracked streams of cash it creates can fuel more illegal activity, including terrorism.

This Just In: Jeremy Corbyn Can Count

Jeremy Corbyn has been opposed to a a 2nd referendum on Brexit ever since the process started.

There have been a few motivations ascribed to to this with Corbyn’s mild Euroskepticism (true) and the suggestion that that the EU is fundamentally a neoliberal institution that is structured to dismantle the modern social safety net (also true).

Well, now we have what seems to be a more likely explanation, that Jeremy Corbyn understands the political dynamics involved.

There are two very clear data points:

As Labour Party leader, these have to be a part of his considerations.

When this Goes Nationwide, Look Out Below

Expanding a program already in place in New York City and Miami, the US Treasury will be requiring full purchaser information on all cash real-estate transactions.

It’s called Geographic Targeting Orders (GTOs), and it has been expanded to include Boston; Chicago; Dallas-Fort Worth; Honolulu; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; and Seattle (US Treasury link).

I do not know how much real estate in these areas is criminals and despots trying to conceal their ill gotten gains, but my guess is that, at least at the high end, it is quite a lot.

Assuming that the GTO regime is relatively strict, and given the vicissitudes of the Treasury, and the fact that the current President almost certainly laundered money for Russian oligarchs, I have my doubts.

Who Blinks First?

The European Commission has told the Italian Government that its budget is not acceptable, and the Italian government has told the European Commission to pound sand:

The Italian government will not budge from its position on the country’s budget plan even though it is in breach of EU rules.

In a three-and-a-half page letter sent on Monday to commissioners Pierre Moscovici and Valdis Dombrovskis, Finance Minister Giovanni Tria wrote: “Italy is aware it has chosen a path that isn’t in line with EU rules. It was a hard decision but necessary in order to bring the country’s GDP back to pre-crisis levels and considering the ongoing economic difficulties for Italians.”

Tria went on to address the three objections raised by Moscovici and Dombrovskis in their letter to him last week, saying the government is confident it can achieve the ambitious growth targets it has outlined. Tria’s letter explained that the government will increase public investments and implement a number of significant structural reforms that should help trigger such growth. However, should Italy’s “growth trajectory evolve differently to what we expect, we would intervene,” he wrote.

Tria concluded the letter by saying that although the positions of Rome and Brussels are different, he hopes a “constructive dialogue” within the framework of EU rules can continue. He said Italy’s place is “in the eurozone.”

This situation is likely going to be rather different than that of Greece, or even Spain:  Italy is a far larger economy, and its current ruling coalition is not irrevocably linked to the Euro or the EU as, for example, Syriza was in Greece, which made meaningful negotiations impossible.

Also, it should be noted that even with the spending increase, the budget remains in primary surplus (its revenues exceed all spending but interest on the debt).

As I’ve noted before, the problem with the EU in general, and the Eurozone in particular, is the hegemony that Germany, and its economic philosophy, hold over the entire European Project.

Even without the obvious history, current events have shown this to be a bad thing.