Thursday, September 15, 2011

'DEFICIT SINNERS' - Germany’s EU Commissioner Wants Flags Of All Bailed Out Nations Flown At Half-Mast


The Scarlet Bailout moment is upon us.  Sentiment is turning in Germany against the Euro-periphery bailout as evidenced by the following story from Brussels yesterday.  Meanwhile, in a moment of hilarity as the EU approaches collapse, some EU officials are apparently demanding a new and more powerful Lisbon Treaty.  Good luck with that.
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EU Bailout Scarlet Letter
GERMANY’S EUROPEAN COMMISSIONER has lent his voice to demands that the national flags of all bailed-out European Union member states be flown at half-mast at EU buildings.
Günther Oettinger told German media last Friday that the move would “be a big deterrent” to those countries – which he called “deficit sinners” – who cannot keep control of their financial affairs, though he admitted that it would “just be a symbol”.
The suggestion would mean that the flags of Ireland, Greece and Portugal would have to be flown at half-mast outside all of the EU’s buildings in Brussels, Strasbourg and elsewhere.
Among Oettinger’s other controversial ideas are that the EU simply take over the power of collecting tax in Greece.
Continue reading...
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New Lisbon Treaty
EUROPE’S MAJOR ECONOMIES demanded a replacement for the Lisbon Treaty, creating further fiscal and economic ties between Eurozone countries, Britain’s chancellor George Osborne has revealed.
Osborne told reporters that officials from the European Union, France, Germany and Italy want a new treaty superseding Lisbon – which infamously took several years to negotiate and ratify across the EU – at the weekend’s G7 conference in Marseille.
“I think it is on the cards that there may be a treaty change imposed in the next year or two, beyond what has already been proposed,” the Daily Telegraph quoted Osborne as saying, referring to the agreement already reached about upgrading the EU’s permanent bailout fund.
“This would be for the eurozone – this would be to further integrate the eurozone, [and] further strengthen fiscal integration”.
Continue reading...

GE Dumps Offshore Wind-Power Plans AFTER Collecting $125 Million In Stimulus From Taxpayers For Wind Projects


Best friends Obama and Immelt applaud as GE screws taxpayers once again.
Source - Gateway Pundit
GE was awarded 44 contracts totaling over $46,000,000 and 44 grants totaling more than$79,000,000 from the Obama-Pelosi $757 billion dollar stimulus package. Millions of dollars in stimulus funds were used by GE in green energy projects.
Today GE announced that it was going to gut its offshore wind-power plans.
Forbes reported:
General Electric, the U.S.-based industrial giant and leading manufacturer of wind-power turbines, is scaling back efforts to expand its presence in the offshore wind power market.
The rationale: there is no meaningful offshore wind market to speak of – at least not yet.  Given slower-than-expected industry growth, the offshore market may not mature as rapidly as many wind boosters once believed.  In 2009, GE moved into the offshore market by acquiring Norway’s ScanWind, a developer of direct-drive turbines, based in the city of Trondheim.
GE is considering laying off about 40 employees in Norway as it scales-back its offshore operations there, according to reports in Recharge. The company has also suspended plans to construct a manufacturing facility in the United Kingdom indefinitely.
Immelt also said the stimulus would work way back in April 2009.

GE CEO Jeffrey Immelt, the head of Barack Obama’s Economic Advisory Panel, was invited to sit with the First Lady during the president’s speech to Congress this past week. He’s been a strong supporter of the president since he took over the White House and his companies have received plenty of government funds as well.

First lady Michelle Obama (4th L) and Vice President Joe Biden’s wife, Jill, (2nd R) clap from the front row of the First Lady’s Box before the start of President Barack Obama’s address to a joint session of Congress on Capitol Hill in Washington September 8, 2011. Others in the box are: (top row 3rd L- 2nd R) General Electric CEO Jeffrey Immelt, American Express CEO Kenneth Chenault, AOL co-founder Steve Case, Permac Industries CEO Darlene Miller and Maryland Governor Martin O’Malley, and (front row L-R) Philip Maung, Gracey Ibarra, Kelcie Fisher,Obama, Joseph Kidd, Biden and Marlena Clark. (REUTERS/Jim Bourg)

Obama's Stimulus Plan Will Cost $250,000 Per Job

I'd say $250k per job is a bargain compared with Obama's last stimulus:
The report was written by the White House’s Council of Economic Advisors, a group of three economists who were all handpicked by Obama, and it chronicles the alleged success of the “stimulus” in adding or saving jobs. The council reports that, using “mainstream estimates of economic multipliers for the effects of fiscal stimulus” (which it describes as a “natural way to estimate the effects of” the legislation), the “stimulus” has added or saved just under 2.4 million jobs — whether private or public — at a cost (to date) of $666 billion. That’s a cost to taxpayers of $278,000 per job.
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John Carney
Barack Obama's jobs plan may be one of the worst policy proposals I've ever seen.
As I pointed out last week, the plan to "pay for" the jobs proposal with tax hikes is just lunacy. It eliminates every bit of stimulus effect that could possibly come from additional government spending.
John Poehling has run the numbers on the American Jobs Act (AJA).
Even if you take very optimistic figures, the jobs bill turns out to be unbelievably costly.
For those eager to put some math to the rhetoric coming from the White House over the president's jobs creation plan, and that should be everyone, here is a quick and dirty estimate based on the numbers being thrown around of a 2 percent GDP increase in year 1 and 1.9 million jobs created or saved...most saved, as in those you can't really quantify. Said otherwise, roughly a $300 billion increase in GDP yields 1.9 million jobs. So far so good.
Now since the president is proposing to pay for the program over 10 years, let's assume the $475 billion in direct expenses is financed for 10 years at 2.5 percent which adds roughly $120 billion to the total cost of the program. In other words, as the calculations detailed and show below elaborate, the overall AJA plan will cost $250,000 per job created (excluding the interest expense) and $312,500 per union job created (including interest). And that's how much it costs for Obama to purchase one vote...created or saved. Keynesian efficiency strikes like a Swiss watch yet again.
So that's $250,000 per job, before interest expense.  Wouldn't it be better just to have a free national lottery and mail $200,000 checks to a lucky 1.9 million people?

Highly Ranked BofA Strategist Says S&P May Fall 20% More In 2011, 2-Year Treasury Hit 0%


CNBC
Rising risk aversion, a surging U.S. dollar, historical seasonal weakness and a climb in bonds could send the S&P 500 down as much as 21 percent from Friday’s close, according to Mary Ann Bartels, Bank of America Merrill Lynch’s technical research analyst.
The 2-year Treasury yield could drop to zero, Bartels added.
“Unfortunately, nothing in our work suggests that the market is improving,” Bartels wrote in a report today. “More importantly, we are more concerned now that the downside risk could be more than we originally forecast.”
“September historically is the worst performing month in the year, while October traditionally marks important market bottoms.”
The S&P 500 is already down 15 percent from its bull market high hit at the start of May.  Bartels believes that the benchmark will retest the 1100-1020 area and if it fails there, then look out below. She gets her target in the 900s using a combination of commonly-used factors, most notably a 61.8 percent Fibonacci retracement of the March 2009 to May 2011 rally.
Bartels ranked third among technical analysts in Institutional Investor’s 2010 survey.

Is Greece the catalyst to global default?

Moody's Downgrades Top French Banks On Fears Of Greek Crisis

PARIS -- Moody's downgraded the credit ratings of French banks Societe Generale and Credit Agricole on Wednesday following a period of huge volatility in the markets as investors fretted about their exposure to Greece's debts.
Some sort of move by Moody's had been widely expected this week since the agency had put them and rival BNP Paribas on review for downgrade in mid-June.
While cutting its rating on Societe Generale's long-term debt rating by one notch to Aa3 and Credit Agricole's by the same amount to Aa1, Moody's warned that both could have their ratings downgraded by a further notch as it assesses "the implications of the persistent fragility in the bank financing markets." BNP's rating also remains under review.
The downgrades come as Europe scrambles to deal with the Greek debt crisis amid mounting fears that the debt-laden nation may have to default. That would leave some banks holding a lot of debt that might never be repaid, and investors are wondering if the banks have enough of a cushion to absorb those losses.
Because of those fears, some European banks have been having trouble securing the loans they need to fund their day-to-day operations; U.S. money-market funds have seemingly been particularly reluctant, and one European bank was forced to pay higher than market rates recently to get dollar funding from the European Central Bank.
Moody's assessment on Wednesday explored how the banks would weather a significant loss on their Greek debt, and the new review will now look at how much they've been affected by the difficulty to raise money on capital markets.
"Our concern now is more the financing markets of banks. Funding conditions have become more difficult and the risk is that persists and that becomes progressively more negative the longer it persists," said Nicholas Hill, an analyst at Moody's.
The banks, Societe Generale and BNP Paribas, in particular, have denied that the funding difficulties have put them in any real danger, saying that they still have plenty of access to loans.
Moody's maintained its Aa2 rating on BNP Paribas because its profits and capital base "provide an adequate cushion to support its Greek, Portuguese and Irish exposure."
Following the downgrade, Societe Generale said Moody's analysis shows that the bank's exposure to Greece "to be modest and manageable."
Earlier this week, Societe Generale's chief executive Frederic Oudea said that the bank was prepared for a downgrade and that it would not change its outlook.
Christian Noyer, the governor of the Banque de France, also shrugged off the news.
"For me, it's relatively good news," Noyer told French radio RTL. "First, because it's a very limited downgrade, only on two out of three banks, and especially since Moody's rates them better than the other two agencies (Standard & Poor's and Fitch), so, in reality, it put them at the same level or even slightly higher than the other agencies."
Government spokeswoman Valerie Pecresse, who is also the budget minister, reiterated her "confidence in the position of the French banks."
But analyst Louise Cooper of BGC Partners said that there are real concerns about the banks' access to funding.
"Why are share prices then so low and volatile? Because investors are highly skeptical of what they are told. Why are they so skeptical? Because clearly anyone who works in these markets ... will tell you that lending between banks and other financial groups in the short term wholesale markets is anything but normal," she said.
Credit Agricole did not comment on the downgrade specifically but said in a statement that its retail bank will put in place a general guarantee of the investment banking subsidiary. The retail bank, Credit Agricole SA, is generally considered to be in a stronger position than the investment banking arm.
The statement seemed aimed at reassuring investors of the level of support available to the investment bank.
It may have worked: Credit Agricole was the only one of the three banks whose shares were trading higher on Wednesday afternoon. They were up 3.2 percent.
Societe Generale was down 2.8 percent, while BNP Paribas was also pressured even though it wasn't downgraded. Its share price fell 2.2 percent.
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Sylvie Corbet contributed to this report.
http://www.huffingtonpost.com/2011/09/14/moodys-french-banks_n_961689.html

Fight brewing over U.S. offshore profit taxation

WASHINGTON (Reuters) - Large U.S. corporations are pressuring Congress and the White House to exempt overseas corporate profits from taxes, a policy shift that critics say would hurt the economy and increase the federal deficit.
A fight is shaping up between supporters of territorial taxation, as this policy proposal is known, and opponents who favor a different reform -- repealing a tax law that allows corporations to defer paying taxes on their overseas income.
The two sides are facing off over an old and worsening problem -- how to fix the system for taxing companies' foreign income. Both sides agree the system is not working and a new approach is needed, but their solutions are direct opposites.
"A tax system that raises little revenue, but imposes high compliance and administrative burdens on taxpayers and the IRS is the very definition of a bad tax system. Unfortunately, that is the system we have," said Philip West, a former U.S. Treasury Department tax official, at a Senate hearing.
Case in point: business software and hardware giant Oracle Corp. Based in California, Oracle generates 60 percent of its nearly $36 billion in annual sales overseas.
Much of its overseas profit never comes home to the United States, however. Oracle has at least $20 billion in profits parked abroad avoiding taxation, and that is perfectly legal under the overseas income deferral law.
Oracle is a strong supporter of territorial taxation, along with many other Silicon Valley high technology companies, drug makers and other businesses with large foreign operations.

Under territorial taxation, in its strictest form, overseas profits of U.S. companies would be taxed only by the country where they are earned, no longer by the United States.
That would allow companies such as Oracle to bring home their active foreign business income tax-free or nearly so.
This would be a big change because, under present law, foreign profits are supposed to be taxed when they come home at the same 35-percent rate applicable to U.S. domestic profits.
The trouble is that many large multinationals -- like Oracle and others -- do not pay the full tax, or often any U.S. tax at all, on their foreign income.
That is because of the overseas income deferral law, which lets them put off indefinitely the payment of tax on active foreign earnings as long as the earnings remain abroad.
The solution to this problem is not to exempt those earnings permanently from U.S. taxation, say opponents of territorial taxation. Instead, they say, the solution is to repeal the overseas income deferral law.
That would make overseas profits immediately taxable, like domestic profits. And, proponents say, it would lift government revenues, perhaps making room for a corporate tax rate cut.
POSSIBLE SHIFT
The Obama administration is considering a limited version of territorial taxation, although details of its plan are still unclear, The Wall Street Journal reported on Saturday.
Multinational corporations have an estimated $1.5 trillion in profits parked overseas right now, avoiding taxes. They want to be able to bring those profits home tax-free, or with only a small tax hit, and they would like that arrangement to be permanent, as territorial taxation would accomplish.
Such far-reaching reform is unlikely to happen without broad tax reform. That is unlikely to come soon. Congress' "super committee" on deficit reduction, which had its first hearing on Monday, does not have enough time for tax reform and November 2012 elections will make it difficult, analysts said.
The White House's bipartisan Bowles-Simpson deficit reduction panel last year endorsed territorial taxation. Major corporate lobbying groups are banging the drum for it.
The business community is not solidly in favor, however. Multinationals tend to back it. Small and mid-sized companies with less to gain generally are not as enthusiastic.
"I'm a proponent of a territorial system," said Harvard Business School Professor Fritz Foley, citing his concern about other nations, including Japan and Britain, embracing it.
"Having said that, any move to territorial needs to be ... thought through quite carefully," he said.
As for the inevitable political firestorm that would accompany a major push for tax reform, Foley remarked:
"Anything is going to be a tough sell politically, but ... some adults need to stand up and say, here are the trade-offs, here is our fiscal reality, let's think about the best way forward ... My reading of the situation in Washington now is that we're not exactly close to that."
SOME COUNTRIES GO TERRITORIAL
The main argument made in territorial taxation's favor is that everyone is doing it, so the United States should too.
Territorial taxation has been adopted, in one form or another by Canada, France, Germany, the Netherlands, Australia, Switzerland, Japan and Britain. Not adopting it puts the United States at a competitive disadvantage, say its supporters.
"We are so out of step with the rest of the world right now. It is important for us to adopt a territorial system," said University of Michigan Law School Professor James Hines.
Others take a different view.
"I do not agree that we should go to a territorial system," said University of Michigan Law School Professor Reuven Avi-Yonah. "The United States has traditionally been a leader, not a follower, in international tax matters."
Nations that still have a worldwide system of taxation for foreign corporate profits, resembling the U.S. system, include Korea, Chile, Greece, Ireland, Israel and Mexico.
China, Brazil and India, growing economies with thriving manufacturing sectors, also tax the foreign income of their companies much the same way the United States does. "Those are our real competitors," not tax-haven nations, said Avi-Yonah.
A territorial system would prompt U.S. companies to shift offshore even more income than they already do and jobs would follow, worsening unemployment and the economy, critics say.
"Giving corporations a permanent tax exemption for their purported offshore profits will make things much worse. The only real solution is for Congress to do the opposite" and repeal foreign income deferral, said Bob McIntyre, director of Citizens for Tax Justice, a left-leaning tax watchdog group.
(Editing by Howard Goller)
Fight brewing over U.S. offshore profit taxation
Kevin Drawbaugh
Reuters US Online Report Business News
Sep 14, 2011 07:05 EDT
WASHINGTON (Reuters) - Large U.S. corporations are pressuring Congress and the White House to exempt overseas corporate profits from taxes, a policy shift that critics say would hurt the economy and increase the federal deficit.
<br/>
A fight is shaping up between supporters of territorial taxation, as this policy proposal is known, and opponents who favor a different reform -- repealing a tax law that allows corporations to defer paying taxes on their overseas income.
The two sides are facing off over an old and worsening problem -- how to fix the system for taxing companies' foreign income. Both sides agree the system is not working and a new approach is needed, but their solutions are direct opposites.
"A tax system that raises little revenue, but imposes high compliance and administrative burdens on taxpayers and the IRS is the very definition of a bad tax system. Unfortunately, that is the system we have," said Philip West, a former U.S. Treasury Department tax official, at a Senate hearing.
Case in point: business software and hardware giant Oracle Corp. Based in California, Oracle generates 60 percent of its nearly $36 billion in annual sales overseas.
Much of its overseas profit never comes home to the United States, however. Oracle has at least $20 billion in profits parked abroad avoiding taxation, and that is perfectly legal under the overseas income deferral law.
Oracle is a strong supporter of territorial taxation, along with many other Silicon Valley high technology companies, drug makers and other businesses with large foreign operations.
Under territorial taxation, in its strictest form, overseas profits of U.S. companies would be taxed only by the country where they are earned, no longer by the United States.
That would allow companies such as Oracle to bring home their active foreign business income tax-free or nearly so.
This would be a big change because, under present law, foreign profits are supposed to be taxed when they come home at the same 35-percent rate applicable to U.S. domestic profits.
The trouble is that many large multinationals -- like Oracle and others -- do not pay the full tax, or often any U.S. tax at all, on their foreign income.
That is because of the overseas income deferral law, which lets them put off indefinitely the payment of tax on active foreign earnings as long as the earnings remain abroad.
The solution to this problem is not to exempt those earnings permanently from U.S. taxation, say opponents of territorial taxation. Instead, they say, the solution is to repeal the overseas income deferral law.
That would make overseas profits immediately taxable, like domestic profits. And, proponents say, it would lift government revenues, perhaps making room for a corporate tax rate cut.
POSSIBLE SHIFT
The Obama administration is considering a limited version of territorial taxation, although details of its plan are still unclear, The Wall Street Journal reported on Saturday.
Multinational corporations have an estimated $1.5 trillion in profits parked overseas right now, avoiding taxes. They want to be able to bring those profits home tax-free, or with only a small tax hit, and they would like that arrangement to be permanent, as territorial taxation would accomplish.
Such far-reaching reform is unlikely to happen without broad tax reform. That is unlikely to come soon. Congress' "super committee" on deficit reduction, which had its first hearing on Monday, does not have enough time for tax reform and November 2012 elections will make it difficult, analysts said.
The White House's bipartisan Bowles-Simpson deficit reduction panel last year endorsed territorial taxation. Major corporate lobbying groups are banging the drum for it.
The business community is not solidly in favor, however. Multinationals tend to back it. Small and mid-sized companies with less to gain generally are not as enthusiastic.
"I'm a proponent of a territorial system," said Harvard Business School Professor Fritz Foley, citing his concern about other nations, including Japan and Britain, embracing it.
"Having said that, any move to territorial needs to be ... thought through quite carefully," he said.
As for the inevitable political firestorm that would accompany a major push for tax reform, Foley remarked:
"Anything is going to be a tough sell politically, but ... some adults need to stand up and say, here are the trade-offs, here is our fiscal reality, let's think about the best way forward ... My reading of the situation in Washington now is that we're not exactly close to that."
SOME COUNTRIES GO TERRITORIAL
The main argument made in territorial taxation's favor is that everyone is doing it, so the United States should too.
Territorial taxation has been adopted, in one form or another by Canada, France, Germany, the Netherlands, Australia, Switzerland, Japan and Britain. Not adopting it puts the United States at a competitive disadvantage, say its supporters.
"We are so out of step with the rest of the world right now. It is important for us to adopt a territorial system," said University of Michigan Law School Professor James Hines.
Others take a different view.
"I do not agree that we should go to a territorial system," said University of Michigan Law School Professor Reuven Avi-Yonah. "The United States has traditionally been a leader, not a follower, in international tax matters."
Nations that still have a worldwide system of taxation for foreign corporate profits, resembling the U.S. system, include Korea, Chile, Greece, Ireland, Israel and Mexico.
China, Brazil and India, growing economies with thriving manufacturing sectors, also tax the foreign income of their companies much the same way the United States does. "Those are our real competitors," not tax-haven nations, said Avi-Yonah.
A territorial system would prompt U.S. companies to shift offshore even more income than they already do and jobs would follow, worsening unemployment and the economy, critics say.
"Giving corporations a permanent tax exemption for their purported offshore profits will make things much worse. The only real solution is for Congress to do the opposite" and repeal foreign income deferral, said Bob McIntyre, director of Citizens for Tax Justice, a left-leaning tax watchdog group.
(Editing by Howard Goller)
Source: Reuters US Online Report Business News