Author Archives: Yves Smith
Tax Inversion Remains (Huge)
Yves here. When normally MEGO (My Eyes Glaze Over) inducing tax schemes become a topic of national debate, it’s because despite their complexity, they’ve become too big and ugly to ignore.
Mind you, multinationals already have tons of ways to escape from the tax man, starting with clever transfer pricing so as to claim pretty much all their profits occurred in super low tax domiciles. But the trick that has caused consternation is tax inversions. In crude terms is using mergers as a way to move the headquarters of a company from a higher tax to a lower tax jurisdiction. The acquired company in the lower-tax location becomes the new parent company.
The Treasury Department was so concerned about potential revenue loss that it took measures to reduce tax inversions. This article argues, in effect, that while Treasury may have made it more difficult, that the incentive to enter into inversion remains. The analysis is clever and compelling. It also happens to debunk the argument made by defenders of Antonio Weiss, the Lazard banker nominated to a Treasury post who is fiercely opposed by Elizabeth Warren. Weiss was an important advisor on the Burger King-Hortons merger, the deal that (according to the Wall Street Journal) that led Treasury to put rules in place to combat tax inversions. The defenders argued that the tax rates between US and Canada weren’t all that different, so that the tax considerations weren’t important to the deal. This article mentions the Burger King deal and the difference between US and Canadian inbound divident repatriation tax rates at 10%, more than enough to be motivating.
Read more...Free Markets: Yellow Brick Road to War
Yves here. I’m a believer in synchronicity, and this post will allow readers to continue the discussion we’ve been having over the last few days about the forces for war versus peace in industrial and post industrial economies.
The author John Weeks does himself a disservice by letting his considerable frustration with how economics treats topics like trade and war descend into spurts of hyperventilation. However, I believe you’ll find his argument though-provoking. Some of his points include that analysis of trade assumes that countries, as opposed to companies, are the locus of activity, and that trade creates incentives for peace, when in fact trade just as often (if not more often) creates incentives for war, for instance, via competition for resources.
Read more...The Real Cause Of Low Oil Prices: Interview With Arthur Berman
Yves here. This is a terrific interview that you need to read pronto if you have any interest in the outlook for oil prices, understanding fracking economics, and the real reason for the push for Keystone XL pipeline. Berman is colorful, direct, and provides lots of granular detail.
Read more...Links 1/4/15
Ilargi: Oil, Power and Psychopaths
Yves here. One minor caveat to a fine overview. Ilargi mentions at the end that Angela Merkel has said that it is prepared to let Greece leave the Eurozone if it bucks austerity. A regular reader of the German press who also read the report in Der Spiegel thinks this is a bluff to influence the Greek election.
And there is a bigger question that goes unanswered: why so much US warmongering and destructive, and eventually self-destructive behavior (blowback, anyone?). As Karl Polanyi mentions in passing in his The Great Transformation (see our recent post) because it seems so obvious, a peace consensus had emerged among the Great Powers in the nineteenth century, largely because domestic and international commerce were now a major social organizing principle, and businessmen correctly saw war as bad for business. So why has the peace faction been successfully supplanted by a war faction? Is it that (so far) the US wars are not inflicted on parties we consider to be contemporary Great Powers?
Read more...Harvard Law School: Three Proposals to Curb Its Role as Hedge Fund and Corporate Shill
Yves here. This article about Harvard Law School’s endowment applies just as well to other well-heeled professional schools. And in many respects, the way these endowments operate reveals what “professionalism” has come to mean in America: fealty to monied interests.
Read more...Links 1/3/15
Michael Hudson: The War on Pensions – The US Budget Anti-Pension Law
On the Senate’s last day in session in December, it approved the government’s $1.1 trillion budget for coming fiscal year.
Few people realize how radical the new U.S. budget law was. Budget laws are supposed to decide simply what to fund and what to cut. A budget is not supposed to make new law, or to rewrite the law. But that is what happened, and it was radical.
Read more...Bill Moyers’ Last Show: Our Children’s Trust Climate Litigation
Yves here. We will all miss Bill Moyers, who in an important act of public service came out of retirement twice at viewer request. I was lucky enough to appear on his show twice. Bill is both a gentleman and a true pro, and went to great lengths to make his interviewees look good. His […]
Read more...Links 1/2/15
Something That Changed My Perspective: Karl Polanyi’s The Great Transformation
The first Christmas-New Years period for this site, in 2007, we featured a series “Something That Changed My Perspective,” which presented some things that affected how I viewed the world. The offerings included John Kay on obliquity and Michael Prowse on how income inequality was bad for the health even of the wealthy.
Karl Polanyi’s The Great Transformation (which I should have read long ago) is proving to be a particularly potent example of this general phenomenon.
Read more...Bill Mitchell: Demystifying Modern Monetary Theory
Yves here. This is a useful and accessible talk by one of the leading Modern Monetary Theory developers, Bill Mitchell of the University of Newcastle, interviewed here by Marshall Auerback of INET.
This talk is wide-ranging, and starts by pointing out that in key ways, Modern Monetary Theory incorporates basic concepts that have perversely omitted from mainstream macroeconomics, largely for ideological reasons. This conversation does not get much into central bank operations, which is the basis for MMT’s claim that it is a much more accurate representation of how monetary operations work for a fait currency issuer like the US than textbook or popular press accounts that are based on outdated “gold standard” notions.
In typical Australian fashion, Mitchell is blunt, so I suspect readers will find this talk to be more lively and accessible than typical economists’ fare.
Read more...Yanis Varoufakis: Greek and European Prospects for 2015
Yves here. Yanis Varoufakis discusses the prospects for negotiations between a new, likely Szyria-led Greek government and the Troika over the next Greek restructuring. Varoufakis in effect argues that the Greeks should go hardball because the Trokia’s demands are unreasonable. We’ll find out soon enough whether the incoming government has the public support and the guts to do so.
As much as a Grexit would be a lose-lose of major proportions, Varoufakis argues that the logic of current Eurzone arrangements is driving members to a break-up. Indeed, some observers believe that Germany would like to kick Greece out of the Eurozone. As Marshall Auerback put it by e-mail:
Read more...As far as Germany goes, let me quote Macbeth:
I am in blood
Stepped in so far that, should I wade no more,
Returning were as tedious as go o’er.
