Oil company and Taxes

Exxon profited by $16 billion this last quarter, bringing its earnings for 2012 to $25 billion. Exxon and Shell made a combined $160,000 per minute last quarter, even though the top five oil companies benefit from $2.4 billion federal tax breaks every year. Exxon paid just 13 percent in federal taxes last year, lower than the average American family. Mitt Romney is the top recipient of Exxon federal contributions, he is also the one proposing a new tax plan that could lower the top five oil companies’ annual tax bill by another $2.3 billion, virtually doubling what they already receive in tax breaks. Moral of the story: If you earn $160,000 you pay around 30-40% tax. If you earn $160,000 per minute you pay 13%. The full details and the numbers are on this article: Top Two Oil Companies Earn $160,000 Per Minute, Paid Low Tax Rate.

Spain

Finally the day has come. It was foreseeable for so long. It was negated for as long as it was foreseeable. Both Spanish government and banks repeated and repeated over and over again "we have the safest and healthiest banks in Europe", "there is no risk", "we will not need any bail-out money", ... Yesterday it was finally official: Spain took €100 billion in bailout money.

It is always the same pattern. We have seen it at least 3 times in the last 3 years: Iceland, Ireland, Greece, ... 1) denial and refusal, misinformation and lies by governments and banks, 2) accepting the bailout, 3) shifting the debts and risks from the private sector to the public sector, 4) as the rescue and bailout money runs out quickly soon we repeat with step (1).

What was slightly different in the bailout of Spain is the time the euphoria lasted. Usually once the rescue funds are injected there is a month or so of euphoria and (false) optimism. Not so with the Spanish bailout. Just 24 hours later there were mostly negative press. Mainstream media like the WSJ reported in its article "Bulls Retreat on Spain Bailout Plan": ..., bailout doesn't help Spain repair its tattered economy, ... Spain's capital injections entail a transfer of risk from the private to the public sector, ... Spain is likely to need more external help going forward. The Huffington Post put it even more bluntly: Spain Bank Bailout 'Not Going To Work'. Same at the Guardian "Hurried Spanish banking bailout fails to calm market nerves".

Next up for bailout: Italy. Just watch and see steps 1 through 4 being executed there.

The Greed Game

In 2008 the BBC has created a 58-min documentary summarizing the past sub-prime crisis from a European perspective. It is online now at "Super Rich - The Greed Game". While it doesn't add new insights, it is an easy to understand summary. It also explains and discusses some of the unfair one-way-bets implications (asymmetric risks) showing how the poor get tapped to make the super-rich even super-richer. It concludes with the comment "we haven't learned from our mistakes".

Tech Bubble 2.0

Silicon Valley and the tech industry as a whole is going through another cycle of incredible hype. Valuations of companies are wilder than ever. The New York Times wrote an article about this new bubble. Apparently we haven't learned anything from the last tech sector bubble. The only difference to the new bubble, Bubble 2.0 seems to be an appropriate name, is that 2.0 is a bigger and bolder bubble. Read the article: Disruptions: With No Revenue, an Illusion of Value.

Spain the next country to collapse?

Iceland, Ireland, Portugal and Greece all have gone through crash-and-rescue operation. The storm over Spain is brewing for a long time already. The PIIGS (Portugal, Italy, Ireland Greece and Spain) have been in the news for more than a year. Spain's job less rate is officially over 20% already, unofficially it is assumed to be even higher. Some cities, e.g. Cadiz, have an official jobless rate of 33%+. The biggest problem is the real-estate market, the past real-estate boom, the still inflated real-estate prices and the real-estate loans banks signed in the past 30 years. This is not something that can be corrected in a single year. The loans are bad and will eternally remain bad. The price adjustment of real-estate could be fast. The bubble could burst and instead of the 10% decline over the last 3 years, prices might go down 30% or more.

Here is an article that argues that the Spanish collapse is imminent. All other collapses (from Iceland to Greece) have been controlled collapses through IMF and ECB injections of freshly printed paper money. Will Spain also be a controlled collapse and will it be a rougher ride this time around? And how far will the rumbling be felt? Read this "Spain is About to Enter a Full-Scale Collapse".

Bill Still running for President

Bill Still announced his candidacy for the Libertarian Party nomination for President of the United States. Have a look at his campain website: still2012.com. He promises 3 actions if voted president:

1. He will put an end to government borrowing. No More National Debt! The United States will replace Federal Reserve Notes by re-issuing debt-free U.S. Notes, and gradually pay off the National Debt with them. 
2. He will put an end to the ability of commercial banks to control the Quantity of money in our system through what is essentially counterfeiting. This has been a massive fraud on the people of the United States. We, the people, will take back the money power from the big banks and return the American economy to monetary stability and prosperity. 
3. He will abolish the Internal Revenue System and the income tax – both personal and corporate — and implement a fair, simple and equitable consumption tax in accordance with the U.S. Constitution. This is how we funded the US government for the first 100 years, and we can do it again.

MF Global

Here is a 23-min summary of the MF Global case: Capital Account of 12/08/11 from RT (first 23 minutes). What is your bank or broker doing?

Re-hypothecation

A new word we need to learn: re-hypothecation. Hypothecation is when a borrower pledges collateral to secure a debt. Rehypothecation, in short, means lending of property lent to one, but of whom one is not the owner. The biggest misuse of re-hypothecation might be the current MF Global scandal. Read this article to see how large and established financial institutions break the law or use loopholes to enrich themselves and have the unaware customers pick up the losses when the bets fail: MF Global and the great Wall St re-hypothecation scandal.

‘D-Day’ Near For GLD

If you own GLD or think about investing in GLD it is a smart idea to read these two articles first:

• D-Day near for GLD
• The Seven Sins of GLD

According to the author Jeff Nielson of the article, "D" can stand for "Default"-Day or "Destruction"-Day. He is wrong about the date when D-Day will occur (he suggested 11/11/11), but his warnings are food for thought nevertheless.

Debt Simplified

These are some numbers from the US, but one can easily replace it with numbers from Greece, Italy, Spain, Zimbabwe, ... It is pretty clear that we are not addressing the problem, we are not even grasping it. (The $38.5 trillion number budget cut figure seems to refer to the budget cut deal that averted a US government shutdown in April 2011.)  (Source)

Some stats about the US government:

• U.S. Tax revenue: $2,170,000,000,000 
• Fed budget: $3,820,000,000,000 
• New debt: $ 1,650,000,000,000 
• National debt: $14,271,000,000,000 
• Recent budget cuts: $ 38,500,000,000 

Now, remove 8 zeroes and pretend it’s a household budget:

• Annual family income: $21,700 
• Money the family spent: $38,200 
• New debt on the credit card: $16,500 
• Outstanding balance on the credit card: $142,710 
• Total budget cuts: $385

Any questions?

Visualization of US Debt

This is the best graphical and visual representation of 1 million dollar, one billion dollars, 1 trillion dollars and the US debt. Have a look at these images to get an idea of the size of the US debt. No doubt, one picture says more than a thousand words.

ECB and Trust

The European Wall Street Journal published this on July 4, 2011:

Some of the European Central Bank's (ECB) notable policy shifts.

• Jan 2010: ECB President Jean Claude Trichet said that the ECB wouldn't change its collateral rules for the sake of any particular country. In May 2010 it suspends these rules for Greek government bonds.
• 
  
• Mar 2010: Mr. Trichet said it wouldn't be appropriate for the IMF to supply assistance for Greece. The IMF later became a a major part of the Greek rescue operation.
• 
  
• May 2010: Mr. Trichet said the ECB in its monthly meeting did not discuss whether to buy Greek bonds. Four days later the ECB anounced it would purchase Greek bonds.

It is always the same story. The politicians and political institutions that should stabilize a country change their opinion on a whim and worse, they deny and hide truths up to the moment when it explodes. The WSJ picked the ECB in this example. But I also vividly remember when on a given Friday all Irish politicians denied any rumors of any bankruptcy or collapse, claiming everything is fine, just to announce the following day or the Sunday that the banking system has failed and that they already brokered a deal with the ECB and IMF for a bail out package! How can one play the game if the rules keep changing all the time?

Greece

Today is a special day. The Greek government is deciding on whether to accept the austerity conditions demanded by the ECB (European Central Bank) and IMF for receiving the next slice of the bailout credit. I am fortunate to be in Greece and see and "feel" the situation in person. General strikes have been called for yesterday and today. In one city and one town I have seen permanent tent cities in public squares to protest. These tent cities are similar to the ones found in Madrid and Barcelona, Spain. There, in Spanish, the protesters are called "Los Indignados", the indignants, the angry ones. These groups across various European countries have united under the motto "Direct Democracy Now" or "Real Democracy Now". The site of the Greek branch of this European wide movement is www.real-democracy.gr/en.

Graffiti is on the walls in many places and flyers posted on many shop windows. They are expressing the feelings of the average people of the street. Where I have been the general strike was a partial one. I had no problem with the public transport and many shops, if not most, were open. One store used the term "Crisis Prices" instead of "Sales" to attract customers. A Greek friend commented that his salary was lowered 20% and that the politicians are discussing to lower it by 20% for a second time. Gas prices have gone from €0.80 to €1.75, i.e. they have more than doubled in a single year. To be truthful I have to say that I was nervous about the decision of the Greek government. I favored a rejection of the credit conditions, but that in turn could be the trigger to a domino effect across nations and economies.

A Greek friend expressed his view as follows. He sees this as a giant battle between banks and governments. Not only on a Greek scale, but on a global scale. In my mind a picture emerged like a Greek tragedy with elements from the Greek mythology; in my head a picture of two snakes formed, one representing a few elite world bankers, the other snake representing the world's governments. He continued to explain that he sees it as a fight between financial power and the political system. Furthermore he sees it as a sort of pilot project. If the banks win over democracy then they will take the Greek case study and rubber stamp it on other nations worldwide. He sees it as a reference case that will be repeated and replicated in the near future in other countries.

At the end of the day the Greek government accepted the bailout conditions and in my friend's view the political system gave in to the financial powers. My friend was disappointed with the decision. The political system and the Greek people are no more than slaves to the banking system. With the acceptance of the credit slice the problem is not averted, and certainly not solved. Everybody knows that it is just delayed by exactly 3 months until September when the next credit payment is due. So, the whole Greek tragedy will repeat itself shortly. Each time it will be worse. The only question I have is: How often will it repeat itself?

Gold Purchases

Who is buying gold? The latest data of state gold purchases and sales have been published by the World Gold Council. This data shows the following countries as leading gold purchasers over the last 10 years:

• China: some 550 tonnes
• Russia: some 420 tonnes
• India: some 200 tonnes
• Mexico: some 100 tonnes

It is interesting to see that there is no European country, not a single one, that has purchased any significant (5 tonnes or more) amount of gold at any point in time. The US hasn't bought any gold either. India and Mexico have been single one-time purchases. China and Russia are continuously buying mid-sized amounts year by year. Europe as a whole has sold around 3,000 tonnes of gold over the last decade.

Saudi Arabia is listed with a one-time 180 tonnes entry, but as far as I can tell this is not a real purchase but a paper adjustment.

It is a telling sign that the US and EU are not purchasing any gold with respect to any future currency decisions the politicians/banks of these countries will make.

Beyond Greece

The New York Times as well as the National Herald posted an article entitled "It's Not About Greece Anymore". The content of this article is not surprising and nothing new. The article identifies the fears of the European politicians to let Greece go into bankruptcy as it might cause a bank run in similarly positioned countries like Spain, Portugal, etc. In short, afraid of a melt-down of the European currency or the European Union (several nations have threatened to revert back to their own independent currencies) EU politicians are willing to do about anything to rescue Greece. As always politicians are trying to save their own hide more than anything else and any solution for Greece is only a temporary one.

The article goes on with the authors' suggestion that the Euro must be devalued drastically and then a dramatic political change must take place in order to survive.

What is surprising is the frankness of the article and that it was published in the NYT and National Herald. The writing is not just on the wall. It is in plain view, published by major mainstream newspapers.

Both US and Europe have overspent, gone into massive debts, and despite the crisis since 2008 nobody wants to face the music. We don't want to see and we pretend not to see the root causes and all we do is apply patchwork fixes here and there, billion dollar band aids that will fall off anytime we shake ourselves. What we need is radio and chemotherapy to get rid of the cancer of our times: the bankers and the politicians they have bought.

The End of Money

Franz Hoermann is a professor at the university of economics in Vienna, Austria. Recently he published a book entitled "Das Ende des Geldes". The book is in German and so is most of the available information about Hoermann. There is a good summary TV interview (16 min) he gave after the documentary presentation of "Zeitgeist - Moving Forward".

The title of his book is frequently translated as "The End of Money" or "The Death of Money". He presents some off-the-beaten path ideas of how to eliminate money and suggests a substitute solution that is more just and socially fair. His replacement for money is a new innovative social accounting system based on "units" rewarded for actions valued by society. Each individual receives a base "income" to which he adds more income received for the productive actions he performs. The received units are stored on a credit card like card and can be spent in any store, gifted, traded, etc.

Here is an English translation of an interview given to the Austrian newspaper Der Standard. This article covers several items mentioned in the TV interview. He briefly comments on his view of an unconditional basic income for everyone. Growth and full employment pressures are removed in his proposed system. People have more spare time and more freedom to decide on what they want to work on. This part is similar to concepts presented in the Zeitgeist documentary series.

The Thdrussell blog offers this article which talks about Hoermann's view of money and the currently used double entry accounting system. This article does not go into the suggested money replacement.

On the KeimForm blog is an article with 3 critical comments on the TV interview given after the Zeitgeist presentation.

Here is a 19-page paper of his entitled "Premises and Promises" in which he outlines how he wants to convert today's zero-sum economic "game" into a more cooperative system where everybody can win.

The Guardian points out that -- according to Hoermann -- money is rewarded with money. We don't reward accomplishment in our system, we reward property. The economists Gunnar Heinsohn and Otto Steiger proved that modern money – worldwide – is not backed by value. Rather, whenever money is created an equal debt is created with it. The systemic problem arises out of the fact that the debt is loaned at interest. The money for this interest is not created. The money for the interest doesn't exist at all. Hoermann's suggested solution eliminates interest completely and creates a solution that rewards actions rather than possessions (as is the case in today's monetary system).

There are several good ideas in his work. The unjust money creation process has been outlined many times before (e.g. The Money Masters). Money as debt and the impossibility to repay the interest is a well understood theme (e.g. Money as Debt). Money should not be rewarded with money. The rat race is equally absurd. We cannot and we should not achieve full employment. We do not need full employment in today's world. As a joke I saw a graffiti that says "We do not lack money, we just have too many thieves". It is so true, we have enough resources, we just spend them unwisely. The thieves are the bankers and politicians. Given our resources we could all live well without putting in so many hours of inefficient and unproductive work. A basic income as suggested brings many advantages, more so than disadvantages. It removes pressures, crime, oppression, not to mention stress and illnesses. No, his plan is not perfect. No system seems to be ever perfect. But we can cherry-pick. There certainly seems to be less evil and risk in his approach than in today's twisted money game controlled by a few bankers.

Inside Job

Inside Job is an extremely well made documentary from 2010 that won a series of awards for its content and quality. Interviews with the director Charles Ferguson are on YouTube. It explained the crisis that started showing its effects in 2008 exceptionally well. I loved how the documentary film started, the very first 30 seconds. "Iceland. Population 320,000 inhabitants. GDP $13 billion. Bank losses $100 billion." That first glimpse into the crisis explained it all too well. These 4 partial sentences drove the point home. It made us grasp the issue in a few seconds. 3 tiny local banks borrowed 120 billion dollars. 10 times the size of Iceland's economy. The accounting firm KPMG audited the banks and found nothing wrong. International rating agencies gave them a AAA credit rating. But that all changed in literally an instant. The house of cards collapsed. The full movie can also be found here. Watch it.

Slow Money

NextWorldTv just publishes this article. Just like the "Slow Food" movement suggests a slow, but conscious engagement and consumption of food, "Slow Money" wants to do the same in the financial environment. Woody Tasch, author of "Slow Money" speaks in this half hour interview about a more integral approach to circulating money. NextWorldTv underlined the quote: "Slower, smaller and local does not mean unimportant, provincial and silly." Money, like any other resouece, should be used and enjoyed consciously and sustainably.

Money

Money is such a crucial resource in our lives, yet nobody teaches us about money. There are no classes in high school. Most people have no true understanding where money is coming from. An expert on teaching about money is Bill Still. In 1995 he produced the classic documentary on money entitled "The Money Masters". This video is available here and here. He just released for free his updated version published in 2009 entitled "The Secrets of Oz". A must-watch video for anyone. Have a look at Bill's channel.

Gold

Just like silver, gold is also up and climbing. And there are lots of news around gold.

First, there is World Bank chief Bob Zoellick who said "Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today." He made further comments that hinted at a gold standard. Amazing, the chief of the World Bank hinting about a gold standard. That is massive news. It was reported instantly. The next day came all the expected retractions and he said he was misinterpreted and that in fact he did not call for a gold standard.

One may think about this as a slip of the tongue or true misinterpretation. Independent of that, he was certainly right when he said "Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today." Why? Gold has been made an official currency for collaterals of large financial transactions. A press announcement from ICE states: "IntercontinentalExchange (ICE), a leading operator of global regulated futures exchanges, clearing houses and over-the-counter (OTC) markets, today announced that ICE Clear Europe will accept gold bullion as collateral for all energy and credit default swaps (CDS) transactions beginning 22 November 2010." With ICE putting this policy in place other operators and clearing houses will have a competitive incentive to follow.

Gold is gaining in importance in the financial world it seems.