The European Commission announced this week that they are going after so-called postbox companies. These are global companies that set up subsidiaries across the world to optimise their taxes. The result is that these global companies hardly pay any taxes at all. The European President stated some weeks ago that all EU members together miss 1000 billion € in taxes per year because of this high-tech financial wizardry.
Needless to say that the announcement was greeted with a lot of acceptance and sympathy both by the media and the public. After all, going after the big bucks from those who apply sneaky tricks is only fair. Or is it? I have some mixed feelings though. Is it ethically and morally questionable when the richest companies on earth use every rule in the book to lower and evade taxes? Hell yes. Is it legally wrong?
The thing is, those 'rules in the books' were voted and implemented by... governments. Countries purposely create rules beneficial to global companies just to attract them and set up shop in their country. In fact countries compete heavily amongst themselves to attract business. My own country, Belgium, is no exception. Belgium invented a very interesting rule (when using their own capital for investing in R&D, companies can deduct it from their taxes as if it was a loan) and then went on a global road show to pitch it to multinationals. Of course many saw the benefits (handy way to lower their taxable income). Can you blame them? Other countries have other incentive schemes. And when companies happily apply (of course!) then suddenly they become the bad guys. Again, it is ethically and morally wrong but shouldn't the Commission go after its own members because it is the Member States that created the rules that companies use? But I guess it is more popular to go after business sharks then go after your own members. And then one another point: Commission officials don't pay taxes on their income as us normal mortals have to do. So who are they to speak about socially unacceptable tax evasion?
I came across a website featuring a flying machine that tickled my imagination. I remember as a kid seeing these things in a comic book ('De speelgoedzaaiers'). But here is this company in Perth that is developing them. Have a look:
We Belgians have always been way ahead of the rest :-).
Ok ok ok, just to prove that I do have some sort of self-relativity as well here is Monthy Python about us Belgians:
For those of you who can't get enough and who missed it (shame of you if you did!), here are they again announcing their new reunion show called "One down, five to go":
There was a fantastic quote circulating the net last week regarding inflation. You can’t switch on the tv last months or you have a central banker or a politician proudly saying that inflation is low. Of course we all know the calculation is rigged (last change in Belgium was to include the Summer and Winter sales in the inflation basket). The bread price on the other hand was taken out years ago already. So inflation is not representative at all about the real cost of living, as anyone who does his weekly grocery shopping himself knows very well. So I give you this wonderful definition of inflation and central banking from Dylan Grice:
“Trying to control a variable you can’t measure (inflation) with a tool you don’t fully understand (money) in a complex system with hidden, unobservable and non-linear interrelationships (the economy) is a guaranteed way to ensure that most things which happen weren’t supposed to happen.”
I came across a graph (courtesy of Bloomberg and Zerohedge) that really spooked me.
It’s the New York Stock Index divided by the US FED balance sheet. Ok so 2008 is Lehman we know that. The thing is since Lehman, the US FED has pumped 4 trillion $ in the economy as reported last week. This has not done anything to the stock exchange if you divide it by the FED balance sheet. So the optimists will look at this graph and say: “Wow! The NYSE can go up another 500% just to reach the 2008 levels. Let’s rock-and-roll!” The realist in me however is scared sh#tless (excusez-le-mot) because 4 trillion $ has done nothing, null, zero, rien. Never mind that stock exchanges are breaking new records. Taking the FED balance sheet as basis, shares haven’t moved an inch. Basically we fell off a cliff in 2008 and since then flat line... The economy and financial system is dead and they don’t know it. Bucket loads of money are acting as defibrillator but no matter how often they push the defibrillator button (printing press) the patient is brain dead and the heart beat is not coming back.
Contrary to the new NYSE records which are in the news almost daily, this piece of very interesting news, hardly got any media attention: Germany argued against the use of European funds to help banks.
From Euroactiv: “Ahead of the meeting, French Finance Minister Pierre Moscovici told reporters: "France continues to believe that we ... must not exclude direct recapitalisation by the European Stability Mechanism as a last resort." Speaking just yards away, however, Wolfgang Schäuble, Germany's finance minister, poured cold water on the idea. "The German legal position rules it out now," said Schäuble. "That's well known. I don't know if everyone has registered that." Inside the meeting room, people close to the talks said the two clashed again, when Germany asked for the removal of any reference to ESM bank aid from the ministers' statement”.
Just politics you say? Well yes of course but there is more behind it. I see some stars lining up here and it doesn't bode well for us working class who try to save some money.
The ECB is going to do a big bank stress test next year. Contrary to earlier bank tests (which were a joke) this time it seems the ECB intends to do a proper job that risks exposing many banks short of capital (because they still have too much bad loans). Latest estimates talk about 95 billion € of losses.
The question then is: who will pay for the losses? A new European wide system was meant to do this, but this is what Germany now opposes to. And what if some banks are not worth salvaging?
The answer is disturbing: “Any state help will come at a heavy cost by imposing losses on shareholders and junior bondholders. In time, possibly as soon as 2015, senior bondholders and even depositors with more than 100,000 euros will be forced to take losses.”
So yet another confirmation that the ‘never-to-be-repeated-once-in-history’ saving of the Cyprus banks slowly but surely becomes institutionalised.
During a meeting in Auckland we were shown below movie of the approach in Queenstown. Very challenging but oh so beautiful. Watch this tribute to airmanship and enjoy the scenery!
I was taken aback by an opinion published in the Wall Street Journal. A certain Andrew Huszar, former manager of the US FED QE program (which buys 85 billion $ of bonds every month), wrote a piece titled 'Confessions of a Quantitative Easer". Although I knew most of what he wrote, it is still a big reality check. QE did not and is not working... except for Wall Street that has made huge profits thanks to it. 2009 (with the financial crisis in full swing) was the most profitable year for Wall Street. 4 trillion$ of QE generated 0,25% of GDP growth (equivalent to 40 billion $ -> that's a return on investment of 1%), 0,2% of the US banks control 70% of US bank assets (who said 'too-big-to-fail' was a problem?). And still the FED and Wall Street continue claims that QE is necessary and helps Main Street. Madness. Read the full opinion piece here, please do so it is worth it.
The moon is upside down, it's the end of Spring, the wine is Tasmanian and the beer from the Western Territories. Other than that there is not much difference between my country and Down Under. Whilst fighting my jet lag on Wednesday I listened to the news about a discussion in the Aussi Parliament to raise the debt ceiling from 300 to 500 billion AUD. I can only conclude that no matter how far one travels from home, there is no hiding. The madness is everywhere.
Thinking about all of this one song came to mind: "Baggy Trousers" a Madness classic: "All I learnt at school was how to bend not break the rules"
Those who understand the code in the above sentence now have water dripping from their mouth.Those of you who don't know Skunk Works nor the SR-71 (not a typo, read on) will have some of questions...
The retired SR-71 was designed by one of the most innovative aeronautical engineers of all time: Clarence “Kelly” Johnson. He became instrumental in the Lockheed Skunk Works where he worked amongst others on the U-2 and the F-104 Starfighter. And Skunk Works is the official alias for Lockheed (Martin’s) Advanced Development Programs. Skunk Works is the birthplace of the P-38 Lightning, F-104 Starfighter, the U-2, the SR-71 Blackbird, the F-117 Nighthawk, the F-22 Raptor and the F-35 Lightning II.
The Blackbird truly was one of a kind. On wiki you can learn that the SR-71 was the world's fastest and highest-flying operational manned aircraft throughout its career. On 28 July 1976, SR-71 serial number 61-7962, broke the world record: an "absolute altitude record" of 85069 feet (25929 m). Several aircraft exceeded this altitude in zoom climbs but not in sustained flight. That same day SR-71, serial number 61-7958 set an absolute speed record of 1905,81 knots (3529,6 km/h), approximately Mach 3.3.
SR-71 Blackbird Copyright: Lockheed Martin
So now work is on its way on an SR-72! At Mach 6.0 it promises to be another wonder of science and technology. But then... the bummer. The damn thing will be a pilotless aircraft!!! Hey guys what's the fun in that????
SR-72 Copyright: Lockheed Martin
It's always sad when an airplane type retires and even more so for the real iconic ones. I know, I have talked about iconic designs in the past but it's a hard search to beat the SR-71. Usually when airplane types are taken off line they are replaced by a new one which is better and more advanced. Not so with the SR-71. It didn't get replaced at all because there was actually nothing flying that could match it. Same for Concorde.
It's 10 years now since its last flight. Gone are the days of supersonic passenger transport. Nothing flying today even comes close to bridging large distances at twice the speed of sound. I saw Concorde for the first time in 1994 in Farnborough and will never forget it. I was standing along runway 24 as it landed and took off, its mighty Olympus engines roaring so hard my heart was resonating in my chest. Ok it may not have been the most fuel efficient airplane around and a lot of technological advances have been made since but if you were offered a transcontinental flight today and could choose between Concorde or any other airliner, which one would you choose? I thought so and rest my case.
