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Posts Tagged ‘finance

“Money laundering is a very sophisticated crime and we must be equally sophisticated”*…

 

money-wash

 

It’s bad form to mention money-laundering. Instead, you talk about asset-management structures and tax beneficial schemes.   — John Sweeney

This is the untold history of how prominent civil servants in the UK tailored US-devised anti-money laundering (AML) policies in ways that suited the needs of Britain’s financial services industry. In the aftermath of these initial compromises in 1987, criminal money managers in both the US and the UK were able to continue to operate in an environment that easily allowed them to hide and use dirty money. The researchers analysed six months of previously unseen personal correspondence and documents exchanged between various actors in the UK Government during 1987. From this they conclude that the core of the current, global AML regime, was not the destruction of drug money laundering and banking secrecy, nor the ending of criminal financial enablers and with it hot money; rather it was the protection and leverage of national trading interests on both sides of the Atlantic. And the drive to protect these interests would see crime control laws made, amended and changed to cater for the interests of the US and UK banking and finance industries. The file had been classified as secret and held by the UK Treasury until it was released to the public in 2017 as an archive document transferred to The National Archives in accordance with The Public Records Act and the Freedom of Information Act…

Mary Alice Young and Michael Woodiwiss tell the extraordinary story of governments effectively competing with criminal gangs at “A world fit for money laundering: the Atlantic alliance’s undermining of organized crime control.”

(Image above: source)

* Attorney General (1993 to 2001) Janet Reno… whose words can be understood, per the article cited above, in more than one way…

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As we follow the money, we might recall that it was on this date in 1957 that George B. Hansburg was issued a patent (#2,793,036) for his invention of “an improved pogo stick”– the modern two-handled pogo stick.

While spring stilts had been invented in 1891, the original pogo stick was created in 1920 by Max Pohlig and Ernst Gottschall– the first two letters of whose surnames gave the device its name.

Pogoanim source

 

Written by LW

May 21, 2020 at 1:01 am

“I like to pay taxes. With them, I buy civilization.”*…

 

Tax Haven

 

The United States and Britain had a treaty under which they agreed not to tax each other’s companies’ profits. Such double-taxation treaties are foundational to the globalised economy because they ensure that a company that operates in more than one country isn’t taxed twice on the same money… this treaty extended to Britain’s overseas colonies, which exposed a flaw at the heart of this system: if one country undercuts the other on tax rates, companies that base themselves there can dramatically reduce the amount of tax they pay in the other.

Most big countries won’t play this game, because it would destroy their tax bases. The BVI, being small and having a weak economy, had no such considerations because it didn’t have much tax revenue to lose: the new business the islands attracted from relocating companies gained them more in fees than they lost in taxes. Such countries are now understood and referred to as tax havens, but back in the 1970s they were a new phenomenon and businesses were exploring them with relish.

In the 1970s, corporations in the BVI paid 15 per cent tax on their profits, while in the United States they paid 50 per cent. If an American incorporated her business in the Caribbean she could export her dividends and cut her effective tax rate by more than half. All she needed was a local lawyer. And, dating from 1976, when US clients first found him, that lawyer was Michael Riegels…

The extraordinary story of the British ex-pat in the British Virgin Islands who founded the now-global off-shore tax haven “industry,” currently estimated to hold $7-10 trillion in assets (up to 10% of global assets) anonymously and outside the reach of home country authorities: “The Second Career of Michael Riegels.”

* Oliver Wendell Holmes Jr.

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As we salt it away, we might recall that it was on this date, the Ides of March, in 44 BCE that Julius Caesar, who was reputedly “born of the knife” (via cesarean section), died by the knife– stabbed to death by Brutus, Casca, and 58 others in the Roman Senate.

In fact, the early history of cesarean section remains shrouded in myth and is of dubious accuracy.  Even the origin of “cesarean” has apparently been distorted over time.  It is commonly believed to be derived from the surgical birth of Julius Caesar, however this seems unlikely since his mother Aurelia is reputed to have lived to hear of her son’s invasion of Britain.  At that time the procedure was performed only when the mother was dead or dying, as an attempt to save the child for a state wishing to increase its population.  Roman law under Caesar decreed that all women who were so fated by childbirth must be cut open; hence, cesarean.  Other possible Latin origins include the verb “caedare,” meaning to cut, and the term “caesones” that was applied to infants born by postmortem operations. [source]

440px-Jean-Léon_Gérôme_-_The_Death_of_Caesar_-_Walters_37884

The Death of Caesar, Jean-Léon Gérôme, 1867

source

 

“Commodities tend to zig when the equity markets zag”*…

 

Screen Shot 2020-01-13 at 11.11.12 AM

 

On the subject of things– things that matter, whether we are active investors or not– that we might (to our peril) take for granted…

There are plenty of expensive assets in the world today. The past decade of loose monetary policy and central bank money dumps have created the infamous “bubble in everything”. This is one reason we now have the bizarrely yo-yoing investment environment that we do, in which everything from risky stocks to safe gold is rising at the same time.

But one thing has remained reliably cheap — commodities. While the US equity market, which keeps ratcheting up to new highs, is almost as expensive as in the past 150 years, commodities are about as cheap relative to stocks as they’ve been in the past century.

Part of this is natural — and structural…

And yet, having watched the last big demand-driven oil spike in 2008, as well as the more financially driven price spike in 2011-12, which eventually came undone when central bankers pulled back on quantitative easing, I think it’s unwise to assume that we have entered a permanent bear market in commodities — at least not yet…

… if commodity prices did rise, there would be myriad ramifications. You would start to see the heads of petro states further emboldened, and populist nationalism increase globally — inflation in food and fuel prices hits the poor hardest, encouraging political volatility. That could, in turn, create new trade turmoil and the sort of disruption that the markets are currently discounting.

On the upside, though, demand for commodities is price elastic — once prices go too high, demand always falls. The cycle of replacing one source of energy with another has been playing out for hundreds of years, and continues. In an ideal world, the next commodities bubble, whenever it comes, could help us make what might be the final shift — away from fossil fuels and towards renewables.

The estimable Rana Foroohar explains there are many reasons for the US dollar to weaken, which would (among other drivers) cause commodity prices to rise: “Commodities may not stay cheap forever.”

* legendary investor Jim Rogers

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As we contemplate cycles, we might rejoice that it was on this date in 1605 that El Ingenioso Hidalgo Don Quijote de la Mancha ( or The Ingenious Hidalgo Don Quixote of La Mancha— aka Don Quixote), the masterwork of Miguel de Cervantes (and of the Spanish Golden Age) was first published.

Original title page

 

Written by LW

January 16, 2020 at 1:01 am

“It has been said that arguing against globalization is like arguing against the laws of gravity”*…

 

globalization

 

The preponderance of evidence suggests that financial globalization – especially unrestricted hot money – aggravates macroeconomic instability, creates the conditions for financial crises, and dampens long-run growth by making the tradable sector less competitive. Few economists would list financial globalization as an essential prerequisite for sustained long-term development or macroeconomic stability. And arguments made in its favor presume that every country has already met highly demanding regulatory requirements. Most have not and probably cannot, except over the long run.

While the International Monetary Fund has begun to make some allowance for restrictions on capital flows, albeit only as a temporary last resort for weathering cyclical surges, the dogma of financial globalization remains intact. One reason, perhaps, is that development economics has not shed its resource/savings fundamentalism, which attributed underdevelopment to a lack of domestic savings. The implication was that developing and emerging economies should attract resources in the form of foreign aid or, after skepticism about aid became widespread, foreign private capital.

Alternatively, the orthodoxy may owe its resilience to the power of entrenched financial interests that have stood in the way of new controls on cross-border capital flows. Wealthy elites in several countries – especially in Latin America and South Africa – embraced financial globalization early on because they saw it as offering a useful escape route for their wealth. In these cases, policy inertia and possible reputational costs made it difficult suddenly to start advocating a reversal. Global financial elites had long relied on a narrative that equates capital controls with expropriation, and responsible policymakers did not want to be seen as violating property rights…

Although much of the intellectual consensus behind neoliberalism has collapsed, the idea that emerging markets should throw their borders open to foreign financial flows is still taken for granted in policymaking circles.  Until that changes, Arvind Subramanian and Dani Rodrik argue, the developing world will suffer from unnecessary volatility, periodic crises, and lost dynamism: “The Puzzling Lure of Financial Globalization.”

* Kofi Annan

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As we cache our cash, we might recall that this was a bad day for inclusiveness in Massachusetts in 1635: the General Court of the then-Colony banished Roger Williams for speaking out for the separation of church and state and against the right of civil authorities to punish religious dissension and to confiscate Indian land.  Williams moved out to edge of the Narragansett Bay, where with the assistance of the Narragansett tribe, he established a settlement at the junction of two rivers near Narragansett Bay, located in (what is now) Rhode Island. He declared the settlement open to all those seeking freedom of conscience and the removal of the church from civil matters– and many dissatisfied Puritans came. Taking the success of the venture as a sign from God, Williams named the community “Providence.”

Williams stayed close to the Narragansett Indians and continued to protect them from the land greed of European settlers. His respect for the Indians, his fair treatment of them, and his knowledge of their language enabled him to carry on peace negotiations between natives and Europeans, until the eventual outbreak of King Philip’s War in the 1670s.  And although Williams preached to the Narragansett, he practiced his principle of religious freedom by refraining from attempts to convert them.

Roger Williams statue, Roger Williams Park, Providence, R.I.

source

 

 

“Money is the opposite of the weather. Nobody talks about it, but everybody does something about it”*…

 

remittance

 

Every month Joy Kyakwita presses a button on her phone and does something in common with millions of other people across the globe: she sends money home.

Ms Kyakwita, a London-based lawyer, gives a third of her salary to her family back home in Uganda, including paying money for school fees for her brothers and nephews.

“I believe that when you pay for them to go on a good course, then there is a good chance of them becoming employable,” she says. “And if they are employed then they will be able to help their siblings as well.”

Ms Kyakwita is just one of an estimated 270m migrants around the world who will send a combined $689bn back home this year, the World Bank estimates. That figure marks a landmark moment: this year remittances will overtake foreign direct investment as the biggest inflow of foreign capital to developing countries.

Remittances were once viewed by many economists as a secondary issue for developing economies behind FDI and equity investments. Yet because of their sheer volume and  consistent and resilient nature, these flows are now “the most important game in town when it comes to financing development”, says Dilip Ratha, head of the World Bank’s global knowledge partnership on migration and development…

The money sent home by 270 million immigrants around the world now exceeds foreign direct investment. The Financial Times takes deep dive into “Remittances: the hidden engine of globalisation.”

(Remittances are painfully expensive for those making them– ranging around the world from over 5% to over 8% of all money transferred… money that goes to financial institutions as opposed to the intended recipients.  Here’s why.)

* Rebecca Johnson

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As we pass it on, we might note that today, September 9, is the most common birthday in the United States.

birthday source

 

Written by LW

September 9, 2019 at 1:01 am

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