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Thursday, September 29, 2016

EUROZONE-ITALY: Why Issuing Fiscal Money Could Help Exit The Italian Crisis - by Enrico Grazzini

Fiscal Money is the most suitable instrument – and perhaps the only one – to overcome Italy’s serious and enduring crisis. The Fiscal Money project can be implemented both in Italy and other Eurozone countries to exit the liquidity trap by increasing aggregate demand. It can also help tackle the weakness of the Italian banking system which is stuck with a large amount of Non-Performing Loans (of around € 360 billion gross).

But first of all: what is Fiscal Money? This is not legal tender or a parallel currency but a financial instrument. By Fiscal Money we mean a euro-denominated bond issued by the state or a public (or semi-public) institution, covered by its fiscal value (i.e. valid for tax discount), maturing more than one year from issuance, but immediately negotiable on financial markets and so immediately convertible into legal currency. Fiscal Money is a bond fully guaranteed by the state as a tax rebate, even if non-refundable in euro by the state: in this way it does not increase public debt.

This bond is valid “to pay taxes ” only after a reasonable period of time, certainly more than one year from issuance. In fact, if the Fiscal Money were immediately used, then it would be like to a simple tax cut, but that would cause an immediate public deficit. Instead, thanks to its extended maturity of 2-3 years, Fiscal Money can be immediately monetized and can quickly increase spending power. Fiscal Money, as a matter of fact, advances the value of future tax revenues. So it becomes the oxygen required to exit the liquidity trap, to increase income and create new wealth thanks to the Keynesian multiplier.

There are several versions of Fiscal Money. The following are the two most important versions.

    Tax Discount Certificates (TDCs) are bonds for tax credit issued by the state and allocated for free to households and businesses; they are also used by government administrations as a means of payment. Their issue would have a huge economic and political impact. The issuance of these free government bonds would be comparable to a kind of helicopter money (see Milton Friedman, J. M. Keynes, Ben Bernanke). In fact, thanks to the issuance of this bond, the state can immediately increase the spending power of families, businesses and public administrations. It can increase demand and restart the economy, unchaining it from the liquidity trap. In order to increase consumption, this “free money” would be distributed to families in inverse proportion to income; and it would be allocated to firms in proportion to the number of employees so as to reduce the cost of labor and increase business competitiveness. In order to increase employment (and also private investments), the state can use TDCs to pay for new public works. A Mediobanca Securities report asserts that, thanks to TDCs, Italian GDP would grow twice as fast, while preserving the level of the public balance and the balance of trade. The TDCs will be sold by those (businesses and households) who need cash and will be purchased by those (businesses and households) which want to get tax discounts. The TDCs would be converted into euros and quickly spent: so the economy would enjoy new air. Thanks to economic growth, the debt/GDP ratio would decline. The state could increase cash in circulation in the real economy, boost consumption, counter the credit crunch, boost investments and jobs. The challenge is that the Keynesian multiplier will increase GDP insofar as the future fiscal revenues will offset the tax deficit that ceteris paribus will be generated by the issuance of the TDCs (see here).TDCs are not refundable in euro by the state: so, they do not constitute a financial liability for the public purse according to Eurostat criteria. Moreover, we foresee that TDCs will impact the economy in a very positive way, assuming that the fiscal multiplier exceeds one when (as currently in Italy and in the Eurozone) capital and labor resources are greatly underutilized.

    Bonds issued by the Cassa Depositi e Prestiti with the option to be converted into tax rebates. The Italian Cassa Depositi e Prestiti – which is a non-state company from a legal point of view, even if it is 80+ percent owned by the state – could get new resources to develop the Italian economy without increasing government debt. This version of Fiscal Money provides that CDP signs an agreement with the fiscal authorities and issues bonds maturing in the long term (eg. 10-20 years) with the option that in certain time slots they can be converted into tax rebates at their nominal value. The CDP bonds would not worsen the public budget because CDP sits outside the scope of government accounts. The bondholders would be fully guaranteed by the tax value of the CDP bonds, while the state would get credit from CDP for the bonds converted into tax rebates, and thus would not worsen its deficit. Thanks to these convertible bonds, CDP could collect some billion (or some tens of billion) in the financial market at low cost. CDP could use these new resources to implement industrial policies and to backstop the banking system. For instance, CDP could provide guarantees on non-performing loans. Similarly, the Caisse des Dépôts et Consignations in France and the Kreditanstalt für Wiederaufbau in Germany, with an ownership structure similar to that of the CDP, and other national development banks could issue this type of Fiscal Money to give a boost to the overall domestic economy.

Read more: Why Issuing Fiscal Money Could Help Exit The Italian Crisis

Wednesday, September 28, 2016

US: Corruption Unchained - by Frank Vogl

The U.S. Department of Justice has announced that it will not seek a new trial of the former Governor of the state of Virginia, Robert McDonnell and his wife, Maureen McDonnell on charges of corruption.

A jury had found them both guilty in 2014 for receiving gifts of over $175,000 from a businessman. However, the U.S. Supreme Court overturned the convictions in a June 2016 ruling.

Government prosecutors, who could have decided to try the case again, announced on September 7th:

“After carefully considering the Supreme Court’s recent decision and the principles of federal prosecution, we have made the decision not to pursue the case further.”

As a result, prosecuting corruption by U.S. public officials has just become far more difficult.

Lobbyists and politicians can feel more confident that their myriad exchanges and relationships are less likely to lead to corruption prosecutions.

The United States, once an admirable leader on combatting political corruption, has now fallen into line with the lax standards of business-political relationships that pervade many other countries.

While left-wing Democratic politicians, notably Senators Bernie Sanders and Elizabeth Warren, rail against corruption in U.S. politics, the mainstream Democratic Party officials at the helm of the Justice Department have accepted an increasingly narrow definition of political corruption.

The Supreme Court concluded that the McDonnells did nothing criminally wrong when Virginia businessman Jonnie Williams, Sr., gave them a gold Rolex watch, a Ferrari, $50,000 in financial aid for their beach house and a significant portion of the costs of their daughter’s wedding.

Newspaper readers may be forgiven for believing this is the kind of political corruption found in Third World or former Soviet countries – but it is perfectly legal in the United States today.

Read more: US: Corruption Unchained - The Globalist

Tuesday, September 27, 2016

Global Competitiveness: 'The Netherlands rises again in global competitiveness ranking'

The Netherlands is the most competitive country within the European Union, the NRC said on Tuesday, quoting the latest Global Competitiveness Index by the World Economic Forum.

The ranking puts the Netherlands in fourth place behind Switzerland, the US and Singapore, a rise of one place over last year’s ranking, the NRC said.

The ranking is not yet available on the forum’s website. Germany was in fourth place last year.

The Netherlands thanks its high ranking to its healthcare, education system, efficient infrastructure, and focus on innovation and technology, the paper quotes the report as saying.

Read more: 'The Netherlands rises again in global competitiveness ranking' -

Monday, September 26, 2016

USA: The Political Rhetoric of Perpetual War- by Robert Crawford

To start with a quick overview of our present situation. Most of you are familiar with this recent history; yet, it bears repeating. For 15 years now, since 2001, the US has been at war.

The longest single battlefield has been the war in Afghanistan and in neighboring Pakistan Tribal Areas. It has spanned two administrations. The Taliban remains undefeated and is gaining ground and war lords pursue their own political and military agendas.

The 2003 invasion and occupation of Iraq, now almost universally acknowledged to be one of the greatest military mistakes in recent times, has virtually destroyed a country that had been created by the imperial powers during WWI. Warfare between a Shia dominated Iraqi government and the Sunnis—now mostly controlled by ISIS—has become a struggle for territory and cities. This war has been internationalized.

The Syrian civil war, which has become another international war, continues its rising death toll and propels the greatest refugee crisis since WWII.

The U.S., British and French air war on Gadhafi’s Libya in 2011 has resulted in another failed state, ongoing civil war, and more U.S. and allied bombing.

Insurgencies in Yemen, Somalia, northern Nigeria, along with military attempts to suppress them continue to cause huge numbers of civilian casualties and further displacement. These conflicts have also been internationalized.

Since 2006, the Israeli siege of Gaza and the essentially one-sided warfare against Hamas, culminating in the brutal assault of 2014, has caused extraordinary suffering. The government-backed settler land grab in the West Bank makes the prospects of a just peace between the Israelis and the Palestinians more remote. In all these wars, civilians are the primary victims.

As you know, the US is neck deep in this descent into perpetual and proliferating warfare. Historian Andrew Bacevich calls it America’s WWIV. Despite repeated military failures and negative unanticipated consequences, the US still pursues the illusion that it can shape the contemporary Middle East through a combination of drone warfare, bombing, Special Operations and other covert actions. It continues to invest heavily in the militaries of Israel, Saudi Arabia, Egypt, Turkey and other U.S. allies.

American military dominance (which must be distinguished from effectiveness) is the most fundamental fact of today’s international order. The U.S., after all, maintains a projection of global power with hundreds of thousands troops stationed abroad” who occupy or use “some 761 ‘sites’ in 39 countries”—what critic Chalmers Johnson called “an empire of bases.”

Anyone with eyes wide open must come to this topic with more questions than answers—to say nothing about the burden of grief and even despair that many of us carry. I continue to struggle with both the questions and the difficult emotions.

For those of us hoping for a more peaceful world and a more peaceful American foreign policy, the core political question—what is to be done?—is perplexing. As long as American soldiers are not dying in significant numbers, Americans, for the most part, seem uninterested—and certainly uniformed—about US wars and their consequences. The corporate controlled media are no help; instead, they do everything possible to hinder understanding and serious debate. Historical amnesia is a particularly American affliction. Each of these obstacles are serious problems we need to confront.

My topic, here, is the political rhetoric of the 2016 presidential election. Even though it is a small part of the puzzle, the rhetoric of the presidential candidates reveals a great deal about the historical moment and the larger forces that shape this nation’s perpetual wars.

My first contention is that there is an ideology of militarism that dominates our political culture and it is being perpetuated by both the Democratic and Republican nominees for president, despite their significant differences.

We know or should know how militarist ideology exploits our fears of terrorism, and perpetuates the illusion that our safety depends on the worldwide projection and use of military power.

We know or should know that this ideology was developed and honed throughout the Cold War and after the collapse of the Soviet Union, the national security establishment had to find a new enemy to justify its continued rule.

We know or should know that militarism is an ideology that denies its own contributions to the continual escalation of violence in the Middle East and to terrorist attacks in the West.

Note EU-Digest: What is probably most amazing, reading the above report, is that the EU member states don't need to be geniuses to figure out that something in the equation related to their US servitude, when it comes to US foreign and military policies, has not only been a complete failure, but also a financial drain on their budgets. Europe, and specially the EU needs to seriously start thinking about developing its own more independent foreign policy and stop supporting US military adventures whereever they may occur.  

Read more: The Political Rhetoric of Perpetual War

Sunday, September 25, 2016

Brexit: david Cameron and Theresa May not on the same wave-length

David Cameron 'let down' by Theresa May, says former PM aide -

Saturday, September 24, 2016

Insurance Industry: Technology influencing profitability of Insurance Industry

THE INSURTECH REPORT: How financial technology firms are helping — and disrupting — the nearly $5 trillion insurance industry